The recurring steps performed each accounting period, starting with analyzing and
recording transactions in the journal and continuing through the post-closing trial
balance, are referred to as the:
A. Accounting period
B. Operating cycle
C. Accounting cycle
D. Closing cycle
E. Natural business year
Answer:
Net income:
A. Decreases equity.
B. Represents the amount of assets owners put into a business.
C. Equals assets minus liabilities.
D. Is the excess of revenues over expenses.
E. Represents the owners’ claims against assets.
Answer:
Reference: 18_01
Willco Inc. manufactures electronic parts. They are analyzing their monthly
maintenance costs to determine the best way to budget these costs in the future. They
have collected the following data for the last six months:
If Willco Inc. expects to operate the machines for a total of 32,000 hours in the next
month, calculate the expected maintenance costs?
A. $31,232
B. $32,512
C. $64,755
D. $63,947
E. $65,227
Answer:
The standard materials cost to produce one unit of Product M is 6 pounds of material at
a standard price of $50 per pound. In manufacturing 8,000 units, 47,000 pounds of
material were used at a cost of $51 per pound. What is the total direct material cost
variance?
A. $48,000 unfavorable
B. $51,000 favorable
C. $51,000 unfavorable
D. $ 3,000 favorable
E. $ 3,000 unfavorable
Answer:
Crowe Company has acquired a building with a loan that requires payments of $20,000
every six months for five years. The annual interest rate on the loan is 12%. What is the
present value of the building?
A. $72,096
B. $113,004
C. $147,202
D. $86,590
E. $200,000
Answer:
On November 12, Kera, Inc., a U.S. company, sold merchandise on credit to Kakura
Company of Japan at a price of 1,500,000 yen. The exchange rate was $0.00837 on the
date of sale. On December 31, when Kera prepared its financial statements, the
exchange rate was $0.00843. Kakura Company paid in full on January 12, when the
exchange rate was $0.00861.
On January 12, Kera should prepare the following journal entry for this transaction:
A.
B.
C.
D.
E.
Answer:
Internal users of accounting information include:
A. Shareholders
B. Customers
C. Creditors
D. Government regulators
E. Production managers
Answer:
A method that allocates an equal portion of the total depreciable cost for a plant asset to
each unit produced is called:
A. Accelerated depreciation.
B. Declining-balance depreciation.
C. Straight-line depreciation.
D. Units-of-production depreciation.
E. Modified accelerated cost recovery system (MACRS) depreciation.
Answer:
Mission Company has three employees:
What are Mission Companys total August payroll taxes for Clark?
A. $ 946.35
B. $1,002.15
C. $1,814.35
D. $6,234.75
E. $812.20
Answer:
A company receives a 7.5%, six-month note for $8,900. The total interest due on the
maturity date is:
A. $66,750.00
B. $4,005.00
C. $2,002.50
D. $667.50
E. $333.75
Answer:
Both the straight-line depreciation method and the double-declining-balance
depreciation method:
A. Produce the same total depreciation over an asset’s useful life.
B. Produce the same depreciation expense each year.
C. Produce the same book value each year.
D. Are acceptable for tax purposes only.
E. Are the only acceptable methods of depreciation for financial reporting.
Answer:
Sara Bloom has prepared the following analysis of September transactions for her
business, Blooming Florist. Unfortunately, she has lost some information. Determine
the missing amounts (a) through (c) below:
Date Cash Accounts Receivable Accounts Payable Notes Payable Common Stock
Retained Earnings
Balances 30,000 30,100 (a) 8,500 10,000 30,000
9/5 -10,000 0 (b) 0 0
9/10 -3,500 0 0 0 0 (c)
Answer:
Reference: 20_01
Next year’s 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, 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.
Budgeted purchases of Product A for the year would be:
A. 22,400 units
B. 20,400 units
C. 20,000 units
D. 19,500 units
E. 12,200 units
Answer:
Aces, Inc., a manufacturer of tennis rackets, began operations this year. The company
produced 6,000 rackets and sold 4,900. At year-end, the company reported the
following income statement using absorption costing.
Production costs per tennis racket total $38, which consists of $25 in variable
production costs and $13 in fixed production costs (based on the 6,000 units produced).
Ten percent of total selling and administrative expenses are variable. Compute net
income under variable costing.
A. $194,100
B. $165,500
C. $311,000
D. $240,500
E. $233,000
Answer:
Horton Foods bakes and sells 1,000 dozen bagels each week to food service operations.
Among the costs are bakers’ salaries, $24,000; production management salaries,
$16,000; production equipment operating costs, $32,000; and flour and ingredient costs,
$15,000.
Required:
(a) Calculate prime costs
(b) Calculate conversion costs.
Answer:
The document, also known as the check authorization, that is a checklist of steps
necessary for approving an invoice for approval and payments is the:
A. Purchase requisition
B. Purchase order
C. Invoice
D. Receiving report
E. Invoice approval
Answer:
A company uses a process cost accounting system. Its Sewing Department’s beginning
inventory consisted of 50,000 units (1/4 complete with respect to direct labor and
overhead). The Sewing Department started and finished 120,000 units this period. Its
ending inventory consists of 40,000 units (1/4 complete with respect to direct labor and
overhead). All direct materials are added at the beginning of the process. Under the
weighted-average inventory valuation method, what are the equivalent units of
production for the Sewing Department for direct materials and for direct labor and
overhead, respectively?
A. 210,000;120,000
B. 210,000; 180,000
C. 167,500; 167,500
D. 160,000; 162,500
E. 160,000; 167,500
Answer:
Which of the following assets is not depreciated?
A. Store fixtures
B. Computers
C. Land
D. Buildings
E. Vehicles
Answer:
A corporation’s distribution of additional shares of its own stock to its stockholders
without the receipt of any payment in return is called a:
A. Stock dividend
B. Stock subscription
C. Premium on stock
D. Discount on stock
E. Treasury stock
Answer:
Match each of the following terms with the appropriate definitions:
A) Stock split
B) No-par value stock
C) Stock dividend
D) Authorized stock
E) Common stock
F) Preemptive right
G) Par value
H) Callable preferred stock
I) Convertible preferred stock
J) Organization costs
Answer:
During 2013, Carpenter invested $75,000 and DiAngelo invested $90,000 in a
partnership. They agreed to share income and loss by allowing a $40,000 per year
salary allowance to Carpenter and a $42,000 per year salary allowance to DiAngelo,
plus an interest allowance on the partners’ beginning-year capital investments at 8%,
with the balance to be shared equally. Under this agreement, if the partnership earns net
income of $300,000 during 2013 the income allocated to each partner is:
A. $40,000 to Carpenter; $42,000 to DiAngelo.
B. $148,400 to Carpenter; $151,600 to DiAngelo.
C. $43,200 to Carpenter; $45,360 to DiAngelo.
D. $150,000 to Carpenter; $150,000 to DiAngelo.
E. $105,720 to Carpenter; $105,720 to DiAngelo.
Answer:
Which of the following statements regarding fraud is true?
A. Fraud is a deliberate act.
B. Fraud can be deliberate or unintentional.
C. A company with a strong code of ethics can eliminate fraud.
D. A company with strong internal controls can eliminate fraud.
E. The most common type of fraud is financial statement fraud.
Answer:
On December 31, the balance in the Prepaid Advertising account was $176,000, which
is the remaining balance of a 12-month advertising campaign purchased on August 31
in the current year. Assuming the cost is spread equally over each month, how much did
this advertising campaign cost in total?
A. $286,000
B. $176,000
C. $264,000
D. $154,000
E. $22,000
Answer:
The least-squares regression method is:
A. A graphical method to identify cost behavior.
B. An algebraic method to identify cost behavior.
C. A statistical method to identify cost behavior.
D. The only identify cost estimation method allowed by GAAP.
E. A cost estimation method that only uses the two extreme values.
Answer:
An accounts payable ledger is:
A. A subsidiary ledger that contains an account for each of the companys suppliers.
B. A list of the balances of all the accounts in the accounts receivable ledger that is
added to show the total amount of accounts receivable outstanding.
C. A book of original entry that is designed and used for recording only a specific type
of transaction.
D. The ledger that contains the financial statement accounts of a business.
E. A subsidiary ledger that contains a separate account for each party that grants both
short-term and long-term credit on account to the company.
Answer:
Which of the following elements are found on the balance sheet?
A. Service revenue
B. Net income
C. Operating activities
D. Utilities expense
E. Retained earnings
Answer:
A company is currently operating at 80% capacity producing 5,000 units. Current cost
information relating to this production is shown in the table below:
The company has been approached by a customer with a request for a 100-unit special
order. What is the minimum per unit sales price that management would accept for this
order if the company wishes to increase current profits?
A. Any amount over $34 per unit.
B. Any amount over $20 per unit.
C. Any amount over $14 per unit.
D. Any amount over $9 per unit.
E. Any amount over $5 per unit.
Answer:
On December 1, 2013, Gates Company borrowed $45,000 cash from First Bank on a
90-day, 9% note payable. Gates is a calendar year company
a. Prepare Gate’s general journal entry to record the issuance of the note payable.
b. Prepare Gate’s general journal entry to record the accrued interest due at December
31, 2013.
c. Prepare Gate’s general journal entry to record the payment of the note on March 1,
2014.
Assume no other entries related to this note were made in 2014.
Answer:
A simple account form widely used in accounting to illustrate how debits and credits
work is called a:
A. Dividend account
B. Common stock account
C. Drawing account
D. T-account
E. Balance column sheet
Answer:
On April 30, 2014, a three-year insurance policy was purchased for $18,000 with
coverage to begin immediately. What is the amount of insurance expense that would
appear on the company’s income statement for the year ended December 31, 2014?
A. $500
B. $4,000
C. $6,000
D. $14,000
E. $18,000
Answer:
A companys total expected overhead costs and related overhead data are shown in the
following table:
a. Compute estimated manufacturing overhead costs for Department A.
(b. Compute estimated manufacturing overhead costs for Department B.
c. Compute the departmental overhead rate based on direct labor hours for Department
A.
d. Compute the departmental overhead rate based on machine hours for Department B.
Answer:
The following information is available for the Ehrens Corporation:
Additional information:
(1) There was no gain or loss on the sales of the long-term investments, nor on the
bonds retired.
(2) Old equipment with an original cost of $37,550 was sold for $2,100 cash.
(3) New equipment was purchased for $67,550 cash.
(4) Cash dividends of $33,600 were paid.
(5) Additional shares of stock were issued for cash.
Prepare a statement of cash flows for the 2013 calendar year using the indirect method.
Answer:
The following series of transactions occurred during 2014 and 2015 when Linwood
Co. sold merchandise to John Moore. Linwood’s annual accounting period ends on
December 31.
Prepare Linwood Co.’s journal entries to record the above transactions assuming they
use the allowance method of accounting for uncollectible accounts.
Answer:
Explain the difference between direct and indirect expenses in accounting for
departments.
Answer:
On July 31, a company declared a cash dividend of $0.25 per common share to the
shareholders of record on August 15. The cash dividend will be paid on August 25. This
company has 500,000 shares authorized and 100,000 shares outstanding. Prepare the
journal entries required on July 31, August 15, and August 25.
Answer:
A company borrows money from the bank by promising to make six annual year-end
payments of $25,000 each. How much is the company able to borrow if the interest rate
is 9%?
Answer:
Airtex Company budgeted the following credit sales during the current year:
September, $90,000; October, $123,000; November, $105,000; December, $111,000.
Experience has shown that cash from credit sales is received as follows: 10% in the
month of sale, 50% in the first month after sale, 35% in the second month after sale,
and 5% is uncollectible. How much cash should Eastern Company expect to collect in
November from all current and past credit sales?
Answer:
What is a cost center?
Answer:
A _______________________________ is the combination of products sold by a
company.
Answer:
Bean Company uses a job order cost system and last period incurred $70,000 of
overhead and $100,000 of direct labor. Bean estimates that its overhead next period will
be $65,000. The company also expects to incur $100,000 of direct labor. If Bean bases
its overhead applied on direct labor cost, what should be the overhead allocation rate for
the next period?
Answer:
Discuss the differences in the special journals between a company using a perpetual
inventory system and one using a periodic inventory system.
Answer:
A corporation has 200,000 shares of $10 par value common stock outstanding. The
following selected transactions related to the company’s stock took place during the
current year:
Prepare the journal entries to record these transactions.
Answer:
What is a production budget?
Answer:
The collection of job cost sheets for all jobs in process makes up the subsidiary ledger
controlled by the _____________________ inventory.
Answer:
A company entered into the following transactions. For each transaction, indicate the
appropriate journal in which it would be recorded.
Answer:
The adjusted trial balance of the Thomas Company follows:
Prepare the closing entries for Thomas Company.
Answer:
