1) Promissory notes cannot be transferred from party to party because they are
nonnegotiable.
2) Total asset cost plus depreciation expense equals book value.
3) A note payable can be used to extend the payment due on an account payable.
4) If the predetermined overhead allocation rate is 75% of direct labor cost, and the
Assembly Department’s direct labor cost for the reporting period is $20,000, the
following entry would be made to record the allocation of overhead to the products
processed in this department:
5) A company has net income of $130,500. Its net sales were $1,740,000 and its average
total assets were $2,750,000. Its total asset turnover equals 4.7%.
6) On January 1, a company issues bonds dated January 1 with a par value of $300,000.
The bonds mature in 5 years. The contract rate is 9%, and interest is paid semiannually
on June 30 and December 31. The market rate is 8% and the bonds are sold for
$312,177. The journal entry to record the first interest payment using the effective
interest method of amortization is:
A.Debit Interest Expense $12,487.08; debit Premium on Bonds Payable $1,012.92;
credit Cash $13,500.00.
B.Debit Interest Payable $13,500; credit Cash $13,500.00.
C.Debit Bond Interest Expense $12,487.08; debit Discount on Bonds Payable
$1,012.92; credit Cash $13,500.00.
D.Debit Bond Interest Expense $14,717.70; credit Premium on Bonds Payable
$1,217.70; credit Cash $13,500.00.
E.Debit Bond Interest Expense $12,282.30; debit Premium on Bonds Payable
$1,217.70; credit Cash $13,500.00.
7) Flack Corporation provides the following information for its December budgeting
process:
The November 30 inventory was 1,800 units.
Budgeted sales for December are 4,000 units.
Desired December 31 inventory is 2,840 units.
Budgeted purchases are:
A.5,040 units.
B.1,240 units.
C.6,840 units.
D.4,000 units.
E.5,800 units.
8) The independent group that is attempting to harmonize accounting practices of
different countries is the:
A.
B.IASB.
C.CAP.
D.SEC.
E.FASB.
9) Which of the following products is most likely to be produced in a process
operations system?
A.Airplanes
B.Cereal
C.Bridges
D.Designer bridal gowns
E.Custom cabinets
10) A company uses the following standard costs to produce a single unit of output.
During the latest month, the company purchased and used 58,000 pounds of direct
materials at a price of $1.00 per pound to produce 10,000 units of output. Direct labor
costs for the month totaled $56,350 based on 4,900 direct labor hours worked. Variable
manufacturing overhead costs incurred totaled $15,000 and fixed manufacturing
overhead incurred was $10,400. Based on this information, the direct materials quantity
variance for the month was:
A.$1,800 favorable
B.$5,800 unfavorable
C.$5,800 favorable
D.$1,800 unfavorable
E.$1,000 favorable
11) Webster Corporation is preparing its cash budget for April. The March 31 cash
balance is $36,400. Cash receipts are expected to be $641,000 and cash payments for
purchases are expected to be $608,500. Other cash expenses expected are $27,000
selling and $33,500 general and administrative. The company desires a minimum cash
balance at the end of each month of $30,000. If necessary, the company borrows
enough cash to meet the minimum using a short-term note. Webster’s preliminary cash
balance before loan activity for April is expected to be:
A.$8,400.
B.$21,600.
C.$30,000.
D.($28,000).
E.$68,900.
12) Use the following information to calculate the net cash provided or used by
financing activities for the Streams Corporation:
(a) Net income, $10,000
(b) Sold common stock for $40,000 cash
(c) Paid cash dividend of $13,000
(d) Paid bond payable, $28,000
(e) Purchased equipment for $12,000 cash
13) Frankie’s Chocolate Co. reports the following information from its sales budget:
Cash sales are normally 25% of total sales and all credit sales are expected to be
collected in the month following the date of sale. The total amount of cash expected to
be received from customers in September is:
A.$30,000.
B.$78,000.
C.$108,000.
D.$120,000.
E.$130,500.
14) Guidelines (rules-of-thumb) are general standards of comparison developed from:
A.Industry statistics from the government.
B.Past experience.
C.Analysis of competitors.
D.Relations between financial items.
E.Dun and Bradstreet.
15) During March, the production department of a process operations system completed
and transferred to finished goods 25,000 units that were in process at the beginning of
March and 110,000 units that were started and completed in March. March’s beginning
inventory units were 100% complete with respect to materials and 55% complete with
respect to labor. At the end of March, 30,000 additional units were in process in the
production department and were 100% complete with respect to materials and 30%
complete with respect to labor. The production department incurred direct materials cost
of $253,000 and its beginning inventory included materials cost of $93,500. Compute
the direct materials cost per equivalent unit for the department using the
weighted-average method.
A.$1.53.
B.$2.48.
C.$2.10.
D.$2.57.
E.$2.40.
16) Regarding overhead costs, as volume increases:
A.Unit fixed cost increases, unit variable cost decreases.
B.Unit fixed cost decreases, unit variable cost increases.
C.Unit variable cost decreases, unit fixed cost remains constant.
D.Unit fixed cost decreases, unit variable cost remains constant.
E.Both unit fixed cost and unit variable cost remain constant.
17) A company’s store was destroyed by an earthquake on February 10 of the current
year. The only information for the current period that could be salvaged included the
following:
Historically, the company’s gross profit ratio has been 30%. Estimate the value of the
destroyed inventory using the gross profit method.
18) Match the following terms with the definitions.
19) Calculate the amount of interest that would be owed on a $18,000, 60-day, 8% note
receivable at maturity.
20) Variations Company had the following results of operations for the past year:
A foreign company (whose sales will not affect Variations’ regular sales) offers to buy
700 units at $4.00 per unit. In addition to variable manufacturing costs, there would be
an export cost of $0.30 per unit. Prepare an analysis of this additional business to show
whether Variations should take this order.
21) Describe ratio analysis including its purpose, application, and interpretation.
22) A ______________________________ accumulates and reports costs and expenses
that a manager is responsible for, including budgeted amounts.