1) On the income statement, miscellaneous expenses are usually presented as the last
item without regard to the dollar amount.
2) The erroneous moving of an entire number one or more spaces to the right or left,
such as writing $85 as $850, is called a transposition.
3) The process of transferring the debits and credits from the journal entries to the
accounts is known as updating the accounts.
4) The percentage analysis of increases and decreases in corresponding items in
comparative financial statements is referred to as horizontal analysis.
5) A decentralized business organization is one in which all major planning and
operating decisions are made by top management.
6) A dividends account records amounts paid to stockholders.
7) When a plant asset is traded for another similar asset, losses on the asset traded are
not recognized.
8) A post-closing trial balance should be prepared before the financial statements are
prepared.
9) In the absorption costing income statement, deduction of the cost of goods sold from
sales yields contribution margin.
10) Sales to customers who use nonbank credit cards, such as American Express, are
generally treated as credit sales.
11) Residual value is not incorporated in the initial calculations for
double-declining-balance depreciation.
12) The relationship of each asset item as a percent of total assets is an example of
vertical analysis.
13) Push manufacturing (made-to-stock) is a traditional approach to manufacturing.
14) Both job order and process cost accounting use equivalent units of production to
determine costs.
15) If the dividend amount of preferred stock, $50 par value, is quoted as 8%, then the
dividends per share would be $4.
16) Of the following, which will determine if the accounting equation is in balance?
A.journal entry
B.income statement
C.trial balance
D.account reconciliation
17) For which of the following businesses would the job order cost system be
appropriate?
A.Meat processor
B.Automobile manufacturer
C.Oil refinery
D.Construction contractor
18) Discounts taken by a buyer because of early payment are recorded on the sellers
accounting records as
A.Purchases discount
B.Sales discount
C.Trade discount
D.Early payment discount
19) The controller’s staff often consists of several management accountants. All of the
following would most likely be on the controller’s staff EXCEPT:
A.general accountants
B.budgets and budget analysts
C.investments and shareholder relations managers
D.cost accountants
20) Assume that Division J has achieved income from operations of $165,000 using
$900,000 of invested assets. If management desires a minimum rate of return of 11%,
the residual income is:
A.$99,000
B.$18,150
C.$264,000
D.$66,000
21) Which of the following is not classified as paid-in capital on the balance sheet?
A.common stock
B.common stock distributable
C.donated capital
D.treasury stock
22) Cash flow per share is
A.required to be reported on the balance sheet
B.required to be reported on the income statement
C.required to be reported on the statement of cash flows
D.not required to be reported on any statement
23) Cost of Materials Used $45,000
Direct Labor costs $48,000
Factory Overhead $39,000
Work in Process, beg. $28,000
Work in Process, end. $18,000
What is Cost of Goods Manufactured?
A.$178,000
B.$132,000
C.$122,000
D.$142,000
24) Which of the following is not an advantage of the average rate of return method?
A.It is easy to use.
B.It takes into consideration the time value of money.
C.It includes the amount of income earned over the entire life of the proposal.
D.It emphasizes accounting income.
25) There are four transactions that affect stockholders equity.
(a) What are the two types of transactions that increase stockholders equity?
(b) What are the two types of transactions that decrease stockholders equity?
26) Division X of O’Blarney Company has sales of $300,000, cost of goods sold of
$120,000, operating expenses of $58,000, and invested assets of $150,000.
What is the rate of return on investment for Division X?
A.9.15%
B.81.3%
C.40.7%
D.200%
27) Widgeon Co. manufactures three products: Bales; Tales; and Wales. The selling
prices are: $55; $78; and $32, respectively. The variable costs for each product are: $20;
$50; and $15, respectively. Each product must go through the same processing in a
machine that is limited to 2,000 hours per month. Bales take 5 hours to process, Tales
take 7 hours, and Wales take 1 hour.
What is the contribution margin per machine hour for Bales?
A.$5
B.$7
C.$35
D.$28
28) The account type and normal balance of Prepaid Expense is
A.revenue, credit
B.expense, debit
C.liability, credit
D.asset, debit
29) Identify the following costs as (a) direct materials, (b) direct labor, or (c) factory
overhead for a cake manufacturer.
1> Frosting
2> Depreciation on oven
3> Wages of bakers
4> Sprinkles for topping
30) On the first day of the fiscal year, Lisbon Co. issued $1,000,000 of 10-year, 7%
bonds for $1,050,000, with interest payable semiannually. Orange Inc. purchased the
bonds on the issue date for the issue price. The journal entry to record the amoritization
of the bond premium (by straight-line method) for the year by Orange Inc. includes a
credit to:
A.Interest Revenue for $5,000
B.Interest Revenue for $2,500
C.Investment in Lisbon Co. Bonds $5,000
D.Investment in Lisbon Co. Bonds $2,500
31) Indicate whether each of the following would be added to or deducted from net
income in determining net cash flow from operating activities by the indirect method:
(a) Increase in prepaid expenses
(b) Amortization of patents
(c) Increase in salaries payable
(d) Gain on sale of fixed assets
(e) Decrease in accounts receivable
(f) Increase in notes receivable due in 60 days
(g) Amortization of discount on bonds payable
(h) Decrease in merchandise inventory
(i) Depreciation of fixed assets
(j) Loss on retirement of long-term debt
(k) Decrease in accounts payable
(l) Increase in notes payable due in 30 days
(m) Increase in income taxes payable
32) A loss due to a discontinued operation should be reported in the income statement
A.above income from continuing operations
B.without related tax effect
C.below income from continuing operations
D.as an operating expense
33) Determine the due date and amount of interest due at maturity on the following
notes:
34) A chart of accounts is
A.the same as a balance sheet
B.usually a listing of accounts in alphabetical order
C.usually a listing of accounts in financial statement order
D.used in place of a ledger
35) Gladstorm Enterprises sells a product for $60 per unit. The variable cost is $20 per
unit, while fixed costs are $85,000. Determine the (a) break-even point in sales units,
and (b) break-even point in sales units if the selling price increased to $80 per unit.
Round your answer to the nearest whole number.
36) Match the following stockholders equity concepts to the appropriate answer.
1>a company whose shares can be bought and sold on a stock exchange A. corporation
2>formally creates a corporation B. publicly held corporation
3>creditors cannot pursue stockholders personal assets to satisfy claims C. bylaws
4>a legal entity, separate from the people who create and operate it D. privately held
corporation
5>rules and procedures for corporate conduct of its affairs E. articles of incorporation
6>responsible for establishing corporate policies F. limited liability
7>company whose shares are not bought or sold on a stock exchange G. board of
directors
8>earnings of a company distributed to stockholders H. dividends
37) The account Valuation Allowance for Trading Securities is found on the:
A.Income statement as Other Revenue (Expenses)
B.Balance sheet as an adjustment to the asset account
C.Balance sheet as an adjustment to Stockholders’ Equity
D.Statement of Retained Earnings
38) Match each of the following investment terms with the appropriate definition
below.
1>The company whose stock is purchased by another entity. A. Trading Securities
2>Debt and equity securities purchased and sold to earn short-term profits from
changes in the market price. B. Equity Securities
3>Preferred and common stock that represent ownership in a company and do not have
a fixed maturity date. C. Cost Method
4>When using this, dividends are treated as a reduction of the investment. D. Equity
Method
5>Securities not held for trading or to maturity or other strategic reasons. E. Debt
Securities
6>The method of reporting an investment that represents less than 20% of the voting
stock of another company. F. Held-to-maturity Securities
7>The company investing in another companys stock. G. Available-for-sale Securities
8>What occurs when a company purchases 50% or more of another companys stock. H.
Investor
9>Debt investments that a company intends to keep until their maturity date. I. Business
Combination
10>Notes and bonds that pay interest and have a fixed maturity. J. Investee
39) Merchandise inventory at the end of the year is overstated. Which of the following
statements correctly states the effect of the error?
A.owner’s equity is overstated
B.cost of merchandise sold is overstated
C.gross profit is understated
D.net income is understated
40) Accrued expenses are ordinarily reported on the balance sheet as
A.assets
B.liabilities
C.fixed assets
D.prepaid expenses
41) The primary difference between a periodic and perpetual inventory system is that a
A.periodic system determines the inventory on hand only at the end of the accounting
period
B.periodic system keeps a record showing the inventory on hand at all times
C.periodic system provides an easy means to determine inventory shrinkage
D.periodic system records the cost of the sale on the date the sale is made
42) Which of the following methods is appropriate for a business whose inventory
consists of a relatively small number of unique, high-cost items?
A.FIFO
B.LIFO
C.average
D.specific identification
43) On March 1, 2014, Cooks Catering Company Capital Stock balance was $30,000
and the balance of Retained Earnings was $120,000. During March, dividends of
$31,000 were declared and paid by the business. Assets, liabilities, revenues, and
expenses at March 31, 2014, were as follows:
Present, in good form, (a) an income statement for March, (b) a retained earnings
statement for March, and (c) a balance sheet as of March 31.
44) Bonds Payable has a balance of $1,000,000 and Premium on Bonds Payable has a
balance of $7,000. If the issuing corporation redeems the bonds at 101, what is the
amount of gain or loss on redemption?
A.$3,000 loss
B.$3,000 gain
C.$7,000 loss
D.$7,000 gain
45) The cost of goods sold for Heedy manufacturing in 2011 was $233,000. The
January 1, 2011, finished goods inventory balance was $31,600, and the December 31,
2011, finished goods inventory balance was $24,200. Cost of goods manufactured
during the period was:
A.$233,000
B.$225,600
C.$288,800
D.$240,400
46) A company manufactured 50,000 units of a product at a cost of $450,000. They sold
40,000 units for $15 each. What is the gross margin?
A.$750,000
B.$240,000
C.$600,000
D.$450,000
47) If total liabilities decreased by $46,000 during a period of time and stockholders
equity increased by $60,000 during the same period, the amount and direction (increase
or decrease) of the period’s change in total assets is
A.$106,000 increase
B.$14,000 increase
C.$14,000 decrease
D.$106,000 decrease
48) The cash and securities comprising a sinking fund established to redeem bonds at
maturity in 2015 should be classified on the balance sheet as
A.fixed assets
B.current assets
C.intangible assets
D.investments
49) Hazard Company is considering the acquisition of a machine that costs $525,000.
The machine is expected to have a useful life of 6 years, a negligible residual value, an
annual cash flow of $150,000, and annual operating income of $87,500. What is the
estimated cash payback period for the machine?
A.3 years
B.4.3 years
C.3.5 years
D.5 years
50) The following balance sheet contains errors.
(a) List the errors in the balance sheet above and (b) prepare a corrected balance sheet.
51) Financial Statement data for the years ended December 31 for Parker Corporation is
as follows:
2012 2011
Net Sales $2,595,600 $2,409,500
Accounts Receivable
Beginning of the year $ 390,000 $400,000
End of the year 434,000 390,000
a) Determine the accounts receivable turnover for 2012 and 2011.
b) Determine the number of days sales in receivables for 2012 and 2011.
c) Does the change in accounts receivable turnover and number of days sales in
receivables from 2011 to 2012 indicate a favorable or unfavorable trend.?
52) Department A had 1,000 units in Work in Process that were 60% completed at the
beginning of the period at a cost of $7,000. 4,000 units of direct materials were added
during the period at a cost of $8,200. 4,500 units were completed during the period, and
500 units were 40% completed at the end of the period. All materials are added at the
beginning of the process. Direct labor was $28,700 and factory overhead was $4,510.
The cost of the 500 units in process at the end of the period if the first-in, first-out
method is used to cost inventories was:
A.$3,240
B.$5,175
C.$2,569
D.$2,645
53) On the basis of the following data, determine the value of the inventory at the lower
of cost or market. Apply lower of cost or market to each inventory item. Show your
work.
54) Consider the following journal entry made by Jones Company. Upon investigation,
what might you find happened to create this amount of Cash Over/Short account
difference? Give three possible reasons for this difference.
55) Journalize the following entries on the books of the borrower and creditor. Label
accordingly. (Assume a 360-day year is used for interest calculations.)
56) Fill in the missing amounts from the chart below regarding the calculation of Bean
Corporations estimated inventory using the retail method of estimation.
57) Kennedy, Inc. reported the following data:
Prepare the cash flows for operating activities under the indirect method as it would
appear on the statement of cash flows.
58) The following units of a particular item were available for sale during the year:
The firm uses the perpetual inventory system and there are 240 units of the item on
hand at the end of the year. What is the total cost of ending inventory according to
FIFO?
59) An investment of $185,575 is expected to generate returns of $65,000 per year for
each of the next four years. What is the investments internal rate of return?