1) Dividing stockholders’ equity applicable to common shares by the number of
common shares outstanding yields the book value per common share.
2) Part of the decision to accept additional business should be based on a comparison of
the incremental (differential) costs of the added production with the additional revenues
to be received.
3) Treasury stock is stock that has been authorized, issued, and is outstanding.
4) The process of allocating the cost of a plant asset to expense in the accounting
periods benefiting from its use is called depletion.
5) Asset accounts normally have debit balances and revenue accounts normally have
credit balances.
6) Return on total assets can be separated into the profit margin ratio and total asset
turnover.
7) Input devices involve converting data on source documents from written or
electronic form to a form usable for the system.
8) The depreciation method that allocates an equal portion of the total depreciable cost
for a plant asset to each unit produced is called:
A.Accelerated depreciation.
B.Declining-balance depreciation.
C.Straight-line depreciation.
D.Units-of-production depreciation.
E.Modified accelerated cost recovery system (MACRS) depreciation.
9) Trey Morgan is an employee who is paid monthly. For the month of January of the
current year, he earned a total of $4,538. The FICA tax for social security is 6.2% and
the FICA tax rate for Medicare is 1.45% for both the employee and the employer. The
amount of federal income tax withheld from his earnings was $680.70. His net pay for
the month is:
A.$3,510.14
B.$3,857.30
C.$4,190.84
D.$4,538.00
E.$3,162.98
10) A corporation borrowed $125,000 cash by signing a 5-year, 9% installment note
requiring equal annual payments each December 31 of $32,136. What journal entry
would the issuer record for the first payment?
A.Debit Interest Expense $7,136; debit Notes Payable $25,000; credit Cash $32,136.
B.Debit Notes Payable $32,136; debit Interest Payable $11,250; credit Cash $43,386.
C.Debit Interest Expense $11,250; debit Notes Payable $20,886; credit Cash $32,136.
D.Debit Notes Payable $32,136; credit Cash $32,136.
E.Debit Notes Payable $11,250; credit Cash $11,250.
11) Factory overhead costs may include all of the following except:
A.Indirect labor costs.
B.Indirect material costs.
C.Selling costs.
D.Assembly supplies.
E.Factory rent.
12) Investments can be classified as all but which of the following?
A.Intangible investments.
B.Held-to-maturity debt securities.
C.Available-for-sale debt securities.
D.Available-for-sale equity securities.
E.Trading securities.
13) A company estimates that warranty expense will be 4% of sales. The company’s
sales for the current period are $185,000. The current period’s entry to record the
warranty expense is:
A.Debit Warranty Expense $7,400; credit Sales $7,400.
B.Debit Warranty Expense $7,400; credit Estimated Warranty Liability $7,400.
C.Debit Estimated Warranty Liability $7,400; credit Warranty Expense $7,400
D.Debit Estimated Warranty Liability $7,400; credit Cash $7,400.
E.No entry is recorded until the items are returned for warranty repairs.
14) On January 1, Year 1 a company borrowed $70,000 cash by signing a 9%
installment note that is to be repaid with 4 annual year-end payments of $21,607, the
first of which is due on December 31, Year 1.
(a) Prepare the company’s journal entry to record the note’s issuance.
(b) Prepare the journal entries to record the first and second installment payments.
15) Plans that identify costs and expenses under each manager’s control prior to the
reporting period, typically based on the flexible budget approach, are called:
A.Cost accounting systems.
B.Managerial accounting systems.
C.Responsibility accounting systems.
D.Responsibility accounting budgets.
E.Activity-based accounting systems.
16) Variable budget is another name for:
A.Cash budget.
B.Flexible budget.
C.Fixed budget.
D.Manufacturing budget.
E.Rolling budget.
17) The difference between the amount received from issuing a note payable and the
amount repaid at maturity is referred to as:
A.Interest.
B.Principle.
C.Face Value.
D.Cash.
E.Accounts Payable.
18) The following schedule reflects shows the first month’s transactions of the Green
Construction Company, owned by Jennifer Green:
Provide descriptions for each transaction.
19) Thatcher Company had a January 1, credit balance in its Allowance for Doubtful
Accounts of $4,000 for the current year. The following transactions and events affected
the Allowance for Doubtful Accounts during the current year:
What amount should appear in the allowance for doubtful accounts in the December 31,
balance sheet for the current year?
20) Landers, Inc., held 1,500 of Shipman Company common stock with a cost of
$36,900. These shares were classified as a long-term available-for-sale investment. It
sold the shares on December 13 for $42,100. Prepare Lander’s journal entry to record
this sale.
21) Resources such as cash removed from the business by the business owner for
personal use are called ____________.
22) A company borrowed $60,000 by signing a 60-day, 5% note payable from its bank.
Compute the total cash payment due on the note’s maturity date.
23) A company reported operating cash flows in Year 1 of $33,100 and $26,220 in Year
2. Its average total assets in Year 1 were $262,000 and $313,000 in Year 2. Calculate the
cash flow on total assets ratio for both years. Comment on the results.
24) Whidbey Co. fixed budget for the year is shown below:
Prepare a flexible budget for Whidbey Co. that shows a detailed budget for its actual
sales volume of 42,000 units. Use the contribution margin format.
