1) Asset accounts normally have credit balances and revenue accounts normally have
debit balances.
2) On a bank statement, deposits are listed as debits because the bank increases its cash
account when the deposit is made.
3) Service firms, unlike manufacturing firms, should only use actual costs when
determining a selling price for their services.
4) Analysis of a single financial number is often of limited value.
5) The FIFO method does not use the beginning inventory costs in computing the cost
per equivalent unit for the current period.
6) Successful use of a just-in-time inventory system can narrow the gap between the
acid-test and the current ratio.
7) Maintaining adequate records is an important internal control principle.
8) The trial balance is a list of all accounts and their balances at a point in time taken
from the ledger.
9) A revenue account normally has a debit balance.
10) A business segment is a part of a company that is separately identified by its
products or services, or by the geographic market it serves.
11) Larger, more complex organizations usually require a longer time to prepare their
budgets than smaller organizations because of the considerable effort to coordinate the
different units within the business.
12) The statement of cash flows reports all of the following except:
A.Cash flows from operating activities
B.Cash flows from investing activities
C.Cash flows from financing activities
D.The net increase or decrease in assets for the period reported
E.The net increase or decrease in cash for the period reported
13) The debt-to-equity ratio:
A.Is calculated by dividing book value of secured liabilities by book value of pledged
assets
B.Is a means of assessing the risk of a company’s financing structure
C.Is not relevant to secured creditors
D.Can always be calculated from information provided in a company’s income
statement
E.Must be calculated from the market values of assets and liabilities
14) A company had inventory of 10 units at a cost of $20 each on November 1. On
November 2, it purchased 10 units at $22 each. On November 6 it purchased 6 units at
$25 each. On November 8, it sold 22 units for $54 each. Using the FIFO perpetual
inventory method, what was the cost of the 22 units sold?
A.$470
B.$490
C.$450
D.$570
E.$520
15) The times interest earned ratio reflects:
A.A company’s ability to pay its operating expenses on time
B.A company’s ability to pay interest even if sales decline
C.A company’s profitability
D.The relation between income and debt
E.The relation between assets and liabilities
16) The board of directors of a corporation:
A.Are elected by the corporate registrar
B.Are responsible for day-to-day operations of the business
C.Do not have the power to bind the corporation to contracts, due to lack of mutual
agency
D.May not also be executive officers of the corporation, due to the separate entity
principle
E.Are responsible for and have final authority for managing corporate activities
17) Costs included in the Merchandise Inventory account can include all of the
following except:
A.Invoice price minus any discount
B.Transportation-in
C.Storage
D.Insurance
E.Damaged inventory that cannot be sold
18) Tops had cost of goods sold of $9,421 million, ending inventory of $2,089 million,
and average inventory of $1,965 million. Its inventory turnover equals:
A.0.21
B.4.51
C.4.79
D.76.1 days
E.80.9 days
19) A company used the percent of sales method to determine its bad debts expense. At
the end of the current year, the company’s unadjusted trial balance reported the
following selected amounts:
All sales are made on credit. Based on past experience, the company estimates 1% of
credit sales to be uncollectible. What adjusting entry should the company make at the
end of the current year to record its estimated bad debts expense?
A.Debit Bad Debts Expense $19,750; credit Allowance for Doubtful Accounts $19,750
B.Debit Bad Debts Expense $15,225; credit Allowance for Doubtful Accounts $15,225
C.Debit Bad Debts Expense $22,250; credit Allowance for Doubtful Accounts $22,250
D.Debit Bad Debts Expense $7,350; credit Allowance for Doubtful Accounts $7,350
E.Debit Bad Debts Expense $21,000; credit Allowance for Doubtful Accounts $21,000
20) A statistical method for deriving an estimated line of cost behavior is the:
A.Scatter diagram method
B.High-low method
C.Composite method
D.CVP charting method
E.Least-squares regression method
21) On February 15, Seacroft buys 7,000 shares of Kebo common stock at $28.53 per
share plus a brokerage fee of $400. The stock is classified as available-for-sale
securities. On March 15, Kebo declares a dividend of $1.15 per share payable to
stockholders of record on April 15. Seacroft received the dividend on April 15 and
ultimately sells half of the Kebo stock on November 17 of the current year for $29.30
per share less a brokerage fee of $250. The journal entry to record the dividend on April
15 is:
A.Debit Cash $7,350; credit Dividend Revenue $7,350
B.Debit Cash $8,050; credit Dividend Revenue $8,050
C.Debit Cash $8,050; credit Interest Revenue $8,050
D.Debit Cash $7,350; credit Interest Revenue $7,350
E.Debit Cash $8,050; credit Gain on Sale of Investments $8,050
22) All of the following statements regarding source documents are true except:
A.Source documents provide the basic information processed by an accounting system
B.Source documents include bank statements, cash register files, and employee
earnings records
C.Source documents are insignificant and play a minor role in the reliability of the
information system
D.Source documents can be paper or electronic files
E.Source documents can include Web communications
23) When a credit sale is denominated in a foreign currency, the foreign exchange rate
used to record the sale is the current exchange rate:
A.Thirty days from the date of sale
B.At the end of the seller’s fiscal year
C.At the end of the buyer’s fiscal year
D.On the date final payment is made
E.On the date of the sale
24) Which of the following is included in the cash flows from financing activities
section of the statement of cash flows?
A.Interest revenue
B.Sale of equipment
C.Interest expense
D.Purchase of treasury stock
E.Purchase of stock in another company
25) Select cost information for Winfrey Enterprises is as follows:
Based on this information:
A.Both direct materials and rent expense are variable costs
B.Utilities expense is a mixed cost and rent expense is a variable cost
C.Utilities expense is a mixed cost and rent expense is a fixed cost
D.Direct materials is a fixed cost and utilities expense is a mixed cost
E.Both direct materials and utilities expense are mixed costs
26) The overall coordinating activity of the budget process is the responsibility of the:
A.Chief Accounting Officer
B.Chief Executive Officer (CEO)
C.Chief Financial Officer (CFO)
D.Budget Committee
E.Board of Directors
27) The accounting principle that prescribes an accounting information system conform
with a company’s activities, personnel, and structure is the:
A.Control principle
B.Compatibility principle
C.Relevance principle
D.Flexibility principle
E.Cost-Benefit principle
28) Winthrop Manufacturing produces a product that sells for $50.00. Fixed costs are
$260,000 and variable costs are $24.00 per unit. Winthrop can buy a new production
machine that will increase fixed costs by $11,400 per year, but will decrease variable
costs by $3.50 per unit. Compute break-even point in dollars with the purchase of the
new machine.
A.$500,000
B.$440,678
C.$521,923
D.$480,000
E.$460,000
29) Rent expense that is paid with cash appears on which of the following statements?
A.Balance sheet
B.Income statement
C.Statement of owner’s equity
D.Income statement and statement of cash flows
E.Statement of cash flows only
30) Calculate the cost of goods manufactured using the following information:
A.$680,500
B.$701,900
C.$687,100
D.$674,600
E.$772,600
31) All of the following regarding accounting for Treasury Stock under U.S. GAAP and
IRFS are true except:
A.U. S. GAAP applies the principle that companies do not record gains or losses on
transactions involving their own stock
B.Only gains are recognized on retirements of treasury stock under IFRS
C.IFRS applies the principle that companies do not record gains or losses on
transactions involving their own stock
D.Gains are not recognized on retirements of treasury stock under U. S. GAAP
E.A company’s assets and equity are always reduced by the amount paid for the retiring
stock
32) The date the directors vote to pay a dividend is called the:
A.Date of stockholders’ meeting.
B.Date of declaration
C.Date of record
D.Date of payment
E.Liquidating date
33) Wilson Trade School allocates administrative costs to its respective departments
based on the number of students enrolled, while maintenance and utilities are allocated
per square feet of the classrooms. Based on the information below, what is the total
amount allocated to the Automotive Department (rounded to the nearest dollar) if
administrative costs for the school were $50,000, maintenance fees were $12,000, and
utilities were $6,000?
A.$0
B.$17,000
C.$18,500
D.$22,667
E.$30,000
34) A company has two departments, A and B that incur delivery expenses. An analysis
of the total delivery expense of $9,000 indicates that Dept. A had a direct expense of
$1,000 for deliveries and Dept. B had no direct expense. The indirect expenses are
$8,000. The analysis also indicates that 60% of regular delivery requests originate in
Dept. A and 40% originate in Dept. B. Departmental delivery expenses for Dept. A and
Dept. B, respectively, are:
A.$4,500; $4,500
B.$5,800; $3,200
C.$5,500; $3,500
D.$5,500; $4,500
E.$5,400; $3,600
35) A plan showing the planned sales units and the revenue to be derived from these
sales, and is the usual starting point in the budgeting process, is called the:
A.Operating budget
B.Business plan
C.Income statement budget
D.Merchandise purchases budget
E.Sales budget
36) All of the following statements related to current liabilities for U.S. GAAP and
IFRS are True except:
A.The definitions and characteristics of current liabilities are broadly similar for both
U.S. GAAP and IFRS
B.Provision is typically used under IRFS to refer to liability under U.S. GAAP
C.Because tax regulatory systems of countries are different, the approach to recording
taxes is totally different
D.When there is little uncertainty surrounding current liabilities, both require
companies to record them in a similar manner
E.When there is a known current obligation that involves an uncertain amount, but one
that can be reasonable estimated, both require similar treatment
37) What is a corporation? Identify the key advantages and disadvantages of
corporations.
38) A company reported earnings per share of $9.75, paid a $6.00 cash dividend per
share to preferred shareholders, and paid a $0.54 cash dividend per share to common
shareholders. There were 1,000 shares of preferred stock outstanding and 6,000 shares
of common stock outstanding during the year, and the market price per share of
common stock was $45. Calculate the company’s dividend yield for common stock.
39) On November 1, a company established a $90 petty cash fund. On November 12,
the petty cash fund contains $3 in cash and the following paid petty cash receipts:
transportation-in on merchandise inventory $14.25; postage, $34.50; and office
supplies, $36. Give the entry to reimburse the fund and to increase its amount to $150
on November 12.
40) What is a cost center?
41) Using the information given below for a company that uses a perpetual inventory
system, calculate the ending inventory using LIFO.
42) From the adjusted trial balance for Worker Products Company given below, prepare
a multiple-step income statement in good form.
43) Camden Properties is developing a golf course subdivision that includes 230 home
lots; 150 lots are golf course lots and will sell for $125,000 each; 80 are street frontage
lots and will sell for $78,125. The developer acquired the land for $5,800,000 and spent
another $2,300,000 on street and utilities improvement. Assign the joint land and
improvement costs to the lots using the value basis and determine the average cost per
lot.
44) Herren, Inc. reported the following data regarding costs and inventories for the
current year: beginning goods-in-process inventory, $4,000; beginning finished goods
inventory, $2,000; cost of goods manufactured, $11,500; operating expenses, $3,000;
ending finished goods inventory, $1,000; ending goods-in-process inventory, $1,500.
Cost of goods sold for Herren, Inc. equals _________________.