1) A detailed listing of all the assets invested by a partner in a partnership appears on
the Partners’ Capital Statement.
2) Under the equity method, the investment in common stock is initially recorded at
cost, and the Stock Investments account is adjusted annually.
3) If a partner’s investment in a partnership consists of Accounts Receivable of $35,000
and an Allowance for Doubtful Accounts of $7,000, it would not be appropriate for the
partnership to record the Allowance for Doubtful Accounts.
4) When a corporation has only one class of capital stock, it is identified as preferred
stock.
5) A company should never accept an order for its product at less than its regular sales
price.
6) Under the lower-of-cost-or-market basis, market is defined as current replacement
cost.
7) In one closing entry, Owner’s Drawings is credited and Income Summary is debited.
8) Management of a business enterprise is the major external user of information.
9) Financial planning models and statistical and mathematical techniques may be used
in forecasting sales.
10) Raw materials inventory shows the cost of completed goods available for sale to
customers.
11) An event or transaction should be classified as an extraordinary item if it is unusual
in nature or if it occurs infrequently.
12) A plant asset must be fully depreciated before it can be removed from the books.
13) A single-step income statement reports all revenues, both operating and other
revenues and gains, at the top of the statement.
14) Post-retirement benefits consist of payments by employers to retired employees for
health care, life insurance, and pensions.
15) A factor purchases receivables from businesses for a fee and collects the remittances
directly from customers.
16) In CVP analysis, the term cost includes manufacturing costs, and selling and
administrative expenses.
17) A subsidiary ledger is a group of control accounts which provides information to the
managers for controlling the operation of the company.
18) Corporations report which of the following in a separate section of the income
statement?
a.Cost of goods sold
b.Income tax expense
c.Gross profit
d.Other revenues and gains
19) North Company reports the following amounts for 2014:
Net income$ 160,000
Average stockholders equity2,000,000
Preferred dividends45,000
Par value preferred stock250,000
The 2014 rate of return on common stockholders equity is:
a.5.8%
b.6.6%
c.8.0%
d.9.1%
20) Joanna Newsom owns and operates Joanna’s Burgers, a small fast food store,
located at the edge of City College campus in Newton, Ohio. After several very
profitable years, Joanna’s Burgers began to have problems. Most of the problems were
related to Joanna’s expansion of the eating area in the restaurant without corresponding
increases in the food preparation area. Joanna does not have the cash or financial
backing to expand further. She has therefore decided to sell her business.
Vivian Girls is interested in purchasing the business. However, she is located in another
city and is unfamiliar with Newton. She has asked Joanna why she is selling Joanna’s
Burgers. Joanna replies that her elderly mother requires extra care, and that her brother
needs help in his manufacturing business. Both are true, but neither is his primary
reason for selling. Joanna reasons that Vivian should not have asked her anyway, since
profitable businesses don’t come up for sale.
Required:
1>Identify the stakeholders in this situation.
2>Did Joanna act ethically in not revealing fully his reasons for selling the business?
Why or why not?
21) $4 million, 8%, 10-year bonds are issued at face value. Interest will be paid
semi-annually. When calculating the market price of the bond, the present value of
a.$320,000 received for 10 periods must be calculated
b.$4 million received in 10 periods must be calculated
c.$4 million received in 20 periods must be calculated
d.$160,000 received for 10 periods must be calculated
22) Rowlands Corporation has 100,000 shares of $40 par value preferred stock
authorized. During the year, it had the following transactions related to its preferred
stock.
(a)Issued 20,000 shares at $55 per share.
(b)Issued 10,000 shares for equipment having a $700,000 asking price. The stock had a
market value of $75 per share
Instructions
Journalize the transactions.
23) Outstanding stock of the Larson Corporation included 40,000 shares of $5 par
common stock and 10,000 shares of 5%, $10 par noncumulative preferred stock. In
2013, Larson declared and paid dividends of $4,000. In 2014, Larson declared and paid
dividends of $12,000. How much of the 2014 dividend was distributed to preferred
shareholders?
a.$6,000
b.$7,000
c.$5,000
d.None of these answer choices are correct
24) Which of the following is a true statement about cost behaviors in incremental
analysis?
1>Fixed costs will not change between alternatives.
2>Fixed costs may change between alternatives.
3>Variable costs will always change between alternatives.
a.only 1
b.only 2
c.only 3
d.both 2 and 3
25) Use the following table,
Present value of an Annuity of 1
Period 8% 9% 10%
1.926.917.909
21.7831.7591.736
32.5772.5312.487
A company has a minimum required rate of return of 8%. It is considering investing in a
project that costs $231,930 and is expected to generate cash inflows of $90,000 each
year for three years. The approximate internal rate of return on this project is
a.8%
b.9%
c.10%
d.The IRR on this project cannot be approximated
26) Costs incurred to increase the operating efficiency or useful life of a plant asset are
referred to as
a.capital expenditures
b.expense expenditures
c.ordinary repairs
d.revenue expenditures
27) If a single future amount of $6,000 is to be received in 5 years and discounted at
6%, its present value is
a.$4,484
b.$4,200
c.$4,701
d.$4,083
28) Use the following table,
Present value of an Annuity of 1
Period 8% 9% 10%
1.926.917.909
21.7831.7591.736
32.5772.5312.487
A company has a minimum required rate of return of 9%. It is considering investing in a
project that requires an investment of $210,000 and is expected to generate cash inflows
of $90,000 at the end of each year for three years. The present value of future cash
inflows for this project is
a.$210,000
b.$223,830
c.$227,790
d.$17,790
29) Which of the following statements is incorrect regarding partnership agreements?
a.It may be referred to as the articles of co-partnership
b.Oral agreements are preferable to written articles
c.It should specify the different relationships that are to exist among the partners
d.It should state procedures for submitting disputes to arbitration
30) Anna Leigh invested her savings at 8% annual interest and left the money invested
without withdrawing any of the interest for 15 years. At the end of the 15 years, Anna
decided to withdraw the accumulated amount of money which was $121,000. What
amount did Anna originally invest, assuming the investment earns simple interest?
a.$66,000
b.$55,000
c.$111,000
d.$88,000
31) In computing depletion, salvage value is
a.always immaterial
b.ignored
c.impossible to estimate
d.included in the calculation
32) Selected comparative statement data for Willow Products Company are presented
below. All balance sheet data are as of December 31 .
2015 2014
Net sales$800,000$720,000
Cost of goods sold480,000440,000
Interest expense7,0005,000
Net income60,00042,000
Accounts receivable120,000100,000
Inventory85,00075,000
Total assets600,000500,000
Total common stockholders’ equity430,000320,000
Instructions
Compute the following ratios for 2015:
(a)Profit margin.
(b)Asset turnover.
(c)Return on assets.
(d)Return on common stockholders’ equity.
33) Sales Returns and Allowances is increased when
a.an employee does a good job
b.goods are sold on credit
c.goods that were sold on credit are returned
d.customers refuse to pay their accounts
34) Assume that the payroll records of Klein Tanker Company provided the following
information for the weekly payroll ended November 30, 2014 .
Year-to-Date
HourlyFederalEarnings Through
EmployeeHours WorkedPay RateIncome TaxUnion Dues Previous Week
T. King44$45$362$9$111,000
T. Binion461597523,200
N.Cole40251485,700
C. Hennesey4230230749,500
Additional information: All employees are paid overtime at time and a half for hours
worked in excess of 40 per week. The FICA tax rate is 7.65% for the first $110,100 of
each employee’s annual earnings. The employer pays unemployment taxes of 6.2%
(5.4% for state and .8% for federal) on the first $7,000 of each employee’s annual
earnings.
Instructions
(a)Prepare the payroll register for the pay period.
(b)Prepare general journal entries to record the payroll and payroll taxes.
35) The major IFRS requirements related to accounting for and reporting inventories
are
a.the same as GAAP
b.the same as GAAP with a couple of exceptions
c.completely different fom GAAP
d.not comparable to GAAP
36) All of the following are advantages of using subsidiary ledgers except they
a.eliminate errors in individual accounts
b.free the general ledger of excessive details
c.show, in a single account, transactions affecting one customer or one creditor
d.make possible a division of labor
37) Alternative adjusting entries do not apply to
a.accrued revenues and accrued expenses
b.prepaid expenses
c.unearned revenues
d.prepaid expenses and unearned revenues
38) For each entry below make a correcting entry if necessary. If the entry given is
correct, then state “No entry required.”
(a)The $60 cost of repairing a printer was charged to Equipment.
(b)The $5,000 cost of a major engine overhaul was debited to Maintenance and Repairs
Expense. The overhaul is expected to increase the operating efficiency of the truck.
(c)The $6,000 closing costs associated with the acquisition of land were debited to
Miscellaneous Expense.
(d)A $500 charge for transportation expenses on new equipment purchased was debited
to Freight-In.
39) Casey Company has a materials price standard of $2.10 per pound. Six thousand
pounds of materials were purchased at $2.20 a pound. The actual quantity of materials
used was 6,000 pounds, although the standard quantity allowed for the output was
5,400 pounds.
Casey Company’s materials price variance is
a.$60 U
b.$600 F
c.$540 U
d.$600 U
40) In a perpetual inventory system, the amount of the discount allowed for paying for
merchandise purchased within the discount period is credited to
a.Inventory
b.Purchase Discounts
c.Purchase Allowance
d.Sales Discounts
41) In 2014, Ronge Company had a break-even point of $800,000 based on a selling
price of $10 per unit and fixed costs of $320,000. In 2015, the selling price and variable
costs per unit did not change, but the break-even point increased to $850,000.
Instructions
(a)Compute the variable cost per unit and the contribution margin ratio for 2014 .
(b)Using the contribution margin ratio, compute the increase in fixed costs for 2015 .
42) Losses on an exchange of plant assets that has commercial substance are
a.not possible
b.deferred
c.recognized immediately
d.deducted from the cost of the new asset acquired
43) Dense Company’s income statement showed revenues of $275,000 and operating
expenses of $135,000. Accounts receivable decreased by $40,000 and accounts payable
increased by $35,000 during the year.
Instructions
Compute (a) cash receipts from customers and (b) cash payments for operating
expenses using the direct method.
44) Vertical analysis is also called
a.common size analysis
b.horizontal analysis
c.ratio analysis
d.trend analysis
45) Compensating balances are a restriction on the use of a company’s cash and should
be
a.reported as a current asset
b.reported as a noncurrent asset
c.disclosed in the financial statements
d.reported as a reduction of cash
46) The Painting Department of Shore Manufacturing Company has the following
production and manufacturing cost data for September.
Production: Beginning inventory 8,000 units that are 100% complete as to materials and
40% complete as to conversion costs; units started into production 27,000; ending
inventory of 12,000 units that are 20% complete as to conversion costs.
Manufacturing Costs: Beginning work in process inventory of $40,000, comprised of
$30,000 of materials and $10,000 of conversion costs. Materials added during the
month, $110,000; labor and overhead applied during the month, $62,000 and $55,000,
respectively.
Instructions:
1>Compute the equivalent units of production for materials and conversion costs for the
month of September.
2>Compute the unit costs for materials and conversion costs.
3>Determine the costs to be assigned to the units transferred out and ending work in
process.
47) The ______________ of a company is the average time that it takes to purchase
inventory, sell it on account, and then collect cash from customers.
48) For each of the following, indicate whether the transaction increased (+), decreased
(-), or had no effect (NE) on assets, liabilities, and owner’s equity using the following
format.
Assets = Liabilities + Owner’s Equity
1>Made an investment to start the business.
2>Billed customers for services performed.
3>Purchased equipment on account.
4>Withdrew cash for personal use.
5>Paid for equipment purchased in 3. above.
49) There are three parties to a check: (1)_______________, (2)______________, and
the (3)______________.
50) Listed below are current asset items for Nicholson Company at December 31,
2014 .
Finished goods inventory$38,000Short-term investments$20,000
Cash25,000Raw materials inventory27,000
Prepaid expenses2,500Work in process inventory17,000
Accounts receivable5,000Supplies800
Instructions
Prepare the current assets section of the balance sheet. (Include a complete heading.)
51) Shellhammer Company’s inventory records show the following data for the month
of September:
UnitsUnit Cost
Inventory, September 1100$3.34
Purchases:September 84503.50
September 183503.70
A physical inventory on September 30 shows 200 units on hand. Calculate the value of
the ending inventory and cost of goods sold if the company uses weighted average
inventory costing and a periodic inventory system. Round cost per unit to 2 decimal
places and ending inventory and cost of goods sold to the nearest dollar.
52) Instructions: Prepare journal entries to record the following events, rounding to the
nearest dollar if necessary:
April1Annstar Company received a 7%, 6-month $50,000 note dated April 1 from a
customer whose account balance was in default.
Oct.1The note is honored and no interest had been accrued.
Oct.1Assume instead that the note is dishonored by the customer and there is hope of
future collection.
Oct.1Assume instead that the note is dishonored and there is no hope of future
collection.
53) Assuming that there is a net loss for the period, in which section of the worksheet
will debits not be equal to credits?
Adjusted trial balance columns
Income statement columns and balance sheet columns
c.Adjustments columns
d.Trial balance columns
54) Using these data from the comparative balance sheet of Banner Company, perform
vertical analysis.
December 31, 2015December 31, 2014
Accounts receivable$ 480,000$ 336,000
Inventory720,000504,000
Total assets4,000,0003,000,000