1) Investments in stocks that are expected to be held for the long term are listed in the
stockholders equity section of the balance sheet.
2) The three inventory costing methods will normally each yield different amounts of
net income.
3) If the volume of sales is $6,000,000 and sales at the break-even point amount to
$4,800,000, the margin of safety is 25%.
4) Currently attainable standards do not allow for reasonable production difficulties.
5) On the variable costing income statement, the figure representing the difference
between the contribution margin and income from operations is the fixed manufacturing
costs and fixed selling and administrative expenses.
6) The statement of cost of goods manufactured is an extension of the income statement
for a manufacturing company.
7) Generally accepted accounting principles require the accrual basis of accounting.
8) Freight in is the amount paid by the company to deliver merchandise sold to a
customer.
9) A plantwide factory overhead rate is computed by dividing total budgeted factory
overhead costs by the plantwide allocation base.
10) A qualitative characteristic that may impact upon capital investment analysis is
employee morale.
11) When companies sell their receivables to other companies, the transaction is called
factoring.
12) Adjusting entries affect only expense and asset accounts.
13) For a period during which the quantity of inventory at the end was smaller than that
at the beginning, income from operations reported under variable costing will be
smaller than income from operations reported under absorption costing.
14) If in evaluating a proposal by use of the net present value method there is an excess
of the present value of future cash inflows over the amount to be invested, the rate of
return on the proposal is less than the rate used in the analysis.
15) The entry to transfer goods in process from Department X to Department Y includes
a debit to Work in Process-Department X.
16) The financial statements are prepared from the unadjusted trial balance.
17) The cost of repairing damage to a machine during installation is debited to a fixed
asset account.
18) Job order cost accounting systems can be used only for companies that manufacture
a product.
19) The reduction of par or stated value of stock by issuance of a proportionate number
of additional shares is termed a
A.liquidating dividend
B.stock split
C.stock option
D.preferred dividend
20) Hakik Enterprises offers rug cleaning services to business clients. Below is the
work sheet containing the trial balance for the month ended July 31, 2012.
Journalize adjusting entries based on the work sheet trial balance and the adjustment
data provided below.
a) The equipment is estimated to last for 5 years with no salvage value. The asset will
be depreciated evenly over its useful life. Record one months depreciation.
b) Accrued wages, $2.
c) Unused supplies on hand, $8.
d) Of the unearned revenue, 75% has been earned.
e) Unexpired insurance remaining at the end of the month, $9.
21) 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
22) In general, consolidated financial statements should be prepared
A.when a corporation owns more than 20% and less than 40% of the common stock of
another company
B.when a corporation owns more than 50% of the common stock of another company
C.only when a corporation owns 100% of the common stock of another company
D.whenever the market value of the stock investment is significantly lower than its cost
23) Which of the following will increase retained earnings?
A.Expenses > revenues
B.Dividends are declared and paid
C.Revenues > expenses
D.Cash is received from customers on account
24) A fixed asset with a cost of $30,000 and accumulated depreciation of $28,500 is
sold for $3,500. What is the amount of the gain or loss on disposal of the fixed asset?
A.$2,000 loss
B.$1,500 loss
C.$3,500 gain
D.$2,000 gain
25) Supplies purchased on account were incorrectly recorded as Office Equipment. The
correcting entry would be
A.Supplies, debit; Office Equipment, credit
B.Accounts Receivable, debit; Supplies, credit
C.Office Equipment, debit; Supplies Expense, credit
D.Supplies, debit; Accounts Payable, credit
26) The journal entry a company records for the issuance of bonds when the contract
rate and the market rate are the same is
A.debit Bonds Payable, credit Cash
B.debit Cash and Discount on Bonds Payable, credit Bonds Payable
C.debit Cash, credit Premium on Bonds Payable and Bonds Payable
D.debit Cash, credit Bonds Payable
27) In 2012 Robert Corporation had net income of $250,000 and paid dividends to
common stockholders of $50,000. They had 50,000 shares of common stock
outstanding during the entire year. Robert Corporation’s common stock is selling for
$50 per share on the New York Stock Exchange.
Robert Corporation’s price-earnings ratio is
A.10 times
B.5 times
C.2 times
D.8 times
28) An investor purchased 500 shares of common stock, $25 par, for $19,250.
Subsequently, 100 shares were sold for $35 per share. What is the amount of gain or
loss on the sale?
A.$3,500 gain
B.$350 gain
C.$350 loss
D.$500 gain
29) A negative fixed overhead volume variance can be caused due to the following
except:
A.Sales orders at a low level
B.Machine breakdowns
C.Employee inexperience
D.Increase in utility costs
30) On January 1, 2011, Zero Company obtained a $52,000, four-year, 6.5% installment
note from Regional Bank. The note requires annual payments of $15,179, beginning on
December 31, 2011. The December 31, 2013 carrying amount in the amortization table
for this installment note will be equal to:
A.$0
B.$13,000
C.$14,252
D.$16,603
31) Another name for the quick ratio is
A.quick cash ratio
B.current ratio
C.working capital ratio
D.acid-test ratio
32) Credit memos from the bank
A.decrease a bank customer’s account
B.are used to show a bank service charge
C.show that a company has deposited a customer’s NSF check
D.show the bank has collected a note receivable for the customer
33) Rosalba Manufacturing Company had the following account balance for 2012:
Collections on account were $625,000 in 2012.
Cost of goods sold was 68% of sales.
Direct materials purchased amounted to $90,000.
Factory overhead was 300% of the cost of direct labor.
Compute:
a) sales revenue (all sales were on account)
b) cost of goods sold
c) cost of goods manufactured
d) direct labor incurred
e) direct materials used
f) factory overhead incurred
34) Finished goods inventory is reported on the:
A.income statement as a period cost
B.balance sheet as a long-term asset
C.balance sheet as a current asset
D.income statement as revenue
35) Partridge Co. can further process Product J to produce Product D. Product J is
currently selling for $21 per pound and costs $15.75 per pound to produce. Product D
would sell for $38 per pound and would require an additional cost of $9.25 per pound to
produce.
What is the differential cost of producing Product D?
A.$6.50 per pound
B.$9.25 per pound
C.$17 per pound
D.$5.25 per pound
36) Managerial accounting information includes both historical and estimated data.
37) Which of the following is NOT an example of a cost that varies in total as the
number of units produced changes?
A.Electricity per KWH to operate factory equipment
B.Direct materials cost
C.Insurance premiums on factory building
D.Wages of assembly worker
38) On January 1, 2011, Zero Company obtained a $52,000, four-year, 6.5% installment
note from Regional Bank. The note requires annual payments consisting of principal
and interest of $15,179, beginning on December 31, 2011. The December 31, 2011
carrying amount in the amortization table for this installment note will be equal to:
A.$27,635
B.$40,201
C.$36,821
D.$48,620
39) 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 profit margin for Division X?
A.81.3%
B.20.2%
C.40.7%
D.60%
40) Pacific Division for Bean Company has a rate of return on investment of 28% and
an investment turnover of 1.4. What is the profit margin?
A.28%
B.20%
C.14%
D.39.2%
41) On the balance sheet, the amount shown for the Allowance for Doubtful Accounts is
equal to the
A.Uncollectible accounts expense for the year
B.total of the accounts receivables written-off during the year
C.total estimated uncollectible accounts as of the end of the year
D.sum of all accounts that are past due.
42) 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
43) During the period, labor costs incurred on account amounted to $275,000 including
$200,000 for production orders and $75,000 for general factory use. In addition, factory
overhead applied to production was $32,000. From the following, select the entry to
record the actual factory overhead costs incurred.
A.Accounts Payable75,000
Factory Overhead75,000
B.Factory Overhead32,000
Accounts Payable32,000
C.Work in Process75,000
Wages Payable 75,000
D.Factory Overhead75,000
Wages Payable75,000
44) On the statement of cash flows prepared by the indirect method, a $50,000 gain on
the sale of investments would be
A.deducted from net income in converting the net income reported on the income
statement to cash flows from operating activities
B.added to net income in converting the net income reported on the income statement to
cash flows from operating activities
C.added to dividends declared in converting the dividends declared to the cash flows
from financing activities related to dividends
D.deducted from dividends declared in converting the dividends declared to the cash
flows from financing activities related to dividends
45) Using the lower of cost or market, what should the total inventory value be for the
following items:
Apply the lower-of-cost-or-market method to inventory as a whole.
46) What is a capital expenditures budget?
47) Consider the cash account below.
Additional Information: cash disbursements were 80% of collections.
How much was the Beginning Balance of the Cash Account?
48) Other than accounts receivable and notes receivable, name other receivables that
might be included in the general ledger.
49) The actual cash received during the week ended January 16 for cash sales was
$7,427 and the amount indicated by the cash register total was $7,413. Journalize the
entry to record the cash receipts and cash sales.
Journal
50) The net income reported on an income statement for the current year was $58,000.
Depreciation recorded on fixed assets for the year was $24,000. In addition, equipment
with an original cost of $130,000 and accumulated depreciation of $115,000 on the date
of the sale, was sold for $20,000. Balances of the current asset and current liability
accounts at the end and beginning of the year are listed below. Prepare the cash flows
from operating activities section of a statement of cash flows using the indirect method.
51) On May 7, Carpet Barn Company offered to pay $83,000 for land that had a selling
price of $105,000. On May 15, Carpet Barn accepted a counteroffer of $95,000. On
June 5, the land was assessed at a value of $115,000 for property tax purposes. On
December 10, Carpet Barn Company was offered $135,000 for the land by another
company. At what value should the land be recorded in Carpet Barn Companys records?
52) Beginning inventory, purchases and sales data for widgets are as follows:
Complete the inventory cost card assuming the business maintains a perpetual
inventory system and calculates the cost of merchandise sold and ending inventory
using LIFO.
53) The assets and liabilities of S&P Day Spa at December 31, 2014 and expenses for
the year are listed below. The retained earnings balance was $68,000 at January 1, 2014.
Net income for 2014 is $45,625.
Prepare an income statement for the current year ended December 31,
54) A one-year insurance policy was purchased on June 1, 2011 for $1,500. The
adjusting entry on December 31, 2011 would be