1) Lattimer Company had the following results of operations for the past year:
A foreign company whose sales will not affect Lattimer’s market offers to buy 5,000
units at $7.50 per unit. In addition to existing costs, selling these units would add a
$0.25 selling cost for export fees. If Lattimer accepts this additional business, the
special order will yield a:
A.$2,000 loss.
B.$8,250 loss.
C.$3,750 profit.
D.$3,250 loss.
E.$5,000 profit.
2) The inventory turnover ratio:
A.Is used to analyze profitability.
B.Is used to measure solvency.
C.Reveals how many times a company sells its merchandise inventory during a period.
D.Reveals how many days a company can sell inventory if no new merchandise is
purchased.
E.Calculation depends on the company’s inventory valuation method.
3) Brown invested $200,000 and Freeman invested $150,000 in a partnership. They
agreed to an interest allowance on the partners’ beginning-year capital investments at
10%, with the balance to be shared equally. Under this agreement, the shares of the
partners when the partnership earns $205,000 in income are:
A.$102,500 to Brown; $102,500 to Freeman.
B.$117,143 to Brown; $87,857 to Freeman.
C.$122,500 to Brown; $82,500 to Freeman.
D.$105,000 to Brown; $100,000 to Freeman.
E.$112,750 to Brown; $92,250 to Freeman.
4) A company issues 9% bonds with a par value of $100,000 at par on April 1. The
bonds pay interest semi-annually on January 1 and July 1. The cash paid on July 1 to
the bond holder(s) is:
A.$1,500.
B.$3,000.
C.$4,500.
D.$6,000.
E.$7,500.
5) The following data concerns a proposed equipment purchase:
The annual average investment amount used to calculate the accounting rate of return
is:
A.$72,000
B.$70,000
C.$37,000
D.$74,000
E.$48,950
6) Provided below is a list of definitions and terms. Match them by placing the letter
that identifies the best definition in the blank space next to each term.
7) Identify the accounts that would normally have balances in the debit column of a
business’s trial balance.
A.Assets and expenses.
B.Assets and revenues.
C.Revenues and expenses.
D.Liabilities and expenses.
E.Liabilities and withdrawals.
8) The calculation of the payback period for an investment when net cash flow is even
(equal) is:
A.Cost of investment/Annual net cash flow
B.Cost of investment/Total net cash flow
C.Annual net cash flow/Cost of investment
D.Total net cash flow/Cost of investment
E.Total net cash flow/Annual net cash flow
9) Fellows and Marshall are partners in an accounting firm and share net income and
loss equally. Fellows’ beginning partnership capital balance for the current year is
$185,000, and Marshall’s beginning partnership capital balance for the current year is
$260,000. The partnership had net income of $350,000 for the year. Fellows withdrew
$80,000 during the year and Marshall withdrew $70,000. What is Marshall’s return on
equity?
A.67.3%
B.60.3%
C.78.7%
D.54.3%
E.56.0%
10) Powers Company reported Net sales of $1,200,000 and Accounts Receivable, net of
$78,500. The Day’s sales uncollected (rounded to whole days) is:
A.24 days.
B.15 days.
C.4 days.
D.56 days.
E.48 days.
11) Joseph, Inc., provides the following results of June’s operations:
Required:
(a) Determine the total overhead cost variance for June.
(b) Applying the management by exception approach, which of the variances shown are
of greatest concern? Why?
12) A new manufacturing machine is expected to cost $278,000, have an eight-year life,
and a $30,000 salvage value. The machine will yield an annual incremental after-tax
income of $35,000 after deducting the straight-line depreciation. Compute the
accounting rate of return for the investment.
A.22.7%.
B.23.4%.
C.46.9%.
D.12.2%.
E.24.5%.
13) Owens Company uses the direct write-off method of accounting for uncollectible
accounts receivable. On December 6, Year 1, Owens sold $6,300 of merchandise to the
Valley Company. On August 8, Year 2, after numerous attempts to collect the account,
Owens determined that the account of the Valley Company was uncollectible.
a. Prepare the journal entry required to record the transactions on August 8.
b. Assuming that the $6,300 is material, explain how the direct write-off method
violates the matching principle in this case.
14) Walter Enterprises expects its September sales to be 20% higher than its August
sales of $150,000. Purchases were $100,000 in August and are expected to be $120,000
in September. All sales are on credit and are collected as follows: 30% in the month of
the sale and 70% in the following month. Merchandise purchases are paid as follows:
25% in the month of purchase and 75% in the following month. The beginning cash
balance on September 1 is $7,500. The ending cash balance on September 30 would be:
A.$31,500.
B.$67,500.
C.$54,000.
D.$61,500.
E.$136,500.
15) A company issued 7%, 5-year bonds with a par value of $100,000. The market rate
when the bonds were issued was 7.5%. The company received $97,947 cash for the
bonds. Using the effective interest method, the amount of interest expense for the first
semiannual interest period is:
A.$3,500.00.
B.$3,673.01.
C.$3,705.30.
D.$7,000.00.
E.$7,346.03.
16) Faster Freight Co. reported net cash provided by operating activities of $142.7
million and average total assets of 1,762.5 million at the end of the year. Calculate the
cash flow on total assets ratio for Faster Freight.
17) A ________________________ is a continuously revised budget that adds future
months or quarters to replace months or quarters that have lapsed.
18) A company’s January 1 Work in Process inventory contained 30,000 units that were
25% complete with respect to direct labor. The beginning inventory was completed this
year and another 120,000 units were started. Of those started, 80,000 were finished and
the remaining 40,000 were 30% complete. Calculate the equivalent units of production
for the year using the FIFO method.
19) A company has just received a special, one-time order for 1,000 units. Producing
the order will have no effect on the production and sales of other units. The buyer’s
name will be stamped on each unit, at a cost of $1.50 per unit. Normal cost data,
excluding stamping, follows:
Prepare an analysis that indicates the selling price per unit this company will require to
earn $3,000 on the order.
20) During the current year, Beldon Co. acquired a new computer with a cash price of
$12,800 by exchanging an old one on which the company received a $1,500 trade-in
allowance (with the balance of $11,300 paid in cash). The old computer cost $9,000 and
its accumulated depreciation was $5,500 as of the exchange date. Assuming the
exchange transaction had commercial substance, prepare the journal entry to record the
exchange.