1) Pravis Corporation owns 30% of Kuster Corporation. Pravis Corporation received
$9,000 in cash dividends from Kuster Corporation. The entry to record receipt of these
dividends is:
A.Debit Cash, $9,000; credit Long-Term Investments, $9,000.
B.Debt Long-Term Investment, $9,000; credit Cash, $9000.
C.Debit Cash, $9,000; credit Interest Revenue, $9,000.
D.Debit Unrealized Gain-Equity, $9,000; credit Cash, $9,000.
E.Debit Cash, $9,000; credit Dividend Revenue, $9,000.
2) Glaston Company manufactures a single product using a JIT inventory system. The
production budget indicates that the number of units expected to be produced are
193,000 in October, 201,500 in November, and 198,000 in December. Glaston assigns
variable overhead at a rate of $0.75 per unit of production. Fixed overhead equals
$150,000 per month. Compute the total budgeted overhead that would appear on the
factory overhead budget for month of October.
A.$343,000.
B.$150,000.
C.$144,750.
D.$301,125.
E.$294,750.
3) The purchase of long-term assets by issuing a note payable for the entire amount is
reported on the statement of cash flows in the:
A.Operating activities.
B.Financing activities.
C.Investing activities.
D.Schedule of noncash financing and investing activities.
E.Reconciliation of cash balance.
4) If a company has advance ticket sales totaling $2,000,000 for the upcoming football
season, the receipt of cash would be journalized as:
A.Debit Sales, credit Unearned Revenue.
B.Debit Unearned Revenue, credit Sales.
C.Debit Cash, credit Unearned Revenue.
D.Debit Unearned Revenue, credit Cash.
E.Debit Cash, credit Revenue.
5) On June 18, Wyman Company (a U.S. Company) sold merchandise to the Nielsen
Company of Denmark for ¬60,000 (Euros), with a payment due in 60 days. If the
exchange rate was $1.35 per euro on the date of sale and $1.14 per euro on the date of
payment, Johnson Company should recognize a foreign exchange gain or loss in the
amount of:
A.$60,000 gain.
B.$60,000 loss.
C.$68,400 loss.
D.$12,600 gain.
E.$12,600 loss.
6) A company borrowed $10,000 by signing a 180-day promissory note at 9%. The
maturity value of the note is:
A.$10,450
B.$10,900
C.$10,075
D.$11,800
E.$10,300
7) A company purchased $1,800 of merchandise on July 5 with terms 2/10, n/30. On
July 7, it returned $200 worth of merchandise. On July 28, it paid the full amount due.
The amount of the cash paid on July 28 equals:
A.$200.
B.$1,564.
C.$1,568.
D.$1,600.
E.$1,800.
8) West Company declared a $0.50 per share cash dividend. The company has 190,000
shares issued, and 10,000 shares in treasury stock. The journal entry to record the
dividend declaration is:
A.Debit Retained Earnings $90,000; credit Common Dividends Payable $90,000.
B.Debit Common Dividends Payable $95,000; credit Cash $95,000.
C.Debit Retained Earnings $5,000; credit Common Dividends Payable $5,000.
D.Debit Common Dividends Payable $90,000; credit Cash $90,000.
E.Debit Retained Earnings $95,000; credit Common Dividends Payable $95,000.
9) Tara Westmont, the proprietor of Tiptoe Shoes, had annual revenues of $185,000,
expenses of $103,700, and withdrew $18,000 from the business during the current year.
The owner’s capital account before closing had a balance of $297,000. The Net Income
for the year is:
A.$185,000
B.$63,300
C.$81,300
D.$360,300
E.$378,300
10) Watson Corporation is considering buying a machine for $25,000. Its estimated
useful life is 5 years, with no salvage value. Watson anticipates annual net income after
taxes of $1,500 from the new machine. What is the accounting rate of return assuming
that Watson uses straight-line depreciation and that income is earned uniformly
throughout each year?
A.6.0%.
B.8.0%.
C.8.5%.
D.10.0%.
E.12.0%.
11) A company had income before interest expense and income taxes of $186,000, and
its interest expense is $55,000. Calculate the company’s times interest earned ratio.
12) On May 1 of the current year, a company paid $200,000 cash to purchase 6%,
10-year bonds with a par value of $200,000; interest is paid semiannually each May 1
and November 1. The company intends to hold these bonds until they mature. Prepare
the journal entry for the accrual of interest for the year-end December 31.
13) Larry Matt completed these transactions during December of the current year:
Prepare general journal entries to record these transactions.
14) Serene Spa Sales uses the perpetual inventory system and had the following
transactions during August.
Required:
Prepare the general journal entries to record these transactions.
15) ___________________ are costs incurred to produce or purchase two or more
products at the same time.
16) A company is considering a 5-year project. It plans to invest $62,000 now and it
forecasts cash flows for each year of $16,200. The company requires a hurdle rate of
12%. Calculate the internal rate of return to determine whether it should accept this
project. Selected factors for a present value of an annuity of 1 for five years are shown
below:
17) Explain in detail how to compute each of the following depreciation methods:
straight-line, units-of-production, and double-declining-balance.