1) The responsibility for keeping the records for an asset should be separate from the
physical custody of that asset.
2) A contingent liability is a liability that may occur if some future event takes place.
3) Two proprietorships cannot combine and form a partnership.
4) When recording bond interest, Interest Receivable is reported as a fixed asset in the
balance sheet.
5) In preparing a statement of cash flows, the issuance of debt should be reported
separately from the retirement of debt.
6) A partnership must have more than one owner.
7) A common application of materiality is weighing the factual nature of cost figures
versus the relevance of fair value.
8) Partnership creditors may have a claim on the personal assets of any of the partners if
the partnership assets are not sufficient to settle claims.
9) The responsibility for ordering, receiving, and paying for merchandise should be
assigned to different individuals.
10) If total credits in the income statement columns of a worksheet exceed total debits,
the enterprise has net income.
11) The cash basis of accounting is not in accordance with generally accepted
accounting principles.
12) An adjusting entry always involves two balance sheet accounts.
13) When purchasing delivery equipment, sales taxes and motor vehicle licenses should
be charged to Delivery Equipment.
14) Reversing entries are an optional bookkeeping procedure.
15) Determine the missing items.
Assets = Liabilities + Owners Equity
$85,000$52,000(a)
(b)$28,000$34,000
$84,000(c)$50,000
16) When a partnership interest is purchased
a.every partners capital account is affected
b.the transaction is a personal transaction between the purchaser and the selling
partner(s)
c.the buyer receives equity equal to the amount of cash paid
d.all partners will receive some part of the purchase price
17) The following information is available for Oakland Company:
2014 2013
Accounts receivable$ 360,000$ 400,000
Inventory 340,000400,000
Net credit sales2,470,0001,400,000
Cost of goods sold1,850,0001,060,000
Net income300,000170,000
The inventory turnover ratio for 2014 is
a.6.7 times
b.5.0 times
c.5.4 times
d.4.6 times
18) Which of the following liabilities are not related to the operating cycle?
a.Salaries and wages payable
b.Accounts payable
c.Utilities payable
d.Bonds payable
19) Which of the following is not a true statement?
a.Incremental analysis might also be referred to as differential analysis
b.Incremental analysis is the same as CVP analysis
c.Incremental analysis is useful in making decisions
d.Incremental analysis focuses on decisions that involve a choice among alternative
courses of action
20) Squeeze Company reports the following:
End of YearBeginning of Year
Inventory$25,000$42,000
Accounts Payable22,00012,000
If cost of goods sold for the year is $220,000, the amount of cash paid to suppliers is
a.$227,000
b.$205,000
c.$193,000
d.$247,000
21) If the entry to assign factory labor showed only a debit to Work In Process
Inventory, then all labor costs were
a.direct labor
b.indirect labor
c.overtime related
d.regular hours
22) The payroll is paid by the
a.personnel department
b.payroll department
c.cashier
d.treasurer’s department
23) An example of a mixed cost is
a.direct materials
b.supervisory salaries
c.utility costs
d.property taxes
24) The partnership form of business organization
a.is a separate legal entity
b.is a common form of organization for service-type businesses
c.enjoys an unlimited lif
d.has limited liability
25) The entry to record an installment payment on a long-term note payable is
a.Mortgage Payable
Cash
b.Interest Expense
Cash
c.Mortgage Payable
Interest Expense
Cash
d.Bonds Payable
Cash
26) The total materials variance is equal to the
a.materials price variance
b.difference between the materials price variance and materials quantity variance
c.product of the materials price variance and the materials quantity variance
d.sum of the materials price variance and the materials quantity variance
27) Kern Company sells merchandise on account for $8,000 to Block Company with
credit terms of 2/10, n/30. Block Company returns $1,600 of merchandise that was
damaged, along with a check to settle the account within the discount period. What is
the amount of the check?
a.$6,272
b.$6,400
c.$7,840
d.$7,872
28) The adjusted trial balance is prepared
a.after financial statements are prepared
b.before the trial balance
c.to prove the equality of total assets and total liabilities
d.after adjusting entries have been journalized and posted
29) The Assembly Department shows the following information:
Units
Beginning Work in Process20,000
Ending Work in Process50,000
Units Transferred Out21,000
How many total units are to be accounted for by the Assembly Department?
a.71,000
b.50,000
c.70,000
d.51,000
30) A check returned by the bank marked “NSF” means
a.no service fee
b.no signature found
c.not satisfactorily filled-out
d.not sufficient funds
31) The LIFO inventory method assumes that the cost of the latest units purchased are
a.the last to be allocated to cost of goods sold
b.the first to be allocated to ending inventory
c.the first to be allocated to cost of goods sold
d.not allocated to cost of goods sold or ending inventory
32) Pan Inc. has an investment in available-for-sale securities of $70,000. This
investment experienced an unrealized loss of $6,000 during the current year. Assuming
a 35% tax rate, the effect of this loss on comprehensive income will be
a.no effect
b.$70,000 increase
c.$24,500 decrease
d.$6,000 decrease
33) If common stock is issued for an amount greater than par value, the excess should
be credited to
a.Cash
b.Retained Earnings
c.Paid-in Capital in Excess of Par
d.Legal Capital
34) Identify whether each of the following items would be (a) added to the book
balance, or (b) deducted from the book balance in a bank reconciliation.
1>EFT transfer to a supplier
2>Bank service charge
3>Check printing charge
4>Error recording check # 214 which was written for $450 but recorded for $540
5>Collection of note and interest by bank on companys behalf
35) Consolidated financial statements present all of the following except the
a.individual assets and liabilities of the parent company
b.individual assets and liabilities of the subsidiary
c.total revenues and expenses of the subsidiary
d.All of these are presented in consolidated financial statements
36) Each of the following is an extraordinary item except the
a.effects of major casualties, if rare in the area
b.effects of a newly enacted law or regulation
c.expropriation of property by a foreign government
d.losses attributable to labor strikes
37) In its first year of operations, Banner Elk Corporation had the following
transactions pertaining to its $10 par value preferred stock.
Feb.1Issued 6,000 shares for cash at $43 per share.
Nov.1Issued 3,000 shares for cash at $45 per share.
Instructions
(a)Journalize the transactions.
(b)Indicate the amount to be reported for (1) preferred stock, and (2) paid-in capital in
excess of par preferred stock at the end of the year.
38) In the production cost report, the total
a.physical units accounted for equals the costs accounted for
b.physical units accounted for equals the units to be accounted for
c.costs charged equals the units to be accounted for
d.costs accounted for equals the costs of the units started into production
39) Debt investments that are held to maturity are recorded at
a.amortized cost
b.fair value
c.original cost
d.maturity value
40) At March 1, Psychocandy Inc. reported a balance in Supplies of $200. During
March, the company purchased supplies for $750 and consumed supplies of $800. If no
adjusting entry is made for supplies
a.owners equity will be overstated by $800
b.expenses will be understated by $750
c.assets will be understated by $250
d.net income will be understated by $800
41) A copy of the materials requisition slip would not include the:
a.quantity
b.stock number
c.cost per unit
d.name of the supplier
42) What is the biggest disadvantage of ABC?
a.It does not provide costing information needed for GAAP purposes
b.It causes management to make frivolous decisions
c.It often causes managers to argue about the best activity measure
d.It is expensive
43) Hilbert Company recorded operating data for its shoe division for the year. The
companys desired return is 5%.
Sales$1,000,000
Contribution margin220,000
Total direct fixed costs120,000
Average total operating assets400,000
Which one of the following reflects the controllable margin for the year?
a.22%
b.55%
c.$100,000
d.$220,000
44) Yuanne Sipp and Letitia Grimes share partnership income on a 3:2 basis. They have
capital balances of $560,000 and $280,000, respectively, when Tammy Tuck is admitted
to the partnership.
Instructions
Prepare the journal entry to record the admission of Tammy Tuck under each of the
following assumptions:
(a)Tuck invests $320,000 for a 25% ownership interest.
(b)Tuck invests $220,000 for a 25% ownership interest.
(c)Tuck invests an amount that gives him a 25% ownership interest.
45) The direct materials budget shows:
Desired ending direct materials74,000 pounds
Total materials required108,000 pounds
Direct materials purchases94,800 pounds
The total direct materials needed for production is
a.34,000 pounds
b.13,200 pounds
c.20,800 pounds
d.202,800 pounds
46) Somento Forest Inc. has 10,000 shares of 6%, $100 par value, cumulative preferred
stock and 100,000 shares of $1 par value common stock outstanding at December 31,
2014 . What is the annual dividend on the preferred stock?
a.$60 per share
b.$60,000 in total
c.$100,000 in total
d.$0.60 per share
47) Zyrkel Corporations December 31, 2014 balance sheet showed the following:
8% preferred stock, $20 par value, cumulative, 30,000 shares
authorized; 20,000 shares issued$ 400,000
Common stock, $10 par value, 2,000,000 shares authorized;
1,950,000 shares issued, 1,920,000 shares outstanding19,500,000
Paid-in capital in excess of parpreferred stock60,000
Paid-in capital in excess of parcommon stock27,000,000
Retained earnings7,500,000
Treasury stock (30,000 shares)630,000
Zyrkel total paid-in capital was
a.$46,960,000
b.$47,590,000
c.$46,330,000
d.$27,060,000
48) After transaction information has been recorded in the journal, it is transferred to
the
a.trial balance
b.income statement
c.book of original entry
d.ledger
49) With regard to accounting for a merchandising company versus a service enterprise,
which of the following is false?
There are just as many steps as in the accounting cycle for a merchandising company
Additional accounts and entries are typically required for a merchandising company
c.Both retail and wholesale enterprises generally use accounting techniques of a
merchandising company
d.The process of measuring net income is conceptually different
50) Which of the following accounts is not included in the computation of net sales?
Freight-out
Sales Discounts
c.Sales Revenue
d.Sales Returns and Allowances
51) Walsh Company has budgeted the following unit sales for the first quarter of 2015:
Units
January36,000
February54,000
March45,000
It takes two pounds of direct materials, which cost $6 per pound, to manufacture one
unit of product. It is the company’s policy to have a finished goods inventory on hand at
the end of each month equal to 20% of next month’s sales and to maintain a direct
materials inventory at the end of the month equal to 30% of the next month’s production
needs. The inventory levels at December 31, 2014, were in accordance with company
policy.
Instructions: Answer the following independent questions and show computations
which support your answers.
1>What was the number of units in ending finished goods inventory at December 31,
2014?
2>Calculate the number of units that should be scheduled for production in the month
of February.
3>What was the number of units in ending direct materials inventory at December 31,
2014?
4>What was the number of units and the dollar amount of direct materials purchases
budgeted for the month of January?
52) Sales taxes collected from customers are a ______________ of the business until
they are remitted to the taxing agency.
53) When the allowance method of recognizing bad debts expense is used, the entry to
recognize that expense
decreases the amount customers owe the company
increases net income
c.decreases current assets
d.has no effect on current assets
54) Internal control consists of the related methods and measures adopted to
____________ its assets and enhance the ______________ and ______________ of its
accounting records.
55) On April 25, Davis Company buys 4,200 shares of Carter common stock for
$94,500. On October 31, Davis sells 600 shares of Carter stock for $16,500,. Prepare
journal entries for the purchase and sale of the Carter common stock.