1) At the end of the fiscal period, prepaid expenses are reported on the income
statement as expenses.
2) If a business sells two products, it is not possible to estimate the break-even point.
3) Services provided on account is recorded in the revenue journal.
4) Depreciation on factory plant and equipment is an example of factory overhead cost.
5) The closer a company moves towards Just in Time production, the differences in unit
costs between average costing and FIFO will be reduced.
6) Receivables not currently collectible are reported in the investments section of the
balance sheet.
7) Unsold consigned merchandise should be included in the consignee’s inventory.
8) Normally standard costs should be revised when labor rates change to incorporate
new union contracts.
9) In computing the maturity date of a note, the date the note is issued is included but
the due date is omitted.
10) At 12/31/2009, the cash and securities held in a sinking fund to redeem bonds in
2011 are classified on the balance sheet as current assets.
11) The abbreviation FOB stands for Free On Board.
12) Sales to customers who use bank credit cards, such as MasterCard and VISA, are
generally treated as credit sales.
13) The lowest contribution margin per scarce resource is the most profitable.
14) The primary disadvantage of decentralized operations is that decisions made by one
manager may affect other managers in such a way that the profitability of the entire
company may suffer.
15) Accrued revenues are ordinarily listed on the balance sheet as current liabilities.
16) Intangible assets differ from property, plant and equipment assets in that they lack
physical substance.
17) The process by which management plans, evaluates, and controls long-term
investment decisions involving fixed assets is called cost-volume-profit analysis.
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 about the same level of detail as reports for lower levels of management
D.are rarely provided or reviewed
19) Sales to customers who use bank credit cards such as MasterCard and Visa are
usually recorded by a
A.debit to Bank Credit Card Sales, debit to Credit Card Expense, and a credit to Sales
B.debit to Cash and a credit to Sales
C.debit to Cash, credit to Credit Card Expense, and a credit to Sales
D.debit to Sales, debit to Credit Card Expense, and a credit to Cash
20) On July 8, Alton Co. issued an $80,000, 6%, 120-day note payable to Seller Co.
Assume that the fiscal year of Alton Co. ends July 31. Using the 360-day year in your
calculations, what is the amount of interest expense recognized by Alton in the current
fiscal year?
A.$1,200.00
B.$106.67
C.$306.67
D.$400.00
21) Managerial accounting
A.is prepared according to GAAP
B.is prepared according to management needs
C.is prepared periodically only
D.is related to the entire business entity only
22) 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.216,000 lbs. of A; 72,000 lbs. of B
B.216,000 lbs. of A; 36,000 lbs. of B
C.225,000 lbs. of A; 37,500 lbs. of B
D.234,000 lbs. of A; 39,000 lbs. of B
23) The term applied to the amount of cost to transfer to expense resulting from a
decline in the utility of intangible assets is
A.amortization
B.depletion
C.depreciation
D.allocation
24) The basis for recording direct and indirect labor costs incurred is a summary of the
period’s:
A.job order cost sheets
B.time tickets
C.employees’ earnings records
D.clock cards
25) Widgeon Co. manufactures three products: Bales; Tales; and Wales. The selling
prices are: $55; $78; and $32, respectively. The variable costs for each product are: $20;
$50; and $15, respectively. Each product must go through the same processing in a
machine that is limited to 2,000 hours per month. Bales take 5 hours to process, Tales
take 7 hours, and Wales take 1 hour.
What is the contribution per machine hour for Wales?
A.$35
B.$28
C.$17
D.$7
26) Which of the following is true in regards to a Limited Liability Company?
A.Makes up 10% of business organizations in the United States
B.Combines the attributes of a partnership and a corporation
C.Provides tax and liability advantages to the owners
D.All are correct
27) Tomas and Saturn are partners who share income in the ratio of 3:1. Their capital
balances are $80,000 and $120,000 respectively. Income Summary has a credit balance
of $30,000. What is Saturns capital balance after closing Income Summary to Capital?
A.$102,500
B.$120,000
C.$112,500
D.$127,500
28) Which one of the following will not be found on the balance sheet of a
manufacturing company?
A.cost of goods sold
B.materials
C.work in process
D.finished goods
29) Debtors are interested in the times-interest-earned ratio because they want to
A.know what rate of interest the corporation is paying
B.have adequate protection against a potential drop in earnings jeopardizing their
interest payments
C.be sure their debt is backed by collateral
D.know the tax effect of lending to a corporation
30) The cost of office supplies to be used in future periods is ordinarily shown on the
balance sheet as a(n)
A.capital
B.asset
C.contra asset
D.liability
31) Which one of the statements below is not a purpose for the journal?
A.to show increases and decreases in accounts
B.to show a chronological order by date
C.to show a complete transaction in one place
D.to help locate errors
32) Expenses that are incurred directly or entirely in connection with the sale of
merchandise are classified as
A.selling expenses
B.general expenses
C.other expenses
D.administrative expenses
33) All of the following qualitative considerations may impact upon capital investment
analysis except:
A.manufacturing productivity
B.manufacturing sunk cost
C.manufacturing flexibility
D.market opportunities
34) Singer and McMann are partners in a business. Singers original capital was $40,000
and McManns was $60,000. They agree to salaries of $12,000 and $18,000 for Singer
and McMann respectively and 10% interest on original capital. If they agree to share
remaining profits and losses on a 3:2 ratio, what will Singers share of the income be if
the income for the year was $15,000?
A.$9,000
B.$2,400
C.$1,000
D.$5,600
35) Which of the following receivables would not be classified as an “other receivable?
A.Advance to an employee
B.Interest receivable
C.Refundable income tax
D.Notes receivable
36) Flagler Company allocates overhead based on machine hours. They estimated
overhead costs for the year to be $420,000. Estimated machine hours were 50,000.
Actual hours and costs for the year were 46,000 machine hours and $380,000 of
overhead.
Required:
a. Calculate the overhead application rate for the year.
b. What is the amount of applied overhead for the year?
c. What is the amount of under or overapplied overhead for the year? Indicate whether
it is over- or underapplied.
37) Journalize the entries to record the following selected transactions of Oliver Co.:
(a) Purchased $100,000 of Kruse Co. 8% bonds at par value plus accrued interest of
$2,000.
(b) Received first semiannual interest payment.
(c) Sold the bonds at 97 plus accrued interest of $1,500.
38) Investment centers differ from profit centers in that they
A.are responsible for net income only
B.are able to invest in assets
C.have less responsibilities than cost centers and profit centers
D.are only responsible for revenues
39) Given the following data:
Dec. 31,2014 Dec. 31,2013
Total liabilities $128,250 $120,000
Total owners equity 95,000 80,000
a. Compute the ratio of liabilities to owners equity for each year.
b. Has the creditors risk increased or decreased from December 31, 2013, to December
31, 2014?
40) Prepare the required entries for the following transactions:
(a) Austin Company pays daily wages of $645 (Monday – Friday). Paydays are every
other Friday. Prepare the Monday, January 31 adjusting entry assuming that the last
payday was Friday, January 21
(b) Prepare the journal entry to record the Austin Companys payroll on Friday, February
4
(c) Annual depreciation expense on the companys fixed assets is $39,600. Prepare the
adjusting entry to recognize depreciation for the month of January
(d) The companys Office Supplies account shows a debit balance of $3,755. A count of
office supplies on hand on January 31 shows $635 worth of supplies on hand. Prepare
the January 31 adjusting entry for Office Supplies
41) Accompanying the bank statement was a debit memo for bank service charges. On
the bank reconciliation, the item is
A.a deduction from the balance per company’s records
B.an addition to the balance per bank statement
C.a deduction from the balance per bank statement
D.an addition to the balance per company’s records
42) Which of the following should be shown on a statement of cash flows under the
financing activity section?
A.the purchase of a long-term investment in the common stock of another company
B.the payment of cash to retire a long-term note
C.the proceeds from the sale of a building
D.the issuance of a long-term note to acquire land
43) 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 in ratio of time devoted to business.
A.$75,000 and $75,000
B.$37,500 and $112,500
C.$100,000 and $50,000
D.$112,500 and $37,500
44) Bonds Payable has a balance of $1,000,000 and Premium on Bonds Payable has a
balance of $7,000. If the issuing corporation redeems the bonds at 101, what is the
amount of gain or loss on redemption?
A.$3,000 loss
B.$3,000 gain
C.$7,000 loss
D.$7,000 gain
45) Identify each of the following as either internal or external users of accounting
information.
A. Payroll Manager
B. Bank
C. Presidents Secretary
D. Internal Revenue Service
E. Raw Material Vendors
F. Social Security Administration
G. Health Insurance Provider
H. Managerial Accountant
46) The business entity concept means that
A.the owner is part of the business entity
B.an entity is organized according to state or federal statutes
C.an entity is organized according to the rules set by the FASB
D.the entity is an individual economic unit for which data are recorded, analyzed, and
reported
47) The Bacon Company acquired new machinery with a price of $15,200 by trading in
similar old machinery and paying $12,700. The old machinery originally cost $9,000
and had accumulated depreciation of $5,000. In recording this transaction, Bacon
Company should record
A.the new machinery at $16,700
B.the new machinery at $12,700
C.a gain of $1,500
D.a loss of $1,500
48) Bonds with a face amount $1,000,000, are sold at 108. The entry to record the
issuance is
A.Cash 1,000,000
Premium on Bonds Payable 80,000
Bonds Payable 1,080,000
B.Cash 1,080,000
Premium on Bonds Payable 80,000
Bonds Payable 1,000,000
C.Cash 1,080,000
Discount on Bonds Payable 80,000
Bonds Payable 1,000,000
D.Cash 1,080,000
Bonds Payable 1,080,000
49) What information is generally included in the Management Discussion and Analysis
(MD&A) section of a corporate annual report?
50) On the statement of cash flows prepared by the indirect method, the cash flows
from operating activities section would include
A.receipts from the sale of investments
B.amortization of premium on bonds payable
C.payments for cash dividends
D.receipts from the issuance of capital stock
51) A business is operating at 70% of capacity and is currently purchasing a part used in
its manufacturing operations for $24 per unit. The unit cost for the business to make the
part is $36, including fixed costs, and $28, not including fixed costs. If 15,000 units of
the part are normally purchased during the year but could be manufactured using
unused capacity, what would be the amount of differential cost increase or decrease
from making the part rather than purchasing it?
A.$60,000 cost decrease
B.$180,000 cost increase
C.$60,000 cost increase
D.$180,000 cost decrease
52) Falcon Inc. manufactures Product B, incurring variable costs of $15.00 per unit and
fixed costs of $70,000. Falcon desires a profit equal to a 12% rate of return on assets,
$785,000 of assets are devoted to producing Product B, and 100,000 units are expected
to be produced and sold.
Round your intermediate calculations and final answer to two decimal places.
53) The Bottling Department of Mountain Springs Water Company had 5,000 liters in
beginning work in process inventory (20% complete). During the period, 58,000 liters
were completed. The ending work in process inventory was 3,000 liters (90%
complete). What are the equivalent units for conversion costs under the FIFO method?
54) The following information was taken from the financial statement of Fox Resources
for December 31 of the current fiscal year:
The net income was $600,000 and the declared dividends on the common stock were
$125,000 for the current year. The market price of the common stock is $20 per share.
Required:
Calculate for the common stock:
(1) earnings per share
(2) the price-earnings ratio
(3) the dividends per share and the dividend yield.
Round to one decimal place except earnings per share, which should be rounded to two
decimal places.
55) The sales, income from operations, and invested assets for each division of Marcus
Company are as follows:
Determine the minimum rate of return for invested assets.
56) Olsen Company produces two products. Product A has a contribution margin of $30
and requires 10 machine hours. Product B has a contribution margin of $24 and requires
4 machine hours. Determine the most profitable product assuming the machine hours
are the constraint.
57) Proposals L and K each cost $500,000, have 6-year lives, and have expected total
cash flows of $720,000. Proposal L is expected to provide equal annual net cash flows
of $140,000, while the net cash flows for Proposal K are as follows:
Determine the cash payback period for each proposal. Round your answers to two
decimal places.
58) The cost of direct materials transferred into the Bottling Department of the
Mountain Springs Water Company is $27,225. The conversion cost for the period in the
Bottling Department is $7,596. The total equivalent units for direct materials and
conversion are 60,500 and 63,300 respectively. Determine the direct materials and
conversion cost per equivalent unit.
Round answers to nearest cent.
59) 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