1) A large public corporation normally uses registrars and transfer agents to maintain
records of the stockholders.
2) Most companies who have several bank accounts, petty cash, and cash on hand,
would list each separately on the balance sheet.
3) If, prior to the last weekly payroll period of the calendar year, the cumulative
earnings for an employee are $98,800, earnings subject to social security tax are
$100,000, and the tax rate is 6.0%, the employer’s social security tax on the $2,000
gross earnings paid on the last day of the year is $120.
4) Absorption costing is required for financial reporting under generally accepted
accounting principles.
5) If the underapplied factory overhead amount is material, it is transferred to Cost of
Goods Sold at the end of the fiscal year.
6) A variable cost system is an accounting system where standards are set for each
manufacturing cost element.
7) Cost systems using detailed estimates of each element of manufacturing cost entering
into the finished product are called budgeted cost systems.
8) A remittance advice is the notification accompanying the check issued to a creditor
that states the specific invoice being paid.
9) A bottleneck happens when a key piece of manufacturing machinery can produce
1000 units per hour and demand for the product supports a production rate of 1200 units
per hour.
10) Transfer prices may be used when decentralized units are organized as cost, profit,
or investment centers.
11) A company using the periodic inventory system has the following account balances:
Merchandise Inventory at the beginning of the year, $3,600; Freight-In, $650;
Purchases, $10,700; Purchases Returns and Allowances, $1,950; Purchases Discounts,
$330. The cost of merchandise purchased is equal to
A.$12,670
B.$9,070
C.$8,420
D.$17,230
12) Which of the following errors, each considered individually, would cause the trial
balance totals to be unequal?
A.a transaction was not posted
B.a payment of $67 for insurance was posted as a debit of $76 to Prepaid Insurance and
a credit of $76 to Cash
C.a payment of $4,450 to a creditor was posted as a debit of $4,500 to Accounts
Payable and a credit of $450 to Accounts Receivable
D.cash received from customers on account was posted as a debit of $720 to Cash and a
credit of $720 to Accounts Payable
13) The Flapjack Corporation had 8,200 actual direct labor hours at an actual rate of
$12.40 per hour. Original production had been budgeted for 1,100 units, but only 1,000
units were actually produced. Labor standards were 7.6 hours per completed unit at a
standard rate of $13.00 per hour.
Compute the labor rate variance.
A.4,920U
B.4,920F
C.4,560U
D.4,560U
14) Answer the following questions for each of the errors listed below, considered
individually:
(a) Did the error cause the trial balance totals to be unequal?
(b) What is the amount of the difference between the trial balance totals (where
applicable)?
(c) Which of the trial balance totals, debit or credit, is the larger (where applicable)?
Present your answers in columnar form, using the following headings:
15) Which of the following ratios provides a solvency measure that shows the margin of
safety of bondholders and also gives an indication of the potential ability of the
business to borrow additional funds on a long-term basis?
A.ratio of fixed assets to long-term liabilities
B.ratio of net sales to assets
C.number of days’ sales in receivables
D.rate earned on stockholders’ equity
16) The Clydesdale Company has sales of $4,500,000. It also has invested assets of
$2,000,000 and operating expenses of $3,600,000. The company has established a
minimum rate of return of 7%.
What is Clydesdale Company’s residual income?
A.$252,000
B.$900,000
C.$1,400,000
D.$760,000
17) Given the following information, compute Accounts Receivable Turnover:
A.6.75
B.7.5
C.6.13
D.6.82
18) Another name for the quick ratio is
A.quick cash ratio
B.current ratio
C.working capital ratio
D.acid-test ratio
19) The journal entry a company uses to record the issuance of an interest-bearing note
for the purpose of borrowing funds for the business is
A.debit Accounts Payable; credit Notes Payable
B.debit Cash; credit Notes Payable
C.debit Notes Payable; credit Cash
D.debit Cash and Interest Expense; credit Notes Payable
20) Just-in-time processing is a business philosophy that focuses on reducing time and
cost and eliminating poor quality. This is accomplished in manufacturing and
non-manufacturing processes by:
A.moving a product from process to process as each function is completed
B.combining processing functions into work centers and cross-training workers to
perform more than one function
C.having production supervisors attempt to enter enough materials into manufacturing
to keep all manufacturing departments operating
D.having workers typically perform one function on a continuous basis
21) The formula to compute direct material quantity variance is to calculate the
difference between
A.actual costs – standard costs
B.standard costs – actual costs
C.(actual quantity * standard price) – standard costs
D.actual costs – (standard price * standard costs)
22) Prepare entries to record the following:
(a) Issued 1,000 shares of $15 par common stock at $54 for cash.
(b) Issued 1,400 shares of no-par common stock in exchange for equipment with a fair
market price of $24,000.
(c) Purchased 100 shares of treasury stock at $26.
(d) Sold 100 shares of treasury stock purchased in (c) at $29.
23) If fixed costs are $300,000, the unit selling price is $31, and the unit variable costs
are $22, what is the break-even sales (units) if fixed costs are reduced by $30,000?
A.30,000 units
B.8,710 units
C.12,273 units
D.20,000 units
24) Which of the following transactions is recorded in the purchases journal?
A.purchase of store supplies on account
B.return of damaged office equipment
C.purchase of store supplies for cash
D.purchase of office equipment for cash
25) ABC Corporation has three service departments with the following costs and
activity base:
ABC has three operating divisions, Micro, Macro and Super. Their revenue, cost and
activity information are as follows:
How much service department cost would be allocated to the Super Division?
A.$350,000
B.$100,000
C.$125,000
D.$550,000
26) The amount of increase or decrease in revenue that is expected from a particular
course of action as compared with an alternative is termed:
A.manufacturing margin
B.contribution margin
C.differential cost
D.differential revenue
27) Bonds with a face amount $1,000,000, are sold at 96. The entry to record the
issuance is
A.Cash 1,000,000
Premium on Bonds Payable 40,000
Bonds Payable 960,000
B.Cash 960,000
Premium on Bonds Payable 40,000
Bonds Payable 1,000,000
C.Cash 960,000
Discount on Bonds Payable 40,000
Bonds Payable 1,000,000
D.Cash 960,000
Bonds Payable 960,000
28) 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 $120,000 of net income under each of the following
assumptions:
(a) No agreement as to division of net income.
(b) In ratio of capital balances.
(c) In ratio of time devoted to business.
(d) Interest of 10% on capital balances and remainder equally.
(e) Interest of 10% on capital balances, salaries of $40,000 to Jackson and $20,000 to
Campbell, and the remainder equally.
29) You began your new job as the accountant for Morton Company. You were
surprised to find that the company had a $2,000 petty cash fund, which sits in the break
room. The President of the company told you: Our petty cash system here works quite
smoothly. Since everyone is honest here, everyone has access to the fund for incidentals
that might pop up in the course of the business day. Most of these situations dont have
any receipts tied to them, so I just put the money back in the fund when my secretary
tells me that we have run out and debit the amount to Miscellaneous Expense.
Required:
(a) Should you implement some controls on petty cash? Why?
(b) If so, what controls could be used for petty cash?
30) Assuming no employees are subject to ceilings for their earnings, Jensen Company
has the following information for the pay period of January 15 – 31, 20xx.
Assuming that all wages are subject to federal and state unemployment taxes, the
Payroll Taxes Expense would be recorded as:
A.$1,370
B.$750
C.$620
D.$2,870
31) Scott Manufacturing Co.’s static budget at 10,000 units of production includes
$40,000 for direct labor and $4,000 for electric power. Total fixed costs are $25,000. At
12,000 units of production, a flexible budget would show:
A.variable costs of $52,800 and $30,000 of fixed costs
B.variable costs of $44,000 and $25,000 of fixed costs
C.variable costs of $52,800 and $25,000 of fixed costs
D.variable and fixed costs totaling $69,000
32) On May 1, 2014, Stanton Company purchased $60,000 of Harris Companys 12%
bonds at 100 plus accrued interest of $2,400. On June 30, 2014, Stanton received its
first semiannual interest. On February 1, 2015, Stanton sold $50,000 of the bonds at
103 plus accrued interest.
The journal entry Stanton will record on June 30, 2014, will include:
A.a credit to Interest Revenue for $2,400
B.a debit to Cash for $3,600
C.a credit to Cash for $2,400
D.a credit to Interest Receivable for $1,200
33) Which of the following entries records the receipt of cash for two months’ rent? The
cash was received in advance of providing the service
A.Prepaid Rent, debit; Rent Revenue, credit
B.Cash, debit; Unearned Rent, credit
C.Cash, debit; Prepaid Rent, credit
D.Cash, debit; Rent Expense credit
34) Operating expenses other than depreciation for the year were $400,000. Prepaid
expenses increased by $17,000 and accrued expenses decreased by $30,000 during the
year. Cash payments for operating expenses to be reported on the cash flow statement
using the direct method would be
A.$353,000
B.$413,000
C.$447,000
D.$383,000
35) The Boxwood Company sells blankets for $60 each. The following was taken from
the inventory records during May. The company had no beginning inventory on May 1.
Assuming that the company uses the perpetual inventory system, determine the gross
profit for the sale of May 23 using the FIFO inventory cost method.
A.$108
B.$120
C.$72
D.$180
36) The following information pertains to Brock Company. Assume that all balance
sheet amounts represent both average and ending balance figures. Assume that all sales
were on credit.
Assets
Liabilities and Stockholders Equity
Income Statement
What is the current ratio for this company?
A. 1.42
B. 0.78
C.1.58
D. 0.67
37) Income statement information for Sharif Corporation is provided below:
Required: Prepare a vertical analysis of the given income statement information for
Sharif Corporation.
38) Sabas Company has 20,000 shares of $100 par, 2% cumulative preferred stock and
100,000 shares of $50 par common stock. The following amounts were distributed as
dividends:
Determine the dividends per share for preferred and common stock for each year.
39) On January 8th, Damien Lawson transfers ownership of several pieces of office
equipment to his new business, JumpStart. When new, these items were worth $72,500.
The fair market value of the equipment is $60,000. Journalize this transfer.
40) Sabas Company has 20,000 shares of $100 par, 1% non-cumulative preferred stock
and 100,000 shares of $50 par common stock. The following amounts were distributed
as dividends:
Determine the dividends per share for preferred and common stock for each year.
41) Within the United States, the dominant body in the primary development of
accounting principles is the
42) Journalize the following transactions for Armour Inc. using both the periodic
inventory system and the perpetual inventory system, presented in a side-by-side format
shown at the end of this exercise.
Oct.7 Sold merchandise on credit to Rondo Distributors, terms n/30, FOB destination,
$1,200; the cost of the merchandise was $720.
Oct. 8 Purchased merchandise, $10,000, terms FOB shipping point, 2/15, n/30, with
prepaid freight charges of $525 added to the invoice.
SALES OF MERCHANDISE ON CREDIT
Oct.7 Sold merchandise on credit to Rondo Distributors, terms n/30, FOB destination,
$1,200; the cost of the merchandise was $720:
43) Prepare the December 31 adjusting entries for the following transactions. Omit
explanations.
1> Fees accrued but unbilled total $6,300.
2> The supplies account balance on December 31 is $4,750. Supplies on hand are $960.
3> Wages accrued but not paid are $2,700.
4> Depreciation of office equipment is $1,650.
5> Rent expired during year, $10,800.
44) Why is the sales budget usually prepared first?