1) When selling a piece of equipment for cash, a loss will result when the proceeds of
the sale are less than the book value of the asset.
2) The process of transferring the data from the journal to the ledger accounts is
posting.
3) In a job order cost accounting system for a service business, materials costs are
normally included as part of overhead.
4) For an automotive repair shop, the wages of mechanics would be classified as direct
labor cost.
5) If factory overhead applied exceeds the actual costs, the factory overhead account
will have a credit balance.
6) When minor errors occur in the estimates used in the determination of depreciation,
the amounts recorded for depreciation expense in the past should be corrected.
7) If bonds of $1,000,000 with unamortized discount of $10,000 are redeemed at 98, the
gain on redemption of bonds is $10,000.
8) The ratio of the market price per share of common stock on a specific date to the
annual earnings per share is referred to as the price-earnings ratio.
9) Journalizing is the process of entering amounts in the ledger.
10) If paid-in-capital in excess of par/preferred stock is $30,000, preferred stock is
$200,000, paid-in-capital in excess of par/common stock is $20,000, common stock is
$525,000, and retained earnings is $105,000 (deficit), the total stockholders’ equity is
$880,000.
11) The present value of $5,000 to be received in 4 years at a market rate of interest of
6% compounded annually is $3,636.30.
12) If the standard to produce a given amount of product is 600 direct labor hours at
$17 and the actual was 500 hours at $15, the time variance was $1,500 unfavorable.
13) Most companies will not take a purchases discount, because 1% or 2% discounts
are insignificant.
14) When land is purchased to construct a new building, the cost of removing any
structures on the land should be charged to the building account.
15) Materials must have which two qualities in order to be classified as direct
materials?
A.They must be classified as both prime costs and conversion costs
B.They must be introduced into the process in both work-in-process inventories and
finished goods inventories.
C.They must be an integral part of the finished product, but can be an insignificant
portion of the total product cost
D.They must be an integral part of the finished product and be a significant portion of
the total product cost
16) Sparrow Co. is currently operating at 80% of capacity and is currently purchasing a
part used in its manufacturing operations for $8.00 a unit. The unit cost for Sparrow Co.
to make the part is $9.00, which includes $.60 of fixed costs. If 4,000 units of the part
are normally purchased each year but could be manufactured using unused capacity,
what would be the amount of differential cost increase or decrease for making the part
rather than purchasing it?
A.$12,000 cost decrease
B.$4,000 cost increase
C.$20,000 cost decrease
D.$1,600 cost increase
17) The Marx Company issued $100,000 of 12% bonds on April 1, 2010 at face value.
The bonds pay interest semiannually on January 1 and July 1. The bonds are dated
January 1, 2010, and mature on January 1, 2014. The total interest expense related to
these bonds for the year ended December 31, 2010 is
A.$1,000
B.$3,000
C.$9,000
D.12,000
18) Scooby Company has applied $567,988 of overhead into production on Jobs in the
Work in Process account. Actual overhead at the end of the year is $575,000. What is
the adjustment for over or underapplied overhead?
A.$7012 Overapplied, increase Cost of Goods Sold
B.$7012 Underapplied, increase Cost of Goods Sold
C.$7012 Overapplied, decrease Cost of Goods Sold
D.$7012 Underapplied, decrease Cost of Goods Sold
19) Inventory shortage is recorded when
A.merchandise is returned by a buyer
B.merchandise purchased from a seller is incomplete or short
C.merchandise is returned to a seller
D.there is a difference between a physical count of inventory and inventory records
20) The arrangements between buyer and seller as to when payments for merchandise
are to be made are called
A.credit terms
B.net cash
C.cash on demand
D.gross cash
21) The following production data were taken from the records of the Finishing
Department for June:
Determine the number of equivalent units of production in the June 30 Finishing
Department inventory, assuming that the first-in, first-out method is used to cost
inventories. Assume the completion percentage of 25% applies to both direct materials
and conversion costs.
A.575 units
B.200 units
C.1,000 units
D.300 units
22) Which of the following is an example of an accrued expense?
A.Salary owed but not yet paid
B.Fees received but not yet earned
C.Supplies on hand
D.A two-year premium paid on a fire insurance policy
23) The charter of a corporation provides for the issuance of 100,000 shares of common
stock. Assume that 45,000 shares were originally issued and 5,000 were subsequently
reacquired. What is the amount of cash dividends to be paid if a $2 per share dividend is
declared?
A.$80,000
B.$10,000
C.$90,000
D.$100,000
24) The period costs of a textbook publisher would include:
A.wages of a press operator
B.factory utility costs
C.advertising expenses
D.paper costs
25) An aging of a company’s accounts receivable indicates that estimate of the
uncollectible accounts totals $4,000. If Allowance for Doubtful Accounts has a $800
credit balance, the adjustment to record the bad debt expense for the period will require
a
A.debit to Allowance for Doubtful Accounts for $3,200
B.debit to Bad Debt Expense for $3,200
C.debit to Allowance for Doubtful Accounts for $4,000
D.credit to Allowance for Doubtful Accounts for $4,000
26) If the effect of the debit portion of an adjusting entry is to increase the balance of an
expense account, which of the following describes the effect of the credit portion of the
entry?
A.decreases the balance of an owner’s equity account
B.increases the balance of a liability account
C.increases the balance of an asset account
D.decreases the balance of an expense account
27) A chart of accounts is
A.the same as a balance sheet
B.usually a listing of accounts in alphabetical order
C.usually a listing of accounts in financial statement order
D.used in place of a ledger
28) The following data is given for the Stringer Company:
Overhead is applied on standard labor hours.
The direct material price variance is:
A.22,800U
B.22,800F
C.52,000U
D.52,000F
29) The following transactions took place for the XYZ Corporation;
a. November 12th – Declared a total cash dividend of $45,000 for stockholders of
record November 20th payable on December 1st. Record the journal entry, if necessary,
for the following events;
Nov. 12 –
Nov. 20 –
Dec. 1 –
b. Briefly describe the significance of November 20th.
30) Expenses can result from:
A.increasing owners equity
B.consuming services
C.using up liabilities
D.all are true
31) Which of the following concepts relates to separating the reporting of business and
personal economic transactions?
A.Cost Concept
B.Unit of Measure Concept
C.Business Entity Concept
D.Objectivity Concept
32) Interest revenue on bonds is reported
A.as an addition to the Investment in Bonds account
B.as part of Comprehensive Income but not as part of Net Income.
C.as part of other income
D.as part of operating income
33) The budgeted finished goods inventory and cost of goods sold for a manufacturing
company for the year 2012 are as follows: January 1 finished goods, $765,000;
December 31 finished goods, $640,000; cost of goods sold for the year, $2,560,000.
The budgeted costs of goods manufactured for the year is?
A.$1,405,000
B.$2,560,000
C.$2,435,000
D.$3,965,000
34) Listed below are accounts to use for transactions (a) through (d), each identified by
a number. Following this list are the transactions. You are to indicate for each
transaction the accounts that should be debited and credited by placing the account
number(s) in the appropriate box.
Transactions Account(s) Debited Account(s) Credited
a. Utility bill is received; payment will be made in 10 days.
b. Paid the utility bill previously recorded in transaction (a).
c. Bought a three year insurance policy and paid in full.
d. Received $7,000 from a contract to perform accounting services over the next two
years.
35) Present entries to record the selected transactions described below:
(a) Issued $2,750,000 of 10-year, 8% bonds at 97.
(b) Amortized bond discount for a full year, using the straight-line method.
(c) Called bonds at 98. The bonds were carried at $2,692,250 at the time of the
redemption.
36) A loss on disposal of a segment would be reported in the income statement as a(n)
A.administrative expense
B.other expense
C.deduction from income from continuing operations
D.selling expense
37) For the year ending June 30, Island Clinical Services mistakenly omitted adjusting
entries for (1) $1,500 of supplies that were used, (2) unearned revenue of $4,200 that
was earned, and (3) insurance of $5,000 that expired. What is the combined effect of
these errors on (a) revenues, (b) expenses, and (c) net income for the year ending June
30?
38) On January 1, 2014, Blanton Companys Valuation Allowance for Trading
Investments account has a debit balance of $23,200. On December 31, 2014, the cost of
the trading securities portfolio was $80,000. The fair value was $98,000. Which of the
following would Blanton report on the income statement for 2014?
A.an Unrealized Loss on Trading Investments of $5,200
B.an Unrealized Gain on Trading Investments of $5,200
C.an Unrealized Gain on Trading Investments of $18,000
D.an Unrealized Loss on Trading Investments of $18,000
39) For each of the following errors, considered individually, indicate whether the error
would cause the trial balance totals to be unequal. If the error would cause the trial
balance total to be unequal, indicate whether the debit or credit total is higher and by
how much.
A. Payment of a cash withdrawal of $6,800 was journalized and posted as a debit of
$8,600 to Salaries Expense and a credit of $8,600 to Cash.
B. A fee of $9,780 earned was debited to Accounts Receivable for $7,980 and credited
to Fees Earned for $9,780.
C. A payment of $3,000 to a creditor was posted as a credit of $3,000 to Accounts
Payable and a credit of $3,000 to Cash.
40) A company purchases equipment for $32,000 cash. This transaction should be
shown on the statement of cash flows under
A.investing activities
B.financing activities
C.noncash investing and financing activities
D.operating activities
41) Department W had 2,400 units, one-third completed at the beginning of the period,
16,000 units were transferred to Department X from Department W during the period,
and 1,800 units were one-half completed at the end of the period. Assume the
completion ratios apply to direct materials and conversion costs.
What is the equivalent units of production used to compute unit conversion cost on the
cost of production report for Department W (Assuming the company uses FIFO)?
A.16,100 units
B.13,600 units
C.15,000 units
D.18,500 units
42) Costs that are treated as assets until the product is sold are called:
A.product costs
B.period costs
C.conversion costs
D.selling expenses
43) Production and sales estimates for June are as follows:
The number of units expected to be manufactured in June is:
A.10,000
B.11,500
C.14,500
D.12,500
44) 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, what would be the present value of $15,000 (rounded to the
nearest dollar) to be received four years from today, assuming an earnings rate of 10%?
A.$11,250
B.$10,245
C.$3,750
D.$47,550
45) If the individual subsidiary ledger accounts of Accounts Receivable and Accounts
Payable contained the following data:
Cadence Company – Vendor – $250 credit balance
Franklin Enterprises – Customer – $750 debit balance
Marcelo Construction – Client – $125 – debit balance
Peyton Supplies – Supplier – $375 – credit balance
The Accounts Receivable (A/R) controlling account and the Accounts Payable (A/P)
controlling account balances would be:
A.A/R – $1,000, A/P – $500
B.A/R – $625, A/P – $875
C.A/R – $875, A/P – $625
D.A/R – $750, A/P – $750
46) The following data were gathered to use in reconciling the bank statement of
Build-A-Lot:
Required:
(1) What is the adjusted balance on the bank reconciliation?
(2) Journalize any necessary entries for Build-A-Lot based on the bank reconciliation.
47) Based on the following data, calculate the estimated cost of the merchandise
inventory on March 31 using the retail method.
48) The total assets and the total liabilities of a business at the beginning and at the end
of the year appear below. During the year, the owner had withdrawn $55,000 for
personal use and had made an additional investment of $33,000 in the business.
Calculate the net income for the year.
49) Flanders Industries collects 35% of its sales on account in the month of the sale and
65% in the month following the sale. If sales on account are budgeted to be $175,000
for May and $225,000 for June, what are the budgeted cash receipts from sales on
account for June?
50) A company issued $2,000,000 of 30-year, 8% callable bonds on April 1, 2011, with
interest payable on April 1 and October 1. The fiscal year of the company is the
calendar year. Journalize the entries to record the following selected transactions:
51) On August 30th JumpStart pays numerous bills which include:
Payment to the landlord for August rent – $2,300
Payment to the Gas & Electric Company for Augusts bill – $525
Payment of employee wages for the last half of August – $1,750
Payment of shopping centers parking lot cleaning fee – $275
Journalize these payments as one compound journal entry.