Before any month-end adjustments are made, the net income of Bennett Company is
$76,000. The following adjustments are necessary: office supplies used, $3,160;
services performed for clients but not yet recorded or collected, $3,640; interest accrued
on note payable to bank, $3,040. After adjusting entries are made for the items listed
above, Bennett Company’s net income will be:
A. $66,160.
B. $78,560.
C. $73,440.
D. $76,000.
When volume increases, fixed cost per unit:
A. Increases.
B. Decreases.
C. Stays the same.
D. Increases or decreases, depending upon the situation.
Shown below is information relating to the stockholders’ equity of Brookdale
Corporation at December 31, 2015:
Refer to the information above. The average issue price per share of the preferred stock
was:
A. $150.
B. $165.
C. $180.
D. $195.
An unfavorable overhead volume variance results from:
A. An unfavorable overhead spending variance.
B. Poor decisions made by the production manager.
C. Producing at levels of output which exceed normal output levels.
D. Producing at levels of output which fall short of normal output levels.
Debits to the Manufacturing Overhead account record:
A. The actual amounts of overhead costs incurred during a period.
B. The amount of overhead applied to production during a period.
C. The amount of overhead incurred on a specific job.
D. All conversion costs of a period.
The collection of accounts receivable is recorded by a:
A. Debit to Cash and a debit to Accounts Receivable.
B. Credit to Cash and a credit to Accounts Receivable.
C. Debit to Cash and a credit to Accounts Receivable.
D. Credit to Cash and a debit to Accounts Receivable.
The accounting systems of most business organizations:
A. Are tailored to meet the organization’s needs for accounting information and the
resources available for operating the system.
B. Are similar in design to the journals, ledgers, and worksheets illustrated in this text.
C. Utilize data bases, rather than ledger accounts.
D. Are designed by the CPA firm that performs the annual financial audit.
Shrinkage losses
At year-end, the perpetual inventory records of James Products indicate 105 units of a
particular product in inventory, acquired at the following dates and unit costs:
A complete physical inventory taken at year-end indicates only 93 units of this product
actually are on hand.
Determine the dollar amount of the shrinkage loss assuming that James uses:
Trego Company issued, on December 31, 2015, $1,000,000 face value, 4%, 5-year
bonds. Interest will be paid semiannually each June 30 and December 31. The bonds
sold at a price of 102; Trego uses the straight-line method of amortizing bond discount
or premium.
Refer to the information above. The carrying value of this liability in Trego Company’s
December 31, 2016, balance sheet is:
A. $1,000,000.
B. $1,016,000.
C. $1,020,000.
D. $1,024,000.
Austin Corporation issues $6,000,000 of 10%, 10-year bonds, dated December 31, Year
1. The bonds are issued on April 30, Year 2, at 100 plus accrued interest. Interest on the
bonds is payable semiannually each June 30 and December 31.
Refer to the information above. The journal entry made by Austin Corporation to record
the first semiannual interest payment on the bonds includes:
A. A debit to Bond Interest Expense of $300,000.
B. A debit to Bond Interest Payable of $100,000.
C. A debit to Bond Interest Expense of $100,000.
D. A debit to Bond interest Expense of $200,000.
Closing entries would be prepared before:
A. Financial statements are prepared.
B. The after-closing trial balance.
C. An adjusted trial balance.
D. Adjusting entries.
Sherman has budgeted sales for the upcoming quarter as follows:
The desired ending finished goods inventory for each month is one-half of next month’s
budgeted sales. Three pounds of direct material are required for each unit produced. If
direct material costs $5 per pound, and must be paid for in the month of purchase, the
budgeted direct materials purchases (in dollars) for April are:
A. $17,500.
B. $40,500.
C. $26,250.
D. $38,250.
Bonds which may be exchanged for a specified number of shares of capital stock are
called:
A. Junk bonds.
B. Convertible bonds.
C. Debenture bonds.
D. Mortgage bonds.
Refer to the information above. The amount of cash paid by Korman Corporation in
2015 for the purchase of marketable securities was:
A. $240,000.
B. $160,000.
C. $200,000.
D. $190,000.
Factors affecting the market price of stocks
(a) Murdock Corporation has outstanding several different stock issues. For each of the
types of stock listed below, briefly describe a situation or circumstance that would cause
the market price of that type of stock to increase.
Preferred stock
Common stock
Convertible preferred stock
(b) How would the increase in market value of any of Murdock’s stock be reflected in
Murdock’s financial statements?
On April 1, 2015, Jetter Corporation reacquired 2,000 shares of its own $10 par stock
for $120,000 cash. On October 15, 2015, 600 of the treasury shares were reissued at a
price of $65 per share.
Refer to the information above. The journal entry to record the reissuance of the 600
shares of stock on October 15 includes a:
A. Credit to Common Stock of $6,000.
B. Credit to Additional Paid-In Capital: Treasury Stock Transactions of $3,000.
C. Credit to Gain on Treasury Stock Transactions of $3,000.
D. Credit to Treasury Stock Reissued of $39,000.
Paid-in Capital refers to:
A. The lifetime earnings of the corporation.
B. The amount invested by stockholders.
C. Net income less dividends.
D. The amount in excess of the par value of the stock.
Which of the following statements regarding the direct and indirect methods of
reporting cash flow from operating activities is false?
A. Although both methods result in the same net increase or decrease in cash for the
year, net cash flow from operating activities will be different under the two methods.
B. The direct method shows the specific cash inflows and outflows constituting the
operating activities of the business.
C. Under the indirect method, the computation of net cash flow from operating
activities begins with net income as shown in the income statement.
D. The FASB permits both the direct and the indirect methods, but has expressed a
preference for the direct method.
A job order cost system traces direct materials cost to a particular job by means of:
A. Materials requisitions.
B. A production budget.
C. The Materials Inventory controlling account.
D. A debit to the job cost sheet for the job.
Thirty percent of the total assets of Shanahan Corporation have been financed through
borrowing. The total liabilities of the company are $600,000. What is the amount of
owners’ equity?
A. $180,000.
B. $2,000,000.
C. $1,400,000.
D. $2,600,000.
Blue Wholesale Shirt Co. sold shirts to Pink Retail Shoppe. The owner of Pink Retail
said she would pay Blue at a later date, which Blue Wholesale agreed to. Blue
Wholesale Shirt Co. is considered to be a:
A. borrower.
B. liability.
C. creditor.
D. debtor.
In regard to the accounts receivable turnover rate:
A. The higher the better.
B. The lower the better.
C. In some industries it is better higher and in some industries it is better to be lower.
D. The auto industry prefers a lower rate.
Refer to the information above. With respect to labor costs, Roman’s production
manager is responsible for:
A. Any labor rate variance as well as any labor efficiency variance.
B. Only a labor rate variance.
C. Only a labor efficiency variance.
D. Only unfavorable labor variances.
Refer to the information above. If the Cash balance at December 31, 2014 is $62,500
then Total Liabilities amounts to:
A. $42,500.
B. $140,000.
C. $45,000.
D. $182,500.
Cash ($62,500) + A/R ($18,750) + Land ($30,000) + Building ($31,250) + Equipment
($40,000) = $182,500
A/P ($2,500) + N/P (?) + Capital Stock ($12,500) + R.E. ($125,000) = $182,500
Which of the following would not be considered as part of the cost of equipment
recently purchased?
A. Sales tax.
B. Transportation charges.
C. Installation and setup charges.
D. The cost to repair damage incurred after dropping the equipment.
Responsibility accounting systems measures the performance of:
A. The entire company.
B. Each center individually.
C. Both the entire company and each center individually.
D. Neither the entire company nor each center individually.
Which of the following is generally not considered a capital budgeting technique?
A. Payback period.
B. Return on average investment.
C. Return on stockholders’ equity.
D. Discounted future cash flows.
Earnings per share figures are shown in the income statement:
A. For income before extraordinary items and for income from continuing operations,
as well as for net income.
B. For common stock as well as for preferred stock.
C. For all publicly owned, as well as for all privately held, corporations.
D. As an optional disclosure for all corporations, and may be omitted completely or
disclosed in a footnote at the option of the issuing corporation.
The following information has been taken from the perpetual inventory system of Elite
Mfg. Co. for the month ended August 31:
Refer to the above data. The cost of finished goods manufactured in August is:
A. $147,000.
B. $92,000.
C. $57,000.
D. Some other amount.
Of the following objectives of financial reporting, which is the most specific?
A. Provide information useful in assessing amount, timing, and uncertainty of future
cash flows.
B. Provide information useful in making investment and credit decisions.
C. Provide information about economic resources, claims to resources, and changes in
resources and claims.
D. Provide information useful to help the enterprise achieve its goals, objectives, and
mission.
As the volume of output decrease:
A. Fixed costs per unit will increase.
B. Fixed costs per unit will decrease.
C. Fixed costs per unit will not change.
D. Fixed costs in total will decrease.
Refer to the information above. The materials price variance for Maple Company for
June is:
A. $520 favorable.
B. $990 favorable.
C. $30 unfavorable.
D. $520 unfavorable.
Revenues increase owners’ equity because:
A. Revenues increase net income which increases retained earnings.
B. Revenues are recorded by a debit.
C. Of the matching principle.
D. The conservatism principle requires revenues be recognized with an increase to
owners’ equity.