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1) If 10,000 units which were 40% completed are in process at November 1, 80,000
units were completed during November, and 12,000 were 20% completed at November
30, the number of equivalent units of production for November was 75,600. (Assume
no loss of units in production and that inventories are costed by the first-in, first-out
method.)
2) In computerized accounting systems, reports may be generated at any time.
3) The financial statements are prepared from the unadjusted trial balance.
4) The balance in a bond discount account should be reported on the balance sheet as a
deduction from the related bonds payable.
5) After Net Income or Loss is entered on the work sheet, the debit column total must
equal the credit column total for the Balance Sheet pair of columns.
6) Those unusual items reported as deductions from income from continuing operations
should be listed net of the related income tax.
7) For proper matching of revenues and expenses, the estimated cost of fringe benefits
must be recognized as an expense of the period during which the employee earns the
benefits.
8) A cash refund paid to a customer who overpaid an account receivable is recorded in
the cash payments journal.
9) For an interest bearing note payable, the amount borrowed is equal to the face
amount of the note.
10) An advantage of the partnership form of business is that each partners potential loss
is limited to that partners investment in the partnership.
11) If the straight-line method of amortization of discount on bonds payable is used, the
amount of yearly interest expense will increase as the bonds approach maturity.
12) The bank reconciliation is an important part of the system of internal controls.
13) The higher the times interest earned ratio, the better the creditors protection.
14) The matching concept requires expenses be recorded in the same period that the
related revenue is recorded.
15) When a sale for $1,350 takes place, with a $250 deposit having been received in
advance, only the $1,100 on account is recorded into the Revenue journal.
16) Which of the following group of accounts are increased with a debit?
A.assets, liabilities, owners equity
B.assets, drawing, expenses
C.assets, revenues, expenses
D.assets, liabilities, revenues
17) The primary difference between a periodic and perpetual inventory system is that a
A.periodic system determines the inventory on hand only at the end of the accounting
period
B.periodic system keeps a record showing the inventory on hand at all times
C.periodic system provides an easy means to determine inventory shrinkage
D.periodic system records the cost of the sale on the date the sale is made
18) Accrued revenues would appear on the balance sheet as
A.assets
B.liabilities
C.capital
D.prepaid expenses
19) What entry is required in the company's accounts to record outstanding checks?
A.debit Accounts Receivable; credit Cash
B.debit Cash; credit Accounts Receivable
C.debit Cash; credit Accounts Payable
D.none
20) In which journal is the receipt of a promissory note from a customer on account
recorded?
A.Revenue journal
B.Cash Receipts journal
C.General journal
D.Purchases journal
21) The order of presentation of activities on the statement of cash flows is
A.operating, investing, and financing
B.operating, financing, and investing
C.financing, operating, and investing
D.financing, investing, and operating
22) Determining the transfer price as the price at which the product or service
transferred could be sold to outside buyers is known as the:
A.Cost price approach
B.Negotiated price approach
C.Revenue price approach
D.Market price approach
23) Mundall Company is considering a project that will require an initial investment of
$600,000 and is expected to generate the following cash flows:
Year 1 $100,000
Year 2 $250,000
Year 3 $250,000
Year 4 $200,000
Year 5 $100,000
A. What is the projects payback period?
B. If the required rate of return is 20% and taxes are ignored, what is the projects net
present value? The present value of $1 at compound interest of 20% for 1, 2, 3, 4 and 5
years is .8333, .6944, .5787, .4823 and .4019, respectively.
24) Which of the following expressions is termed the investment turnover factor as used
in determining the rate of return on investment?
A.Invested Assets/Sales
B.Income From Operations/Invested Assets
C.Income From Operations/Sales
D.Sales/Invested Assets
25) Under a periodic inventory system
A.accounting records continuously disclose the amount ofinventory
B.a separate account for each type of merchandise is maintained in a subsidiary ledger
C.a physical inventory is taken at the end of the period
D.merchandise inventory is debited when goods are returned to vendors
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) Division A of Mocha Company has sales of $155,000, cost of goods sold of
$83,000, operating expenses of $43,000, and invested assets of $150,000.
What is the investment turnover for Division A?
A.1.03
B.1.0
C.5.17
D.5.34
28) Match each of the following investment terms with the appropriate definition
below.
1>When using this, dividends are treated as a reduction of the investment. A. Trading
Securities
2>Debt investments that a company intends to keep until their maturity date. B. Equity
Securities
3>The company investing in another companys stock. C. Cost Method
4>The company whose stock is purchased by another entity. D. Equity Method
5>Notes and bonds that pay interest and have a fixed maturity. E. Debt Securities
6>Securities not held for trading or to maturity or other strategic reasons. F.
Held-to-maturity Securities
7>Preferred and common stock that represent ownership in a company and do not have
a fixed maturity date. G. Available-for-sale Securities
8>What occurs when a company purchases 50% or more of another companys stock. H.
Investor
9>Debt and equity securities purchased and sold to earn short-term profits from
changes in the market price. I. Business Combination
10>The method of reporting an investment that represents less than 20% of the voting
stock of another company. J. Investee
29) In which journal is the return of supplies purchased on account recorded?
A.General journal
B.Cash Receipts journal
C.Cash Payments journal
D.Purchases journal
30) The cumulative effect of the declaration and payment of a cash dividend on a
companys financial statements is to
A.decrease total liabilities and stockholders equity
B.increase total expenses and total liabilities
C.increase total assets and stockholders equity
D.decrease total assets and stockholders equity
31) Allowance for Doubtful Accounts has a debit balance of $2,500 at the end of the
year (before adjustment), and bad debt expense is estimated at 4% of net credit sales. If
net credit sales are $800,000, the amount of the adjusting entry to record the estimate of
the uncollectible accounts is
A.$29,500
B.$34,500
C.$32,000
D.cannot be determined
32) Hsu Company produces a part with a standard of 5 yds. of material per unit. The
standard price of one yard of material is $8.50. During the month, 8,800 parts were
manufactured, using 45,700 yards of material at a cost of $8.30.
Required:
Determine the (a) price variance, (b) quantity variance, and (c) cost variance.
33) Which of the following is the appropriate general journal entry to record the
declaration of a cash dividends?
A.Retained earnings
Cash
B.Cash Dividends payable
Cash
C.Paid-in capital
Cash Dividends payable
D.Cash Dividends
Cash Dividends Payable
34) The cost method of accounting for stock
A.recognizes dividends as income
B.is only appropriate as part of a consolidation
C.requires the investment be increased by the reported net income of the investee
D.requires the investment be decreased by the reported net income of the investee
35) On October 1, Black Company receives a 9% interest bearing note from Reese
Company to settle a $20,000 account receivable. The note is due in six months. At
December 31, Black should record interest revenue of
A.$0
B.$450
C.$900
D.$1,800
36) Which statement below is not a reason for a corporation to buy back its own stock.
A.resale to employees
B.bonus to employees
C.for supporting the market price of the stock
D.to increase the shares outstanding
37) An employee of Morgan Corporation has found some partially completed units of
Model X in a dusty corner of the warehouse. A job ticket attached to the units indicates
that a total of $750 in manufacturing costs have been used to bring the materials to this
point in the manufacturing process. The units can be sold in their current condition for
$275 to a scrap metal dealer. If Morgan spends $250 to complete the units, they could
be sold for $600.
Required: A. What should Morgan do? Why?
B. Identify the sunk cost, if any.
38) The chart of account for the Corning Company includes some of the following
accounts:
On the journal page 3, the following transaction was found:
What is the post reference that will be found on the journal entry?
A.15, 11
B.15
C.11
D.3
39) The inventory system employing accounting records that continuously disclose the
amount of inventory is called
A.retail
B.periodic
C.physical
D.perpetual
40) A summary of selected ledger accounts appear below for Albertos Plumbing
Services for the current calendar year end.
Net income for the period is
A.$13,000
B.$33,500
C.$15,000
D.$18,500
41) Match each of the following terms associated with notes receivable with the best
description of that term.
1>The party promising to pay a note A. Notes Receivable
2>The amount due when the note is paid off. B. Maturity Value
3>The stated rate charged for using the money of another party C. Interest
4>The dollar amount listed on the promissory note. D. Interest Rate
5>A formal written instrument that represents amounts due from customers. E.
Dishonored Note
6>The time between the date a note is issued and the due date of the note. F. Face
Amount
7>The amount charged for using the money of another party. G. Maker
8>A note that is not paid when it is due H. Term
42) Computer equipment was acquired at the beginning of the year at a cost of $65,000
that has an estimated residual value of $3,800 and an estimated useful life of 8 years.
Determine the (a) depreciable cost, (b) straight-line rate, and (c) annual straight-line
depreciation.
43) Using the following information, what is the amount of gross profit?
A.$34,870
B.$31,880
C.$27,460
D.$62,090
44) Vanessa Company is evaluating a project requiring a capital expenditure of
$480,000. The project has an estimated life of 4 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 for net present value analysis is 15%.
The present value of $1 at compound interest of 15% for 1, 2, 3, and 4 years is .870, .
756, .658, and .572, respectively.
Determine (a) the average rate of return on investment, using straight line depreciation,
and (b) the net present value.
45) The amount of the average investment for a proposed investment of $90,000 in a
fixed asset, with a useful life of four years, straight-line depreciation, no residual value,
and an expected total net income of $21,600 for the 4 years, is:
A.$10,800
B.$21,600
C.$ 5,400
D.$45,000
46) Gladstorm Enterprises sells a product for $60 per unit. The variable cost is $20 per
unit, while fixed costs are $85,000. Determine the (a) break-even point in sales units,
and (b) break-even point in sales units if the selling price increased to $80 per unit.
Round your answer to the nearest whole number.
47) A new partner may be admitted to a partnership by
A.inheriting a partnership interest
B.contributing assets to the partnership
C.purchasing a specific quantity of assets from the partnership
D.a written approval under the federal law
48) Bobbi and Stuart are partners. The partnership capital of Bobbi is $40,000 and
Stuart is $70,000. Bobbi sells his interest in the partnership to John for $50,000. The
journal entry to record the admission of John as a new partner would include
A.a credit to Johns capital for $40,000
B.a credit to Stuarts capital for $10,000
C.a credit Johns capital for $50,000
D.a credit to Johns capital for $40,000 and a credit to Stuarts capital for $10,000
49) Several items are missing from the following table of rate of return on investment
and residual income. Determine the missing items, identifying each item by the
appropriate letter.
InvestedAssets IncomefromOper. Rate ofReturnon Inv. Min.Rate ofReturn Min. Amt.of
IncomefromOper. ResidualIncome
(a) (b) (c) 16% $128,000 $10,000
$850,000 $153,000 (d) 12% (e) (f)
$825,000 (g) 20% (h) (i) $24,000
(j) $129,000 24% (k) $60,000 (l)
Round percentage values to one decimal point.
50) Generally, the revenue account for a merchandising business is entitled
A.Sales
B.Fees Earned
C.Gross Sales
D.Gross Profit
51) When a company uses the allowance method of accounting for uncollectible
receivables, which entry would not be found in the general journal?
A.Bad Debt Expense 500
Allowance for Doubtful Accounts 500
B.Bad Debt Expense 500
Accounts Receivable - Bob Smith 500
C.Cash 300
Allowance for Doubtful Accounts 200
Accounts Receivable - Bob Smith 500
D.Cash 500
Accounts Receivable - Bob Smith 500
52) Determine the average rate of return for a project that is estimated to yield total
income of $400,000 over four years, cost $720,000, and has a $70,000 residual value.
Round answers in percentage to one decimal place.
53) Information for the Sandy Manufacturing Company for the month of July 2012 is as
follows:
Prepare a cost of production report for the month of July, using the FIFO method.
54) A business had a margin of safety ratio of 20%, variable costs of 75% of sales, fixed
costs of $240,000, a break-even point of $960,000, and operating income of $60,000 for
the current year. Calculate the current year's sales.
55) On April 10, Maranda Corporation issued for cash 11,000 shares of no-par common
stock at $25. On May 5, Maranda issued at par 1,000 shares of 4%, $50 par preferred
stock for cash. On May 25, Maranda issued for cash 15,000 shares of 4%, $50 par
preferred stock at $55.
Journalize the entries to record the April 10, May 5, and May 25 transactions.
56) Company G has a ratio of liabilities to stockholders equity of 0.12 and 0.28 for
2010 and 2011, respectively. In contrast, Company M has a ratio of liabilities to
stockholders equity of 1.13 and 1.29 for the same period.
REQUIRED:
Based on this information, which company's creditors are more at risk and why? Should
the creditors of either company fear the risk of nonpayment?
57) Given the following data, prepare an amortization table (use the effective method)
1/1/10 - issue $800,000, 9%, 3 year bonds, interest paid annually on 12/31, to yield 8%
Use the following format (round to nearest dollar - may have a slight rounding
difference);
Date Cash paid Int. expense Amortization Bond carry value
58) Technics Inc., a manufacturing company, utilizes job order costing. Each division
establishes its own estimates regarding overhead which are as follows:
Division A Division B
Total estimated overhead $128,000 $261,000
Total estimated machine hours 16,000 72,500
Total estimated direct labor costs $155,000 $290,000
Required:
If Division A allocates overhead on the basis of machine hours, and Division B
allocates overhead as a percentage of direct labor costs, what would the predetermined
overhead rate be for each division?
59) Proposals A and B each cost $500,000 and have 5-year lives. Proposal A is expected
to provide equal annual net cash flows of $109,000, while the net cash flows for
Proposal B are as follows:
Determine the cash payback period for each proposal. Round answers to two decimal
places.
