1) Twenty percent of all businesses in the United States are corporations and they
account for 80% of the total business dollars generated.
2) Most large companies will use only one inventory costing methods for all of its
different segments.
3) Differential analysis can aid management in making decisions on a variety of
alternatives, including whether to discontinue an unprofitable segment and whether to
replace usable plant assets.
4) The payroll register is a multicolumn form used to assemble the data related for all
employees.
5) The accounts receivable turnover measures the length of time in days it takes to
collect a receivable.
6) Once equivalent units are calculated for materials, this number will also be used for
direct labor and factory overhead.
7) A company pays $36,000 for twelve month’s rent on October 1. The adjusting entry
on December 31 is debit Rent Expense, $9,000 and credit Prepaid Rent, $9,000.
8) Variable costs as a percentage of sales are equal to 100% minus the contribution
margin ratio.
9) Form W-2 is called the Wage and Tax Statement.
10) A qualitative characteristic that may impact upon capital investment analysis is the
impact of investment proposals on product quality.
11) The total cost concept includes all manufacturing costs plus selling and
administrative expenses in the cost amount to which the markup is added to determine
product price.
12) The accumulated depreciation account is closed to the income summary account.
13) In contribution margin analysis, the quantity factor is computed as the difference
between actual quantity sold and the planned quantity sold, multiplied by the planned
unit sales price or unit cost.
14) The amount of the depreciation expense for the second full year of use of a fixed
asset costing $100,000, with an estimated residual value of $5,000 and a useful life of 4
years, is $25,000 by the declining-balance method at twice the straight-line rate.
15) The manner of reporting cash flows from investing and financing activities will be
different under the direct method as compared to the indirect method.
16) Which of the following best describes accounting?
A.It records economic data but does not communicate the data to users according to any
specific rules
B.It is an information system that provides reports to users regarding economic
activities and condition of a business
C.It is of no use by individuals outside of the business
D.It is used only for filling out tax returns and for financial statements for various type
of governmental reporting requirements
17) If budgeted beginning inventory is $8,300, budgeted ending inventory is $9,400,
and budgeted cost of goods sold is $10,260, budgeted purchases should be:
A.$1,100
B.$9,300
C.$11,360
D.$11,250
18) The charter of a corporation provides for the issuance of 100,000 shares of common
stock. Assume that 60,000 shares were originally issued and 10,000 were subsequently
reacquired. What is the amount of cash dividends to be paid if a $2 per share dividend is
declared?
A.$ 60,000
B.$ 20,000
C.$120,000
D.$100,000
19) Profit is the difference between
A.assets and liabilities
B.the incoming cash and outgoing cash
C.the assets purchased with cash invested by stockholders and the cash spent to operate
the business
D.the amounts received from customers for goods or services and the amounts paid
for the inputs used to provide the goods or services
20) On October 1, Sebastian Company acquired new equipment with a fair market
value of $458,000. Sebastian received a trade-in allowance of $92,000 on the old
equipment of a similar type and paid cash of $366,000. The following information
about the old equipment is obtained from the account in the equipment ledger: Cost,
$336,000; accumulated depreciation on December 31, the end of the preceding fiscal
year, $220,000; annual depreciation, $20,000. Assuming the exchange has commercial
substance, journalize the entries to record: (a) the current depreciation of the old
equipment to the date of trade-in and (b) the exchange transaction on October 1.
21) Stockholders’ equity
A.is usually equal to cash on hand
B.includes paid-in capital and liabilities
C.includes retained earnings and paid-in capital
D.is shown on the income statement
22) Which of the following is considered a part of factory overhead cost?
A.Sales commissions
B.Depreciation of factory buildings
C.Depreciation of office equipment
D.Direct materials used
23) If the allowance method of accounting for uncollectible receivables is used, what
general ledger account is credited to write off a customer’s account as uncollectible?
A.Uncollectible Accounts Expense
B.Accounts Receivable
C.Allowance for Doubtful Accounts
D.Interest Expense
24) In accounting for uncollectible receivables, the balance in Allowance for Doubtful
Accounts will directly impact the amount of the adjustment when applying which
method?
A.direct write-off method
B.percentage of sales method
C.Analysis of receivables method
D.both (b) and (c)
25) If title to merchandise purchases passes to the buyer when the goods are delivered
to the buyer, the terms are
A.consigned
B.n/30
C.FOB shipping point
D.FOB destination
26) Which of the following are present value methods of analyzing capital investment
proposals?
A.Internal rate of return and average rate of return
B.Average rate of return and net present value
C.Net present value and internal rate of return
D.Net present value and payback
27) The comparative balance sheet of Posner Company, for 2011 and the preceding year
ended December 31, 2010, appears below in condensed form:
The income statement for the current year is as follows:
Additional data for the current year are as follows:
(a) Fully depreciated equipment costing $60,000 was scrapped, no salvage, and
equipment was purchased for $183,200.
(b) Bonds payable for $100,000 were retired by payment at their face amount.
(c) 5,000 shares of common stock were issued at $13 for cash.
(d) Cash dividends declared and paid, $25,000.
Prepare a statement of cash flows, using the indirect method of reporting cash flows
from operating activities.
28) The number of days’ sales in receivables
A.is an estimate of the length of time the receivables have been outstanding
B.measures the number of times the receivables turn over eachyear
C.is Net Credit Sales divided by Average Receivables
D.is not meaningful and therefore is not used
29) Assume that Corn Co. sold 8,000 units of Product A and 2,000 units of Product B
during the past year. The unit contribution margins for Products A and B are $30 and
$60 respectively. Corn has fixed costs of $378,000. The break-even point in units is:
A.8,000 units
B.6,300 units
C.12,600 units
D.10,500 units
30) The proper journal entry to record the receipt of inventory purchased on account in
a perpetual inventory system would be:
A.Jan 1 Merchandise Inventory 1,500
Accounts Payable 1,500
B.Jan 1 Office Supplies 1,500
Accounts Payable 1,500
C.Jan 1 Purchases 1,500
Accounts Payable 1,500
D.Jan 1 Purchases 1,500
Accounts Receivable 1,500
31) Tibet Company sells glasses, fine china, and everyday dinnerware. They use
activity-based costing to determine the cost of the shipping and handling activity. The
shipping and handling activity has an activity rate of $7 per pound. A box of glasses
weighs 2 lbs, the box of china weighs 4 lbs, and a box of everyday dinnerware weighs 6
lbs. (a) Determine the shipping and handling activity for each product and (b) determine
the total shipping and receiving costs for the china if 3,500 boxes are shipped.
32) Managerial accounting
A.is prepared according to GAAP
B.is prepared according to management needs
C.is prepared periodically only
D.is related to the entire business entity only
33) Which one of the following accounts below would likely be included in a deferral
adjusting entry?
A.Interest Revenue
B.Unearned Revenue
C.Salaries Payable
D.Accounts Receivable
34) Zeke Company is a manufacturing company that has worked on several production
jobs during the 1st quarter of the year. Below is a list of all the jobs for the quarter:
Job 356, 357, 358 & 359 were completed. Jobs 356 & 357 were sold at a profit of $500
on each job.
What is the ending balance of Work in Process for Zeke Company as of the end of the
1st quarter?
A.$0
B.$456
C.$3,208
D.$2,752
35) Which of the following is not true of a corporation?
A.It may enter into binding legal contracts in its own name
B.It may sue and be sued
C.The acts of its owners bind the corporation
D.It may buy, own, and sell property
36) The following data are available from the accounting records of Suwanee Co. for
the month ended May 31, 2012. 17,000 units were manufactured and sold during the
accounting period at a price of $60 per unit. There was no beginning inventories and all
units were completed (no work in process).
37) The total manufacturing cost variance consists of:
A.Direct materials price variance, direct labor cost variance, and fixed factory overhead
volume variance
B.Direct materials cost variance, direct labor rate variance, and factory overhead cost
variance
C.Direct materials cost variance, direct labor cost variance, variable factory overhead
controllable variance
D.Direct materials cost variance, direct labor cost variance, factory overhead cost
variance
38) Which of the following would most likely be a product cost?
A.Salary of VP of sales
B.Advertising for a particular product
C.Drill bits for a drill press used in the plant assembly area
D.Salary of the company receptionist
39) Emma Co. sold Isabella Co. merchandise on account FOB shipping point,, 2/10, net
30, for $15,000. Emma Co.prepaid the $750 shipping charge. Using the perpetual
inventory method, which of the following entries will Isabella Co. make to record
payment of the merchandise if Isabella Co.pays within the discount period?
A.Accounts Payable-Emma Co., debit $15,000; Freight In, credit $750; Cash, credit
$14,250
B.Accounts Payable-Emma Co., debit $15,750; Merchandise Inventory, credit $300;
Cash, credit $15,450
C.Accounts Payable-Emma Co., debit $15,000; Freight In, debit $750; Cash, credit
$15,750
D.Accounts Payable-Emma Co., debit $15,750; Merchandise Inventory, debit
$300;Cash, credit $16,050
40) The statement of cash flows is not useful for:
A.planning future investing and financing activities
B.determining a companys ability to pay its debts
C.determining a companys ability to pay dividends
D.calculating the net worth of a company
41) On the statement of cash flows, the cash flows from financing activities section
would include
A.receipts from the sale of investments
B.payments for the acquisition of investments
C.receipts from a note receivable
D.receipts from the issuance of capital stock
42) All of the following are factors contributing to the trend for regulators to adopt
accounting principles using fair value concepts except:
A.a greater percentage of total assets existing as receivables and securities
B.pressure on regulators to adopt an international set of accounting principles and
standards
C.hybrid measurement methods within GAAP that conflict with each other
D.the ease of applying market values to assets and liabilities
43) The retained earnings statement begins with the beginning balance followed by
A.net income (loss) and dividends
B.net income (loss) and issuances of capital stock
C.issuances of capital stock and dividends
D.issuances of capital stock, net income (loss), and dividends
44) Moon Shoe Factory is an investment center and is responsible for all of their net
income and the use of their assets. In 2012, the invested assets totaled $475,000 and net
income was $125,000. What is the rate of return on assets?
A.26.3%
B.25.0%
C.4.0%
D.380.0%
45) If the expected sales volume for the current period is 8,000 units, the desired ending
inventory is 1,400 units, and the beginning inventory is 1,200 units, the number of units
set forth in the production budget, representing total production for the current period,
is:
A.10,600
B. 8,200
C. 66,000
D. 6,800
46) Which of the following is most associated with managerial accounting?
A.Must follow GAAP
B.May rely on estimates and forecasts
C.Is prepared for users outside the organization
D.Always reports on the entire entity
47) Periods in time that experience increasing price levels are known as periods of:
A.inflation
B.recession
C.depression
D.deflation
48) Which one of the fixed asset accounts listed below will not have a related contra
asset account?
A.Office Equipment
B.Land
C.Delivery Equipment
D.Building
49) Assuming a 360-day year, when a $40,000, 90-day, 9% interest-bearing note
payable matures, total payment will amount to:
A.$40,900
B.$43,600
C.$900
D.$3,600
50) At the end of the current year, Accounts Receivable has a balance of $550,000;
Allowance for Doubtful Accounts has a credit balance of $5,500; and net sales for the
year total $2,500,000. An analysis of receivables estimates uncollectible receivables as
$25,000.
Determine the amount of the adjusting entry for bad debt expense and the adjusted
balance of Allowance of Doubtful Accounts, respectively.
A.$19,500 and $25,000
B.$30,500 and $525,000
C.$19,500 and $525,000
D.$30,500 and $25,000
51) When using the total cost concept of applying the cost-plus approach to product
pricing, what is included in the markup?
A.Total selling and administrative expenses plus desired profit
B.Total fixed manufacturing costs, total fixed selling and administrative expenses, and
desired profit
C.Total costs plus desired profit
D.Desired profit
52) A note receivable due in 18 months is listed on the balance sheet under the caption
A.long-term liabilities
B.fixed assets
C.current assets
D.investments
53) Match each of the following terms with the best definition given.
1>Combines market-based pricing with a cost reduction emphasis A. Production
bottleneck
2>Sets the price according to demand B. Target costing
3>Only costs of manufacturing are included in product cost per unit C. Product cost
concept
4>Constraint D. Competition-based concept
5>Sets the price according to competitors E. Demand-based concept
54) Requirement: Make the journal entries for both of the following:
(a) On December 1, $18,000 was received for a service contract to be performed from
December 1 through until April 30.
(b) If the service work for this contract is performed evenly and on a regular basis
throughout this period, prepare the adjusting journal entry as of year-end, December 31.
55) The balance in Allowance for Doubtful Accounts will directly impact the end of
period adjustment for the bad debt expense when using which of the following
methods?
A.Allowance method
B.Direct write-off method
C.Accrual method
D.declining value method
56) Crystal Company manufactures two models of microcassette recorders, VCH and
MTV. Based on the following production data for April of the current year, prepare a
production budget for April.
57) Groceries R Us, Inc. reported the following date in its December 31, 2011 annual
report.
(1) What is the companys cash burn per month?
(2) What is the companys ratio of cash to monthly cash expenses?
(3) Interpret the ratio you computed in part 2. What are the implications for Groceries R
Us, Inc.?
58) Jamison Company produces and sells Product X at a total cost of $25 per unit, of
which $15 is product cost and $10 is selling and administrative expenses. In addition,
the total cost of $25 is made up of $14 variable cost and $11 fixed cost. The desired
profit is $5 per unit. Determine the mark up percentage on total cost.
59) The total assets and the total liabilities of a business at the beginning and at the end
of the year appear below. During the year, the company paid $55,000 in cash dividends
and issued an additional $33,000 of capital stock.
Calculate the net income for the year.
60) Journalize the entries to record the following:
Jun 1 Established a petty cash fund of $200
Jun 30 The amount of cash in the petty cash fund is now $57. The fund is replenished
based on the following receipts: postage, $25; entertainment $100; miscellaneous $20.
Record any discrepancy in the cash short and over account.
Journal
61) The following data were extracted from the accounting records of Meridian Designs
for the year ended March 31, 2014.
Prepare the cost of merchandise sold section of the income statement for the year ended
March 31, 2014, using the periodic method. Also determine gross profit.
62) The accountant for Franklin Company prepared the following list of account
balances from the companys records for the year ended December 31, 2011:
Based on this information, is Franklin Company profitable? Explain your answer by
including net income or loss.
63) Identify four capital investment analysis models discussed in the chapter and
discuss the strengths and weaknesses of each model.
The four capital investment models discussed in the chapter are the payback method,
the accounting rate of return model, the net present value model, and the internal rate of
return model.
Following are strengths and weaknesses of each:
The payback model is easy to understand and is based on cash flows, which are of
primary concern to many businesses. However, it ignores profitability and the time
value of money.
The accounting rate of return model measures profitability, but it ignores the time value
of money.