1) In a perpetual inventory system, merchandise returned to vendors reduces the
merchandise inventory account.
2) The job order costing system is not used by service organizations.
3) Accruals are needed when an unrecorded expense has been incurred or an unrecorded
revenue has been earned.
4) If the ownership of merchandise passes to the buyer when the seller delivers the
merchandise for shipment, the terms are stated as FOB destination.
5) While some businesses have been granted charters under state laws, most businesses
receive their charters under federal laws.
6) Deferrals are recorded transactions that delay the recognition of an expense or
revenue.
7) If the bondholder has the right to exchange a bond for shares of common stock, the
bond is called a convertible bond.
8) Financial reporting systems that are guided by the principle of exceptions concept
focus attention on variances from standard costs.
9) Merchandise is sold for $3,600, terms FOB destination, 2/10, n/30, with prepaid
freight costs of $150. If $500 of the merchandise is returned prior to payment and the
invoice is paid within the discount period, the amount of the sales discount is $65.
10) When common stock is issued in exchange for land, the land should be recorded in
the accounts at the par amount of the stock issued.
11) Cost behavior refers to the methods used to estimate costs for use in managerial
decision making.
12) Standard costs should always be revised when they differ from actual costs.
13) Factory overhead is applied to production using a predetermined overhead rate.
14) Whenever a partnership is dissolved, the assets are liquidated.
15) The balance in the Allowance for Doubtful Accounts account at the end of the year
includes the total of all accounts written-off since the beginning year.
16) Standard costs serve as a device for measuring efficiency.
17) In the distribution of income, the net income is less than the salary and interest
allowances granted; the remaining balance will be a negative amount that must be
divided among the partners as though it were a loss.
18) If the perpetual inventory system is used, the account entitled Merchandise
Inventory is debited for purchases of merchandise.
19) When preparing the cash budget, all the following should be considered except:
A.Cash receipts from customers
B.Depreciation expense
C.Cash payments to suppliers
D.Cash payments for equipment
20) The primary advantages of the average rate of return method are its ease of
computation and the fact that:
A.it is especially useful to managers whose primary concern is liquidity
B.there is less possibility of loss from changes in economic conditions and
obsolescence when the commitment is short-term
C.it emphasizes the amount of income earned over the life of the proposal
D.rankings of proposals are necessary
21) The balance in Discount on Bonds Payable
A.should be reported on the balance sheet as an asset because it has a debit balance
B.should be allocated to the remaining periods for the life of the bonds by the
straight-line method, if the results obtained by that method materially differ from the
results that would be obtained by the interest method
C.would be added to the related bonds payable to determine the carrying amount of the
bonds
D.would be subtracted from the related bonds payable on the balance sheet
22) Assume that social security taxes are payable at a 6% rate on the first $100,000 of
earnings and Medicare taxes are payable at a 1.5% rate with no maximum earnings, and
that federal and state unemployment compensation taxes total 4.6% on the first $7,000
of earnings. If an employee, George Jones, earns $2,500 for the current week and Jones’
year-to-date earnings before this week were $6,800, what is the total payroll taxes
related to the current week?
A.$187.50
B.$196.70
C.$344.50
D.$9.20
23) When using a revenue journal:
A.both a Fees Earned and an Accounts Receivable column are included
B.both cash sales and sales on account are posted to the journal
C.revenues are normally recorded when the company sends customer invoices
D.postings to customer accounts are done at month end
24) Which equation better describes Target Costing?
A.Selling Price – Desired Profit = Target Costs
B.Selling Price + Profit = Target Costs
C.Target Variable Costs + Contribution Margin = Selling Price
D.Selling Price = Profit – Target Variable Costs
25) A company uses the allowance method to account for uncollectible accounts
receivables. When the firm writes off a specific customer’s account receivable
A.total current assets are reduced
B.total expenses for the period are increased
C.net realizable value of accounts receivable increases
D.there is no effect on total current assets or total expenses
26) A building with a book value of $54,000 is sold for $63,000 cash Using the indirect
method, this transaction should be shown on the statement of cash flows as follows:
A.an increase of $54,000 from investing activities
B.an increase of $63,000 from investing activities and a deduction from net income of
$9,000
C.an increase of $9,000 from investing activities
D.an increase of $54,000 from investing activities and an addition to net income of
$9,000
27) In an investment center, the manager has the responsibility for and the authority to
make decisions that affect:
A.the assets invested in the center, but not costs and revenues
B.costs and assets invested in the center, but not revenues
C.both costs and revenues for the department or division
D.not only costs and revenues, but also assets invested in the center
28) 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
29) The account type and normal balance of Prepaid Expense is
A.revenue, credit
B.expense, debit
C.liability, credit
D.asset, debit
30) Managerial accountants would most likely prepare all of the following reports
except:
A.A performance report identifying amounts of scrap
B.A control report comparing direct material usage over time
C.A sales report targeting monthly sales and potential bonuses
D.An annual report for external regulators such as the SEC
31) Use the following worksheet to answer the following questions.
Based on the preceding trial balance, the entry to close income summary would be:
A.debit C. Finley, Capital $50,000; credit Income Summary $50,000
B.debit Income Summary $155,000; credit C. Finley, Capital $155,000
C.debit Income Summary $50,000, credit C. Finley, Capital $50,000
D.debit C. Finley, Capital $9,000; credit Income Summary $9,000
32) Which of the following journals is called an all-purpose journal?
A.General journal
B.Purchases journal
C.Revenue journal
D.Accounting journal
33) Match the transaction below with the journal or ledger in which it would be entered.
1>record payment made to vendor A. General journal
2>record sale on account to customer B. Accounts receivable subsidiary ledger
3>record purchase on account from vendor C. Revenue journal
4>record payment received from customer D. Purchase journal
5>cash receipt posting to an individual customer account E. Cash receipts journal
6>monthly adjustment for supplies used F. Cash payments journal
7>cash payment posting to an individual vendor account G. Accounts payable
subsidiary ledger
34) A legal document that indicates the name of the issuer, the face value of the bond
and such other data is called
A.trading on the equity
B.convertible bond
C.a bond debenture
D.a bond certificate
35) A widely used activity base for developing factory overhead rates in highly
automated settings is:
A.direct labor hours
B.direct labor dollars
C.direct materials
D.machine hours
36) If sales are $400,000, variable costs are 80% of sales, and operating income is
$40,000, what is the operating leverage?
A.0
B.7.500
C.2.0
D.1.333
37) In a process cost system, the cost of completed production in Department A is
transferred to Department B by which of the following entries?
A.Debit Work in Process–Dept. B; credit Work in Process–Dept. A
B.Debit Work in Process–Dept. B; credit Finished Goods–Dept. A
C.Debit Work in Process–Dept. B; credit Cost of Goods Sold–Dept. A
D.Debit Finished Goods; credit Work in Process–Dept. B
38) Jackson and Campbell have capital balances of $100,000 and $300,000
respectively. Jackson devotes full time and Campbell one-half time to the business.
Determine the division of $150,000 of net income when there is no reference to division
in partership agreement.
A.$75,000 and $75,000
B.$37,500 and $112,500
C.$100,000 and $50,000
D.$112,500 and $37,500
39) Materials used by Square Yard Products Inc. in producing Division 3’s product are
currently purchased from outside suppliers at a cost of $5 per unit. However, the same
materials are available from Division 6. Division 6 has unused capacity and can
produce the materials needed by Division 3 at a variable cost of $3 per unit. A transfer
price of $3.20 per unit is established, and 40,000 units of material are transferred, with
no reduction in Division 6’s current sales.
How much would Division 3’s income from operations increase?
A.$150,000
B.$50,000
C.$32,000
D.$72,000
40) The Sarbanes-Oxley Act of 2002 prohibits employment of auditors by their clients
for what period after their last audit of the client?
A.Indefinitely
B.One year
C.Two years
D.There is no such prohibition
41) Izabelle and Marta are forming a partnership. Izabelle will invest a piece of
equipment with a book value of $7,500 and a fair market value of $20,000. Marta will
invest a building with a book value of $40,000 and a fair market value of $58,000.
What amount will be recorded to Martas capital account ?
A.$18,000
B.$20,000
C.$40,000
D.$58,000
42) What effect will this adjusting journal entry have on the accounting records?
A.Increase income
B.Decrease net income
C.Decrease expenses
D.Increase assets
43) Match the following stockholders equity concepts to the most appropriate answer.
1>a value that the stock is worth on the stock exchange A. additional paid in capital
2>the maximum number of shares a company can issue to shareholders B. par value
3>the number of shares currently held by stockholders C. outstanding shares
4>account used when issue price exceeds par value of stock D. preferred stock
5>a class of stock that provides voting rights for shareholders E. authorized shares
6>a value established for the protection of creditors F. issued shares
7>a class of stock that does not provide voting rights for shareholders G. common stock
8>the number of sharing originally sold to stockholders H. market price
44) If the revenues are correctly reported and the Gross Profit of a company is
understated, what is the effect on Owners Equity?
A.Understated
B.Overstated
C.Correctly Stated
D.None of the above
45) The St. Augustine Corporation originally budgeted for $360,000 of fixed overhead
at 100% production capacity. Production was budgeted to be 12,000 units. The standard
hours for production were 5 hours per unit. The variable overhead rate was $3 per hour.
Actual fixed overhead was $360,000 and actual variable overhead was $170,000.
Actual production was 11,700 units.
Compute the factory overhead volume variance.
A.$9,000F
B.$9,000U
C.$5,500F
D.$5,500U
46) The employee earnings record would contain which column that the payroll register
would probably not contain?
A.deductions
B.payment
C.earnings
D.cumulative earnings
47) All of the following statements regarding vertical analysis are true except:
A.Vertical analysis may be prepared for several periods to analyze changes in
relationships over time
B.In a vertical analysis of a balance sheet, each asset item is stated as a percent of total
assets
C.In a vertical analysis of an income statement, each item is stated as a percent of total
expenses
D.Major differences between a companys vertical analysis and industry averages should
be investigated
48) Which of the following is not considered as a complicating factor in capital
investment decisions?
A.Income tax
B.Lease versus capital investment
C.Equal proposed lives
D.Qualitative considerations
49) The following items are reported on a companys balance sheet:
Determine the (a) current ratio, and (b) quick ratio. Round your answer to one decimal
place.
50) Receipts from cash sales of $3,200 were recorded incorrectly in the cash receipts
journal as $2,300. This item would be included on the bank reconciliation as a(n)
A.deduction from the balance per company’s records
B.addition to the balance per bank statement
C.deduction from the balance per bank statement
D.addition to the balance per company’s records
51) Armando Company owns 17,000 of the 70,000 shares of common stock outstanding
of Tito Company and exercises a significant influence over its operating and financial
policies. The investment should be accounted for by the
A.equity method
B.market method
C.cost or market method
D.cost method
52) The following are steps in the accounting cycle. Of the following, which would be
prepared last?
A.An adjusted trial balance is prepared
B.Transactions are posted to the ledger
C.An unadjusted trial balance is prepared
D.Adjusting entries are journalized and posted to the ledger
53) A corporation has 60,000 shares of $25 par value stock outstanding that has a
current market value of $120. If the corporation issues a 5-for-1 stock split, the number
of shares outstanding will be:
A.60,000
B.10,000
C.300,000
D.30,000
54) The rate of earnings is 10% and the cash to be received in two year is $10,000.
Determine the present value amount, using the following partial table of present value
of $1 at compound interest:
A.$8,900
B.$9,090
C.$7,970
D.$8,260
55) Which of the following are guidelines for behaving ethically?
A.I and II
B.II and III
C.I and III
D.I, II, and III
56) At the end of the fiscal year, the following adjusting entries were omitted:
Assuming that financial statements are prepared before the errors are discovered,
indicate the effect of each error, considered individually, by inserting the dollar amount
in the appropriate spaces. Insert “0” if the error does not affect the item.
57) Allowance for Doubtful Accounts has a debit balance of $2,300 at the end of the
year (before adjustment). The company prepares an analysis of customers’ accounts and
estimates the amount of uncollectible accounts to be $31,900. Which of the following
adjusting entries is needed to record the Bad Debt Expense for the year?
A.debit Bad Debt Expense, $34,200; credit Allowance for Doubtful Accounts, $34,200
B.debit Allowance for Doubtful Accounts, $34,200; credit Bad Debt Expense, $34,200
C.debit Allowance for Doubtful Accounts, $29,600; credit Bad Debt Expense, $29,600
D.debit Bad Debt Expense, $29,600; credit Allowance for Doubtful Accounts, $29,600
58) The units of an item available for sale during the year were as follows:
There are 19 units of the item in the physical inventory at December 31. The periodic
inventory system is used. Determine the ending inventory cost using LIFO.
59) On the basis of the following data for Branch Co. for the year ended December 31,
2011 and the preceding year, prepare a statement of cash flows using the indirect
method of reporting cash flows from operating activities.
Assume that equipment costing $125,000 was purchased for cash and the land was sold
for $15,000. The stock was issued for cash and the only entries in the retained earnings
account were net income of $56,000 and cash dividends declared and paid of $18,000.
60) An analysis of the general ledger accounts indicates that equipment, with an
original cost of $134,000 and accumulated depreciation of $105,000 on the date of sale,
was sold for $20,000 during the year. Using this information, indicate the items to be
reported on the statement of cash flows using the indirect method.
61) At the beginning of the period, the Molding Department budgeted direct labor of
$33,000 and supervisor salaries of $24,000 for 3,000 hours of production. The
department actually completed 2,500 hours of production. Determine the budget for the
department assuming that it uses flexible budgeting?
62) The following data were taken from the Balance Sheet columns of the work sheet
for April 30, 2010 for Mackenzie Company:
Prepare a classified balance sheet.
63) Briefly describe the time value of money. Why is the time value of money
important in capital investment analysis?
64) The Supplies account had a beginning balance of $1,750. Supplies purchased during
the period totaled $3,500. At the end of the period before adjustment, $350 of supplies
were on hand. Prepare the adjusting entry for supplies.
65) Mobile Service Corp. has the following debits and credits from two transactions
presented in the a customer account:
NAME: Gen-X Products, Inc.
Address: 123 My Way
Describe each transaction and the source of each posting.