1) A customer charges a treadmill at Annie’s Sport Shop. The price is $4,000 and the
financing charge is 9% per annum if the bill is not paid in 30 days. The customer fails to
pay the bill within 30 days and a finance charge is added to the customer’s account.
The accounts affected by the journal entry made by Annie’s Sport Shop to record the
finance charge are
a.Accounts Receivable
Cash
b.Cash
Finance Receivable
c.Accounts Receivable
Interest Payable
d.Accounts Receivable
Interest Revenue
2) Gagner Clinic purchases land for $175,000 cash. The clinic assumes $1,500 in
property taxes due on the land. The title and attorney fees totaled $1,000. The clinic has
the land graded for $2,200. What amount does Gagner Clinic record as the cost for the
land?
a.$157,200
b.$175,000
c.$179,700
d.$157,500
3) The purpose of the post-closing trial balance is to
a.prove that no mistakes were made
b.prove the equality of the balance sheet account balances that are carried forward into
the next accounting period
c.prove the equality of the income statement account balances that are carried forward
into the next accounting period
d.list all the balance sheet accounts in alphabetical order for easy reference
4) Working capital is
a.current assets plus current liabilities
b.current assets minus current liabilities
c.current assets divided by current liabilities
d.current assets multiplied by current liabilities
5) When a note is accepted to settle an open account, Notes Receivable is debited for
the note’s
a.net realizable value
b.maturity value
c.face value
d.face value plus interest
6) Daggett, Lamppin, and Pendergast are partners who share profits and losses 50%,
30%, and 20%, respectively. Their capital balances are $150,000, $90,000, and $60,000,
respectively.
Instructions
(a)Assume Sanford joins the partnership by investing $140,000 for a 25% interest with
bonuses to the existing partners. Prepare the journal entry to record his investment.
(b)Assume instead that Daggett leaves the partnership. Daggett is paid $170,000 with a
bonus to the retiring partner. Prepare the journal entry to record Daggetts withdrawal.
7) The investigation of materials price variance usually begins in the
a.first production department
b.purchasing department
c.controller’s office
d.accounts payable department
8) The common characteristic possessed by all assets is
a.long life
b.great monetary value
c.tangible nature
d.future economic benefit
9) The Finishing Department of Edison Manufacturing has the following production
and cost data for July:
1>Transferred out, 5,000 units.
2>Started 1,000 units that are 80% completed at July 31 .
3>Materials added, $30,000; conversion costs incurred, $23,200.
Materials are entered at the beginning of the process. Conversion costs are incurred
uniformly during the process.
Instructions
(a)Compute the equivalent units of production for materials and conversion costs for
the month of July.
(b)Compute unit costs and prepare a cost reconciliation schedule.
10) Under IFRS, equity is described as each of the following except
a.retained equity
b.shareholders’ funds
c.owners’ equity
d.capital and reserves
11) Can financial statements be prepared directly from the adjusted trial balance?
a.They cannot. The general ledger must be used
b.Yes, adjusting entries have been recorded in the general journal and posted to the
ledger accounts
c.No, the adjusted trial balance merely proves the equality of the total debit and total
credit balances in the ledger after adjustments are posted. It has no other purpose
d.They can because that is the only reason that an adjusted trial balance is prepared
12) Delvin Corporation incurred the following costs while manufacturing its product.
Materials used in product$130,000Advertising expense$49,000
Depreciation on plant65,000Property taxes on plant16,000
Property taxes on store7,700Delivery expense20,000
Labor costs of assembly-line workers112,000Sales commissions31,000
Factory supplies used 24,000Salaries paid to sales clerks58,000
Work-in-process inventory was $23,000 at January 1 and $15,800 at December 31 .
Finished goods inventory was $67,000 at January 1 and $52,600 at December 31 .
Instructions
(a)Compute cost of goods manufactured.
(b)Compute cost of goods sold.
13) Which one of the following is a name for the range over which a company expects
to operate?
a.Mixed range
b.Fixed range
c.Variable range
d.Relevant range
14) Gayton Corporation purchased 1,000 shares of Smart common stock ($50 par) at
$80 per share as a short-term investment. The shares were subsequently sold at $78 per
share. The cost of the securities purchased and gain or loss on the sale were
Cost Gain or Loss
a.$50,000$2,000 gain
b.$50,000$2,000 loss
c.$80,000$2,000 gain
d.$80,000$2,000 loss
15) Unicycle Company developed the following reconciling information in preparing
its September bank reconciliation:
Cash balance per bank, 9/30$24,000
Note receivable collected by bank12,000
Outstanding checks14,000
Deposits in transit7,000
Bank service charge150
NSF check2,400
Determine the cash balance per books (before adjustments) for Unicycle Company.
a.$2,450
b.$7,550
c.$9,550
d.$17,000
16) If stock is issued for a noncash asset, the asset should be recorded on the books of
the corporation at
a.fair value
b.cost
c.zero
d.a nominal amount
17) In a make-or-buy decision, opportunity costs are
a.added to the make total cost
b.deducted from the make total cost
c.added to the buy total cost
d.ignored
18) The origins of accounting are generally attributed to the work of
a.Christopher Columbus
b.Abner Doubleday
c.Luca Pacioli
d.Leonardo da Vinci
19) Fitzgerald Company wrote checks totaling $34,160 during October and $37,300
during November. $32,480 of these checks cleared the bank in October, and $36,440
cleared the bank in November. What was the amount of outstanding checks on
November 30?
a.$2,860
b.$1,680
c.$2,540
d.$3,140
20) Which one of the following items is not necessary in preparing a statement of cash
flows?
a.Determine the change in cash
b.Determine the cash provided by operations
c.Determine cash from financing and investing activities
d.Determine the cash in all bank accounts
21) All of the following are characteristics of partnerships except
a.co-ownership of property
b.mutual agency
c.unlimited life
d.association of individuals
22) Cherokee, Inc. paid $180,000 to buy back 20,000 shares of its $1 par value common
stock. This stock was sold later at a selling price of $6 per share. The entry to record the
sale includes a
a.debit to Retained Earnings for $60,000
b.credit to Retained Earnings for $20,000
c.debit to Paid-in Capital from Treasury Stock for $180,000
d.credit to Paid-in Capital from Treasury Stock for $20,000
23) Betas Bunny Barn has experienced a $80,000 loss due to tornado damage to its
inventory. Tornados have never before occurred in this area. Assuming that the
companys tax rate is 30%, what amount will be reported for this loss on the income
statement?
a.$80,000
b.$56,000
c.$24,000
d.$72,000
24) At October 1, 2014, Padilla Industries had an accounts payable balance of $40,000.
During the month, the company made purchases on account of $33,000 and made
payments on account of $48,000. At October 31, 2014, the accounts payable balance is
a.$25,000
b.$41,000
c.$55,000
d.$121,000
25) Rosenblum, Inc. has the following budgeted sales: July $300,000, August $200,000,
and September $250,000. 40% of the sales are for cash and 60% are on credit. For the
credit sales, 50% are collected in the month of sale, and 50% the next month. The total
expected cash receipts during September are
a.$220,000
b.$250,000
c.$135,000
d.$235,000
26) If a company utilizes reversing entries, they will
a.be made at the beginning of the next accounting period
b.not actually be posted to the general ledger accounts
c.be made before the post-closing trial balance
d.be part of the adjusting entry process
27) The economic entity assumption states that economic events
a.of different entities can be combined if all the entities are corporations
b.must be reported to the IASB
c.of a sole proprietorship cannot be distinguished from the personal economic events of
its owners
d.of every entity can be separately identified and accounted for
28) In developing the cash flows from operating activities, most companies in the U. S.
a.use the direct method
b.use the indirect method
c.present both the indirect and direct methods in their financial reports
d.prepare the operating activities section on the accrual basis
29) The one characteristic that all entries recorded in a cash receipts journal have in
common is
a.a credit to the Cash account
b.that they all represent collections from customers
c.that they originate from the sales of merchandise
d.a debit to the Cash account
30) Preston Merchandising Companys cash budget showed total available cash less
cash disbursements. What does this amount equal?
a.Ending cash balance
b.Total cash receipts
c.The excess of available cash over cash disbursements
d.The amount of financing required
31) Match the items in the two columns below by entering the appropriate code letter in
the space provided.
A.Activity indexG.Break-even point
B.Variable costsH.Contribution margin
C.Fixed costsI.Margin of safety
D.High-low methodJ.Contribution margin ratio
E.Relevant rangeK.Variable costing
F.Mixed costsL.Absorption costing
____1>The amount of revenue remaining after deducting variable costs.
____2>Costs that contain both a variable and a fixed element.
____3>The percentage of sales dollars available to cover fixed costs and produce
income.
____4>Identifies the activity which causes changes in the behavior of costs.
____5>The difference between actual or expected sales and sales at the break-even
point.
____6>Costs that vary in total directly and proportionately with changes in the activity
level.
____7>The level of activity at which total revenues equal total costs.
____8>The range over which the company expects to operate during the year.
____9>Costs that remain the same in total regardless of changes in the activity level.
____10>A costing approach in which all manufacturing costs are charged to the
product.
____11>A method that uses the total costs incurred at the high and low levels of
activity.
____12>A costing approach in which only variable manufacturing costs are product
costs and fixed manufacturing costs are period costs (expenses).
32) The appropriate table to use when an investment promises to return unequal cash
flows is the
a.future value of 1 table
b.future value of annuity table
c.present value of 1 table
d.present value of annuity table
33) Barkley Company has beginning and ending raw materials inventories of $192,000
and $250,000, respectively. If direct materials used were $800,000, what was the cost of
raw materials purchased?
a.$1,050,000
b.$1,020,000
c.$742,000
d.$858,000
34) All revenue and expense accounts have been closed at the end of the calendar year
for Patton Company. The Income Summary account has total debits of $530,000 and
total credits of $600,000. As of the same date, Owners Capital has a balance of
$115,000, and Owners Drawings has a balance of $48,000.
Instructions
(a)Journalize the entries required to complete the closing of the accounts.
(b)Prepare an owner’s equity statement for the year ended December 31, 2014 .
35) For the work of factory employees to be considered as direct labor, the work must
be conveniently and
a.materially associated with raw materials conversion
b.periodically associated with raw materials conversion
c.physically associated with raw materials conversion
d.promptly associated with raw materials conversion
36) Match the items below by entering the appropriate code letter in the space provided.
A.Merchandise InventoryF.First-in, first-out (FIFO) method
B.Work in processG.Last-in, first-out (LIFO) method
C.FOB shipping pointH.Average-cost method
D.FOB destinationI.Inventory turnover
E.Specific identification methodJ.Current replacement cost
1>Measures the number of times the inventory sold during the period.
2>Tracks the actual physical flow for each inventory item available for sale.
3>Goods that are only partially completed in a manufacturing company.
4>Cost of goods sold consists of the most recent inventory purchases.
5>Goods ready for sale to customers by retailers and wholesalers.
6>Title to the goods transfers when the public carrier accepts the goods from the seller.
7>Ending inventory valuation consists of the most recent inventory purchases.
8>The same unit cost is used to value ending inventory and cost of goods sold.
9>Title to goods transfers when the goods are delivered to the buyer.
10>The amount that would be paid at the present time to acquire an identical item.
37) A comparative balance sheet for Rocker Company appears below:
ROCKER COMPANY
Comparative Balance Sheet
Dec. 31, 2014Dec. 31, 2013
Assets
Cash$ 34,000$11,000
Accounts receivable18,00013,000
Inventory25,00017,000
Prepaid expenses6,0009,000
Long-term investments-0-17,000
Equipment60,00033,000
Accumulated depreciationequipment (20,000)(15,000)
Total assets$123,000$85,000
Liabilities and Stockholders’ Equity
Accounts payable$ 17,000$ 7,000
Bonds payable36,00045,000
Common stock40,00023,000
Retained earnings 30,000 10,000
Total liabilities and stockholders’ equity$123,000$85,000
Additional information:
1>Net income for the year ending December 31, 2014 was $35,000.
2>Cash dividends of $15,000 were declared and paid during the year.
3>Long-term investments that had a cost of $17,000 were sold for $14,000.
4>Sales for 2014 were $120,000.
Instructions
Prepare a statement of cash flows for the year ended December 31, 2014, using the
indirect method.
38) The paid-in capital section of the balance sheet consists of two classifications:
______________________ and ______________________.
39) Medaid is a medical office management franchise. There are currently twenty-five
medical offices managed by a Medaid franchisee. One of the services provided to
franchisees is assistance in training various staff members.
Medaid is preparing a manual for the front office staff to use as a reference guide. It
will be used in training new employees as well. One of the reasons the manual is being
prepared is to stress the importance of strong internal controls.
Required:
Prepare a short paragraph, to be included in the training materials, describing the
benefits of sound internal control, from the viewpoint of the employee.
40) In using variance reports, top management normally looks for _________________
variances.
41) All recordable transactions are initially recorded in the journal. Discuss the
contributions that the journal makes to the recording process.