1) A secured bond is called a debenture bond and is backed only by the general
creditworthiness of the corporation.
2) Product costs include direct labor and advertising expense.
3) Cost systems using detailed estimates of each element of manufacturing cost entering
into the finished product are called standard cost systems.
4) Ideal standards are developed under conditions that assume no idle time, no machine
breakdowns, and no materials spoilage.
5) Net income and net profit do not mean the same thing.
6) If Division Inc. expects to sell 200,000 units in 2012, desires ending inventory of
24,000 units, and has 22,000 units on hand as of the beginning of the year, the budgeted
volume of production for 2012 is 202,000 units.
7) The absorption costing income statement does not distinguish between variable and
fixed costs.
8) Federal unemployment taxes are paid by the employer and the employee.
9) Bank customers are considered creditors of the bank so the bank shows their
accounts with credit balances on the bank’s records.
10) Accumulated Depreciation is a permanent account.
11) The petty cash fund eliminates the need for a bank checking account.
12) The FIFO method separates work done on beginning inventory in the previous
period from work done on it in the current period.
13) The buyer determines how much to pay for bonds by computing the present value
of future cash receipts using the contract rate of interest.
14) Under absorption costing, the amount of income reported from operations can be
increased by producing more units than are sold.
15) When the petty cash fund is replenished, the petty cash account is credited for the
total of all expenditures made since the fund was last replenished.
16) Using the data from the Terrace Industries, determine the divisional income from
operations for Districts 1 & 2.
Allocate service department expenses proportional to the sales of each district.
17) Discount Mart utilizes the allowance method of accounting for uncollectible
receivables. On December 12th the company receives a $550 check from Chad Thomas
in settlement of Thomas $1,100 outstanding accounts receivable. Due to Thomas failing
health he is closing his company and is expecting to make no further payments to
Discount Mart. Journalize this declaration.
18) Journalize the following transactions using the direct write-off method of
accounting for uncollectible receivables.
April 1 Sold merchandise on account to Jim Dobbs, $7,200. The cost of the
merchandise is $5,400.
June 10 Received payment for one-third of the receivable from Jim Dobbs and wrote
off the remainder.
Oct. 11 Reinstated the account of Jim Dobbs for and received cash in full payment.
19) The income statement for Dodson Corporation reported net income of $22,400 for
the year ended December 31, 2012 before considering the following:
During the year the company purchased available-for-sale securities. At year end, the
fair value of the investment portfolio was $2,100 more than cost.
The balance of retained earnings was $83,000 on December 31, 2011. Dobson
Corporation paid $9,000 in cash dividends in 2012. Calculate the balance of retained
earnings on December 31, 2012.
20) Determine the amount to be paid in full settlement of each invoice, assuming that
credit for returns and allowances was received prior to payment and that all invoices
were paid within the discount period.
21) Given below are the accounts and amounts for Bright Futures Company as of
August 31, 2011. All of the revenue and expense amounts are for the month of August.
Based on the data provided for Bright Futures Company, prepare in good format an
income statement for the month ended August 31,
22) On January 1, DogMart Company purchased a two-year liability insurance policy
for $22,800 cash. The purchase was recorded to Prepaid Insurance. Prepare the January
31 adjusting entry.
23) Briefly describe the time value of money. Why is the time value of money
important in capital investment analysis?
24) Given the following data, determine the times interest earned ratio.
Net income – $70,000
Bonds Payable (issued at face value), 8% – $5,000,000
Preferred Stock ($50 par value, 6%, 10,000 shares issued & outstanding)
Tax rate – 30%