1) If bonds with a face value of $140,000 are converted into common stock when the
carrying value of the bonds is $135,000, the entry to record the conversion will include
a debit to
a.Bonds Payable for $140,000
b.Bonds Payable for $135,000
c.Discount on Bonds Payable for $5,000
d.Bonds Payable equal to the market price of the bonds on the date of conversion
2) Griffiti Company is planning to produce 2,500 units of product in 2014 . Each unit
requires 3 pounds of materials at $8 per pound and a half hour of labor at $16 per hour.
The overhead rate is 75% of direct labor.
Instructions
(a)Compute the budgeted amounts for 2014 for direct materials to be used, direct labor,
and applied overhead.
(b)Compute the standard cost of one unit of product.
3) Each of the following items affect the cash balance per books except
a.bank service charges
b.notes collected by the bank
c.NSF checks
d.outstanding checks
4) Pappys Staff Junkets has the following inventory information.
July1Beginning Inventory20 units at $90
5Purchases120 units at $92
14Sale80 units
21Purchases60 units at $95
30Sale56 units
Assuming that a perpetual inventory system is used, what is the ending inventory on a
LIFO basis?
a.$5,848
b.$5,860
c.$6,068
d.$6,346
5) An aging of a company’s accounts receivable indicates that $14,000 are estimated to
be uncollectible. If Allowance for Doubtful Accounts has a $1,100 credit balance, the
adjustment to record bad debts for the period will require a
a.debit to Bad Debt Expense for $14,000
b.debit to Allowance for Doubtful Accounts for $12,900
c.debit to Bad Debt Expense for $12,900
d.credit to Allowance for Doubtful Accounts for $14,000
6) Internal control consists of the plan of organization and all of the related methods
and measures adopted within a business to (a) safeguard its assets, and (b) enhance the
accuracy and reliability of its accounting records.
7) Sales commissions are classified as
a.overhead costs
b.period costs
c.product costs
d.indirect labor
8) Which one of the following is not a benefit of budgeting?
a.It facilitates the coordination of activities
b.It provides definite objectives for evaluating performance
c.It provides assurance that the company will achieve its objectives
d.It requires all levels of management to plan ahead on a recurring basis
9) The following information is available for Masun Company:
Sales$550,000Total fixed expenses$150,000
Cost of goods sold390,000Total variable expenses$370,000
A CVP income statement would report
a.gross profit of $160,000
b.contribution margin of $400,000
c.gross profit of $180,000
d.contribution margin of $180,000
10) Which of the following is not used in assigning manufacturing costs to work in
process inventory?
a.Actual manufacturing overhead
b.Time tickets
c.Materials requisitions
d.Predetermined overhead rate
11) On November 30, capital balances are Roses $300,000, Ellis $250,00 and Gise
$250,000. The income ratios are 20%, 20% and 60%, respectively. Roses decides to
retire from the partnership. The partnership pays Roses $350,000 cash for her
partnership interest. After Roses retirement, what is the balance of Elliss capital
account?
a.$237,500
b.$240,000
c.$250,000
d.$325,000
12) The most appropriate basis for dividing partnership net income when the partners
do not plan to take an active role in daily operations is
a.on a fixed ratio
b.interest on capital balances and salaries to the partners
c.on a ratio based on average capital balances
d.salaries to the partners and the remainder on a fixed ratio
13) aA private accountant can perform many activities in a business organization but
would not work in
a.budgeting
b.accounting information systems
c.external auditing
d.tax accounting
14) The Gorni, Chambers, and Hale partnership is terminated when the claims of
company creditors exceed partnership assets by $100,000. The capital balances for
Gorni, Chambers, and Hale are $70,000, $10,000, and $0, respectively. The original
claims of the creditors were negotiated by Chambers and Hale. Which partner(s) is(are)
personally and individually liable for all partnership liabilities?
a.Gorni
b.Chambers
c.Chambers and Hale
d.Gorni, Chambers, and Hale
15) During an accounting period, a business has numerous transactions affecting each
of the following accounts. State for each account whether it is likely to have (a) debit
entries only, (b) credit entries only, or (c) both debit and credit entries.
(1)Advertising Expense(6)Owners Drawings
(2)Service Revenue(7)Cash
(3)Accounts Payable(8)Salaries and Wages Expense
(4)Accounts Receivable(9)Notes Payable
(5)Owners Capital(10)Insurance Expense
16) The “Other Accounts” column in a cash receipts journal is also referred to as the
a.miscellaneous column
b.excess column
c.sundry accounts column
d.compound-entry column
17) Solaris, Inc. has 2,000 shares of 5%, $10 par value, cumulative preferred stock and
50,000 shares of $1 par value common stock outstanding at December 31, 2014 . What
is the annual dividend on the preferred stock?
a.$5 per share
b.$1,000 in total
c.$10,000 in total
d.$.05 per share
18) The retained earnings statement
a.is the owners’ equity statement for a corporation
b.will show an addition to the beginning retained earnings balance for an
understatement of net income in a prior year
c.will not reflect net losses
d.will, in some cases, fail to reconcile the beginning and ending retained earnings
balances
19) Two items are omitted from each of the following summaries of balance sheet and
income
statement data for two proprietorships for the year 2014, Holly Enterprises and Cat
Stevens.
Black Sheep EnterprisesCat Stevens
Beginning of year:
Total assets $ 98,000 $129,000
Total liabilities 60,000 (c)
Total owners equity (a) 85,000
End of year:
Total assets 160,000 180,000
Total liabilities 100,000 50,000
Total owners equity 60,000 130,000
Changes during year in owners equity:
Additional investment (b) 25,000
Drawings 25,000 (d)
Total revenues 215,000 100,000
Total expenses 185,000 65,000
Instructions
Determine the missing amounts.
20) Damone Inc. applies overhead to production at a predetermined rate of 80% based
on direct labor cost. Job No. 250, the only job still in process at the end of August, has
been charged with manufacturing overhead of $7,400. What was the amount of direct
materials charged to Job 250 assuming the balance in Work in Process inventory is
$32,000?
a.$9,250
b.$15,350
c.$22,750
d.$32,000
21) Paid-In Capital in Excess of Stated Value
a.is credited when no-par stock does not have a stated value
b.is reported as part of paid-in capital on the balance sheet
c.represents the amount of legal capital
d.normally has a debit balance
22) A debit memorandum would not be issued by the bank for
a.a bank service charge
b.the issuance of traveler’s checks
c.the wiring of funds
d.the collection of a notes receivable
23) George Company has a standard costing system. The following data are available
for July:
a.Actual manufacturing overhead cost incurred: $23,000
b.Actual machine hours worked: 1,600
c.Overhead volume variance: $3,600 Unfavorable
d.Total overhead variance: $2,000 Unfavorable
e.Overhead is assigned to production on the basis of machine hours
Instructions
Determine the amount of (1) the controllable overhead variance and (2) the overhead
applied.
24) Carothers Company assembled the following information in completing its March
bank reconciliation: balance per bank $7,640; outstanding checks $1,550; deposits in
transit $2,500; NSF check $160; bank service charge $50; cash balance per books
$8,800. As a result of this reconciliation, Carothers will
a.reduce its cash account by $50
b.reduce its cash account by $210
c.reduce its cash account by $950
d.increase its cash account by $110
25) Under IFRS, there is no classification for
a.changes in accounting estimates
b.changes in accounting principles
c.discontinued operations
d.extraordinary items
26) When converting to IFRS statements, a company must do each of the following
except
a.identify the timing of its first IFRS statements
b.prepare an income statement at the date of transition to IFRS
c.select accounting principles that comply with IFRS
d.make extensive disclosures to explain the transition to IFRS
27) The interest charged on a $400,000 note payable, at the rate of 8%, on a 90-day note
would be
a.$32,000
b.$17,776
c.$8,000
d.$2,666
28) Sonoma Company has the following selected accounts after posting adjusting
entries:
Accounts Payable$ 62,000
Notes Payable, 3-month40,000
Accumulated DepreciationEquipment14,000
Notes Payable, 5-year, 6%80,000
Payroll Tax Expense4,000
Interest Payable3,000
Mortgage Payable120,000
Sales Taxes Payable38,000
Instructions
Prepare the current liability section of Sonoma Company’s balance sheet, assuming
$16,000 of the mortgage is payable next year.
29) The two criteria necessary for an item to be classified as an extraordinary item are
that the transaction or event must be (1) __________________ and (2)
___________________.
30) Accounting is an information system that identifies, _____________, and
_____________ the economic events of an organization.
31) Prepare an income statement, an owner’s equity statement, and a balance sheet for
the accupuncture practice of Golda Bear, from the items listed below for the month of
September.
Owners Capital, September 1$47,000
Accounts payable7,000
Equipment35,000
Service revenue28,000
Owners Drawings6,000
Insurance expense4,500
Cash3,000
Utilities expense700
Supplies4,800
Salaries and wages expense9,000
Accounts receivable14,000
Rent expense5,000
GOLDA BEAR, ACCUPUNCTURIST
Income Statement
For the Month Ended September 30, 2014
Revenues$
Expenses$$
Total expenses$
Net income$
GOLDA BEAR, ACCUPUNCTURIST
Owner’s Equity Statement
For the Month Ended September 30, 2014
Owners Capital, September 1$
Add:
$
Less:
$
GOLDA BEAR, ACCUPUNCTURIST
Balance Sheet
September 30, 2014
Assets
$
Total assets
$
Liabilities and Owner’s Equity
Liabilities
$
Owner’s Equity$
Total liabilities and owner’s equity$
32) Vineyard Company is proposing to spend $138,000 to purchase a machine that will
provide annual cash flows of $25,000. The appropriate present value factor for 10
periods is 5.65.
Instructions
Compute the proposed investments net present value, and indicate whether the
investment should be made by Vineyard Company.
33) Newton Company has the following accounts in its general ledger at July 31:
Accounts Receivable $40,000 and Allowance for Doubtful Accounts $2,500. During
August, the following transactions occurred.
Oct.15Sold $15,000 of accounts receivable to Fast Factors, Inc. who assesses a 3%
finance charge.
25Made sales of $800 on VISA credit cards. The credit card service charge is 2%.
Instructions
Journalize the transactions.
34) If a $1 million, 10%, 10-year bond issue was sold at 98, the cash proceeds from the
issuance of the bonds amounted to $________________.
35) Show Company had total operating expenses of $153,000 in 2014, which included
Depreciation Expense of $30,000. Also during 2014, prepaid expenses decreased by
$9,500 and accrued expenses increased by $8,500.
Instructions
Calculate the amount of cash payments for operating expenses in 2012 using the direct
method.
36) You are visiting with a friend, Jim Borke, who wants to start a new business. During
discussions on forming the business, Jim makes this statement:
Our business will have accounts receivable and accounts payable. It will also acquire a
substantial amount of computers and equipment. Will it be acceptable to use the cash
basis of accounting?
Prepare a response for Jim.
37) West Jefferson Corporation has the following stockholders’ equity accounts:
Preferred Stock
Paid-in Capital in Excess of ParPreferred Stock
Common Stock
Paid-in Capital in Excess of Stated ValueCommon Stock
Paid-in Capital from Treasury StockCommon
Retained Earnings
Treasury StockCommon
Instructions
Classify each account using the following tabular alignment.
Paid-in CapitalRetained
AccountCapital StockAdditionalEarningsOther