1) A company that produces motion pictures would likely use a process cost system.
2) Transactions are recorded in alphabetic order in a journal.
3) The owner’s drawings account is a permanent account whose balance is carried
forward to the next accounting period.
4) The accounts payable subsidiary ledger provides detailed information about amounts
owed to creditors.
5) In activity-based costing (ABC), the cost of a product is equal to the sum of the costs
of all activities performed to manufacture it.
6) Interest is the difference between the amount borrowed and the amount repaid or
collected.
7) Electronic Funds Transfer (EFT) is a disbursement system that uses telephone or
computer to transfer cash from one location to another.
8) Current liabilities are expected to be paid within one year or the operating cycle,
whichever is longer.
9) Standard cost + price variance + quantity variance = Budgeted cost.
10) Internal control is most effective when several people are responsible for a given
task.
11) A static budget report
a.shows costs at only 2 or 3 different levels of activity
b.is appropriate in evaluating a manager’s effectiveness in controlling variable costs
c.should be used when the actual level of activity is materially different from the master
budget activity level
d.may be appropriate in evaluating a manager’s effectiveness in controlling costs when
the behavior of the costs in response to changes in activity is fixed
12) The following totals for the month of April were taken from the payroll register of
Asplend Company.
Salaries and wages$72,000
FICA taxes withheld5,508
Income taxes withheld15,000
Medical insurance deductions2,700
Federal unemployment taxes192
State unemployment taxes1,296
The entry to record the payment of net payroll would include a
a.debit to Salaries and Wages Payable for $47,304
b.debit to Salaries and Wages Payable for $48,792
c.debit to Salaries and Wages Payable for $43,284
d.credit to Cash for $54,300
13) In a period of rising prices, FIFO will have
a.lower net income than LIFO
b.lower cost of goods sold than LIFO
c.lower income tax expense than LIFO
d.lower net purchases than LIFO
14) Meat Puppets Company purchased equipment for $7,200 on December 1. It is
estimated that annual depreciation on the equipment will be $1,800. If financial
statements are to be prepared on December 31, the company should make the following
adjusting entry:
a.Debit Depreciation Expense, $1,800; Credit Accumulated Depreciation, $1,800
b.Debit Depreciation Expense, $150; Credit Accumulated Depreciation, $150
c.Debit Depreciation Expense, $5,400; Credit Accumulated Depreciation, $5,400
d.Debit Equipment, $7,200; Credit Accumulated Depreciation, $7,200
15) Which of the following would not appear in the operating activities section of a
statement of cash flows prepared under the direct method?
a.Cash receipts from customers
b.Cash paid for income taxes
c.Gain on sale of equipment
d.Cash paid to employees
16) Which one of the following characteristics would likely be associated with a
just-in-time inventory method?
a.Ending inventory of work in process that would allow several production runs
b.A backlog of inventory orders not yet shipped
c.Minimal finished goods inventory on hand
d.An understanding with customers that they may come to the showroom and select
from inventory on hand
17) Financial information is presented below:
Operating Expenses$ 60,000
Sales Revenue 225,000
Cost of Goods Sold 135,000
Gross profit would be
a.$30,000
b.$90,000
c.$165,000
d.$225,000
18) An employer’s estimated cost for post-retirement benefits for its employees should
be
a.recognized as an expense when paid
b.recognized as an expense during the employees’ work years
c.recognized as an expense during the employees’ retirement years
d.charged to the goodwill account because providing employees with benefits generates
employee goodwill
19) Which of the following is not an accounting assumption?
a.Integrity
b.Going concern
c.Periodicity
d.Economic entity
20) Which of the following statements about a budgeted income statement is not true?
a.The budgeted income statement is prepared after the financial budgets are prepared
b.The budgeted income statement is prepared on the accrual basis of accounting
c.The budgeted income statement can be prepared in a multiple-step format
d.The budgeted income statement is prepared using the individual operating budgets
21) An assetexpense relationship exists with
a.liability accounts
b.revenue accounts
c.prepaid expense adjusting entries
d.accrued expense adjusting entries
22) IFRS
a.requires a specific format for the balance sheet (statement of financial position) that is
identical to U.S. GAAP
b.requires a specific format for the balance sheet (statement of financial position) that is
different from U.S. GAAP
c.requires no specific format for the balance sheet (statement of financial position) but
most companies that follow IFRS prepare the statement identical to U.S. GAAP
d.requires no specific format for the balance sheet (statement of financial position) but
most companies that follow IFRS prepare the statement in a different format from U.S.
GAAP
IFRS.
23) Generally accepted accounting principles are
a.income tax regulations of the Internal Revenue Service
b.standards that indicate how to report economic events
c.theories that are based on physical laws of the universe
d.principles that have been proven correct by academic researchers
24) Managerial accounting does not encompass
a.calculating product cost
b.calculating earnings per share
c.determining cost behavior
d.profit planning
25) A process began the month with 3,000 units in the beginning work in process
inventory and ended the month with 2,000 units in the ending work in process. If
15,000 units were completed and transferred out of the process during the month, how
many units were started into production during the month?
a.14,000
b.16,000
c.15,000
d.13,000
26) A company purchased factory equipment for $700,000. It is estimated that the
equipment will have a $70,000 salvage value at the end of its estimated 5-year useful
life. If the company uses the double-declining-balance method of depreciation, the
amount of annual depreciation recorded for the second year after purchase would be
a.$280,000
b.$168,000
c.$252,000
d.$120,960
27) The assumptions that underlie basic CVP analysis include all of the following
except:
a.when more than one product is sold, total sales will be in a constant sales mix
b.all costs can be classified as variable or fixed with reasonable accuracy
c.the behavior of both costs and revenues is linear throughout the relevant range
d.All of the above are assumptions
28) A company that owns more than 50% of the common stock of another company is
known as the
a.charge company
b.subsidiary company
c.parent company
d.management company
29) Which of the following is not included in factory labor costs?
a.Gross earnings
b.Net earnings
c.Fringe benefits
d.Employer payroll taxes
30) A net loss
a.occurs if operating expenses exceed cost of goods sold
b.is not closed to Retained Earnings if it would result in a debit balance
c.is closed to Retained Earnings even if it would result in a debit balance
d.is closed to the paid-in capital account of the stockholders’ equity section of the
balance sheet
31) A term that is not synonymous with property, plant, and equipment is
a.plant assets
b.fixed assets
c.intangible assets
d.long-lived tangible assets
32) TransAm Mail Service purchased equipment for $2,000. TransAm paid $400 in
cash and signed a note for the balance. TransAm debited the Equipment account,
credited Cash and
a.nothing further must be done
b.debited the Capital account for $1,600
c.credited another asset account for $400
d.credited a liability account for $1,600
33) Vangaurd Corporations December 31, 2014 balance sheet showed the following:
8% preferred stock, $20 par value, cumulative, 20,000 shares
authorized; 15,000 shares issued$ 300,000
Common stock, $10 par value, 2,000,000 shares authorized;
1,950,000 shares issued, 1,920,000 shares outstanding19,500,000
Paid-in capital in excess of parpreferred stock60,000
Paid-in capital in excess of parcommon stock27,000,000
Retained earnings7,500,000
Treasury stock (30,000 shares)630,000
Vangaurd declared and paid a $96,000 cash dividend on December 15, 2014 . If the
companys dividends in arrears prior to that date were $20,000, Vangaurds common
stockholders received
a.$76,000
b.$44,000
c.$52,000
d.$0
34) Nonfinancial information that management might evaluate in making a decision
would not include
a.employee turnover
b.contribution margin
c.the environment
d.the corporate profile in the community
35) The historical cost principle requires that when assets are acquired, they be recorded
at
a.appraisal value
b.cost
c.market price
d.book value
36) A bank may issue a credit memorandum for
a.a bank service charge
b.an NSF (not sufficient funds) check from a customer
c.the collection of a note receivable for the depositor by the bank
d.the cost of printing checks
37) A flexible budget is appropriate for
Direct Labor CostsManufacturing Overhead Costs
a.NoNo
b.YesYes
c.YesNo
d.NoYes
38) Wrapp Company has income before taxes of $350,000 and an extraordinary loss of
$70,000. If the income tax rate is 30% on all items, the income statement should show
income before irregular items and an extraordinary loss, respectively, of:
a.$350,000 and ($70,000)
b.$245,000 and ($24,000)
c.$245,000 and ($49,000)
d.$105,000 and ($21,000)
39) During December 2014, Apartment Publishing sold 2,500 12-month annual
magazine subscriptions at a rate of $20 each. The first issues were mailed in February
2015 . Prepare the entries on Apartments books to record the sale of the subscriptions
and the mailing of the first issues.
40) Presented below are incomplete 2014 manufacturing cost data for Beloshi
Corporation.
Instructions
Determine the missing amounts.
41) Maddy Peterss regular hourly wage rate is $14, and she receives an hourly rate of
$21 for work in excess of 40 hours. During a March pay period, Maddy works 47 hours.
Maddys federal income tax withholding is $80, and she has no voluntary deductions.
Prepare the journal entry to record Maddys pay for the period. Use March 15 for the
end of the pay period.
42) Sable, Inc. has budgeted direct materials purchases of $400,000 in March and
$500,000 in April. Past experience indicates that the company pays for 60% of its
purchases in the month of purchase and the remaining 40% in the next month. Other
costs are all paid during the month incurred. During April, the following items were
budgeted:
Wages expense$120,000
Purchase of office equipment200,000
Selling and administrative expenses126,000
Depreciation expense18,000
Instructions
Compute the amount of budgeted cash disbursements for April.
43) The three accounts shown below appear in the general ledger of Larson Corp.
during 2014 .
Equipment
DateDebitCreditBalance
Jan.1Balance160,000
July 31Purchase of equipment75,000235,000
Sept.2Cost of equipment constructed56,000291,000
Nov.10Cost of equipment sold45,000246,000
Accumulated DepreciationEquipment
DateDebitCreditBalance
Jan.1Balance71,000
Nov. 10Accumulated depreciation on
equipment sold30,00041,000
Dec.31Depreciation for year20,00061,000
Retained Equipment
DateDebitCreditBalance
Jan.1Balance105,000
Aug.23Dividends (cash)15,00090,000
Dec.31Net income50,000140,000
Instructions
From the postings in the accounts, indicate how the information is reported on a
statement of cash flows using the indirect method. The loss on sale of equipment was
$7,000. (Hint: Cost of equipment constructed is reported in the investing activities
section as a decrease in cash of $58,000.)
