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1) The FIFO method of computing equivalent units focuses on production activity in
the current period only.
2) Additions to land that increase the usefulness of the land such as parking lots, fences,
and lighting are not depreciated.
3) Electronic funds transfers (EFTs) are decreasingly used by companies due to the
inconvenience and high cost.
4) A company purchased equipment for $150,000 by paying $50,000 and signing a
$100,000 note payable. The entire transaction is disclosed to users in the financing
section of the statement of cash flows.
5) Edmond reported average total assets of $9,965 million and net sales of $10,430
million. Its total asset turnover equals .96.
6) The higher the accounts receivable turnover, the less quickly accounts receivable are
collected.
7) Cash withdrawn by the owner of a proprietorship for personal expenses, should be
treated as an expense of the business.
8) A known obligation of an uncertain amount that can at least be reasonably estimated
is reported as an estimated liability.
9) Amortization is the process of allocating the cost of natural resources to periods
when they are consumed.
10) Long-term investments in debt securities not classified as trading or
held-to-maturity securities are classified as available-for-sale securities.
11) Adopting a lean business model should have no effect on cost in a modern
manufacturing environment.
12) Continuous budgeting is the practice of revising the entire set of budgets for the
periods remaining and adding new budgets to replace those for the periods that have
elapsed.
13) Dazzle, Inc. produces beads for jewelry making use. The following information
summarizes production operations and sales activities for June. The journal entry to
record June sales is:
A.Debit Accounts Receivable $810,000; credit Cost of Goods Sold $810,000.
B.Debit Accounts Receivable $810,000; credit Sales $366,000; credit Finished Goods
Inventory $444,000.
C.Debit Cost of Goods Sold $444,000; credit Sales $444,000.
D.Debit Finished Goods Inventory $444,000; debit Sales $810,000; credit Accounts
Receivable $810,000; credit Cost of Goods Sold $444,000.
E.Debit Accounts Receivable $810,000; credit Sales $810,000; debit Cost of Goods
Sold $444,000; credit Finished Goods Inventory $444,000.
14) Landmark Corp. buys $300,000 of Schroeter Company's 8% five-year bonds
payable at par value on September 1. Interest payments are made semiannually.
Landmark plans to hold the bonds for the five year life. The journal entry to record the
purchase should include:
A.A debit to Long-Term Investments-AFS $300,000.
B.A debit to Short-Term Investments-Trading $300,000.
C.A debit to Long-Term Investments-HTM $300,000.
D.A debit to Short-Term Investments-AFS $300,000.
E.A debit to Cash $300,000.
15) Dallas Company uses a job order costing system. The company's executives
estimated that direct labor would be $2,000,000 (200,000 hours at $10/hour) and that
factory overhead would be $1,500,000 for the current period. At the end of the period,
the records show that there had been 180,000 hours of direct labor and $1,200,000 of
actual overhead costs. Using direct labor hours as a base, what was the predetermined
overhead rate?
A.$6.00 per direct labor hour.
B.$7.50 per direct labor hour.
C.$6.67 per direct labor hour.
D.$8.33 per direct labor hour.
E.$7.08 per direct labor hour.
16) Addams Corporation paid cash dividends totaling $75,000 during its most recent
fiscal year. How should this information be reported on Addam's statement of cash
flows?
A.In operating activities as a source of funds.
B.In investing activities as a source of funds.
C.In investing activities as a use of funds.
D.In financing activities as a source of funds.
E.In financing activities as a use of funds.
17) Granfield Company has a piece of manufacturing equipment with a book value of
$40,000 and a remaining useful life of four years. At the end of the four years the
equipment will have a zero salvage value. The market value of the equipment is
currently $22,000. Granfield can purchase a new machine for $120,000 and receive
$22,000 in return for trading in its old machine. The new machine will reduce variable
manufacturing costs by $19,000 per year over the four-year life of the new machine.
The total increase or decrease in net income by replacing the current machine with the
new machine (ignoring the time value of money) is:
A.$22,000 decrease
B.$76,000 increase
C.$18,000 decrease
D.$52,000 increase
E.$22,000 increase
18) A company has bonds outstanding with a par value of $100,000. The unamortized
premium on these bonds is $2,700. If the company retired these bonds at a call price of
99, the gain or loss on this retirement is:
A.$1,000 gain.
B.$1,000 loss.
C.$2,700 loss.
D.$2,700 gain.
E.$3,700 gain.
19) The straight-line depreciation method and the double-declining-balance
depreciation method:
A.Produce the same total depreciation over an asset's useful life.
B.Produce the same depreciation expense each year.
C.Produce the same book value each year.
D.Are acceptable for tax purposes only.
E.Are the only acceptable methods of depreciation for financial reporting.
20) Glisten Co. leases an office to a tenant at the rate of $3,000 per month. The tenant
contacted Glisten and arranged to pay the rent for December on January 8 of the
following year. Glisten agrees to this arrangement.
a.) Prepare the journal entry that Glisten must make at year ended December 31 to
record the accrued rent revenue.
b.) Prepare the journal entry to record the receipt of the rent on January 8 of the
following year.
21) Masters, Hardy, and Rowen are dissolving their partnership. Their partnership
agreement allocates income and losses equally among the partners. The current period's
ending capital account balances are Masters, $15,000; Hardy, $15,000; Rowen,
$(2,000). After all the assets are sold and liabilities are paid, but before any
contributions to cover any deficiencies, there is $28,000 in cash to be distributed.
Rowen pays $2,000 to cover the deficiency in his account. The general journal entry to
record the final distribution would be:
A.Debit Masters, Capital $15,000; debit Hardy, Capital $15,000; credit Cash $30,000.
B.Debit Masters, Capital $14,000; debit Hardy, Capital $14,000; credit Cash $28,000.
C.Debit Masters, Capital $15,000; debit Hardy, Capital $15,000; credit Rowen, Capital
$2,000; credit Cash $28,000.
D.Debit Cash $28,000; debit Rowen, Capital $2,000; credit Masters, Capital $15,000;
credit Hardy, Capital $15,000.
E.Debit Masters, Capital $9,334; debit Hardy, Capital $9,333; debit Rowen, Capital
$9,333; credit Cash $28,000.
22) An employee is dissatisfied with the resolution of an ethical conflict with his
supervisor at his place of employment. According to the Institute of Management
Accountants, the employee's next step should be to
A.contact the IMA.
B.contact the next level of management who is not involved in the ethical conflict.
C.make the president of the company aware of the ethical conflict.
D.report the incident to the State Board of Accountancy.
E.resign from the company.
23) A business's record of the increases and decreases in a specific asset, liability,
equity, revenue, or expense is known as a(n):
A.Journal.
B.Posting.
C.Trial balance.
D.Account.
E.Chart of accounts.
24) A retail store has three departments, S, T, and U, and does general advertising that
benefits all departments. Advertising expense totaled $50,000 for the year, and
departmental sales were as follows. Allocate advertising expense to Department T based
on departmental sales.
A.$11,000.
B.$14,000.
C.$16,667.
D.$22,500.
E.$50,000.
25) The model whose goal is to eliminate waste while satisfying the customer and
providing a positive return to the company is:
A.Just in time manufacturing model.
B.Managerial accounting model.
C.Corporate social responsibility model.
D.Continuous improvement model.
E.Lean business model.
26) Betterments are:
A.Expenditures making a plant asset more efficient or productive.
B.Also called ordinary repairs.
C.Always increase an asset's life.
D.Revenue expenditures.
E.Credited against the asset account when incurred.
27) All of the following statements regarding long-term liabilities are true except?
A.Liabilities not expected to be paid within the longer of one year or the company's
operating cycle are reported as long-term liabilities.
B.Long-term liabilities include long-term notes payable, warranty liabilities, lease
liabilities, and bonds payable.
C.Liabilities that do not have a fixed due date, but are payable on demand, are reported
as long-term liabilities.
D.Long-term liabilities can be reported on the balance sheet in a single total or in
multiple categories.
E.A single long-term liability can be divided between current and noncurrent sections
on the balance sheet.
28) When a company's activities include income-related events not part of normal,
continuing operations, the complete income statement could potentially have the
following sections:
A.Items from continuing operations and earnings per share for a corporation.
B.Income or loss from operating a discontinued segment for the current period.
C.The loss from disposing of the discontinued segment's net assets.
D.Extraordinary items.
E.Continuing operations, discontinued segments, extraordinary items, changes in
accounting principles, and earnings per share for a corporation.
29) On February 15, Jewel Company buys 7,000 shares of Marcelo Corp. common at
$28.53 per share plus a brokerage fee of $400. The stock is classified as
available-for-sale securities. On March 15, Marcelo Corp. declares a dividend of $1.15
per share payable to stockholders of record on April 15. Jewel Company received the
dividend on April 15 and ultimately sells half of the Marcelo Corp. stock on November
17 of the current year for $29.30 per share less a brokerage fee of $250. The fair value
of the remaining 3,500 shares is $29.50 per share. The amount that Jewel Company
should report in the asset section of its year-end December 31 balance sheet for its
investment in Marcelo Corp. is:
A.$200,110.
B.$103,250.
C.$2,245.
D.$3,195.
E.$5,440.
30) Identify the account below that is classified as an asset in a company's chart of
accounts:
A.Accounts Receivable
B.Accounts Payable
C.Owner's Capital
D.Unearned Revenue
E.Service Revenue
31) The correct times interest earned computation is:
A.(Net income + Interest expense + Income taxes)/Interest expense.
B.(Net income + Interest expense - Income taxes)/Interest expense.
C.(Net income - Interest expense - Income taxes)/Interest expense.
D.(Net income - Interest expense + Income taxes)/Interest expense.
E.Interest expense/(Net income + Interest expense + Income taxes expense).
32) How is the retirement of stock recorded?
33) On July 31, Orwell Co. has $448,800 of accounts receivable.
Required:
1> Prepare journal entries to record the following selected August transactions. The
company uses the perpetual inventory system.
2> Also prepare any footnotes to the August 31 financial statements that result from
these transactions.
3> Calculate the balance in the Accounts Receivable account as of August 10.
34) What are the three types of inventories that are carried by manufacturers? Describe
each type of inventory.
35) Gleason Company has developed the following standard cost data based on 60,000
direct labor hours, which is 75% of capacity. Fixed overhead is $360,000 and variable
overhead is $180,000 at this level of activity.
During the current period, the company operated at 80% of capacity and produced
128,000 units. Actual costs were:
Calculate the variable overhead spending and efficiency variance and the fixed
overhead spending and volume variances. Indicate whether each is favorable or
unfavorable.
36) A company purchased a special purpose machine on September 15 of the past year,
and it was installed and ready to run on January 1 of this year. The following costs were
incurred in the purchase and installation of the machine. Determine the total cost of the
machine.
37) Define risk and return and discuss the relation between them.
38) Explain the reason a company might use the retail inventory method for valuing
inventory.
39) What is a short-term note payable? Explain the accounting issues related to notes
payable.
40) A fixed budget is also called a _____________ budget.
41) A company purchased land on which to construct a new building for a cost of
$350,000. Additional costs incurred were:
What total dollar amount should be charged to Land and what amount should be
charged to Building or other accounts?
