Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
1) If employees accept a wage contract that decreases the unit contribution margin, the
break-even point will decrease.
2) On the work sheet, the capital and drawing account balances are extended to the
Balance Sheet columns.
3) A disadvantage of partnerships is the mutual agency of all partners.
4) A low operating leverage is normal for highly automated industries.
5) Solvency analysis focuses on the ability of a business to pay its current and
noncurrent liabilities.
6) Using the indirect method, if land costing $85,000 was sold for $145,000, the
amount reported in the financing activities section of the statement of cash flows would
be $85,000.
7) As a company records depreciation expense for a period of time a corresponding
cash inflow from investing activities is reported on the statement of cash flows.
8) The total of the accounts receivable subsidiary accounts and the account receivable
controlling account should balance to each other at the end of the period.
9) Sales commissions expense for a department store is an example of a direct expense.
10) Posting a transaction twice will cause the trial balance totals to be equal.
11) If a partner's capital balance is a debit after it has absorbed its share of the loss on
realization, the balance is referred to as a deficiency.
12) Reedy Company reports the following information for 2012:
Factory overhead is 75% of the cost of direct labor. Work in process inventory on
December 31, 2012, is:
A.$16,250
B.$8,500
C.$18,750
D.$13,500
13) On November 10th, JumpStart Co. provides $2,900 in services to clients. At the
time of service, the clients paid $600.00 in cash and put the balance on account.
(a) Journalize this event.
(b) On November 20th, JumpStart Co. clients paid an additional $900 on their accounts
due. Journalize this event.
(c) Calculate the amount of accounts receivable on November 30th.
14) Equipment costing $80,000 with a useful life of 10 years and a residual value of
$8,000 has been depreciated for 6 years by the straight-line method. Assume a fiscal
year ending December 31.
15) On December 1st, JumpStart Company provides $2,800 in services to clients.
(a) Journalize this event as if the clients had paid cash at the time the services were
rendered.
(b)(1) Journalize this event as if the clients had placed this on account.
(b)(2) Assume that the clients paid $1,200 of the amount on account on December 30th.
Journalize this transaction.
16) If sales are $400,000, variable costs are 75% of sales, and operating income is
$50,000, what is the operating leverage?
A.2.5
B.7.5
C.2.0
D.0
17) When the perpetual inventory system is used, the inventory sold is shown on the
income statement as
A.cost of merchandise sold
B.purchases
C.purchases returns and allowances
D.net purchases
18) At the end of the period, Carson Company had the following balances in selected
accounts:
Raw Materials Inventory $ 80,000
Finished Goods 190,000
Work in Process Inventory 70,000
Cost of Goods Sold 1,000,000
Factory Overhead 30,000
Required:
a. Assuming the factory overhead balance is relatively small, prepare the journal entry
to close the Factory Overhead account if the balance in the account is a debit balance.
What does a debit balance mean?
b. Assuming the factory overhead balance is relatively small, prepare the journal entry
to close the Factory Overhead account if the balance in the account is a credit balance.
What does a credit balance mean?
19) Match the term with the appropriate definition.
1>Without an agreement, the law will stipulate this method of sharing profits and losses
A. unlimited liability
2>The final step in the liquidation of a partnership B. articles of partnership
3>Causes the dissolution of a partnership C. partnership
4>When a partnership cannot pay its debts with business assets, the partners must use
personal assets to meet the debt D. mutual agency
5>Agreement that is the contract between partners E. liquidation
6>The process of going out of business by selling the entitys assets and paying its
liabilities F. equally
7>A voluntary association of two or more persons who co-own a business for profit G.
distribution of remaining cash to partners
8>Every partner can bind the business to a contract within the scope of the partnerships
regular business operations H. death of a partner
20) When the cost method is used to account for an investment, the carrying value of
the investment is affected by
A.the dividend distributions of the investee
B.the periodic net income of the investee
C.the earnings and dividend distributions of the investee
D.neither the earnings nor the dividends of the investee
21) On January 1, 2014, the Baker Corporation issued 10% bonds with a face value of
$50,000. The bonds are sold for $46,000. The bonds pay interest semiannually on June
30 and December 31 and the maturity date is December 31, 2023. Baker records
straight-line amortization of the bond discount. The bond interest expense for the year
ended December 31, 2014, is
A.$5,000
B.$5,200
C.$5,800
D.$5,400
22) A used machine with a purchase price of $77,000, requiring an overhaul costing
$8,000, installation costs of $5,000, and special acquisition fees of $3,000, would have
a cost basis of
A.$93,000
B.$90,000
C.$82,000
D.$85,000
23) Which of the following is a manufacturing business?
A.Amazon.com
B.Wal-Mart
C.Ford Motors
D.Delta Airlines
24) At the beginning of the year, the balance in the Allowance for Doubtful Accounts is
a credit of $760. During the year, $120 of previously written-off accounts were
reinstated and accounts totaling $740 are written-off as uncollectible. The end of the
year balance (before adjustment) in the Allowance for Doubtful Accounts should be
A.$760
B.$120
C.$140
D.$740
25) The difference between the current sales revenue and the sales at the break-even
point is called the:
A.contribution margin
B.margin of safety
C.price factor
D.operating leverage
26) The balance sheets at the end of each of the first two years of operations indicate
the following:
If net income is $115,000 and interest expense is $30,000 for 2012 what is the rate
earned on total assets for 2012 (round percent to one decimal point)?
A.9.3%
B.10.1%
C.8.0%
D.7.4%
27) Control of inventory should begin as soon as the inventory is received. Which of the
following internal control steps is not done to meet this goal?
A.check the invoice to the receiving report
B.check the invoice to the purchase order
C.check the invoice with the person who specifically purchased the item
D.check the invoice extensions and totals
28) When a business sells more than one product at varying selling prices, the
business's break-even point can be determined as long as the number of products does
not exceed:
A.two
B.three
C.fifteen
D.there is no limit
29) Which of the following is not an element of internal controls?
A.to protect assets from misuse
B.ensure the accuracy of business information
C.ensure that laws and regulations are followed
D.ensure that company policies are in place to maximize profits
30) Nick is admitted to an existing partnership by investing cash. Nick agrees to pay a
bonus for his ownership interest because of the past success of the partnership. When
Nicks investment in the partnership is recorded
A.his capital account will be credited for more than the cash he invested
B.his capital account will be credited for the amount of cash he invested
C.a bonus will be credited for the amount of cash he invested
D.a bonus will be distributed to the old partners' capital accounts
31) A company is preparing its their Cash Budget. The following data has been
provided for cash receipts and payments.
The companys cash balance at January 1st is $290,000. This company desires a
minimum cash balance of $340,000.
What is the amount of excess cash or deficiency of cash (after considering the
minimum cash balance required) for March?
A.$214,200 excess
B.$15,800 excess
C.$60,000 deficiency
D.$25,300 excess
32) Nexis Corp. issues 1,000 shares of $15 par value common stock at $22 per share.
When the transaction is recorded, credits are made to:
A.Common Stock $15,000 and Paid-in Capital in Excess of Par Value $7,000
B.Common Stock $22,000 and Retained Earnings $15,000
C.Common Stock $7,000 and Paid-in Capital in Excess of Stated Value $15,000
D.Common Stock $22,000
33) If the amount of factory overhead cost incurred exceeds the amount applied, the
factory overhead account will have a:
A.debit balance and be underapplied
B.credit balance and be underapplied
C.credit balance and be overapplied
D.debit balance and be overapplied
34) A corporation has 50,000 shares of $25 par value stock outstanding that has a
current market value of $150. If the corporation issues a 5-for-1 stock split, the market
value of the stock after the split will be approximately:
A.$25
B.$150
C.$5
D.$30
35) A company has a margin of safety of 25%, a contribution margin ratio of 30%, and
sales of $1,000,000.
(a) What is the break-even point?
(b) What is the operating income?
(c) If neither the relationship between variable costs and sales nor the amount of fixed
costs is expected to change in the next year, how much additional operating income can
be earned by increasing sales by $110,000?
36) Match each of the following terms with the phrase that most closely describes it.
Each answer may be used only once.
1>Subsidiary ledger for Work in Process. A. Cost of Services
2>Service providers use this account similarly to the cost of merchandise sold account
used by merchandisers. B. Job cost sheets
3>Serves as the basis for recording direct labor on a job cost sheet. C. Time tickets
4>Prepared when materials that have been ordered are received and inspected. D.
Receiving report
5>Serves as the basis for recording materials used. E. Material requisition
37) The following lots of a particular commodity were available for sale during the
year:
The firm uses the periodic system and there are 20 units of the commodity on hand at
the end of the year.
What is the amount of cost of goods sold for the year according to the FIFO method?
A.$1,380
B.$1,375
C.$1,510
D.$1,250
38) The standard price and quantity of direct materials are separated because:
A.GAAP reporting requires this separation
B.direct materials prices are controlled by the purchasing department, and quantity used
is controlled by the production department
C.standard quantities are more difficult to estimate than standard prices
D.standard prices change more frequently than standard quantities
39) 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
40) The controllable variance measures:
A.operating results at less than normal capacity
B.the efficiency of using variable overhead resources
C.operating results at more than normal capacity
D.control over fixed overhead costs
41) Which of the following forms is typically given to employees at the end of the
calendar year so that employees can file their individual income tax forms?
A.Employees Withholding Allowance Certificate (W-4)
B.Wage and Tax Statement (Form W-2)
C.Employer's Quarterly Federal Tax Return (Form 941)
D.401k plans
42) Ending inventory is made up of the oldest purchases when a company uses
A.first-in, first-out
B.last-in, first-out
C.average cost
D.retail method
43) Bobby Company has fixed costs of $160,000. The unit selling price, variable cost
per unit, and contribution margin per unit for the companys two products are provided
below.
The sales mix for product X and Y is 60% and 40% respectively. Determine the
break-even point in units of X and Y.
44) A company had the following stockholders equity information available at year end.
- issued 11,000 shares of $2.00 par value common stock for $12.00 per share
- issued 5,000 shares of $50 par value 6% preferred stock for $70 per share
- purchased 1,000 shares of previously issued common stock for $15.00 per share
-reported net income of $200,000
- declared and paid the preferred stock dividend
Calculate the earnings per share for the current year.
45) The balance in the unearned fees account, before adjustment at the end of the year,
is $10,250. Journalize the adjusting entry required if the amount of unearned fees at the
end of the year is $3,125.
46) Emerson and Dakota formed a partnership dividing income as follows:
1> Annual salary allowance to Emerson of $48,000
2> Interest of 8% on each partners capital balance on January 1
3> Any remaining net income divided equally.
Emerson and Dakota had $25,000 and $140,000 respectively in their January 1 capital
balances. Net income for the year was $220,000.
How much net income should be distributed to Emerson?
47) Journalize the following transactions for Dulcimer Inc. using both the periodic
inventory system and the perpetual inventory system, presented in a side-by-side format
shown at the end of this exercise.
Oct. 9 Merchandise sold on October 7 accepted back from Rondo Co. for full credit and
returned to merchandise inventory, $300; the cost of the merchandise was $180.
Nov. 5 Received payment in full of $900 from Pine Co. for sale of merchandise on Oct.
25
48) Discuss how equivalent units are computed under the average cost method.
49) Fellows Corporation has determined that the $2,700 accounts receivable due from
Andrew Stevens is uncollectible. Compare the journal entry that is required under the
direct write-off method to the journal entry that is required using the allowance method.
50) Door & Window Co. was organized on August 1 of the current year. Projected sales
for the next three months are as follows:
The company expects to sell 40% of its merchandise for cash. Of the sales on account,
25% are expected to be collected in the month of the sale and the remainder in the
following month.
Prepare a schedule indicating total cash collections for August, September, and October.
51) Journalize the following, assuming a 360-day year is used for interest calculations:
52) On the basis of the following data related to assets due within one year for Webb
Co., prepare a partial balance sheet in good form at December 31, 2014. Show total
current assets.
