1) Bonds may be purchased directly from the issuing corporation or through one of the
bond exchanges.
2) Period costs are operating costs that are expensed in the period in which the goods
are sold.
3) In a common-sized income statement, each item is expressed as a percentage of net
income.
4) A company depreciates its equipment $500 a year. The adjusting entry for December
31 is credit Depreciation Expense, $500 and debit Equipment, $500.
5) When the rate of return on total assets ratio is greater than the rate of return on
common stockholders’ equity ratio, the management of the company has effectively
used leverage.
6) Journalizing and posting closing entries must be completed before financial
statements can be prepared.
7) Yield measures the ratio of the materials output quantity to the materials input
quantity.
8) Interim financial statements for a manufacturing business would report overapplied
factory overhead as a deferred item on the balance sheet.
9) Depending upon when an unfunded pension liability is to be paid, it will be classified
on the balance sheet as either a long-term or a current liability.
10) The method used to calculate the depletion of a natural resource is the straight line
method.
11) ABC is used to allocate selling and administrative expenses to each product based
on the products individual differences in consuming these activities.
12) The cost of treasury stock is deducted from total paid-in capital and retained
earnings in determining total stockholders equity.
13) When estimated costs are used in applying the cost-plus approach to product
pricing, the estimates should be based upon normal levels of performance.
14) The equity method is usually more appropriate for accounting for investments
where the purchaser does not have significant influence over the investee.
15) Activity rates are computed by dividing the cost budgeted for each activity pool by
the estimated activity base for that pool.
16) Match the following terms with the best definition given.
1>Begins by estimating the quantity of sales. A. Master budget
2>Shows expected results at several activity levels. B. Sales budget
3>Integrated set of operating, investing and financing budgets for a period of time. C.
Flexible budget
4>Estimates the number of units to be manufactured to meet sales and inventory levels.
D. Production budget
5>Shows expected results at only one activity level. E. Static budget
17) Division A of Mocha Company has sales of $155,000, cost of goods sold of
$83,000, operating expenses of $43,000, and invested assets of $150,000.
What is the investment turnover for Division A?
A.1.03
B.1.0
C.5.17
D.5.34
18) The relative distribution of sales among the various products sold by a business is
termed the:
A.business’s basket of goods
B.contribution margin mix
C.sales mix
D.product portfolio
19) The particular analytical measures chosen to analyze a company may be influenced
by all of the following except:
A.industry type
B.capital structure
C.diversity of business operations
D.product quality or service effectiveness
20) When a business sells more than one product at varying selling prices, the
business’s break-even point can be determined as long as the number of products does
not exceed:
A.two
B.three
C.fifteen
D.there is no limit
21) The total earnings of an employee for a payroll period is referred to as
A.take-home pay
B.pay net of taxes
C.net pay
D.gross pay
22) On the first day of the fiscal year, Lisbon Co. issued $1,000,000 of 10-year, 7%
bonds for $1,050,000, with interest payable semiannually. Orange Inc. purchased the
bonds on the issue date for the issue price. The journal entry to record the amortization
of the premium (by the straight line method) for the year by Lisbon Co. includes a debit
to:
A.Interest Expense for $2,500
B.Premium on Bonds Payable for $2,500
C.Interest Expense for $5,000
D.Premium on Bonds Payable for $5,000
23) Match the following stockholders equity concepts to the most appropriate answer.
1>the maximum number of shares a company can issue to shareholders A. additional
paid in capital
2>account used when issue price exceeds par value of stock B. par value
3>the number of sharing originally sold to stockholders C. outstanding shares
4>a class of stock that provides voting rights for shareholders D. preferred stock
5>the number of shares currently held by stockholders E. authorized shares
6>a class of stock that does not provide voting rights for shareholders F. issued shares
7>a value that the stock is worth on the stock exchange G. common stock
8>a value established for the protection of creditors H. market price
24) Mason Corporation had $650,000 in invested assets, sales of $700,000, income
from operations amounting to $99,000, and a desired minimum rate of return of 15%.
The investment turnover for Mason is:
A.1.08
B..93
C.6.57
D.7.07
25) Which of the following forms is typically given to employees at the end of the
calendar year so that employees can file their individual income tax forms?
A.Employees Withholding Allowance Certificate (W-4)
B.Wage and Tax Statement (Form W-2)
C.Employer’s Quarterly Federal Tax Return (Form 941)
D.401k plans
26) Based on the following information: compute (a) Inventory turnover; (b) Average
daily cost of merchandise sold; and (c) Number of days’ sales in inventory for 2011.
Use a 365-day year. (d) If an inventory turnover of 12 is average for the industry, how is
this company doing?
27) If the physical count of the inventory revealed $158,000 of merchandise on hand
and the inventory records reported $163,000, what would be the necessary adjusting
entry to record inventory shortage?
A.Merchandise inventory debit $158,000; Cost of Merchandise Sold credit $158,000
B.Merchandise inventory debit $5,000; Cost of Merchandise Sold credit $5,000
C.Cost of Merchandise Sold debit $163,000; Merchandise Inventory credit $158,000
D.Cost of Merchandise Sold debit $5,000; Merchandise Inventory credit $5,000
28) If a fixed asset, such as a computer, were purchased on January 1st for $3,750 with
an estimated life of 3 years and a salvage or residual value of $150, the journal entry for
monthly expense under straight-line depreciation is:
(Note: EOM indicates the last day of each month.)
A.EOM Depreciation Expense 100
Accumulated Depreciation 100
B.EOM Depreciation Expense 1,200
Accumulated Depreciation 1,200
C.EOM Accumulated Depreciation 1,200
Depreciation Expense 1,200
D.EOM Accumulated Depreciation 100
Depreciation Expense 100
29) All of the following statements regarding the ratio of liabilities to stockholders
equity are true except
A.A ratio of 1 indicates that liabilities equal stockholders equity
B.The ratio is calculated as total liabilities divided by total stockholders equity
C.The higher this ratio, the better able a business is to withstand poor business
conditions and pay creditors
D.The lower this ratio is, the better able a business is to withstand poor business
conditions and pay creditors
30) Which of the accounts below would be closed by posting a debit to the account?
A.Unearned Revenue
B.Fees Earned
C.Dividends
D.Miscellaneous Expense
31) The balance in Discount on Bonds Payable
A.should be reported on the balance sheet as an asset because it has a debit balance
B.should be allocated to the remaining periods for the life of the bonds by the
straight-line method, if the results obtained by that method materially differ from the
results that would be obtained by the interest method
C.would be added to the related bonds payable to determine the carrying amount of the
bonds
D.would be subtracted from the related bonds payable on the balance sheet
32) Challenger Factory produces two similar products – regular widgets and deluxe
widgets. The total plant overhead budget is $675,000 with 300,000 estimated direct
labor hours. It is further estimated that deluxe widget production will need 3 direct
labor hours for each unit and regular widget production will require 2 direct labor hours
for each unit.
Using the single plantwide factory overhead rate with an allocation base of direct labor
hours, how much factory overhead will be allocated to the deluxe widget production if
the budgeted production for the period is 50,000 units and actual production for the
period is 58,000 units?
A.$391,500
B.$225,000
C.$261,000
D.$337,500
33) Differentiate between:
a) direct materials versus indirect materials
b) direct labor versus indirect labor
34) A person authorized to write checks drawn on a checking account at a bank must
sign and have on file with the bank a
A.signature card
B.deposit ticket
C.checkbook
D.bank card
35) Which of the following is an example of direct labor cost for an airplane
manufacturer?
A.Cost of oil lubricants for factory machinery
B.Cost of wages of assembly worker
C.Salary of plant supervisor
D.Cost of jet engines
36) As of January 1 of the current year, the Grackle Company had accounts receivables
of $50,000. The sales for January, February, and March of 2012 were as follows:
$120,000, $140,000 and $150,000. 20% of each months sales are for cash. Of the
remaining 80% (the credit sales), 60% are collected in the month of sale, with
remaining 40% collected in the following month. What is the total cash collected (both
from accounts receivable and for cash sales) in the month of January?
A.$$74,000
B.$110,000
C.$71,600
D.$131,600
37) What is the primary criterion for the preparation of managerial accounting reports?
A.Relevance of the reports
B.Meet the manager needs
C.Timing of the reports
D.Cost of the reports
38) Which of the following would be used to compute the federal income taxes to be
withheld from an employee’s earnings?
A.FICA tax rate
B.wage and tax statement
C.FUTA tax rate
D.wage bracket and withholding table
39) If the amount of factory overhead cost incurred exceeds the amount applied, the
factory overhead account will have a:
A.debit balance and be underapplied
B.credit balance and be underapplied
C.credit balance and be overapplied
D.debit balance and be overapplied
40) On November 1st, clients of Great Designs Company prepaid $4,250 for services to
be provided in the future at a rate of $85 per hour.
(a) Journalize the receipt of this cash.
(b) As of November 30th, Great Designs shows that 15 hours of services have been
provided on this agreement. Prepare the necessary journal entry to record this.
(c) Determine the total unearned fees in hours and dollars at November 30th.
41) Entries are made to the Petty Cash account when
A.making payments out of the fund
B.recording shortages in the fund
C.replenishing the petty cash fund
D.establishing the fund
42) An example of a period cost is:
A.advertising expense
B.indirect materials
C.depreciation on factory equipment
D.property taxes on plant facilities
43) List the objectives of internal control and give an example of how each is
implemented.
Internal control provides reasonable assurance that
44) On January 2nd, Dog Mart prepaid $30,000 rent for the year and recorded the
prepayment in an asset account. Prepare the January 31st adjusting entry for rent
expense.
45) Newville Corporation reported net income of $50,000 in 2015. They have 10,000
shares of $100 par, 6% preferred stock and 50,000 shares of $2 common stock
outstanding. During 2012 Newville paid the preferred stockholders a $6 per share
dividend and also paid $30,000 to common shareholders. The market value of
Newvilles stock is: Preferred – $105 and Common – $10.
(1) Calculate Newvilles dividend yield.
(2) Why does the dividend yield vary widely across firms?
46) Macy Company has 10,000 shares of 2% cumulative preferred stock of $50 par and
25,000 shares of $75 par common stock. The following amounts were distributed as
dividends:
Required:
Determine the dividends per share for preferred and common stock for each year.
47) Ramiro Company purchased 40% of the outstanding stock of Marco Company on
January 1, 2015. Marco reported net income of $95,000 and declared dividends of
$35,000 during 2015. How much would Ramiro adjust their investment in Marco
Company under the equity method?
48) Explain how net income or loss is determined by using the work sheet.
49) Schedule of Activity Costs
From the above schedule, compute the percentage of non-value-added activities.