1) In the retail inventory method, the cost to retail ratio is equal to the cost of goods
sold divided by the retail price of the good sold.
2) If the underapplied factory overhead amount is immaterial, it is transferred to Cost of
Goods Sold at the end of the fiscal year.
3) The cumulative effects of other comprehensive income items must be reported
separately from retained earnings and paid-in capital, on the balance sheet, as
accumulated other comprehensive income.
4) A service organization will not use the job order costing method because it has no
direct materials.
5) In evaluating the performance of salespersons, the salesperson with the highest level
of sales should be evaluated as the best performer.
6) Managers depend on product costing to make decisions regarding continuing
operations, advertising, and product mix.
7) Employee involvement does not include performing any indirect manufacturing
functions.
8) Revenue is earned only when money is received.
9) The unit of measurement concept requires that economic data be recorded in a
common unit of measurement.
10) Standard cost variances are usually not reported in reports to stockholders.
11) If direct materials cost per unit increases, the break-even point will decrease.
12) A corporation uses the indirect method for preparing the Statement of Cash Flows.
A fixed asset has been sold for $25,000 representing a gain of $4,500. The value in the
operating activities section regarding this event would be:
A.$25,000
B.($4,500)
C.$29,500
D.$4,500
13) Which method of evaluating capital investment proposals uses present value
concepts to compute the rate of return from the net cash flows expected from capital
investment proposals?
A.Internal rate of return
B.Cash payback
C.Net present value
D.Average rate of return
14) A business is operating at 70% of capacity and is currently purchasing a part used in
its manufacturing operations for $24 per unit. The unit cost for the business to make the
part is $36, including fixed costs, and $28, not including fixed costs. If 15,000 units of
the part are normally purchased during the year but could be manufactured using
unused capacity, what would be the amount of differential cost increase or decrease
from making the part rather than purchasing it?
A.$60,000 cost decrease
B.$180,000 cost increase
C.$60,000 cost increase
D.$180,000 cost decrease
15) Office supplies purchased by Aris Alarm Service on account were returned. Which
of the following entries for Aris Alarm Service records this transaction?
A.Cash, debit; Office Supplies, credit
B.Office Supplies, debit; Accounts Receivable, credit
C.Accounts Payable, debit; Office Supplies, credit
D.Office Supplies, debit; Accounts Payable, credit
16) Which of the following below increases cash?
A.depreciation expense
B.acquisition of treasury stock
C.borrowing money by issuing a six-month note
D.the declaration of a cash dividend
17) Which one of the following will not be found on the balance sheet of a
manufacturing company?
A.cost of goods sold
B.materials
C.work in process
D.finished goods
18) Which of the following measures the relationship between cost of merchandise sold
and the amount of inventory carried during the period?
A.inventory turnover
B.Fixed asset turnover
C.retail method of inventory costing
D.gross profit method of inventory costing
19) The state charter allows a corporation to issue only a certain number of shares of
each class of stock. This amount of stock is called
A.treasury stock
B.issued stock
C.outstanding stock
D.authorized stock
20) A check drawn by a company in payment of a voucher for $965 was recorded in the
journal as $695. What entry is required in the company’s accounts?
A.debit Accounts Payable; credit Cash
B.debit Cash; credit Accounts Receivable
C.debit Cash; credit Accounts Payable
D.debit Accounts Receivable; credit Cash
21) When comparing the direct write-off method and the allowance method of
accounting for uncollectible receivables, a major difference is that the direct write-off
method
A.uses a percentage of sales method to estimate uncollectible accounts
B.is used primarily by large companies with many receivables
C.is used primarily by small companies with few receivables
D.uses an allowance account
22) Which of the following costs are referred to as conversion costs?
A.Direct labor cost and factory overhead cost
B.Direct materials cost and direct labor cost
C.Factory overhead cost
D.Direct materials cost and factory overhead cost
23) The units of an item available for sale during the year were as follows:
There are 48 units of the item in the physical inventory at December 31. The periodic
inventory system is used. Determine the inventory cost by (a) the first-in, first-out
method, (b) the last-in, first-out method, and (c) the average cost method. Show your
work.
24) Under the periodic inventory system, the journal entry to record the purchase of
merchandise inventory will include a debit to
A.Merchandise Inventory
B.Purchases
C.Accounts Payable
D.Cost of Merchandise Purchased
25) Which of the following entries records the acquisition of office supplies on
account?
A.Office Supplies, debit; Cash, credit
B.Cash, debit; Office Supplies, credit
C.Office Supplies, debit; Accounts Payable, credit
D.Accounts Receivable, debit; Office Supplies, credit
26) Wendell Company owns 28% of the common stock of Porter Company and
accounts for the investment using the equity method. Assuming that Wendell Company
purchased the stock several years ago, the balance in the investment account would be
equal to the cost of the
A.investment only
B.investment plus Wendells share of Porters net income earned since the investment
was purchased
C.investment plus the total amount of dividends Wendell has received from Porter since
the investment was purchased
D.investment plus Wendells share of Porters net income earned since the investment
was purchased minus the total amount of dividends Wendell has received from Porter
since the investment was purchased
27) Office salaries, depreciation of office equipment, and office supplies are examples
of what type of expense?
A.selling expense
B.miscellaneous expense
C.administrative expense
D.other expense
28) The debit balance in Cash Short and Over at the end of an accounting period is
reported as
A.an expense on the income statement
B.income on the income statement
C.an asset on the balance sheet
D.a liability on the balance sheet
29) 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
30) Activity-based costing for selling and administrative expenses can also be beneficial
in allocating expenses to various products. Which of the following is the best allocation
base for help desk costs?
A.Number of calls
B.Square footage of the help desk office
C.Number of products sold
D.Number of employees
31) Accompanying the bank statement was a debit memo for bank service charges. On
the bank reconciliation, the item is
A.a deduction from the balance per company’s records
B.an addition to the balance per bank statement
C.a deduction from the balance per bank statement
D.an addition to the balance per company’s records
32) 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
33) The ability of a business to pay its debts as they come due and to earn a reasonable
amount of income is referred to as
A.solvency and leverage
B.solvency and profitability
C.solvency and liquidity
D.solvency and equity
34) The proper journal entry to record the receipt of inventory purchased on account in
a periodic inventory system would be:
A.Jan 1 Merchandise Inventory 1,600
Accounts Payable 1,600
B.Jan 1 Office Supplies 1,600
Accounts Payable 1,600
C.Jan 1 Purchases 1,600
Accounts Payable 1,600
D.Jan 1 Purchases 1,600
Accounts Receivable 1,600
35) Standard and actual costs for direct labor for the manufacture of 1,000 units of
product were as follows:
Determine the (a) time variance, (b) rate variance, and (c) total direct labor cost
variance.
36) At the end of the current year, Accounts Receivable has a balance of $750,000;
Allowance for Doubtful Accounts has a debit balance of $6,200; and net sales for the
year total $3,500,000. Bad debt expense is estimated at 1/2 of 1% of net sales.
Determine (a) the amount of the adjusting entry for bad debt expense; (b) the adjusted
balances of Accounts Receivable, Allowance of Doubtful Accounts; and Bad Debt
Expense; and (c) the net realizable value of accounts receivable.
37) Six selected transactions for the current month are indicated by letters in the
following T accounts in a job order cost accounting system:
Materials Work in Process
(a) (a) (d)
(b)
(c)
Wages Payable (f)
(b)
Factory Overhead Finished Goods
(a) (c) (d) (e)
(b) (f) (f)
Cost of Goods Sold
(e)
(f)
Describe each of the six transactions.
38) List the accounts used in the cost flow for (a) a manufacturer and (b) a service
provider.
39) Which one of the following would not be considered an advantage of the corporate
form of organization?
A.Government regulation
B.Separate legal existence
C.Continuous life
D.Limited liability of stockholders
40) A special form on which is recorded pertinent data about a liability and the
particulars of its payment is called a(n)
A.invoice
B.voucher
C.debit memo
D.remittance advice
41) The type of account and normal balance of Petty Cash is a(n)
A.revenue, credit
B.asset, debit
C.liability, credit
D.expense, debit
42) Prepare an Income Statement using the following data for Young Adventures for the
year ended December 31, 2012:
43) Ramierez Company received its first electric bill in the amount of $60 which will be
paid next month. How will this transaction affect the accounting equation?
Fill in the blanks related to the characteristics of a promissory note:
1> maker
2> face
3> maturity or due
45) Marcus Enterprises began in 2011 when Damien Marcus invested $8,000 in
exchange for capital stock. The following is the work sheet for the company at the end
of the first year in business.
Marcus Enterprises
Work Sheet
For the Year Ended December 31, 2011
Prepare the required closing entries for Marcus Enterprises for the year ended
December 31, 2011.
46) A portion of the divisional income statement for the year just ended is presented
below in condensed form.
The operating expenses of Department B include $50,000 for direct expenses.
It is estimated that the discontinuance of Department B would not have affected the
sales of the other departments nor have reduced the indirect expenses of the business.
Assuming the accuracy of these estimates, determine the effect (increase or decrease
and amount) on the income from operations of the business if Department B had been
discontinued.