1) Market prospects are the ability to provide financial rewards sufficient to attract and
retain financing.
2) If the exchange rate for Canadian and U.S. dollars is 0.7382 to 1, this implies that 2
Canadian dollars can be purchased for $1.48 U.S. dollars.
3) A stock split increases total stockholders’ equity.
4) When an asset is purchased (or disposed of) at a time other than the beginning or the
end of an accounting period, depreciation is recorded for part of a year so that the year
of purchase or the year of disposal is charged with its share of the asset’s depreciation.
5) Because employees know that bonding is an insurance policy against loss from theft,
bonding does not generally discourage loss from theft.
6) Times interest earned is calculated by:
A.Multiplying interest expense by income.
B.Dividing interest expense by income before interest expense.
C.Dividing income before interest expense and income taxes by interest expense.
D.Multiplying interest expense by income before interest expense.
E.Dividing income before interest expense by interest expense and income taxes.
7) A company reports the following information regarding its inventory.
Beginning inventory: cost is $80,000; retail is $130,000
Net purchases: cost is $65,000; retail is $120,000
Sales at retail: $145,000
The year-end inventory shows $135,000 worth of merchandise available at retail prices.
What is the cost of the ending inventory calculated using the retail inventory method?
A.$135,000.
B.$73,125.
C.$78,300.
D.$72,900.
E.$105,000.
8) Gross pay is:
A.Take-home pay.
B.Total compensation earned by an employee before any deductions.
C.Salaries after taxes are deducted.
D.Deductions withheld by an employer.
E.The amount of the paycheck.
9) Typical cash flows from investing activities include each of the following except:
A.Payments to purchase property, plant and equipment or other productive assets
(excluding inventory).
B.Proceeds from collecting the principal amount of accounts receivable arising from
customer sales.
C.Payments to buy intangible assets.
D.Payments to acquire held-to maturity securities of other entities, except cash
equivalents.
E.Proceeds from the sale of equipment.
10) A job was budgeted to require 3 hours of labor per unit at $8.00 per hour. The job
consisted of 8,000 units and was completed in 22,000 hours at a total labor cost of
$198,000. What is the total labor cost variance?
A.$2,000 unfavorable.
B.$3,000 unfavorable.
C.$6,000 unfavorable.
D.$8,000 unfavorable.
E.$9,000 unfavorable.
11) A company has established 5 pounds of Material J at $2 per pound as the standard
for the material in its Product Z. The company has just produced 1,000 units of this
product, using 5,200 pounds of Material J that cost $9,880. The direct materials
quantity variance is:
A.$400 unfavorable.
B.$120 favorable.
C.$400 favorable.
D.$520 favorable.
E.$520 unfavorable.
12) Which of the following costs is not included in factory overhead?
A.Payroll taxes on the wages of factory supervisors.
B.Indirect labor.
C.Depreciation of manufacturing equipment.
D.Manufacturing supplies used.
E.Direct materials.
13) A manufacturing company has a beginning finished goods inventory of $28,300,
cost of goods manufactured of $58,500, and an ending finished goods inventory of
$27,600. The cost of goods sold for this company is:
A.$114,400.
B.$57,800.
C.$2,600.
D.$86,100.
E.$59,200.
14) Wright, Bell, and Edison are partners and share income in a 2:5:3 ratio. The
partnership’s capital balances are as follows: Wright, $33,000, Bell $27,000 and Edison
$40,000. Edison decides to withdraw from the partnership, and the partners agree not to
revalue the assets upon Edison’s retirement. The journal entry to record Edison’s June 1
withdrawal from the partnership if Edison sells his interest to Whitney for $45,000 after
the other two partners approve Whitney as partner is:
A.Debit Edison, Capital $45,000; credit Whitney, Capital $45,000.
B.Debit Edison, Capital $40,000; credit Cash $40,000.
C.Debit Edison, Capital $40,000; debit Wright, Capital $2,500; debit Bell, Capital
$2,500; credit Whitney, Capital $45,000.
D.Debit Edison, Capital $40,000; credit Whitney, Capital $40,000.
E.Debit Edison, Capital $40,000; debit Cash $5,000; credit Whitney, Capital $45,000.
15) In preparing a company’s statement of cash flows for the most recent year using the
indirect method, the following information is available:
Net cash provided by operating activities was:
A.$120,000.
B.$71,000.
C.$70,000.
D.$24,000.
E.$110,000.
16) The predetermined overhead rate for Foster, Inc., is based on estimated direct labor
costs of $400,000 and estimated factory overhead of $500,000. Actual costs incurred
were:
(a) Calculate the predetermined overhead rate and calculate the overhead applied during
the year.
(b) Determine the amount of over- or underapplied overhead and prepare the journal
entry to eliminate the over- or underapplied overhead assuming that it is not material in
amount.
17) On July 1, a company paid the $2,400 premium on a one-year insurance policy with
benefits beginning on that date. What will be the insurance expense on the annual
income statement for the current year ended December 31?
A.$1,200.
B.$2,400.
C.$1,000.
D.$400.
E.$1,400.
18) Calculate the current ratio in each of the following separate cases and identify the
company case with the strongest liquidity position.
19) Use the following income statement and information about selected current assets
and current liabilities to calculate the net cash provided or used by operating activities
using the indirect method.
Selected beginning and ending balances of current asset and current liability accounts,
all of which relate to operating activities, are as follows:
20) A __________________________ helps control costs and expenses and evaluates
managers’ performance by assigning costs and expenses to the managers responsible for
controlling them.
21) For each of the following accounts, identify whether a debit or credit yields the
indicated change.
22) ____________________________ are debt and equity securities that a company
intends to actively manage and trade for a profit.
23) A corporation received its charter and began business this year. The company is
authorized to issue 500,000 shares of $100 par, 6%, noncumulative, nonparticipating
preferred stock, and 1,000,000 shares of no-par common stock. The following selected
transactions occurred during this year:
Prepare journal entries to record these transactions.
24) Diego, Inc., sells two products, Baubles and Charms. The sales forecast in units for
the first quarter of the coming year is:
Cash sales are 30% of each product’s monthly sales. The remaining sales are credit sales
which are collected as follows: 70% in the month of sale, 20% the next month, and 10%
in the following month. Unit sale prices are $30 and $20 for Baubles and Charms,
respectively.
Determine the company’s cash receipts for March from its current and past sales.
25) How does the calculation of break-even time (BET) differ from the calculation of
payback period (PBP)?
26) The job cost sheet for Job number 83-421 includes the following information:
DIRECT MATERIALS:
7/12 Requisition R88-566: 20 units @ $3.50 per unit
7/13 Requisition R88-576: 18 units @ $5.00 per unit
7/13 Requisition R88-578: 4 units @ $25.00 per unit
7/14 Requisition R88-591: 40 units @ $1.25 per unit
DIRECT LABOR:
7/12 Employee 19: 8 hours @ $9.00 per hour
7/13 Employee 19: 6 hours @ $9.00 per hour
7/13 Employee 37: 6 hours @ $7.00 per hour
7/14 Employee 19: 5 hours @ $9.00 per hour
7/14 Employee 92: 5 hours @ $11.00 per hour
FACTORY OVERHEAD: Assigned at 150% of direct labor cost.
What is the total cost of Job number 83-421?
27) Explain how to calculate times interest earned and how it is used to analyze a
company’s risk.