1) Marks Company uses four special journals, (cash receipts, cash payments, sales, and
purchases journal) in addition to a general journal. On November 1, 2014, the control
accounts in the general ledger had the following balances: Cash $12,000, Accounts
Receivable $200,000 and Accounts Payable $42,000. Selected information on the final
line of the special journals for the month of November is presented below:
Cash Receipts Journal:
SalesAccountsOther Accounts
CashDiscountReceivableSales Rev.Cr.C. of G. S. Dr.
Dr. Dr. Cr. Cr.Acct. Ref.AmountInventory Cr.
?$1,080$49,000$29,000(X)$1,000$17,400
Cash Payments Journal:
Other AccountsAccountsOfficeStore
Dr.PayableSuppliesSuppliesInventoryCash
Acct. Ref.Amount Dr. Dr. Dr. Cr. Cr.
(X)$1,600?$1,300$1,100$700$32,600
Purchases Journal:
AccountsMerchandiseOfficeStoreOther Accounts
PayableInventorySuppliesSuppliesDr.
Cr. Dr. Dr. Dr.Acct. Ref. Amount
?$34,000$800$650(X)$3,300
Additional Data:
The Sales Journal totaled $42,000. A customer returned merchandise for credit for $460
and Marks Company returned store supplies to a supplier for credit for $500.
Instructions
(a)Determine the missing amounts in the special journals.
(b)Determine the balances in the general ledger accounts (Cash, Accounts Receivable,
and Accounts Payable) at the end of November.
2) Stockholders of a company may be reluctant to finance expansion through issuing
more equity because
a.leveraging with debt is always a better idea
b.their earnings per share may decrease
c.the price of the stock will automatically decrease
d.dividends must be paid on a periodic basis
3) Many U.S. firms are switching to JIT processing because
a.they desire a “push” approach to manufacturing
b.it eliminates conversion costs
c.it can reduce the funds invested in inventories
d.it is a means of building up inventories
4) The comparative balance sheet of Nathan Company appears
below:
NATHAN COMPANY
Comparative Balance Sheet
December 31,
Assets 2015 2014
Current assets $ 420$333
Plant assets 780 567
Total assets $1,200$900
Liabilities and stockholders’ equity
Current liabilities $ 168$144
Long-term debt 300162
Common stock 432306
Retained earnings 300 288
Total liabilities and stockholders’ equity $1,200$900
Instructions
(a)Using horizontal analysis, show the percentage change for each balance sheet item
using 2014 as a base year.
(b)Using vertical analysis, prepare a common size comparative balance sheet.
5) Which account listed below would be double ruled in the ledger as part of the closing
process?
a.Cash
b.Owner’s Capital
c.Owner’s Drawings
d.Accumulated DepreciationEquipment
6) A distinguishing feature of managerial accounting is
a.external users
b.general-purpose reports
c.very detailed reports
d.quarterly and annual reports
7) If more units are produced than are sold during a period, variable costing income
a.will be greater than absorption costing income
b.will be less than absorption costing income
c.will be the same as absorption costing income
d.may be either greater or less than absorption costing income
8) Allowance for Doubtful Accounts on the balance sheet
a.is offset against total current assets
b.increases the cash realizable value of accounts receivable
c.appears under the heading “Other Assets”
d.is offset against accounts receivable
9) TPol Furniture factors $900,000 of receivables to Trip Factors, Inc. Trip Factors
assesses a 2% service charge on the amount of receivables sold. TPol Furniture factors
its receivables regularly with Trip Factors. What journal entry does TPol make when
factoring these receivables?
a.Cash882,000
Loss on Sale of Receivables18,000
Accounts Receivable900,000
b.Cash882,000
Accounts Receivable882,000
c.Cash900,000
Accounts Receivable882,000
Gain on Sale of Receivables18,000
d.Cash882,000
Service Charge Expense18,000
Accounts Receivable900,000
10) Debit postings to the individual accounts in an accounts receivable subsidiary
ledger generally come from the
a.sales journal
b.cash receipts journal
c.purchases journal
d.cash payments journal
11) The predetermined overhead rate is
a.determined on a moving average basis throughout the year
b.not calculated until actual overhead costs are incurred
c.determined at the beginning of the year
d.determined at the end of the current year
12) A 60-day note receivable dated July 13 has a maturity date of
a.September 12
b.September 11
c.September 10
d.September 13
13) A corporation has the following account balances: Common stock, $1 par value,
$30,000; Paid-in Capital in Excess of Par, $650,000. Based on this information, the
a.legal capital is $680,000
b.number of shares issued are 30,000
c.number of shares outstanding are 680,000
d.average price per share issued is $11.25
14) Bonds will always fall into all but which one of the following categories?
a.Callable or convertible
b.Term or serial
c.Registered or bearer
d.Secured or unsecured
15) Grimwood Trucking purchased a tractor trailer for $171,500. Interline uses the
units-of-activity method for depreciating its trucks and expects to drive the truck
1,000,000 miles over its 12-year useful life. Salvage value is estimated to be $24,500. If
the truck is driven 90,000 miles in its first year, how much depreciation expense should
Grimwood record?
a.$12,250
b.$15,435
c.$13,230
d.$14,292
16) Which of the following is false with regard to budgetary planning?
a.A merchandising company uses a purchases budget instead of a production budget
b.The starting point for the budgets of a not-for-profit organization is generally receipts,
rather than expenditures
c.Budgets may be used by manufacturing companies, merchandising companies,
service enterprises, and not-for-profit organizations
d.For a service enterprise, the critical factor in budgeting is coordinating professional
staff needs with anticipated services
17) Interest is usually associated with
a.accounts receivable
b.notes receivable
c.doubtful accounts
d.bad debts
18) An important assumption in using ABC is that
a.production must take place on a continuous basis
b.all costs in an activity should respond proportionately to changes in the activity level
of the cost driver
c.production must take place on a just-in-time basis
d.all costs are pushed through each process when customer orders are received
19) At zero direct labor hours in a flexible budget graph, the total budgeted cost line
intersects the vertical axis at $40,000. At 20,000 direct labor hours, a horizontal line
drawn from the total budgeted cost line intersects the vertical axis at $120,000. Fixed
and variable costs may be expressed as:
a.$40,000 fixed plus $4 per direct labor hour variable
b.$40,000 fixed plus $6 per direct labor hour variable
c.$80,000 fixed plus $2 per direct labor hour variable
d.$80,000 fixed plus $4 per direct labor hour variable
20) Match the items below by entering the appropriate code letter in the space provided.
A.Budgetary controlG.Responsibility reporting system
B.Static budgetH.Return on Investment
C.Flexible budgetI.Profit center
D.Responsibility accountingJ.Investment center
E.Controllable costsK.Indirect fixed costs
F.Management by exceptionL.Direct fixed costs
____1>The review of budget reports by top management directed entirely or primarily
to differences between actual results and planned objectives.
____2>A part of management accounting that involves accumulating and reporting
revenues and costs on the basis of the individual manager who has the authority to
make the day-to-day decisions about the items.
____3>The preparation of reports for each level of responsibility shown in the
company’s organization chart.
____4>A projection of budget data at one level of activity.
____5>Costs that a manager has the authority to incur within a given period of time.
____6>The use of budgets to control operations.
____7>A projection of budget data for various levels of activity.
____8>A responsibility center that incurs costs, generates revenues, and has control
over the investment funds available for use.
____9>Costs that relate specifically to a responsibility center and are incurred for the
sole benefit of the center.
____10>A responsibility center that incurs costs and also generates revenues.
____11>Costs which are incurred for the benefit of more than one profit center.
____12>A measure of the profitability of an investment center computed by dividing
controllable margin (in dollars) by average operating assets.
21) The proprietorship form of business organization
a.must have at least three owners in most states
b.represents the largest number of businesses in the United States
c.combines the records of the business with the personal records of the owner
d.is characterized by a legal distinction between the business as an economic unit and
the owner
22) Cajo Manufacturing Company has the following data:
Direct labor$145,000
Direct materials used161,000
Total manufacturing overhead209,000
Beginning work in process36,000
Instructions
Compute (a) total manufacturing costs and (b) total cost of work in process.
23) Eastover Industries reported the following information for 2014:
OctoberNovemberDecember
Budgeted purchases$240,000$256,000$288,000
Operating expenses are: Salaries, $100,000; Depreciation, $20,000; Rent, $40,000;
Utilities, $28,000
Operating expenses are paid during the month incurred.
Accounts payable is used only for inventory acquisitions.
How much is the budgeted amount of cash to be paid for operating expenses in
November?
a.$424,000
b.$168,000
c.$188,000
d.$444,000
24) Unearned revenues are
a.cash received and a liability recorded before services are performed
b.revenue for services performed and recorded as liabilities before they are received
c.revenue for services performed but not yet received in cash or recorded
d.revenue for services performed and already received in cash and recorded
25) Which one of the following payroll taxes is not withheld from an employee’s wages
because it is not levied on the employee?
a.Federal income tax
b.Federal unemployment tax
c.State income tax
d.FICA tax
26) Which of the following is an incorrect statement about a corporation?
a.A corporation is an entity separate and distinct from its owners
b.Creditors ordinarily have recourse only to corporate assets in satisfaction of their
claims
c.A corporation may be formed in writing, orally, or implied
d.A corporation is subject to numerous state and federal regulations
27) Andy Eggers has invested $150,000 in a privately held family corporation. The
corporation does not do well and must declare bankruptcy. What amount does Eggers
stand to lose?
a.Up to his total investment of $150,000
b.Zero
c.The $150,000 plus any personal assets the creditors demand
d.$100,000
28) Instructions: Classify the following manufacturing costs and expenses by using the
following code letters:
A.Direct materials cost
B.Direct labor cost
C.Manufacturing overhead cost
D.Period cost
Abel Manufacturing Company incurs the following costs and expenses in making
furniture:
1>Lubricants, rosin, and polishing compounds used in manufacturing
2>Oak and pine wood used in desks and chairs
3>Insurance on factory building
4>Advertising in trade magazines
5>Salesperson’s commissions
6>Wages of assembly line workers
7>Rent on leased factory machinery
8>Depreciation on delivery equipment
9>Wages of factory maintenance workers
10>Depreciation on factory machinery
29) Which of the following statements is not true when a fully depreciated plant asset is
retired?
a.The plant asset’s book value is equal to its estimated salvage value
b.The accumulated depreciation account is debited
c.The asset account is credited
d.The plant asset’s original cost equals its book value
30) Financial information is presented below:
Operating Expenses$ 90,000
Sales Returns and Allowances18,000
Sales Discounts12,000
Sales Revenue320,000
Cost of Goods Sold174,000
The amount of net sales on the income statement would be
a.$290,000
b.$302,000
c.$308,000
d.$320,000
31) If the activity level increases 10%, total variable costs will
a.remain the same
b.increase by more than 10%
c.decrease by less than 10%
d.increase 10%
32) The sale of common stock below par
a.is a common occurrence in most states
b.is not permitted in most states
c.is a practice that most stockholders encourage
d.requires that a liability be recorded for the difference between the sales price and the
par value of the shares
33) Gwynn Company has an accounting fiscal year which ends on June 30 . The
company also has a policy of paying the weekly payroll on Friday. Payroll records
indicate the following salary costs were incurred.
DateAmount
MondayJune 28$3,000
TuesdayJune 293,800
WednesdayJune 303,300
ThursdayJuly 13,500
FridayJuly 22,400
Instructions
(a)Prepare any necessary adjusting journal entries that should be made at year end on
June 30 .
(b)Prepare the journal entry to record the payment of the weekly payroll on July 2 .
34) Employees at Tengo Corporation are paid $15,000 cash every Friday for working
Monday through Friday. The calendar year accounting period ends on Wednesday,
December 31 . How much salaries and wages expense should be recorded two days
later on January 2?
a.$15,000
b.$9,000
c.$6,000
d.None, matching requires the weekly salary to be accrued on December 31
35) What percentage of companies worldwide have experienced fraud in a recent
two-year period?
a.1%
b.10%
c.50%
d.100%
36) Knowledge of the ______________________ is necessary when discounting future
cash flows under the net present value approach.
37) A current liability is a debt that can be expected to be paid within ______________
year or the ______________, whichever is longer.
38) Western Company has a machine that affixes labels to bottles. The machine has a
book value of $60,000 and a remaining useful life of 3 years and no salvage value. A
new, more efficient machine is available at a cost of $210,000 that will have a 5-year
useful life with no salvage value. The new machine will lower annual variable
production costs from $490,000 to $390,000.
Instructions
Prepare an analysis showing whether the old machine should be retained or replaced.
39) Financial and managerial accounting are both concerned with the economic events
of an enterprise. Similarities between financial and managerial accounting do exist, but
they do have different focus. Briefly distinguish between financial and managerial
accounting as they relate to (1) the primary users, (2) the type and frequency of reports,
(3) the purpose of reports, and (4) the content of reports.
40) Blue Guitar Music School borrowed $30,000 from the bank signing an 8%,
6-month note on November 1 . Principal and interest are payable to the bank on May 1 .
If the company prepares monthly financial statements, what adjusting entry should the
company make at November 30 with regard to the note (round answer to the nearest
dollar)?
41) Below are some typical transactions incurred by Piper Company.
1>Purchase of merchandise on account.
2>Collection on account from customers.
3>Payment of employee’s wages.
4>Sales of merchandise for cash.
5>Close Income Summary to owner’s capital.
6>Adjusting entry for depreciation on machinery.
7>Payment of creditors on account.
8>Purchase of office equipment on credit.
9>Sales discount taken on goods sold on credit.
10>Sales of merchandise on account.
11>Purchase of a delivery truck for cash.
12>Return of merchandise purchased on credit.
13>Payment of rent in advance.
14>Adjusting entry for accrued interest expense.
15>Purchase of office supplies for cash.
For each transaction, indicate by the code letter the appropriate journal where the
transaction would be journalized.
CRCash Receipts Journal
CPCash Payments Journal
SSales Journal
PSingle-Column Purchases Journal
GGeneral Journal
42) Indicate the special journal(s) in which the following column headings appear.
1>Cash Cr._______________________
2>Cost of Goods Sold Dr._______________________
3>Accounts Receivable Dr._______________________
4>Accounts Payable Cr._______________________
5>Inventory Cr._______________________
6>Sales Discounts Dr._______________________
43) _________________ divided by the contribution margin ratio will give the amount
of _________________ to break even.
44) In the first month of operations, Mordica Company made three purchases of
merchandise in the following sequence: (1) 200 units at $6, (2) 300 units at $7, and (3)
400 units at $9. Assuming there are 300 units on hand, compute the cost of the ending
inventory under (1) the FIFO method and (2) the LIFO method. Mordica uses a periodic
inventory system.