1) The holder of a convertible bond can convert an interest payment received into a
cash dividend paid on common stock if the dividend is greater than the interest
payment.
2) The percentage of receivables basis of estimating expected uncollectible accounts
emphasizes income statement relationships.
3) A capital lease requires the lessee to record the lease as a purchase of an asset.
4) A contra asset account is subtracted from a related account in the balance sheet.
5) The cost of a depreciable asset less accumulated depreciation reflects the book value
of the asset.
6) The process used to identify the financial data that change under alternative courses
of action is called allocation of limited resources.
7) A formula used in developing a flexible budget is: Total budgeted cost = fixed cost +
(total variable cost per unit activity level).
8) Certain budget reports are prepared monthly, whereas others are prepared more
frequently depending on the activities being monitored.
9) Total manufacturing costs for a period consists of the costs of direct materials used,
the cost of direct labor incurred, and the manufacturing overhead applied during the
period.
10) The Purchases account is credited for all raw materials purchase returns and
allowances.
11) Determine whether each of the following costs should be classified as direct
materials (DM), direct labor (DL), or manufacturing overhead (MO).
a.____Depreciation on factory equipment
b.____Table legs used in manufacturing tables
c.____Wages paid to assembly line workers
d.____Factory rent
12) The source of data to serve as inputs in incremental analysis is generated by
a.market analysts
b.engineers
c.accountants
d.All of these answer choices are correct
13) The Ohio Division of Allied Corp. had an ROI of 10% when sales were $1,500,000
and controllable margin was $300,000. What were the average operating assets?
a.$30,000
b.$300,000
c.$3,000,000
d.$15,000,000
14) The following information is for Bright Eyes Auto Supplies:
Bright Eyes Auto Supplies
Balance Sheet
December 31, 2014
Cash$ 40,000Accounts Payable$ 130,000
Prepaid Insurance80,000Salaries and Wages Payable50,000
Accounts Receivable100,000Mortgage Payable 150,000
Inventory140,000Total Liabilities330,000
Land Held for Investment180,000
Land250,000
Building$200,000
Less AccumulatedOwners Capital 740,000
Depreciation(60,000)140,000
Trademark 140,000Total Liabilities and
Total Assets$1,070,000Owners Equity$1,070,000
The total dollar amount of liabilities to be classified as current liabilities is
a.$50,000
b.$130,000
c.$180,000
d.$330,000
15) At June 30, Yaddof Company has the following bank information: cash balance per
bank $1,800; outstanding checks $340; deposits in transit $275; credit memo for
interest $75; bank service charge $10. What is Mareskas adjusted cash balance on June
30?
a.$1,735
b.$1,800
c.$1,810
d.$1,865
16) Cash equivalents are defined by IFRS as
a.cash on hand
b.demand deposits
c.cash on hand and demand deposits
d.short-term, highly liquid investments that are readily convertible into known amounts
of cash
17) The following department data are available:
Total materials costs$240,000
Equivalent units of materials60,000
Total conversion costs$150,000
Equivalent units of conversion costs30,000
What is the total manufacturing cost per unit?
a.$4.00
b.$5.00
c.$9.00
d.$4.33
18) Each of the following items may be classified as operating or financing activities
under IFRS except
a.dividends paid
b.dividends received
c.interest paid
d.All of the above may be classified as such
19) Which of the following is false about a journal?
a.It discloses in one place the complete effects of a transaction
b.It provides a chronological record of transactions
c.It helps to prevent or locate errors because debit and credit amounts for each entry can
be readily compared
d.It keeps in one place all the information about changes in specific account balances
20) The income statement of Fezzik’s Shoe Repair is as follows:
FEZZIKS SHOE REPAIR
Income Statement
For the Month Ended April 30, 2014
Revenue
Service Revenue$9,500
Expenses
Salaries and Wages Expense$4,200
Depreciation Expense350
Utilities Expense400
Rent Expense600
Supplies Expense 1,050
Total Expenses 6,600
Net Income$2,900
On April 1, the Owners Capital account had a balance of $12,900. During April, Fezzik
withdrew $3,000 cash for personal use.
Instructions
(a)Prepare closing entries at April 30 .
(b)Prepare an owner’s equity statement for the month of April.
21) From the standpoint of the issuing company, a disadvantage of using bonds as a
means of long-term financing is that
a.bond interest is deductible for tax purposes
b.interest must be paid on a periodic basis regardless of earnings
c.income to stockholders may increase as a result of trading on the equity
d.the bondholders do not have voting rights
22) Wilco Legal Eagles Company entered into the following transactions during
March 2014 .
1> Purchased office equipment for $23,000 from Business Equipment, Inc. on account.
2> Paid $3,000 cash for March rent on office furniture.
3> Received $15,000 cash from customers for legal work billed in February.
4> Provided legal services to Amy Construction Company for $3,500 cash.
5> Paid Northern States Power Co. $2,700 cash for electric usage in March.
6> J. Wilco invested an additional $32,000 in the business.
7> Paid Business Equipment, Inc. for the office equipment purchased in (1) above.
8> Incurred advertising expense for March of $1,900 on account.
Instructions
Indicate with the appropriate letter whether each of the transactions above results in:
(a) an increase in assets and a decrease in assets.
(b) an increase in assets and an increase in owners equity.
(c) an increase in assets and an increase in liabilities.
(d) a decrease in assets and a decrease in owners equity.
(e) a decrease in assets and a decrease in liabilities.
(f) an increase in liabilities and a decrease in owners equity.
(g) an increase in owners equity and a decrease in liabilities.
23) The amount you must deposit now in your savings account, paying 6% compound
interest, in order to accumulate $15,000 for your first tuition payment when you start
college in 4 years is
a.$11,209
b.$12,340
c.$11,881
d.$11,400
24) Glenn Company purchased merchandise inventory with an invoice price of $9,000
and credit terms of 2/10, n/30. What is the net cost of the goods if Glenn Company pays
within the discount period?
a.$8,100
b.$8,280
c.$8,820
d.$9,000
25) A worksheet is a multiple column form that facilitates the
a.identification of events
b.measurement process
c.preparation of financial statements
d.analysis process
26) If the owner’s equity account increases from the beginning of the year to the end of
the year, then
a.net income is less than owner drawings
b.a net loss is less than owner drawings
c.additional owner investments are less than net losses
d.net income is greater than owner drawings
27) Which depreciation method is most frequently used in businesses today?
a.Straight-line
b.Declining-balance
c.Units-of-activity
d.Double-declining-balance
28) The function that pertains to keeping the activities of the enterprise on track is
a.planning
b.directing
c.controlling
d.accounting
29) The formula for computing earnings per share is net income
a.divided by the ending common shares outstanding
b.divided by the weighted-average number of common shares outstanding
c.less preferred dividends divided by the ending common shares outstanding
d.less preferred dividends divided by the weighted-average number of common shares
outstanding
30) A student should recognize a need to study manual accounting systems because
a.the structure of electronic systems differs greatly from manual systems
b.all small companies only use manual accounting systems
c.the software and hardware of electronic systems vary greatly, which makes manual
procedures more practical to study
d.companies that use manual systems hire more accountants
31) The best interpretation of the word credit is the
a.offset side of an account
b.increase side of an account
c.right side of an account
d.decrease side of an account
32) Manufacturing overhead is applied to each job
a.at the time when the overhead cost is incurred
b.by means of a predetermined overhead rate
c.at the end of the year when actual costs are known
d.only if the overhead costs can be directly traced to that job
33) In analyzing financial statements, horizontal analysis is a
a.requirement
b.tool
c.principle
d.theory
34) Selected transactions for A. Byrjun, a property manager, in her first month of
business,
are as follows.
Jan. 2 Invested $15,000 cash in business.
3 Purchased used car for $5,200 cash for use in business.
9 Purchased supplies on account for $500.
11 Billed customers $2,100 for services performed.
16 Paid $450 cash for advertising.
20 Received $1,300 cash from customers billed on January 11.
23 Paid creditor $300 cash on balance owed.
28 Withdrew $2,000 cash for personal use of owner.
Instructions
For each transaction indicate the following.
(a) The basic type of account debited and credited (asset (A), liability (L), owners
equity (OE)).
(b) The specific account debited and credited (cash, rent expense, service revenue, etc.).
(c) Whether the specific account is increased (incr.) or decreased (decr).
(d) The normal balance of the specific account.
Use the following format, in which the January 2 transaction is given as an example.
Account Debited Account Credited
(a) (b) (c) (d) (a) (b) (c) (d)
Basic Specific Normal Basic Specific Normal
Date Type Account Effect Balance Type Account Effect Balance
Jan. 2 A Cash Incr. Debit OE Owners Incr.Credit
Capital
35) The return on common stockholders equity is computed by dividing net income
available to common stockholders by:
a.average stockholders equity
b.ending stockholders equity
c.average common stockholders equity
d.ending common stockholders equity
36) Debits to Work in Process Inventory are accompanied by a credit to all but which
one of the following accounts?
a.Raw Materials Inventory
b.Factory Labor
c.Manufacturing Overhead
d.Cost of Goods Sold
37) Which statement about long-term investments is not true?
a.They will be held for more than one year
b.They are not currently used in the operation of the business
c.They include investments in stock of other companies and land held for future use
d.They can never include cash accounts
38) Most companies pay current liabilities
a.out of current assets
b.by issuing interest-bearing notes payable
c.by issuing stock
d.by creating long-term liabilities
39) Indicate where the payment of income taxes would appear, if at all, on the statement
of cash flows.
a.Operating activities section
b.Investing activities section
c.Financing activities section
d.Does not represent a cash flow
40) The formula for the materials quantity variance is
a.(SQ AP) (SQ SP)
b.(AQ AP) (AQ SP)
c.(AQ SP) (SQ SP)
d.(AQ AP) (SQ SP)
41) Westglow Corporation purchased 3,000 shares of its $5 par value common stock for
a cash price of $10 per share. Two months later, Westglow sold the treasury stock for a
cash price of $8 per share.
Instructions
Prepare the journal entry to record the sale of the treasury stock assuming
(a)No balance in Paid-in Capital from Treasury Stock.
(b)A $4,000 balance in Paid-in Capital from Treasury Stock.
42) On January 1, 2014, Borse Company issued bonds with a face value of $800,000.
The bonds carry a stated interest of 7% payable each January 1 and July 1 .
Instructions
a.Prepare the journal entry for the issuance assuming the bonds are issued at 95 .
b.Prepare the journal entry for the issuance assuming the bonds are issued at 105 .
43) Which of the following would not be reported under “Other Revenues and Gains”
on the income statement?
a.Unrealized gain on available-for-sale securities
b.Dividend revenue
c.Interest revenue
d.Gain on sale of short-term debt investments
44) On February 7, Jackson Company sold goods on account to Phillips Enterprises for
$5,200, terms 2/10, n/30. On March 9, Phillips gave Jackson a 60-day, 12% promissory
note in settlement of the account. Record the sale and the acceptance of the promissory
note on the books of Jackson Company.
45) Bogle Company has a unit selling price of $500, variable cost per unit of $250, and
fixed costs of $260,000.
Instructions
Compute the break-even point in units and in sales dollars.
46) In an environment where there are limited resources, the products with the highest
contribution per unit of ______________ should identify the products to be produced.
47) Listed below in alphabetical order are the balance sheet items of Rock Plaza Central
Company at December 31, 2014 . Prepare a balance sheet and include a complete
heading.
Accounts Payable$ 24,000
Accounts Receivable15,000
Buildings51,000
Cash7,000
Owners Capital102,000
Land42,000
Equipment11,000
48) Indicate whether each of the following accounts would be shown in the general
ledger or subsidiary ledger.
1>Cash______________________
2>Accounts ReceivableLarson______________________
3>Equipment______________________
4>Accounts PayableParks______________________
5>Common Stock______________________
6>Sales Revenue______________________
49) Lock Company accumulates the following data concerning a mixed cost, using
miles as the activity level.
Miles DrivenTotal Cost
May10,000$16,800
June8,00013,500
July9,00014,400
August7,00012,500
Instructions
Compute the variable and fixed cost elements using the high-low method.
50) Lincoln Company makes and sells a single product, widgets. Three pounds of clay
are needed to make one widget. Budgeted production of widgets for the next few
months follows:
September58,000 units
October62,000 units
The company wants to maintain monthly ending inventories of clay equal to 20% of the
following month’s production needs. On August 31, 16,000 pounds of clay were on
hand.
Instructions
How much clay should be purchased in September?
51) A job order cost accounting system is fully integrated into the general ledger of a
company. Identify the major general ledger accounts used in a job order cost system.
Explain how manufacturing costs flow through these accounts so that inventories may
be costed and income determined when goods are sold.