1) Cash is defined by IFRS as
a.cash on hand
b.demand deposits
c.cash on hand and demand deposits
d.cash on hand, demand deposits, and highly liquid investments
2) Autumn Company purchased a building on January 2 by signing a long-term
$630,000 mortgage with monthly payments of $5,400. The mortgage carries an interest
rate of 10 percent.
The entry to record the first monthly payment will include a
a.debit to the Cash account for $5,400
b.credit to the Cash account for $5,250
c.debit to the Interest Expense account for $5,250
d.credit to the Mortgage Payable account for $5,400
3) Collection of a $1,000 Accounts Receivable
a.increases an asset $1,000; decreases an asset $1,000
b.increases an asset $1,000; decreases a liability $1,000
c.decreases a liability $1,000; increases owner’s equity $1,000
d.decreases an asset $1,000; decreases a liability $1,000
4) The par value of a stock
a.is legally significant
b.reflects the most recent market price
c.is selected by the SEC
d.is indicative of the worth of the stock
5) A capital budgeting technique which takes into consideration the time value of
money is the
a.annual rate of return approach
b.return on stockholders’ equity approach
c.payback approach
d.net present value method
6) An employee authorized to sign checks should not record
a.owner cash contributions
b.mail receipts
c.cash disbursement transactions
d.sales transactions
7) A complete journal entry does not show
a.the date of the transaction
b.the new balance in the accounts affected by the transaction
c.a brief explanation of the transaction
d.the accounts and amounts to be debited and credited
8) Given the following data for Beeing Company, compute (A) total manufacturing
costs and (B) cost of goods manufactured:
Direct materials used$225,000Beginning work in process$15,000
Direct labor170,000Ending work in process30,000
Manufacturing overhead235,000Beginning finished goods38,000
Operating expenses263,000Ending finished goods23,000
(A) (B)
a.$675,000$615,000
b.$630,000$615,000
c.$630,000$645,000
d.$615,000$645,000
9) Blaney Clothing Store had a balance in the Accounts Receivable account of
$437,500 at the beginning of the year and a balance of $500,000 at the end of the year.
Net credit sales during the year amounted to $3,000,000. The average collection period
of the receivables in terms of days was
a.53.2 days
b.365 days
c.60.1 days
d.57 days
10) Manufacturing overhead applied is added to direct labor incurred and to what other
item to equal total manufacturing costs for the period?
a.Goods available for sale
b.Raw materials purchased
c.Work in process
d.Direct materials used
11) On January 1, Layline Corporation had 160,000 shares of $10 par value common
stock outstanding. On June 17, the company declared a 15% stock dividend to
stockholders of record on June 20 . Market value of the stock was $15 on June 17 . The
stock was distributed on June 30 . The entry to record the transaction of June 30 would
include a
a.credit to Common Stock for $240,000
b.debit to Common Stock Dividends Distributable for $360,000
c.credit to Paid-in Capital in Excess of Par for $120,000
d.debit to Stock Dividends for $120,000
12) Which of the following is not true about the graph of a mixed cost?
a.It is possible to determine the amount of the fixed cost from the graph
b.There is a total cost line on the graph
c.The fixed cost portion of the graph is the same amount at all levels of activity
d.The variable cost portion of the graph is rectangular in shape
13) Controllable margin is defined as
a.sales minus variable costs
b.sales minus contribution margin
c.contribution margin less controllable fixed costs
d.contribution margin less noncontrollable fixed costs
14) In process cost accounting, equivalent units of production are the:
a.units that are incomplete at the end of a period
b.units that are transferred to the next processing department
c.units completed and transferred to finished goods
d.work done on physical units expressed in terms of fully completed units
15) Notes receivable are recognized in the accounts at
a.cash (net) realizable value
b.face value
c.gross realizable value
d.maturity value
16) If a mining company extracts 1,500,000 tons in a period but only sells 1,200,000
tons,
a.total depletion on the mine is based on the 1,200,000 tons
b.depletion expense is recognized on the 1,500,000 tons extracted
c.depletion expense is recognized on the 1,200,000 tons extracted and sold
d.a separate accumulated depletion account is set up to record depletion on the 300,000
tons extracted but not sold
17) If total liabilities increased by $8,000, then
a.assets must have decreased by $8,000
b.owner’s equity must have increased by $8,000
c.assets must have increased by $8,000, or owner’s equity must have decreased by
$8,000
d.assets and owner’s equity each increased by $4,000
18) On January 1, 2014, Brenner Company purchased at face value, a $1,000, 8% bond
that pays interest on January 1 and July 1 . Brenner Company has a calendar year end.
The adjusting entry on December 31, 2014, is
a.not required
b.Cash40
Interest Revenue40
c.Interest Receivable40
Interest Revenue40
d.Interest Receivable40
Debt Investments40
19) Expenses paid and recorded as assets before they are used are called
a.accrued expenses
b.interim expenses
c.prepaid expenses
d.unearned expenses
20) Income statements for corporations are the same as the statements for
proprietorships except for the reporting of
a.gross profit
b.income from operations
c.income tax expense
d.other revenues and gains
21) Which one of the following would be classified as an extraordinary item?
a.Expropriation of property by a foreign government
b.Losses attributed to a labor strike
c.Write-down of inventories
d.Gains or losses from sales of equipment
22) A purchases budget is used instead of a production budget by
a.merchandising companies
b.service enterprises
c.not-for-profit organizations
d.manufacturing companies
23) A company has budgeted direct materials purchases of $400,000 in March and
$640,000 in April. Past experience indicates that the company pays for 70% of its
purchases in the month of purchase and the remaining 30% in the next month. During
April, the following items were budgeted:
Wages Expense$200,000
Purchase of office equipment96,000
Selling and Administrative Expenses62,000
Depreciation Expense48,000
The budgeted cash disbursements for April are
a.$864,000
b.$568,000
c.$974,000
d.$926,000
24) For each of the following accounts, indicate the effects of (a) a debit and (b) the
normal account balance.
1>Notes Payable
2>Prepaid Insurance
3>Salaries and Wages Expense
4>Service Revenue
5>Equipment
6>Owners Capital
25) The area manager of the Randos Restaurants is considering two possible expansion
alternatives. The required investments, expected controllable margins, and the ROIs of
each are as follows:
ProjectInvestmentControllable MarginROI
Boston$240,000$60,00025%
Springfield$1,080,000$100,0009.25%
The Randos segment has currently $4,000,000 in invested capital and a controllable
margin of $500,000. Which one of following projects will increase Randos divisions
ROI?
a.Both the Buston and Springfield options
b.Only the Boston option
c.Only the Springfield option
d.Neither the Boston nor the Springfield options
26) The effective federal unemployment tax rate is usually
a.6.2%
b.0.8%
c.5.4%
d.8.0%
27) The net income of the Travis and Tucker partnership is $125,000. The partnership
agreement specifies that profits and losses will be shared equally after salary
allowances of $100,000 (Travis) and $150,000 (Tucker) have been allocated. At the
beginning of the year, Traviss Capital account had a balance of $250,000 and Tuckers
Capital account had a balance of $325,000. What is the balance of Tuckers Capital
account at the end of the year after profits and losses have been distributed?
a.$325,000
b.$50,000
c.$412,500
d.$387,500
28) The accounting environment does not change as a result of
a.technological advances
b.government regulation
c.the double entry system
d.organizational growth
29) If the market rate of interest is lower than the stated rate, bonds will sell at an
amount:
a.equal to face value
b.not determinable from the given information
c.higher than face value
d.lower than face value
30) Ezra Company has sales revenue of $60,000, cost of goods sold of $36,000 and
operating expenses of $14,000 for the year ended December 31. Ezra’s gross profit is
a.$0
b.$10,000
c.$24,000
d.$46,000
31) An adjusting entry is not required for
a.outstanding checks
b.collection of a note by the bank
c.NSF checks
d.bank service charges
32) Nelson Manufacturing Company can make 100 units of a necessary component part
with the following costs:
Direct Materials$120,000
Direct Labor25,000
Variable Overhead45,000
Fixed Overhead20,000
If Nelson Manufacturing Company can purchase the component externally for
$190,000 and only $5,000 of the fixed costs can be avoided, what is the correct
make-or-buy decision?
a.Make and save $5,000
b.Buy and save $5,000
c.Make and save $15,000
d.Buy and save $15,000
33) If 120,000 units are started into production and 30,000 units are in process at the
end of the period, how many units were completed and transferred out?
a.120,000
b.30,000
c.90,000
d.150,000
34) Magnolia Electric Car Cleaning has the following accounts:
Accounts Receivable Notes Payable
Accounts PayableOwners Capital
CashOwners Drawing
SuppliesEquipment
Identify which items are(1)Assets
(2)Liabilities
(3)Owner’s Equity
35) Grayson Building Supplies’ total materials costs are $40,000 and total conversion
costs are $30,000. Equivalent units of production for materials are 10,000, and 6,000
for conversion costs.
Instructions
Compute the unit costs for materials, conversion costs, and total manufacturing costs
for the month.
36) The current ratio is current assets divided by ______________.
37) A check correctly written for $270 was incorrectly entered in the cash payments
journal for $720. In preparing a bank reconciliation, $_____________ must be
______________ the cash balance per ______________.
38) In a period of rising prices, the inventory reported in Crawford Company’s balance
sheet is close to the current cost of the inventory. Breland Company’s inventory is
considerably below its current cost. Identify the inventory cost flow method being used
by each company. Which company has probably been reporting the higher gross profit?
39) The ending work in process inventory is subtracted from the total cost of work in
process to calculate ______________________.
40) Sigur Ros Company is a newly organized business. The list of accounts to be
opened in the general ledger is as follows:
Accounts PayablePrepaid Insurance
Accounts ReceivablePrepaid Rent
Accumulated Depreciation – Equip.Rent Expense
CashSalaries and Wages Expense
Depreciation ExpenseSalaries and Wages Payable
EquipmentService Revenue
Insurance ExpenseSupplies
Owners CapitalSupplies Expense
Owners Drawings
Instructions
Organize the accounts into the order in which they should appear in the ledger of Sigur
Ros Company and assign account numbers. Use the following system to assign account
numbers.
1199Assets
200299Liabilities
300399Owner’s Equity
400499Revenues
500599Expenses