1) FICA tax is a payroll tax that is paid only by employers.
2) When a corporation issues bonds, it executes a contract with the bondholders known
as a bond indenture.
3) If the standard to produce a given amount of product is 2,000 units of direct materials
at $12 and the actual was 1,600 units at $13, the direct materials quantity variance was
$4,800 favorable.
4) The effect of every transaction is an increase or a decrease in one or more of the
accounting equation elements.
5) A favorable cost variance occurs when actual cost is less than budgeted cost at actual
volumes.
6) The maturity value of a 12%, 60-day note for $5,000 is $5,100. (Assume 360 days in
a year)
7) The two sides of the accounting equation do not have to be equal.
8) When evaluating whether to lease or sell equipment, the book value of the equipment
is considered to be a sunk cost and not a differential cost.
9) The ratio that indicates the percentage of each sales dollar available to cover the
fixed costs and to provide operating income is termed as contribution margin ratio.
10) Differential revenue is the amount of increase or decrease in revenue expected from
a particular course of action as compared to an alternative.
11) In valuing damaged merchandise for inventory purposes, net realizable value is the
estimated selling price less any direct cost of disposal.
12) All receivables that are expected to be realized in cash within a year are presented
in the current assets section of the balance sheet.
13) Under accrual accounting, expenses are recorded when incurred regardless of when
paid.
14) During inflationary periods, the use of the LIFO method of costing inventory will
result in a lesser amount of net income than would result from the use of the average
method of inventory costing.
15) Matt, Inc., a toy manufacturing company uses job order cost system. The time
tickets from September jobs are summarized below.
Factory overhead is applied to jobs on the basis of a predetermined overhead rate of $25
per direct labor hour. The direct labor rate is $30 per hour.
a. Determine the total factory labor costs transferred to Work in Process and Factory
Overhead for September.
b. Determine the amount of factory overhead applied to production for September.
16) Given the following list of accounts, calculate Total Assets:
A.$84,100
B.$59,700
C.$46,250
D.$39,700
17) The condensed income statement for a business for the past year is presented as
follows:
Management is considering the discontinuance of the manufacture and sale of Product
G at the beginning of the current year. The discontinuance would have no effect on the
total fixed costs and expenses or on the sales of Products F and H. What is the amount
of change in net income for the current year that will result from the discontinuance of
Product G?
A.$10,000 increase
B.$20,000 increase
C.$10,000 decrease
D.$20,000 decrease
18) For higher levels of management, responsibility accounting reports:
A.are more detailed than for lower levels of management
B.are more summarized than for lower levels of management
C.contain almost the same level of detail as reports for lower levels of management
D.are rarely provided or reviewed
19) Classify the following as either Current Assets (CA), Investments (I), or both (CA
and I).
(a) Trade Receivables
(b) Note Receivable due in 30 days
(c) Interest Receivable on note due in 30 days
(d) Note Receivable due in 2 years
(e) Five-year Note Receivable due in a series of equal annual payments
20) The balance sheet and income statement for the year ended 2013 indicate the
following:
Based on the data presented above, what is the number of times interest charges were
earned?
A.3.5
B.2.2
C.4.0
D.The answer cannot be determined
21) For which of the following businesses would the job order cost system be most
appropriate?
A.Custom cabinet manufacturer
B.Automobile manufacturer
C.Lumber mill
D.Meat processor
22) Hodges, Inc. had the following assets and liabilities as of September 30, 2013
If assets increased by $3,914 and equity increased by $2,290 during October, what is
the increase or decrease in liabilities of Hodges as of October 31, 2013?
A.($1,624)
B.$1,624
C.$6,204
D.($6,204)
23) Which of the following is not considered when figuring net purchases?
A.Cost of goods sold
B.Purchase returns
C.Purchases discounts
D.Purchases
24) The document authorizing the issuance of materials from the storeroom for use in
manufacturing is called:
A.materials requisition
B.purchase requisition
C.receiving report
D.purchase order
25) The sale of a finished good on account would:
A.decrease Cost of Goods Sold and increase Finished Goods
B.increase Cost of Goods Sold and decrease Finished Goods; increase Accounts
Receivable and increase Sales
C.increase Sales Expense and decrease Finished Goods; decrease Cash and decrease
Accounts Receivable
D.increase Work-in-Process and decrease Finished Goods; increase Accounts
Receivable and increase Sales
26) A to Z Corporation issued a $30,000 note payable to borrow cash from the bank. On
the Statement of Cash Flows, the transaction would be classified as:
A.Cash Flows from Operating Activities
B.Cash Flows from Investing Activities
C.Cash Flows from Financing Activities
D.Noncash transaction
27) The role of accounting in business is best defined as:
A.an information system that provides reports to stakeholders about the economic
activities and condition of a business
B.a method of forecasting the future profitability of a company
C.the policies, procedures, and strategies used in a business
D.transaction analysis
28) A department store apportions payroll costs on the basis of the number of payroll
checks issued. Accounting costs are apportioned on the basis of the number of reports.
The payroll costs for the year were $100,000, and the accounting costs for the year
totaled $50,000. The number of payroll checks issued and the number of reports for
each department are as follows:
Determine the amount of (a) payroll cost and (b) accounting cost to be apportioned to
each department.
29) Which of the following businesses is most likely to use a job order costing system?
A.A paper mill
B.A swimming pool installer
C.A company that manufactures chlorine for swimming pools
D.An oil refinery
30) Donald Duck Co.
Donald Duck Co. has a five-day workweek (Monday through Friday). Employees earn
$500 per day.
Refer to Donald Duck Co. How much cash will be paid on Friday?
A.$500
B.$1,500
C.$2,500
D.$1,000
31) A responsibility center in which the department manager has responsibility for and
authority over costs and revenues is called a(n):
A.profit center
B.investment center
C.volume center
D.cost center
32) Washington Corporation has the following financial data for 2013 and 2012 .
What is Washingtons current ratio for 2013?
A.1.08
B.0.79
C.1.27
D.1.50
33) The excess of issue price over par of common stock is termed as:
A.discount
B.income
C.deficit
D.premium
34) Which of the following is a characteristic of fixed assets?
A.Fixed assets are offered for sale as part of normal operations
B.Fixed assets do not exist physically
C.Fixed assets are long-term or relatively permanent assets
D.Fixed assets that are no longer used in operations are still classified as fixed assets
35) The recording of the jobs completed would decrease:
A.Factory Overhead
B.Finished Goods
C.Work-in-Process
D.Cost of Goods Sold
36) Requiring employees to take annual vacations is part of which element of internal
control?
A.Control environment
B.Risk assessment
C.Control procedures
D.Monitoring
37) A sales invoice included the following information: merchandise price, $5,000;
terms 1/10, n/eom. Assuming that a credit for merchandise returned of $600 is granted
prior to payment, and that the invoice is paid within the discount period, what is the
amount of cash received by the seller?
A.$4,656
B.$4,400
C.$4,356
D.$4,950
38) Production estimates for August are as follows:
For each unit produced, the direct materials requirements are as follows:
The number of pounds of materials A and B required for August production is:
A.195,000 lbs. of A; 39,000 lbs. of B
B.200,000 lbs. of A; 40,000 lbs. of B
C.205,000 lbs. of A; 41,000 lbs. of B
D.210,000 lbs. of A; 42,000 lbs. of B
39) If a fixed asset with an original cost of $18,000 and accumulated depreciation of
$2,000 is sold for $15,000, the company must:
A.recognize a loss on the income statement under other expenses
B.recognize a loss on the income statement under operating expenses
C.recognize a gain on the income statement under other revenues
D.recognize a gain on the income statement under revenues
40) Which of the following products would most likely be manufactured using a job
order costing system?
A.Number 2 pencils
B.Computer monitors
C.Wedding invitations
D.Paper