1) Specific Identification must be used for inventory valuation where the inventory
items are not interchangeable under
GAAPIFRS
a.YesNo
b.YesYes
c.NoNo
d.NoYes
2) Under management by exception, which differences between planned and actual
results should be investigated?
a.Material and noncontrollable
b.Controllable and noncontrollable
c.Material and controllable
d.All differences should be investigated
3) A division sold 100,000 calculators during 2014:
Sales$2,000,000
Variable costs:
Materials$380,000
Order processing110,000
Billing labor150,000
Selling expenses 60,000
Total variable costs700,000
Fixed costs1,000,000
How much is the contribution margin per unit?
a.$2
b.$7
c.$17
d.$13
4) Which of the following is usually not an accrued liability?
a.Interest payable
b.Wages payable
c.Taxes payable
d.Notes payable
5) A factory machine was purchased for $375,000 on January 1, 2014 . It was estimated
that it would have a $75,000 salvage value at the end of its 5-year useful life. It was
also estimated that the machine would be run 40,000 hours in the 5 years. The company
ran the machine for 4,000 actual hours in 2014 . If the company uses the
units-of-activity method of depreciation, the amount of depreciation expense for 2014
would be
a.$37,500
b.$60,000
c.$75,000
d.$30,000
6) A production cost report contains sections for:
a.units to be accounted for
b.costs accounted for
c.unit costs
d.All of the above
7) Which of the following statements concerning current liabilities is incorrect?
a.Current liabilities include unearned revenues
b.A company that has more current liabilities than current assets is usually the subject
of some concern
c.Current liabilities include prepaid expenses
d.A current liability is a debt that can reasonably be expected to be paid out of existing
current assets or result in the creation of other current liabilities
8) The acid-test ratio
a.is a quick calculation of an approximation of the current ratio
b.does not include all current liabilities in the calculation
c.does not include inventory as part of the numerator
d.does include prepaid expenses as part of the numerator
9) Under the equity method of accounting for long-term investments in common stock,
when a dividend is received from the investee company,
a.the Dividend Revenue account is credited
b.the Stock Investments account is increased
c.the Stock Investments account is decreased
d.no entry is necessary
10) The costing of inventories at standard cost for external financial statement reporting
purposes is
a.not permitted
b.preferable to reporting at actual costs
c.in accordance with generally accepted accounting principles if significant differences
exist between actual and standard costs
d.in accordance with generally accepted accounting principles if significant differences
do not exist between actual and standard costs
11) If equal amounts are added to the numerator and the denominator of the current
ratio, the ratio will always
a.increase
b.decrease
c.stay the same
d.equal zero
12) Valuing assets at their fair value rather than at their cost is inconsistent with the:
a.economic entity assumption
b.historical cost principle
c.periodicity assumption
d.full disclosure principles
13) The 2014 financial statements of Barker Co. contain the following selected data (in
millions).
Current Assets$ 75
Total Assets140
Current Liabilities40
Total Liabilities90
Cash8
The debt to assets ratio is
a.64.3%
b.53.3%
c.28.6%
d.147.4%
14) Over the term of the bonds, the balance in the Discount on Bonds Payable account
will
a.fluctuate up and down if the market is volatile
b.decrease
c.increase
d.be unaffected until the bonds mature
15) In the month of June, a department had 20,000 units in beginning work in process
that were 70% complete. During June, 70,000 units were transferred into production
from another department. At the end of June there were 10,000 units in ending work in
process that were 40% complete. Materials are added at the beginning of the process,
while conversion costs are incurred uniformly throughout the process. How many units
were transferred out of the process in June?
a.80,000 units
b.70,000 units
c.90,000 units
d.100,000 units
16) Using the following information:
12/31/13
Accounts receivable$525,000
Allowance (35,000)
Cash realizable value$490,000
During 2014, sales on account were $145,000 and collections on account were
$100,000. Also during 2014, the company wrote off $4,000 in uncollectible accounts.
An analysis of outstanding receivable accounts at year end indicated that uncollectible
accounts should be estimated at $40,000.
The change in the cash realizable value from the balance at 12/31/13 to 12/31/14 was a
a.$36,000 increase
b.$41,000 increase
c.$44,000 increase
d.$45,000 increase
17) The following totals for the month of June were taken from the payroll register of
Parks Company.
Salaries and wages$80,000
FICA taxes withheld6,132
Income taxes withheld17,600
Medical insurance deductions3,200
Federal unemployment taxes640
State unemployment taxes4,000
The entry to record accrual of Parks’s Companys payroll taxes would include a
a.debit to Payroll Tax Expense for $10,772
b.credit to Payroll Tax Expense for $10,772
c.credit to FICA Taxes Payable for $4,640
d.credit to Payroll Tax Expense for $4,640
18) Alston Industries recorded operating data for its Leather division for the year.
Alston requires its return to be 9%.
Sales revenue$1,000,000
Controllable margin180,000
Total average assets550,000
Fixed costs60,000
How much is ROI for the year?
a.10.7%
b.18.0%
c.21.8%
d.32.7%
19) Closing entries are
a.an optional step in the accounting cycle
b.posted to the ledger accounts from the worksheet
c.made to close permanent or real accounts
d.journalized in the general journal
20) Conceptually, any under- or overapplied overhead at the end of the year should be
allocated among all of the following except
a.cost of goods sold
b.ending work in process inventory
c.ending raw materials inventory
d.ending finished goods inventory
21) Frank White the new controller of Youngman Company, has reviewed the expected
useful lives and salvage values of selected depreciable assets at the beginning of 2014 .
His findings are as follows.
All assets are depreciated by the straight-line method. Youngman Company uses a
calendar year in preparing annual financial statements. After discussion, management
has agreed to accept Franks proposed changes.
Instructions
(a)Compute the revised annual depreciation on each asset in 2014 . (Show
computations.)
(b)Prepare the entry (or entries) to record depreciation on the building in 2014 .
22) Opportunity cost is usually
a.a standard cost
b.a potential benefit
c.a sunk cost
d.included as part of cost of goods sold
23) Compute the missing amount in each category of the accounting equation.
Assets LiabilitiesOwner’s Equity
(a)$319,000$ ?$143,000
(b)$223,000$ 79,000$ ?
(c)$ ?$233,000$325,000
24) Use the following account balance information for Granobfin Partnership with
income ratios of 2:4:4 for Granger, Noble, and Finn, respectively.
Assets Liabilities and Owners Equity
Cash$ 54,000Accounts payable$ 126,000
AccountsGranger, Capital $138,000
receivable 132,000Noble, Capital 48,000
Inventory 438,000Finn, Capital 312,000
$624,000 $624,000
Assume that, as part of liquidation proceedings, Granobfin sells its noncash assets for
$510,000. The amount of cash that would ultimately be distributed to Finn would be
a.$312,000
b.$288,000
c.$204,000
d.$516,000
25) Corporations are granted the power to issue bonds through
a.tax laws
b.state laws
c.federal security laws
d.bond debentures
26) Goodwill can be recorded
a.when customers keep returning because they are satisfied with the company’s
products
b.when the company acquires a good location for its business
c.when the company has exceptional management
d.only when there is an exchange transaction involving the purchase of an entire
business
27) Which of the following stages of the management decision-making process is
improperly sequenced?
a.Evaluate possible courses of action Make decision
b.Assign responsibility for the decision Identify the problem
c.Identify the problem Determine possible courses of action
d.Assign responsibility for decision Determine possible courses of action
28) Stahl Consulting started the year with total assets of $60,000 and total liabilities of
$15,000. During the year, the business recorded $48,000 in catering revenues and
$30,000 in expenses. Stahl made an additional investment of $9,000 and withdrew cash
of $15,000 during the year. Owners equity changed by what amount from the beginning
of the year to the end of the year?
a.$3,000
b.$9,000
c.$12,000
d.$45,000
29) The primary purpose of the statement of cash flows is to
a.provide information about the investing and financing activities during a period
b.prove that revenues exceed expenses if there is a net income
c.provide information about the cash receipts and cash payments during a period
d.facilitate banking relationships
30) Which of the following practices by a credit card company results in lower interest
charges to the cardholder?
a.The card company states interest as a monthly percentage rather than an annual
percentage
b.The card company allows a grace period before interest is accrued
c.The card company allows cardholders to skip payments on their cards
d.The card company calculates finance charges from the date of purchase to the date the
amount is paid
31) The operating expense section of an income statement for a wholesaler would not
include
a.freight-out
b.utilities expense
c.cost of goods sold
d.insurance expense
32) Which of the following is not relevant information in a decision whether old
equipment presently being used should be replaced by new equipment?
a.The cash price of the new equipment
b.The salvage value of the old equipment
c.The book value of the old equipment
d.The cost savings if the new equipment is purchased
33) The book value of a plant asset is the difference between the
a.replacement cost of the asset and its historical cost
b.cost of the asset and the amount of depreciation expense for the year
c.cost of the asset and the accumulated depreciation to date
d.proceeds received from the sale of the asset and its original cost
34) Companies assign manufacturing overhead to work in process on an applied basis
through the use of a(n)
a.actual overhead rate
b.estimated overhead rate
c.assigned overhead rate
d.predetermined overhead rate
35) The general ledger of Oasis Company has the following work in process account.
WORK IN PROCESSFINISHING
6/1Balance8,0006/30Transferred out?
6/30Materials1,800
6/30Labor3,800
6/30Overhead2,800
6/30Balance?
Production records show that there were 2,000 units in beginning
inventory, 50% complete; 5,500 units started, and 4,000 units transferred out. The
beginning work in process had conversion costs of $3,300. The units in ending
inventory were 60% complete. Materials are added at the beginning of the process.
Instructions
Answer the following questions.
(a)How many units are in process at June 30?
(b)What is the unit conversion cost for June?
(c)What is the conversion cost in the June 30 inventory?
36) A note receivable is a negotiable instrument which
a.eliminates the need for a bad debts allowance
b.can be transferred to another party by endorsement
c.takes the place of checks in a business firm
d.can only be collected by a bank
37) The following information pertains to Ortiz Company. Assume that all balance
sheet amounts represent both average and ending balance figures. Assume that all sales
were on credit.
Assets
Cash and short-term investments$ 45,000
Accounts receivable (net)25,000
Inventory20,000
Property, plant and equipment 210,000
Total Assets$300,000
Liabilities and Stockholders Equity
Current liabilities$ 50,000
Long-term liabilities90,000
Stockholders equitycommon 160,000
Total Liabilities and Stockholders Equity$300,000
Income Statement
Sales$ 100,000
Cost of goods sold 55,000
Gross profit45,000
Operating expenses 15,000
Net income$ 30,000
Number of shares of common stock6,000
Market price of common stock$30
Dividends per share.50
What is the price-earnings ratio for Ortiz?
a.6.0 times
b.1.1 times
c.5 times
d.5.5 times
38) Entries are made to the Petty Cash account when
a.establishing the fund
b.making payments out of the fund
c.recording shortages in the fund
d.replenishing the fund
39) Delmar Company had beginning inventory of $90,000, ending inventory of
$110,000, cost of goods sold of $600,000, and sales of $960,000. Delmar’s days in
inventory is:
a38.0 days
b.54.3 days
c.60.8 days
d.67.5 days
40) In a process cost system, manufacturing costs are summarized in a
________________ report for each department.
41) Gorman Mining invested $960,000 in a mine estimated to have 1,200,000 tons of
ore with no salvage value. During the first year, 200,000 tons of ore were mined and
sold.
Instructions
Prepare the journal entry to record depletion expense.
42) Presented below is the Trial Balance and Adjusted Trial Balance for Morning Jacket
Company on December 31 .
MORNING JACKET
Trial Balance
December 31
Before AdjustmentAfter Adjustment
Dr. Cr. Dr. Cr.
Cash$ 2,000$ 2,000
Accounts Receivable2,8003,800
Prepaid Rent2,1001,400
Supplies1,200650
Equipment18,00018,000
Accumulated depreciation
Equipment$ 1,300$ 1,550
Accounts Payable2,7002,700
Notes Payable10,00010,000
Interest Payable140
Salaries and Wages Payable1,270
Unearned Service Revenue4,4603,960
Owner’s Capital7,2007,200
Owner’s Drawings3,2003,200
Service Revenue8,0009,500
Salaries and Wages Expense3,8605,130
Rent Expense5001,200
Supplies Expense550
Depreciation Expense
Equipment250
Interest Expense140
Totals$33,660$33,660$36,320$36,320
Instructions
Prepare in journal form, with explanations, the adjusting entries that explain the
changes in the balances from the trial balance to the adjusted trial balance.
43) Bakesale Enterprises purchased equipment on May 1, 2014 for $6,300. The
company expects to use the equipment for 5 years. It has no salvage value.
1>What adjusting journal entry should the company make at the end of each month if
monthly financials are prepared (annual depreciation is $1,260)?
2>What is the book value of the equipment at May 31, 2014?
44) Frank Jeffries, a new employee of Stine Company, recorded $1,000 in consigned
goods received as part of the firm’s inventory. The goods were received one day after
the end of the fiscal period, but Frank reasoned that the goods should be included in
inventory sooner because Stine paid the freight. The mistake was brought to his
attention by the purchasing department who said the goods should not have been
recorded as Stine inventory at all. Frank told Sara Janik, the purchasing supervisor, that
nobody needed to worry, because the mistake would cancel itself out the following
month. In Frank opinion, there was no reason to get everyone excited over nothing,
especially since it was monthly, and not annual, financial statements that were affected.
Sara Janik has reported the problem to the accounting department.
Required:
You are Frank’s supervisor. Write a memo to Frank explaining why the error should
have been corrected.
45) Stengle Company retired $500,000 face value, 9% bonds on June 30, 2014 at 96 .
The carrying value of the bonds at the redemption date was $508,000.
Instructions
Prepare the journal entry to record the redemption of the bonds.
46) Prepare a corrected trial balance for Stereolab Company. All accounts should have a
normal balance.
STEROELAB COMPANY
Trial Balance
For the Quarter Ended 3/31/14
Debit Credit
Cash$ 14,000
Accounts Receivable$ 23,000
Prepaid Insurance 2,500
Equipment 60,000
Accounts Payable15,000
Unearned Service Revenue 10,000
Notes Payable25,000
Owners Capital38,000
Owners Drawings 1,500
Service Revenue43,000
Salaries and Wages Expense15,000
Utilities Expense 5,000
Rent Expense 10,000
$116,500$145,500
47) Indicate in the blank spaces below, the section of the balance sheet where the
following items are reported. Use the following code to identify your answer:
PPEProperty, Plant, and Equipment
IIntangibles
OOther
N/ANot on the balance sheet
1>Goodwill7>Timberlands
2>Land Improvements8>Franchises
3>Buildings9>Licenses
4>Accumulated Depreciation10>Equipment
5>Trademarks11>Oil Deposits
6>Research and development costs12>Land