1) When compared to a corporation, one of the major disadvantages of the partnership
is its limited life.
2) The accounting for defined benefit plans is usually very easy and straight forward.
3) Managerial information is for external as well as internal stakeholders.
4) Accounting is an information system that provides essential data about the economic
activities of an entity to various users to aid them in making informed judgments and
decisions.
5) For strong internal control system over cash, it is important to have the duties related
to cash receipts and cash payments divided among different employees.
6) Generally accepted accounting principles do not normally allow the use of the direct
write-off method of accounting for uncollectible accounts.
7) When a partner withdraws from the partnership by selling his or her interest back to
the partnership, the remaining partners must pay the withdrawing partner a specified
amount from their personal assets.
8) The buyer will include the sales tax as part of the cost of items purchased for use.
9) The expected period of time that will elapse between the date of a capital investment
and the complete recovery in cash of the amount invested is called the cash payback
period.
10) A post-closing trial balance should be prepared before the financial statements are
prepared.
11) An increase in the accounts receivable turnover may be due to an improvement in
the collection of receivables or to a change in the granting of credit and/or in collection
practices.
12) The Financial Accounting Standards Board (FASB) is the authoritative body that
has primary responsibility for developing accounting principles.
13) Unit variable cost does not change as the number of units of activity changes.
14) Only a single line, which represents the difference between total sales revenues and
total costs, is plotted on the cost-volume-profit chart.
15) If the cost of employee wages is not a significant portion of the total product cost,
the wages are classified as direct materials cost.
16) The cost of materials entering directly into the manufacturing process is classified
as factory overhead cost.
17) In a factory with several processing departments, a single factory overhead rate may
not provide accurate product costs and effective cost control.
18) Decisions to install new equipment, replace old equipment, and purchase or
construct a new building are examples of
A.sales mix analysis
B.variable cost analysis
C.capital investment analysis
D.variable cost analysis
19) Which of the following conditions would cause the break-even point to increase?
A.Total fixed costs increase
B.Unit selling price increases
C.Unit variable cost decreases
D.Total fixed costs decrease
20) Which one of the following below is not an element of internal control?
A.risk assessment
B.monitoring
C.information and communication
D.cost-benefit considerations
21) The Swan Company produces their product at a total cost of $43 per unit. Of this
amount $8 per unit is selling and administrative costs. The total variable cost is $30 per
unit The desired profit is $20 per unit.
Determine the mark up percentage on total cost.
A.100%
B.110%
C.80%
D.46.5%
22) The inventory at June 1 and costs charged to Work in Process – Department 60
during June are as follows:
During June, 32,000 units were placed into production and 31,200 units were
completed, including those in inventory on June 1. On June 30, the inventory of work in
process consisted of 4,600 units which were 85% completed. Inventories are costed by
the first-in, first-out method and all materials are added at the beginning of the process.
Determine the following, presenting your computations (Prepare your computations
using unit cost data to four decimal places, i.e. $4.4444, to minimize rounding
differences):
(a) equivalent units of production for conversion cost
(b) conversion cost per equivalent unit
(c) total and unit cost of finished goods started in prior period and completed in the
current period
(d) total and unit cost of finished goods started and completed in the current period
(e) total cost of work in process inventory at June 30
23) The process of transferring the cost of metal ores and other minerals removed from
the earth to an expense account is called
A.depletion
B.deferral
C.amortization
D.depreciation
24) The following is a measure of a managers performance working in a profit center.
A.balance sheet
B.rate of return and residual income measures
C.budget performance report
D.divisional income statements
25) Debts owed by a business are referred to as
A.accounts receivables
B.expenses
C.owners equity
D.liabilities
26) For each of the following errors, considered individually, indicate whether the error
would cause the adjusted trial balance totals to be unequal. If the error would cause the
adjusted trial balance total to be unequal, indicate whether the debit or credit total is
higher and by how much.
27) The Zoe Corporation has the following information for the month March.
Determine the (a) cost of goods manufactured, and (b) cost of goods sold.
28) Tanya Inc.s static budget for 10,000 units of production includes $60,000 for direct
materials, $44,000 for direct labor, fixed utilities costs of $5,000, and supervisor
salaries of $20,000. A flexible budget for 12,000 units of production would show:
A.the same cost structure in total
B.direct materials of $72,000, direct labor of $52,800, utilities of $5,000, and supervisor
salaries of $20,000
C.total variable costs of $154,800
D.direct materials of $60,000, direct labor of $52,800, utilities of $6,000, and
supervisor salaries of $20,000
29) A company reports the following:
Determine the (a) rate earned on stockholders equity, and (b) rate earned on common
stockholders equity. Round your answer to one decimal place.
30) When a transposition error is made on the trial balance, the difference between the
debit and credit totals on the trial balance will be
A.zero
B.twice the amount of the transposition
C.one-half the amount of the transposition
D.divisible by 9
31) Spice Inc.’s unit selling price is $60, the unit variable costs are $35, fixed costs are
$125,000, and current sales are 10,000 units. How much will operating income change
if sales increase by 8,000 units?
A.$150,000 decrease
B.$175,000 increase
C.$200,000 increase
D.$150,000 increase
32) When there are a large number of individual accounts with a common
characteristic, it is common to place them in a separate ledger called a(n)
A.General ledger
B.Income Statement Ledger
C.Group Ledger
D.Subsidiary Ledger
33) A company reports the following:
Determine the (a) rate earned on stockholders equity, and (b) rate earned on common
stockholders equity. Round your answer to one decimal place.
34)
Calculate the Direct Materials Price variance using the above information:
A.$1,795.50 Favorable
B.$378.00 Favorable
C.$4,512.50 Unfavorable
D.$378.00 Unfavorable
35) Quick assets include
A.cash; cash equivalents, receivables, prepaid expenses, and inventory
B.cash; cash equivalents, receivables, and prepaid expenses
C.cash; cash equivalents, receivables, and inventory
D.cash; cash equivalents, and receivables
36) What effect will the following adjusting journal entry have on the accounting
records?
A.Increase net income
B.Increase revenues
C.Decrease expenses
D.Decrease net book value
37) Which of the following budgets allow for adjustments in activity levels?
A.Static Budget
B.Continuous Budget
C.Zero-Based Budget
D.Flexible Budget
38) Which of the accounts below would most likely appear on an adjusted trial balance
but probably would not appear on the trial balance?
A.Fees Earned
B.Accounts Receivable
C.Unearned Fees
D.Depreciation Expense
39) A firm operated at 80% of capacity for the past year, during which fixed costs were
$330,000, variable costs were 70% of sales, and sales were $1,000,000. Operating
profit was:
A.$140,000
B.($30,000)
C.$370,000
D.$670,000
40) The sales, income from operations, and invested assets for each division of Wren
Company are as follows:
Management has established a minimum rate of return for invested assets of 8%.
41)
Calculate the Direct Labor Time Variance using the above information
A.$2,362.50 Favorable
B.$2,362,50 Unfavorable
C.$6,540.00 Favorable
D.$6,540.00 Unfavorable
42) All of the following accounts are increased with a debit except:
A.Unearned Revenues
B.Land
C.Accounts Receivable
D.Cash
43) Budgeting supports the planning process by encouraging all of the following
activities except:
A.requiring all organizational units to establish their goals for the upcoming period
B.increasing the motivation of managers and employees by providing agreed-upon
expectations
C.directing and coordinating operations during the period
D.improving overall decision making by considering all viewpoints, options, and cost
reduction possibilities
44) Harold Corporation just started business in January 2012. They had no beginning
inventories. During 2012 they manufactured 12,000 units of product, and sold 10,000
units. The selling price of each unit was $20. Variable manufacturing costs were $4 per
unit, and variable selling and administrative costs were $2 per unit. Fixed
manufacturing costs were $24,000 and fixed selling and administrative costs were
$6,000.
What would be the Harold Corporations net income for 2012 using absorption costing?
A.$114,000
B.$110,000
C.$4,000
D.$106,000
45) A company is contemplating investing in a new piece of manufacturing machinery.
The amount to be invested is $170,000. The present value of the future cash flows is
$185,000. The companys desired rate of return used in the present value calculations
was 10%. Which of the following statements is true?
A.The project should not be accepted because the net present value is negative
B.The internal rate of return on the project is less than 10%
C.The internal rate of return on the project is more than 10%
D.The internal rate of return on the project is equal to 10%
46) Falcon Co. produces a single product. Its normal selling price is $30.00 per unit.
The variable costs are $19.00 per unit. Fixed costs are $25,000 for a normal production
run of 5,000 units per month. Falcon received a request for a special order that would
not interfere with normal sales. The order was for 1,500 units and a special price of
$20.00 per unit. Falcon Co. has the capacity to handle the special order and, for this
order, a variable selling cost of $1.00 per unit would be eliminated.
Should the special order be accepted?
A.Cannot determine from the data given
B.Yes
C.No
D.There would be no difference in accepting or rejecting the special order
47) According to a summary of the payroll of Scotland Company, $450,000 was subject
to the 7.0% social security tax and $500,000 was subject to the 1.5% Medicare tax.
Federal income tax withheld was $98,000. Also, $15,000 was subject to state (4.2%)
and federal (0.8%) unemployment taxes. The journal entry to record accrued payroll
taxes would include:
A.a debit to SUTA Payable of $630
B.a debit to SUTA Payable of $18,900
C.a credit to SUTA Payable of $630
D.a credit to SUTA Payable of $18,900
48) A companys history indicates that 20% of its sales are for cash and the rest are on
credit. Collections on credit sales are 20% in the month of the sale, 50% in the next
month, 25% the following month, and 5% is uncollectible. Projected sales for
December, January, and February are $60,000, $85,000, and $95,000, respectively. The
February expected cash receipts from all current and prior credit sales is:
A.$61,200
B.$57,000
C.$66,400
D.$90,250
49) When the effective-interest method is used, the amortization of the bond premium
A.increases interest expense each period
B.decreases interest expense each period
C.increases interest expense in some periods and decreases interest expense in other
periods
D.has no effect on the interest expense in any period
50) An oven with a book value of $67,000 has an estimated 5 year life. A proposal is
offered to sell the oven for $8,500 and replace it with a new oven costing $110,000. The
new machine has a five year life with no residual value. The new machine would reduce
annual maintenance costs by $23,000. Provide a differential analysis on the proposal to
replace the machine.
51) Journalize the following transactions for both Abbott Co. (seller) and Dalton Co.
(buyer). Assume both the companies use the perpetual inventory system.
52) Using the data from the Ace Guitar Company, determine the divisional income from
operations for the A and B regions.
Allocate service department expenses proportional to the sales of each region. Round
percentage of sales allocation to one decimal place.
53) List the principal advantage of Electronic Funds Transfers.
54) Holiday Decorations Unique has been approached by the community college to
make special decorations for the faculty and staff. The college is willing to buy 5,000
Christmas ornaments with their own design for $6.00 each. The company normally sells
its decorations for $12.00 each. A break down of their costs is as follows:
Should Holiday Decorations Unique accept the special order made by the college? The
company has enough excess capacity to make this order.
55) Westsouth Publishing reports the following segment data regarding its textbook
sales:
Perform a horizontal analysis and a vertical analysis for Westsouth Publishing
Company. Round to one decimal place.