1) The high-low method is often employed in analyzing
a.fixed costs
b.mixed costs
c.variable costs
d.conversion costs
2) Blitzen Corporation had net income of $500,000 and paid dividends to common
stockholders of $40,000 in 2014 . The weighted average number of shares outstanding
in 2014 was 60,000 shares. Blitzen Corporation’s common stock is selling for $50 per
share on the New York Stock Exchange. Blitzen Corporation’s payout ratio for 2014 is
a.$8.33 per share
b.8%
c.12%
d.16%
3) Which of the following statements is true?
a.Trading securities are debt securities that the investor has the intent to hold to
maturity
b.Trading securities are reported at cost in the balance sheet
c.Trading securities are securities that may be sold in the future
d.Trading securities are securities bought and held primarily for sale in the near term
4) An auto manufacturer would classify vehicles in various stages of production as
a.finished goods
b.merchandise inventory
c.raw materials
d.work in process
5) The basic accounting equation may be expressed as
a.Assets = Equities
b.Assets Liabilities = Owner’s Equity
c.Assets = Liabilities + Owner’s Equity
d.All of these answer choices are correct
6) Which of the following is not an advantage of the partnership form of business?
a.Mutual agency
b.Ease of formation
c.Ease of decision making
d.Freedom from governmental regulations and restrictions
7) Intangible assets are the rights and privileges that result from ownership of
long-lived assets that
a.must be generated internally
b.are depletable natural resources
c.have been exchanged at a gain
d.do not have physical substance
8) The standard cost of Product 254 manufactured by Essex Company includes 2
pounds of direct materials at $4.00 per pound. During September, 40,000 pounds of
direct materials are purchased at a cost of $3.85 per pound, and all of the direct
materials are used to produce 19,000 units of Product 254 .
Instructions
(a)Compute the materials price and quantity variances.
(b)Journalize the purchase of the materials and the issuance of the materials, assuming a
standard cost system is used.
9) Employer payroll taxes include all of the following except
a.FICA taxes
b.federal unemployment taxes
c.state unemployment taxes
d.federal income taxes
10) Partridge Bookstore had 500 units on hand at January 1, costing $9 each. Purchases
and sales during the month of January were as follows:
DatePurchasesSales
Jan. 14375 @ $14
17250 @ $10
25250 @ $11
29260 @ $16
Partridge does not maintain perpetual inventory records. According to a physical count,
365 units were on hand at January 31 .
The cost of the inventory at January 31, under the LIFO method is:
a.$3,285
b.$3,650
c.$3,900
d.$4,015
11) All of the following factors in computing depreciation are estimates except
a.cost
b.residual value
c.salvage value
d.useful life
12) On January 1, Sage Corporation issues $1,000,000, 5-year, 12% bonds at 95 with
interest payable on July 1 and January 1 . The carrying value of the bonds at the end of
the third interest period is:
a.$965,000
b.$970,000
c.$930,000
d.$938,000
13) Advances from customers are classified as a(n)
a.revenue
b.expense
c.current asset
d.current liability
14) In an exchange of plant assets that has commercial substance
a.neither gains nor losses are recognized immediately
b.gains, but not losses, are recognized immediately
c.losses, but not gains, are recognized immediately
d.both gains and losses are recognized immediately
15) A $600,000 bond was retired at 102 when the carrying value of the bond was
$622,000. The entry to record the retirement would include a
a.gain on bond redemption of $12,000
b.loss on bond redemption of $10,000
c.loss on bond redemption of $12,000
d.gain on bond redemption of $10,000
16) On October 1, Eli’s Carpet Service borrows $125,000 from First National Bank on a
3-month, $125,000, 8% note. The entry by Eli’s Carpet Service to record payment of the
note and accrued interest on January 1 is
a.Notes Payable127,500
Cash127,500
b.Notes Payable125,000
Interest Payable2,500
Cash127,500
c.Notes Payable125,000
Interest Payable10,000
Cash135,000
d.Notes Payable125,000
Interest Expense2,500
Cash127,500
17) Tempest Co. purchased 60, 6% Urich Company bonds for $60,000 cash. Interest is
payable semiannually on July 1 and January 1 . If 30 of the securities are sold on July 1
for $32,000, the entry would include a credit to Gain on Sale of Debt Investments for
a.$1,600
b.$1,750
c.$1,800
d.$2,000
18) Which one of the following is usually prepared only at the end of a company’s
annual accounting period?
a.Preparing financial statements
b.Journalizing and posting adjusting entries
c.Journalizing and posting closing entries
d.Preparing an adjusted trial balance
19) Partners Cantor and Dickens have capital balances in a partnership of $160,000 and
$240,000, respectively. They agree to share profits and losses as follows:
CantorDickens
As salaries$40,000$48,000
As interest on capital at the beginning of the year10%10%
Remaining profits or losses50%50%
If net loss for the year was $8,000, what will be the distribution to Dickens?
a.$48,000 income
b.$4,000 income
c.$4,000 loss
d.$8,000 loss
20) Kitzman Inc. produces a product requiring 3 direct labor hours at $15 per hour.
During January, 2,000 products are produced using 6,300 direct labor hours. Kitzman
actual payroll during January was $98,280. What is the labor quantity variance?
a.$4,680 U
b.$4,500 U
c.$4,680 F
d.$4,500 F
21) A budget period should be
a.monthly
b.for a year or more
c.long-term
d.long enough to provide an obtainable goal under normal business conditions
22) Turnbull Department Store had net credit sales of $18,000,000 and cost of goods
sold of $15,000,000 for the year. The average inventory for the year amounted to
$2,500,000. Inventory turnover for the year is
a.7.2 times
b.15 times
c.6 times
d.1.5 times
23) The lessee has substantially all of the benefits and risks of ownership in a(n)
a.apartment lease
b.capital lease
c.operating lease
d.operating lease and a capital lease
24) In a service-type business, revenue is considered recognized
a.at the end of the month
b.at the end of the year
c.when the service is performed
d.when cash is received
25) GAAPs provision for ownership of goods (goods-in-transit or consigned goods), as
well as which costs to include in inventory, as compared to IFRS are:
Ownership of goodsCosts to include in inventory
a.essentially similaressentially similar
b.essentially differentessentially different
c.essentially similaressentially different
d.essentially differentessentially similar
26) A company receives $696, of which $56 is for sales tax. The journal entry to record
the sale would include a
adebit to Sales Tax Expense for $56
b.debit to Sales Taxes Payable for $56
c.debit to Sales Revenue for $696
d.debit to Cash for $696
27) Both a stock split and a stock dividend will _________________ the number of
shares outstanding and have _________________ on total stockholders’ equity.
28) Madisun Company issued common stock for proceeds of $20,000 during 2014 . The
company paid dividends of $5,000. The company also issued a long-term note payable
for $35,000 in exchange for equipment during the year. The company sold treasury
stock that had a cost of $3,000 for $9,000.
Instructions
Compute net cash flows from financing activities.
29) Prepare the necessary general journal entries for the month of March for Dogwood
Company for each situation given below. Dogwood uses a perpetual inventory system.
1>Mar. 5Paid cash of $6,000 for operating expenses that were incurred and properly
recorded in the previous period.
2>Mar. 8Purchased merchandise for $28,000 on account. Credit terms: 1/10, n/30;
Freight term: FOB Destination.
3>Mar. 12Borrowed $10,000 from Citizens Bank signing a 6%, 6-month note.
4>Mar. 15Paid for merchandise purchased on March 8 . The company takes all
discounts to which it is entitled.
5>Mar. 20Sold merchandise for $25,000 to Chris Martin on account. The cost of the
merchandise sold was $16,000. Credit terms: 1/10, n/30.
6>Mar. 21Freight term on sale made on March 20th was FOB destination. Cash paid for
shipping was $600.
7>Mar. 22Purchased a 2-year insurance policy for $4,100 cash.
8>Mar. 25Credited Chris Martins account for $400 for merchandise returned by him
from the sale on March 20 . The cost of the merchandise returned was $225.
9>Mar. 29Purchased equipment for $34,000 paying $8,000 in cash and signing a
12-month, 6% note for the remainder.
30) The manufacturing operations of Ganett, Inc. had the following balances for the
month of January:
January 1January 31
Raw materials$12,000$15,000
Work in process20,00023,000
Finished goods16,00013,000
Ganett transferred $245,000 of completed goods out of work in process during January.
Instructions
Compute the cost of goods sold for January.
31) Ravienda Industries provided the following information about its standard costing
system for 2014:
Standard DataActual Data
Materials10 lbs. @ $4 per lbs.Produced4,000 units
Labor3 hrs. @ $22 per hr.Materials purchased50,000 lbs. for $210,000
Budgeted production$3,500 unitsMaterials used41,000 lbs.
Labor worked11,000 hrs. costing $220,000
Instructions
Determine the amount of the materials price variance. By how much will the materials
price variances differ if the price variance is determined at the time of production?
32) 20 Interest of $200 per month has been earned but
not received prior to December 31 .
33) The declining-balance method of computing depreciation expense involves
multiplying a _______________ book value by a _______________ percentage.
34) It is generally recognized that a major objective of accounting for inventory is the
proper determination of ______________.
35) Determine the missing amounts.
ContributionContribution
Unit Selling PriceUnit Variable CostsMargin Per UnitMargin Ratio
1>$300$180AB
2>$600C$210D
3>EF$40030%