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1) Twenty percent of all businesses in the United States are corporations and they
account for 80% of the total business dollars generated.
2) Revenue recognition concept requires that the reporting of revenue be included in the
period when cash for the service is received.
3) When a corporation issues bonds, it executes a contract with the bondholders, known
as a bond debenture.
4) If a proposed expenditure of $80,000 for a fixed asset with a 4-year life has an
annual expected net cash flow and net income of $32,000 and $12,000, respectively, the
cash payback period is 4 years.
5) The accounts payable account is listed in the chart of accounts as an asset.
6) Functional depreciation occurs when a fixed asset is no longer able to provide
services at the level for which it was intended.
7) The reliability of cost-volume-profit analysis does NOT depend on the assumption
that costs can be accurately divided into fixed and variable components.
8) Accounts are records of increases and decreases in individual financial statement
items.
9) Product costs are also referred to as inventoriable costs.
10) After all noncash assets have been converted to cash and all liabilities paid, A, B,
and C have capital balances of $10,000 (debit), $5,000 (debit), and $25,000 (credit).
The cash available for distribution to the partners is $10,000.
11) The difference between the standard cost of a product and its actual cost is called a
variance.
12) If Division Inc. expects to sell 200,000 units in 2012, desires ending inventory of
24,000 units, and has 22,000 units on hand as of the beginning of the year, the budgeted
volume of production for 2012 is 198,000 units.
13) Cross-referencing is useful in assuring that the debits and credits are in balance.
14) When a corporation owns less than 20% of the stock of another company, dividends
received are not treated as income.
15) Industries that typically use process cost systems include chemicals, oil, metals,
food, paper, and pharmaceuticals.
16) If fixed costs are $700,000 and the unit contribution margin is $17, what amount of
units must be sold in order to realize an operating income of $100,000?
A. 5,000
B.41,176
C.47,059
D.58,882
17) Mr. Potts issued a 90-day, 7% note for $200,000, dated February 3rd to Valley Co.
on account. (Assume a 360-day year when calculating interest.)
a. Determine the due date of the note.
b. Determine the interest.
c. Determine the maturity value of the note.
d. Journalize the entry to record the issuance of the note by Potts on Feb. 3.
e. Journalize the entry to record the receipt of payment of the note at maturity by Valley
Co.
18) The detailed record indicating the data for each employee for each payroll period
and the cumulative total earnings for each employee is called the
A.payroll register
B.payroll check
C.employee's earnings record
D.employer's earnings record
19) Using a perpetual inventory system, the entry to record the purchase of $30,000 of
merchandise on account would include a
A.debit to Accounts Payable
B.debit to Merchandise Inventory
C.credit to Merchandise Inventory
D.credit to Sales
20) Which of the following would probably not be found in the accounting system of a
service provider?
A.Cost ledger
B.Finished jobs ledger
C.Deferred revenue account
D.Job cost sheets
21) Sales to customers who use bank credit cards, such as MasterCard and Visa, are
generally treated as
A.sales on account
B.sales returns
C.cash sales
D.sales when the credit card company remits the cash
22) The cost of a product warranty should be included as an expense in the
A.period the cash is collected for a product sold on account
B.future period when the cost of repairing the product is paid
C.period of the sale of the product
D.future period when the product is repaired or replaced
23) Carmelita Inc., has the following information available:
At the beginning of the period, there were 500 units in process that were 60 percent
complete as to conversion costs and 100 percent complete as to direct materials costs.
During the period 4,500 units were started and completed. Ending inventory contained
340 units that were 30 percent complete as to conversion costs and 100 percent
complete as to materials costs. (Assume that the company uses the FIFO process cost
method.)
The equivalent units of production for direct materials and conversion costs,
respectively, were
A.5,340 for direct materials and 4,902 for conversion costs
B.4,840 for direct materials and 4,802 for conversion costs
C.4,602 for direct materials and 4,802 for conversion costs
D.4,902 for direct materials and 4,802 for conversion costs
24) Project A requires an original investment of $50,000. The project will yield cash
flows of $15,000 per year for seven years. Project B has a calculated net present value
of $13,500 over a four year life. Project A could be sold at the end of four years for a
price of $25,000. (a) Using the proper table below determine the net present value of
Project A over a four-year life with salvage value assuming a minimum rate of return of
12%. (b) Which project provides the greatest net present value?
Below is a table for the present value of $1 at compound interest.
Below is a table for the present value of an annuity of $1 at compound interest.
25) If the price paid per unit differs from the standard price per unit for direct materials,
the variance is termed a:
A.variable variance
B.controllable variance
C.price variance
D.volume variance
26) The following data relate to direct materials costs for November:
What is the direct materials price variance?
A.$3,600 favorable
B.$160 favorable
C.$3,760 favorable
D.$3,600 unfavorable
27) The term deficit is used to refer to a debit balance in which of the following
accounts of a corporation?
A.Retained Earnings
B.Treasury Stock
C.Organizational Expenses
D.Common Stock
28) Which of the following entries would probably not be found on the books of a
service provider?
A.Debit Work in Process; credit Materials
B.Debit Work in Process; credit Wages Payable
C.Debit Work in Process; credit Overhead
D.Debit Cost of Services; credit Work in Process
29) As of January 1 of the current year, the Grackle Company had accounts receivables
of $50,000. The sales for January, February, and March of 2012 were as follows:
$120,000, $140,000 and $150,000. 20% of each months sales are for cash. Of the
remaining 80% (the credit sales), 60% are collected in the month of sale, with
remaining 40% collected in the following month. What is the total cash collected (both
from accounts receivable and for cash sales) in the month of January?
A.$$74,000
B.$110,000
C.$71,600
D.$131,600
30) The difference between the balance of a fixed asset account and the related
accumulated depreciation account is termed
A.historical cost
B.contra asset
C.book value
D.market value
31) The standard costs and actual costs for factory overhead for the manufacture of
2,500 units of actual production are as follows:
The amount of the factory overhead volume variance is:
A.$2,000 favorable
B.$2,000 unfavorable
C.$2,500 unfavorable
D.$0
32) On January 1, 20xx, Swenson Corporation had 40,000 shares of $10 par value
common stock issued and outstanding. All 40,000 shares had been issued in a prior
period at $20.00 per share. On February 1, 20xx, Swenson purchased 4,000 shares of
treasury stock for $24 per share and later sold the treasury shares for $21 per share on
March 1, 20xx.
The journal entry to record the purchase of the treasury shares on February 1, 20xx,
would include a
A.credit to Treasury Stock for $96,000
B.debit to Treasury Stock for $96,000
C.debit to a loss account for $120,000
D.credit to a gain account for $120,000
33) The present value index is computed using which of the following formulas?
A.Amount to be invested/Average rate of return
B.Total present value of net cash flow/Amount to be invested
C.Total present value of net cash flow/Average rate of return
D.Amount to be invested/Total present value of net cash flow
34) Gleason invested $90,000 in the James and Kirk partnership for ownership equity
of $90,000. Prior to the investment land was revalued to a market value of $425,000
from a book value of $200,000. James and Kirk share net income in a 1:2 ratio.
a. Provide the journal entry for the revaluation of land.
b. Provide the journal entry to admit Gleason.
35) Merchandise with a list price of $4,200 and costing $2,300 is sold on account,
subject to the following terms: FOB destination, 2/10, n/30. The seller prepays the
freight costs of $85 (debit Freight Out for the freight costs). Prior to payment for the
goods, the seller issues a credit memo for $750 to the customer for merchandise costing
$425 that is returned. The correct amount is received within the discount period. The
company uses a perpetual inventory system.
Record the foregoing transactions of the seller in the sequence indicated below.
(a) Sold the merchandise, recognizing the sale and cost of merchandise sold.
(b) Paid the freight charges.
(c) Issued the credit memo.
(d) Received payment from the customer.
36) Which of the following could not be considered a business segment?
A.Region
B.Product
C.Customer Type
D.All of these could be considered business segments
37) The income summary account is also called
A.the imprest account
B.the clearing account
C.the adjustments account
D.the helpful account
38) 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)
39) If $2,000,000 of 10% bonds are issued at 95, the amount of cash received from the
sale is
A.$2,200,000
B.$2,000,000
C.$2,100,000
D.$1,900,000
40) The Eastern Division of Kentucky Company has a rate of return on investment of
28% and a profit margin of 20%. What is the investment turnover?
A.3.6
B.1.4
C.5.0
D..7
41) Isaac Co. sells merchandise on credit to Sonar Co in the amount of $5,700. The
invoice is dated on April 1 with terms of 1/15, net 45. What is the amount of the
discount and up to what date must the invoice be paid in order for the buyer to take
advantage of the discount?
A.$114, April 15
B.$114, April 16
C.$57, April 15
D.$57, April 16
42) Consider the following journal entry made by Jones Company. Upon investigation,
what might you find happened to create this amount of Cash Over/Short account
difference? Give three possible reasons for this difference.
43) Condensed data taken from the ledger of Joplin Company at December 31, 2012
and 2011, are as follows:
Prepare a comparative balance sheet, with horizontal analysis, for December 31, 2012
and 2011. (Round percents to one decimal point.)
44) Dickerson Co. is evaluating a project requiring a capital expenditure of $810,000.
The project has an estimated life of four years and no salvage value. The estimated net
income and net cash flow from the project are as follows:
The company's minimum desired rate of return is 12%. The present value of $1 at
compound interest of 12% for 1, 2, 3, and 4 years is .893, .797, .712, and .636,
respectively.
Required:
Determine the net present value.
45) McMann Company has a condensed income statement as shown::
REQUIRED:
Prepare a horizontal analysis of McMann Companys income statements. Comment on
the trends, both favorable and unfavorable.
46) Falcon Company acquired an adjacent lot to construct a new warehouse, paying
$40,000 and giving a short-term note for $410,000. Legal fees paid were $13,275,
delinquent taxes assessed were $14,500, and fees paid to remove an old building from
the land were $15,800. Materials salvaged from the demolition of the building were
sold for $6,800. A contractor was paid $890,000 to construct a new warehouse.
Determine the cost of the land to be reported on the balance sheet and show your work.
47) Prior to liquidating their partnership, Porter and Robert had capital accounts of
$160,000 and $100,000 respectively. Prior to liquidation, the partnership had no cash
assets other than what was realized from the sale of the partnership assets. These
partnership assets were sold for $250,000. The partnership had $10,000 of liabilities.
Porter and Robert share income and losses equally.
Required:
Determine the amount received by Porter as a final distribution from liquidation of the
partnership.
48) On November 1st Nikle Company made a cash payment of $200,000 on a note
payable that was generated in the purchase of a building and land plot. Write the journal
entry for this payment in the space below.
49) The following data (in thousands of dollars) have been taken from the accounting
records of Rayburn Corporation for the current year.
