1) For legal reasons, it is not advisable to accept a note receivable in exchange for an
overdue account receivable.
2) As a general rule, revenues should not be recognized in the accounting records when
earned, but rather when cash is received.
3) Conversion cost per equivalent unit is the combined cost of direct labor and factory
overhead per equivalent unit.
4) Equivalent units of production refer to the number of units that could have been
started and completed given the costs incurred during the period.
5) One purpose of financial statement analysis for internal users is to provide strategic
information to improve company efficiency and effectiveness in providing products and
services.
6) Financial statement analysis may be used for personal financial investment decisions.
7) Current information for the Healey Company follows:
All raw materials used were traceable to specific units of product. Healey Company’s
direct materials used for the year is:
A.$58,600.
B.$60,000.
C.$75,200.
D.$76,600.
E.$61,400.
8) Use the information in the adjusted trial balance presented below to calculate the
current ratio for Taron Company:
A.1.87.
B..54.
C.3.92.
D.1.77.
E.1.60.
9) Zhang Corp. owns 40% of Magnor Company’s common stock. Magnor pays $97,000
in total cash dividends to its shareholders. Zhang’s entry to record this transaction
should include a:
A.Debit to Dividends for $97,000.
B.Debit to Dividends for $38,800.
C.Debit to Long-Term investments for $97,000.
D.Credit to Long-Term Investments for $38,800.
E.Credit to Cash for $97,000.
10) Refer to the following selected financial information from Frankle Corp. Compute
the company’s current ratio.
A.6.44.
B.2.84.
C.6.27.
D.3.60.
E.1.44.
11) In a process costing system, direct material costs incurred are recorded:
A.Indirectly to a Work in Process Inventory account from Factory Overhead.
B.Indirectly to a Finished Goods Inventory account from Factory Overhead.
C.Directly to a Work in Process Inventory account.
D.Directly to a Finished Goods Inventory account.
E.Directly to a Cost of Goods Sold account.
12) Managers place a high priority on internal control systems because the systems
assist managers in all of the following except:
A.Promoting efficient operations.
B.Protecting assets.
C.Urging adherence to company policies.
D.Ensuring reliable accounting.
E.Assuring that no loss will occur.
13) Carducci Corporation reported Net sales of $3.6 million and beginning Total assets
of $0.9 million and ending Total assets of 1.3 million. The average Total asset amount
is:
A.$2.3 million.
B.$2.7 million.
C.$0.25 million.
D.$0.36 million.
E.$1.1 million.
14) Using the information below, compute the raw materials inventory turnover:
A.6.76.
B.6.02.
C.54.0.
D.60.6.
E.6.37.
15) Based on predicted production of 12,000 units, a company anticipates $150,000 of
fixed costs and $123,000 of variable costs. The flexible budget amounts of fixed and
variable costs for 10,000 units are:
A.$125,000 fixed and $102,500 variable.
B.$125,000 fixed and $123,000 variable.
C.$102,500 fixed and $150,000 variable.
D.$150,000 fixed and $123,000 variable.
E.$150,000 fixed and $102,500 variable.
16) While in the process of posting from the journal to the ledger, a company failed to
post a $500 debit to the Equipment account. The effect of this error will be that:
A.The Equipment account balance will be overstated.
B.The trial balance will not balance.
C.The error will overstate the debits listed in the journal.
D.The total debits in the trial balance will be larger than the total credits.
E.The error will overstate the credits listed in the journal.
17) FICA taxes include:
A.Social Security and Medicare taxes.
B.Charitable giving.
C.Employee state income tax.
D.Federal and state unemployment taxes.
E.Employee federal income tax.
18) Use the following information to calculate cash received from dividends:
A.$26,400.
B.$29,000.
C.$29,800.
D.$30,600.
E.$32,400.
19) Springfield Company offers a bonus plan to its employees and the amount of the
employee bonuses for the current year is estimated to be $32,500 to be paid during
January of the following year. The journal entry on December 31 to record the bonuses
is:
A.Debit Estimated Bonus Payable $32,500; credit Cash $32,500.
B.Debit Employee Bonus Expense $32,500; credit Bonus Payable $32,500.
C.No entry since the bonuses are not paid until January.
D.Debit Employee Bonus Expense $32,500; credit Prepaid Employee Bonus $32,500.
E.Debit Unearned Bonuses $32,500; credit Bonus Payable $32,500.
20) A company’s calendar-year financial data are shown below. The company had total
assets of $339,000 and total equity of $144,400 for the prior year. No additional shares
of common stock were issued during the year. The December 31 market price per share
is $49.50. Cash dividends of $19,500 were paid during the year. Calculate the following
ratios for the company:
(a) debt ratio
(b) equity ratio
(c) debt-to-equity ratio
(d) times interest earned
(e) total asset turnover
21) Three of the most common tools of financial analysis are (1) ____________, (2)
__________________, and (3) ______________________.
22) Calculate the gross margin ratio for each of the following separate cases A through
C:
23) The following data is available for Donaldson Corp. for the current year:
Calculate the equivalent units of production for the year using the weighted average
method.
24) Indicate on which of the financial statements the following items appears. Use I for
income statement, E for statement of owner’s equity, and B for balance sheet. More than
one statement may be appropriate for some items.
25) Cardinal Company sells merchandise for $24,000 cash on March 31 (cost of
merchandise is $12,300). The sales tax law requires Cardinal to collect 8.5% sales tax
on every dollar of merchandise sold. Record the entry for the sale and its applicable
sales tax.
26) Explain why the Factory Overhead account for a company may have a difference
between the amount debited and credited at the end an accounting period before
adjustment.