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1) A department that incurs costs without directly generating revenues is a:
A.Service center.
B.Production center.
C.Profit center.
D.Cost center.
E.Performance center.
2) A college uses advisors who work with all students in all divisions of the college.
The most useful allocation basis for the salaries of these employees would likely be:
A.number of classes offered in each division.
B.student graduation rate.
C.square footage of each division.
D.number of students advised from each division.
E.relative salaries of division heads.
3) Webster Corporation's budgeted sales for February are $325,000. Webster pays sales
representatives a commission of 6% of sales dollars. The company pays a sales manager
a monthly salary of $4,400 and expects advertising expense of $2,000 per month.
Compute the total selling expenses to be reported on the selling expense budget for the
month of February.
A.$19,500.
B.$6,400.
C.$23,900.
D.$25,900.
E.$21,500.
4) A job order production system would be appropriate for a company that produces
which one of the following items?
A.A landscaping design for a new hospital.
B.Seedlings for sale in a nursery.
C.Sacks of yard fertilizer.
D.Packets of flower seeds.
E.Small gardening tools, including rakes, shovels, and hoes.
5) Record the December 31 adjusting entries for the following transactions and events
in general journal form. Assume that December 31 is the end of the annual accounting
period.
a. The Prepaid Insurance account shows a debit balance of $2,340, representing the cost
of a two-year fire insurance policy that was purchased on October 1 of the current year
and has not been adjusted to-date.
b. The Store Supplies account has a debit balance of $400; a year-end inventory count
reveals $80 of supplies still on hand.
c. On November 1 of the current year, Rent Earned was credited for $1,500. This
amount represented the rent earned for a three-month period beginning November 1.
d. Estimated depreciation on store equipment is $600.
e. Accrued salaries amount to $1,400.
6) A corporation's distribution of additional shares of its own stock to its stockholders
without the receipt of any payment in return is called a:
A.Stock dividend.
B.Stock subscription.
C.Premium on stock.
D.Discount on stock.
E.Treasury stock.
7) The statement of cash flows reports all but which of the following?
A.Cash flows from operating activities.
B.Cash flows from financing activities.
C.Cash flows from investing activities.
D.Significant noncash financing and investing activities.
E.The financial position of the company at the end of the accounting period.
8) Investing activities do not include the:
A.Purchase of plant assets.
B.Lending and collecting on notes receivable.
C.Issuance of common stock.
D.Sale of plant assets.
E.Sale of short-term investments other than cash equivalents.
9) A company's inventory records report the following in November of the current year:
On November 8, it sold 18 units for $54 each. Using the LIFO perpetual inventory
method, what was the amount recorded in the cost of goods sold account for the 18
units sold?
A.$395
B.$410
C.$450
D.$510
E.$520
10) Fontaine and Monroe are forming a partnership. Fontaine invests a building that has
a market value of $250,000; the partnership assumes responsibility for a $75,000 note
secured by a mortgage on the property. Monroe invests $100,000 in cash and equipment
that has a market value of $55,000. For the partnership, the amounts recorded for the
building and for Fontaine's Capital account are:
A.Building $250,000; Fontaine, Capital $250,000.
B.Building $175,000; Fontaine, Capital $175,000.
C.Building $250,000; Fontaine, Capital $75,000.
D.Building $250,000; Fontaine, Capital $175,000.
E.Building $175,000; Fontaine, Capital $75,000.
11) Job order production is also known as:
A.Mass production.
B.Process production.
C.Unit production.
D.Customized production.
E.Standard costing.
12) Fetzer Company declared a $0.55 per share cash dividend. The company has
200,000 shares authorized, 190,000 shares issued, and 8,000 shares in treasury stock.
The journal entry to record the dividend declaration is:
A.Debit Retained Earnings $104,500; credit Common Dividends Payable $104,500.
B.Debit Common Dividends Payable $104,500; credit Cash $104,500.
C.Debit Retained Earnings $100,100; credit Common Dividends Payable $100,100.
D.Debit Common Dividends Payable $100,100; credit Cash $100,100.
E.Debit Retained Earnings $110,000; credit Common Dividends Payable $110,000.
13) A company issued 60 shares of $100 par value common stock for $7,000 cash. The
journal entry to record the issuance is:
A.Debit Cash $7,000; credit Common Stock $7,000.
B.Debit Investment in Common Stock $7,000; credit Cash $7,000.
C.Debit Cash $7,000; credit Common Stock $6,000; credit Paid-in Capital in Excess of
Par Value, Common Stock $1,000.
D.Debit Common Stock $6,000, debit Investment in Common Stock $1,000; credit
Cash $7,000.
E.Debit Cash $7,000; credit Paid-in Capital in Excess of Par Value, Common Stock
$6,000, credit Common Stock $1,000.
14) Daisy Company began business on May 1. They use the periodic inventory method.
The following transactions involving purchases and cash disbursements occurred during
the first week of May.
a. Use the purchases journal and the cash disbursements journal to record these
transactions.
b. Prepare a schedule of accounts payable. There was no accounts payable balance on
May 1.
15) A company receives a 10%, 120-day note for $1,500. The total interest due on the
maturity date is:
A.$50.00.
B.$150.00.
C.$75.00.
D.$37.50.
E.$87.50.
16) At the end of the accounting period, the owners of debt securities:
A.Must report the dividend income accrued on the debt securities.
B.Must retire the debt.
C.Must record a gain or loss on the interest income earned.
D.Must record a gain or loss on the dividend income earned.
E.Must record any interest earned on the debt securities during the period.
17) A key factor in a voucher system includes all of the following except:
A.Only approved departments and individuals are authorized to incur an obligation that
will result in the payment of cash.
B.Procedures for purchasing, receiving and paying for merchandise are divided among
several departments.
C.The system limits the individuals that can incur cash payment obligations for a
company.
D.It is applied to purchases of merchandise inventory and all other expenses.
E.It is not necessary if the supplier provides both receiving report and invoice with the
merchandise shipped.
18) Rent and maintenance expenses would most likely be allocated based on:
A.Sales volume by department.
B.Square feet of floor space occupied.
C.Number of hours worked.
D.Number of invoices processed.
E.Number of employees in each department.
19) The following is a partially completed lower section of a departmental expense
allocation spreadsheet for Brickland. It reports the total amounts of direct and indirect
expenses for the four departments. Purchasing department expenses are allocated to the
operating departments on the basis of purchase orders. Maintenance department
expenses are allocated based on square footage. Compute the amount of Purchasing
department expense to be allocated to Fabrication.
A.$6,400.
B.$9,900.
C.$8,100.
D.$17,600.
E.$25,600.
20) A system of assigning costs to departments and products on the basis of a variety of
activities instead of only one allocation base is called:
A.Plantwide overhead costing.
B.A cost center accounting system.
C.Controllable costing.
D.Activity-based costing.
E.Performance costing.
21) Bannister invested $110,000 and Wilder invested $99,500 in a new partnership.
They agreed to an annual interest allowance of 10% on the partners' beginning-year
capital balance, with the balance of income or loss to be divided equally. Under this
agreement, what are the income or loss shares of the partners if the annual partnership
income is $202,000?
22) Argenta, Inc. is preparing its master budget for the first quarter of its calendar year.
The following forecasted data relate to the first quarter:
Prepare a budgeted income statement for this first quarter.
23) Silver Era Co. exports Southwestern artwork to Japan. Prepare journal entries for
the following transactions.
24) Using the information presented below, prepare an income statement from the
adjusted trial balance of Dodson Containers.
25)
26) On February 3, Smart Company sold merchandise in the amount of $5,800 to
Truman Company, with credit terms of 2/10, n/30. The cost of the items sold is $4,000.
Smart uses the perpetual inventory system. Truman pays the invoice on February 8, and
takes the appropriate discount. The journal entry that Smart makes on February 8 is:
27) __________________ is an information and measurement system that identifies,
records and communicates relevant, reliable and comparable information about an
organization's economic activities.
28) ________________________ refers to all changes in equity for a period except for
those due to investments by and distributions to owners.
29) On March 12, Klein Company sold merchandise in the amount of $7,800 to Babson
Company, with credit terms of 2/10, n/30. The cost of the items sold is $4,500. Klein
uses the perpetual inventory system. On March 15, Babson returns some of the
merchandise. The selling price of the merchandise is $600 and the cost of the
merchandise returned is $350. Babson pays the invoice on March 20, and takes the
appropriate discount. The journal entry that Klein makes on March 20 is:
