1) Sarbanes-Oxleys purpose is to improve financial reporting.
2) Accrued taxes payable are generally reported on the balance sheet as a current
liability.
3) Direct costs can be specifically traced to a cost object.
4) The income summary account is also known as the clearing account.
5) Cash dividends become a liability to a corporation on the date of record.
6) A manufacturer may employ a job order cost system for some of its products and a
process cost system for others.
7) When a portion of a bond issue is redeemed, a related proportion of the unamortized
premium or discount must be written off.
8) Notes Receivable and Accounts Receivable can also be called trade receivables.
9) Standards are designed to evaluate price and quantity variances separately.
10) The par value of common stock must always be equal to its market value on the
date the stock is issued.
11) Cash flows from financing activities, as part of the statement of cash flows, include
payments for dividends.
12) If the costs for direct materials, direct labor, and factory overhead were $522,200,
$82,700, and $45,300, respectively, for 16,000 equivalent units of production, the
conversion cost per equivalent unit was $8.00.
13) Managerial accounting information is used by external and internal users equally.
14) The budgeted volume of production is normally computed as the sum of (1) the
expected sales volume and (2) the desired ending inventory.
15) A job order cost system would be appropriate for a crude oil refining business.
16) A job order cost accounting system provides for a separate record of the cost of
each particular quantity of product that passes through the factory.
17) One of the primary uses of a cost of production report is to assist management in
controlling production costs.
18) If a company has issued only one class of stock, the earnings per share are
determined by dividing net income plus interest expense by the number of shares
outstanding.
19) Chicks Corporation had $1,100,000 in invested assets, sales of $1,210,000, income
from operations amounting to $302,500, and a desired minimum rate of return of 15%.
The profit margin for Chicks is:
A.25%
B.22%
C.15%
D.27.5%
20) The systematic examination of the relationships among selling prices, volume of
sales and production, costs, and profits is termed:
A.contribution margin analysis
B.cost-volume-profit analysis
C.budgetary analysis
D.gross profit analysis
21) Below is a table for the present value of $1 at Compound interest.
Below is a table for the present value of an annuity of $1 at compound interest.
Using the tables above, if an investment is made now for $23,500 that will generate a
cash inflow of $8,000 a year for the next 4 years, what would be the net present value
(rounded to the nearest dollar) of the investment, (assuming an earnings rate of 10%)?
A.$23,500
B.$16,050
C.$25,360
D.$1,860
22) The following totals for the month of April were taken from the payroll register of
Magnum Company.
The entry to record accrual of employers payroll taxes would include a
A.debit to Payroll Tax Expense for $1,170
B.debit to FICA Taxes Payable for $1,500
C.credit to Payroll Tax Expense for $420
D.debit to Payroll Tax Expense for $1,620
23) Which of the items below would appear in the Income Statement columns of the
work sheet?
A.Equipment
B.Unearned Fees
C.Prepaid Expense
D.Net Loss
24) In credit terms of 3/15, n/45, the “3” represents the
A.number of days in the discount period
B.full amount of the invoice
C.number of days when the entire amount is due
D.percent of the cash discount
25) The following adjusting journal entry found in the journal is missing an
explanation. Select the best explanation for the entry.
A.Record payment of wages
B.Record wages paid last month
C.Record wages paid in advance
D.Record wages expense incurred and to be paid next month
26) If Department K had 2,000 units, 40% completed, in process at the beginning of the
period, 12,000 units were completed during the period, and 1,200 units were 25%
completed at the end of the period, what was the number of equivalent units of
production for conversion costs for the period if the first-in, first-out method is used to
cost inventories?
A.11,500
B.11,200
C.15,200
D.10,000
27) The assets and liabilities of the company are $128,000 and $84,000, respectively.
Owners equity should equal
A.$212,000
B.$44,000
C.$128,000
D.$84,000
28) Generally, period costs are classified as either
A.selling expenses or production expenses
B.administrative expense or production expenses
C.selling expenses or administrative expenses
D.general expenses or selling expenses
29) The following data relate to direct labor costs for the current period:
What is the direct labor rate variance?
A.$2,250.00 unfavorable
B.$2,125.00 unfavorable
C.$2,250.00 favorable
D.$2,125.00 favorable
30) On December 31, Strike Company has decided to trade-in one of its batting cages
for another one that has a cost of $500,000. The seller of the batting cage is willing to
allow a trade-in amount of $11,000. The initial cost of the old equipment was $215,000
with an accumulated depreciation of $185,000. Depreciation has been taken up to the
end of the year. The difference will be paid in cash. What is the amount of the gain or
loss on this transaction?
A.Loss of $11,000
B.Gain of $11,000
C.Loss of $19,000
D.No loss or gain will be recorded.
31) Selected accounts with some debits and credits omitted are presented as follows:
If the balance of Work in Process at October 31 is $21,000, what was the amount of
factory overhead applied in October?
A.$63,300
B.$21,300
C.$42,300
D.$11,300
32) Merchandise is sold for cash. The selling price of the merchandise is $5,000 and the
sale is subject to a 7% state sales tax. The journal entry to record the sale would include
A.A credit to Cash for $5,000
B.A credit to Sales for $5,350
C.A credit to Sales Tax Payable for $350
D.None of these answers are correct
33) A check drawn by a company in payment of a voucher for $965 was recorded in the
journal as $695. What entry is required in the company’s accounts?
A.debit Accounts Payable; credit Cash
B.debit Cash; credit Accounts Receivable
C.debit Cash; credit Accounts Payable
D.debit Accounts Receivable; credit Cash
34) The first budget customarily prepared as part of an entity’s master budget is the:
A.production budget
B.cash budget
C.sales budget
D.direct materials purchases
35) Land, originally purchased for $30,000, is sold for $62,000 in cash. What is the
effect of the sale on the accounting equation?
A.assets increase $62,000; owner’s equity increases $62,000
B.assets increase $32,000; owner’s equity increases $32,000
C.assets increase $62,000; liabilities decrease $30,000; owner’s equity increases
$32,000
D.assets increase $30,000; no change for liabilities; owner’s equity increases $62,000
36) Identify each of the following as relating to (a) the control environment, (b) risk
assessment, or (c) control procedures.
1> Mandatory vacations
2> Personnel policies
3> Report of outside consultants on future market changes
37) In order to be useful to managers, management accounting reports should possess
all of the following characteristics EXCEPT:
A.provide objective measures of past operations and subjective estimates about future
decisions
B.be prepared in accordance with generally accepted accounting principles
C.be provided at any time management needs information
D.be prepared to report information for any unit of the business to support decision
making
38) If fixed costs are $850,000 and variable costs are 60% of sales, what is the
break-even point (dollars)?
A.$2,125,000
B.$ 340,000
C.$3,400,000
D.$1,416,666
39) On March 1, a company collects revenue in advance for the next twelve months and
credits a liability account. The adjusting entry at year end on the work sheet would
A.increase a liability account
B.decrease an asset account
C.decrease a revenue account
D.decrease a liability account
40) Which of the following would appear as a prior-period adjustment?
A.loss resulting from the sale of fixed assets
B.difference between the actual and estimated uncollectible accounts receivable
C.error in the computation of depreciation expense in the preceding year
D.loss from the restructuring of assets
41) Carter Co. sells two products, Arks and Bins. Last year Carter sold 14,000 units of
Arks and 56,000 units of Bins. Related data are:
What was Carter Co.’s sales mix last year?
A.20% Arks, 80% Bins
B.12% Arks, 28% Bins
C.70% Arks, 30% Bins
D.40% Arks, 20% Bins
42) The charter of a corporation provides for the issuance of 100,000 shares of common
stock. Assume that 30,000 shares were originally issued and 5,000 were subsequently
reacquired. What is the number of shares outstanding?
A.35,000
B.70,000
C.25,000
D.30,000
43) 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. Present entries to record the following
transactions for the current fiscal year:
Lisbon Co.
(a) Issuance of the bonds.
(b) Second semiannual interest payment.
(c) Amortization of bond premium for the year, using the straight-line method of
amortization.
Orange Inc.
(d) Purchase of the bonds.
(e) Receipt of second semiannual interest payment.
(f) Amortization of bond premium for the year, using the straight-line method of
amortization.
44) Next years sales forecast shows that 20,000 units of Product A and 22,000 units of
Product B are going to be sold for prices of $10 and $12 per unit, respectively. The
desired ending inventory of Product A is 20% higher than its beginning inventory of
2,000 units. The beginning inventory of Product B is 2,500 units. The desired ending
inventory of B is 3,000 units.
Total budgeted sales of both products for the year would be:
A.$42,000
B.$200,000
C.$264,000
D.$464,000
45) An employee receives an hourly rate of $27, with time and a half for all hours
worked in excess of 40 during a week. Payroll data for the current week are as follows:
hours worked, 46; federal income tax withheld, $350; cumulative earnings for year
prior to current week, $99,700; social security tax rate, 6.0% on maximum of $100,000;
and Medicare tax rate, 1.5% on all earnings. What is the net amount to be paid to the
employee?
A.$713.75
B.$935.15
C.$764.75
D.$873.77
46) Mocha Company manufactures a single product by a continuous process, involving
three production departments. The records indicate that direct materials, direct labor,
and applied factory overhead for Department 1 were $100,000, $125,000, and
$150,000, respectively. The records further indicate that direct materials, direct labor,
and applied factory overhead for Department 2 were $55,000, $65,000, and $80,000,
respectively. In addition, work in process at the beginning of the period for Department
1 totaled $75,000, and work in process at the end of the period totaled $60,000.
The journal entry to record the flow of costs into Department 2 during the period for
applied overhead is:
A.Factory Overhead–Department 280,000
Work in Process–Department 280,000
B.Work in Process–Department 2230,000
Factory Overhead–Department 2230,000
C.Work in Process–Department 280,000
Factory Overhead–Department 280,000
D.Work in Process–Department 2150,000
Factory Overhead–Department 2150,000
47) An unfunded pension liability is reported on the balance sheet as
A.current liability
B.owner’s equity
C.long-term liability
D.current liability or long-term liability, depending upon when the pension liability is to
be paid
48) Indicate whether the following error would cause the adjusted trial balance totals to
be unequal. If the error would cause the adjusted trial balance totals to be unequal,
indicate whether the debit or credit total is higher and by how much.
49) Two companies are financed as follows:
Income tax is estimated at 40% of income.
Determine for each company the earnings per share of common stock, assuming that
the income before bond interest and income taxes is $2,280,000 each.
50) Prepare an income statement and a statement of owners equity, for the month ended
August 31, 2014, from the following T-Accounts of Marley Company.
51) The assets and liabilities of Amos Moving Services at March 31, 2014, the end of
the current year, and its revenue and expenses for the year are listed below. The capital
of the owner was $180,000 at April 1, 2013, the beginning of the current year. Mr.
Amos invested an additional $25,000 in the business during the year.
Prepare a statement of owners equity for the current year ended March 31, 2014.
52) Morgan Olsen owns and operates Crystal Pool Service Company. On January 1,
2014, Morgan Olsen, Capital had a balance of $252,000. During the year Morgan
invested an additional $32,000 and withdrew $52,400. For the year ended December
31, 2014 Crystal Pool Service Company reported a net income of $73,200. Prepare a
Statement of Owners Equity for the year ended December 31, 2014.
53) Discuss internal and external users of accounting information. What areas of
accounting provide them with information? Give an example of the type of report each
type of user might use.