1) Evaluation of company performance does not include analysis of (1) past and current
performance, (2) current financial position, and (3) future performance and risk.
2) Product costs are capitalized as inventory on the balance sheet and period costs are
expenses on the income statement.
3) Goods in transit are automatically included in inventory regardless of whether title
has passed to the buyer.
4) If a U.S. Company’s credit sale to an international customer allows payment to be
made in a foreign currency, the same exchange rate must be used for the date of sale
and the cash payment date.
5) Extraordinary repairs are expenditures extending the asset’s useful life beyond its
original estimate, and are capital expenditures because they benefit future periods.
6) Capital structure refers to a company’s long-run financial viability and its ability to
cover long-term obligations.
7) A company has inventory with a selling price of $451,000, a market value of
$223,000 and a cost of $241,000. According to the lower of cost or market, the
inventory should be written down to $223,000.
8) An advantage of the break-even time (BET) method over the payback period method
is that it recognizes the time value of money.
9) If a machine is damaged during unpacking, the repairs are added to its cost.
10) A capital deficiency exists when at least one partner has a debit balance in his or her
capital account at the point of final cash distribution during liquidation.
11) In preparing a company’s statement of cash flows for the year just ended, the
following information is available:
Net cash flows from financing activities for the year were:
A.$147,000 of net cash used.
B.$26,000 of net cash used.
C.$347,000 of net cash used.
D.$51,000 of net cash used.
E.$340,000 of net cash used.
12) A limitation of the internal rate of return method is that it:
A.Does not consider the time value of money.
B.Measures results in years.
C.Lacks ability to compare dissimilar projects.
D.Ignores varying risks over the life of a project.
E.Measures net income rather than cash flows.
13) Internal users of financial information:
A.Are not directly involved in operating a company.
B.Are those individuals involved in managing and operating the company.
C.Include shareholders and lenders.
D.Include directors and customers.
E.Include suppliers, regulators, and the press.
14) Canfield Technical School allocates administrative costs to its respective
departments based on the number of students enrolled, while maintenance and utilities
are allocated per square feet of the classrooms. Based on the information below, what is
the total amount of administrative cost to the Accounting Department (rounded to the
nearest dollar) if administrative costs for the school were $50,000, maintenance fees
were $12,000, and utilities were $6,000?
A.$8,929.
B.$17,000.
C.$18,500.
D.$22,667.
E.$11,111.
15) Portside Watercraft uses a job order costing system. During one month Portside
purchased $153,000 of raw materials on credit; issued materials to production of
$164,000 of which $24,000 were indirect. Portside incurred a factory payroll of
$95,000, paid in cash, of which $25,000 was indirect labor. Portside uses a
predetermined overhead rate of 170% of direct labor cost. The journal entry to record
the application of factory overhead to production is:
A.Debit Work in Process Inventory $55,800; credit Factory Overhead $55,800.
B.Debit Work in Process Inventory $161,500; credit Factory Overhead $161,500.
C.Debit Work in Process Inventory $119,000; credit Factory Overhead $119,000.
D.Debit Factory Overhead $119,000; credit Work in Process Inventory $119,000.
E.Debit Work in Process Inventory $95,000; credit Factory Payroll $95,000.
16) Using the information below for Singing Dolls, Inc., determine cost of goods
manufactured for the year:
A.$13,000.
B.$44,500.
C.$57,500.
D.$94,500.
E.$52,000.
17) Internal control policies and procedures have limitations not including:
A.Human error.
B.Human fraud.
C.Cost-benefit principle.
D.Collusion.
E.Establishing responsibilities.
18) Metaline Corp. uses the weighted average method for inventory costs and had the
following information available for the year. The number of units transferred to finished
goods during the year is:
A.3,200 units.
B.3,000 units.
C.3,400 units.
D.3,160 units.
E.3,500 units.
19) Chandler Company sold merchandise on credit to Jamie Morgan for $700 and the
cost of the merchandise was $290. Chandler would record this sale in the:
A.General journal.
B.Cash receipts journal.
C.Sales journal.
D.General ledger.
E.Accounts Receivable controlling account.
20) Bering Rock acquires a granite quarry at a cost of $590,000, which is estimated to
contain 200,000 tons of granite and is expected to take 6 years to remove. Compute the
depletion expense for the first year assuming 38,000 tons were removed.
A.$98,333.
B.$93,158.
C.$38,000.
D.$12,881.
E.$112,100.
21) Selected current year company information follows:
121,851
The total asset turnover is:
A.2.24 times
B.2.81 times
C.3.64 times
D.4.67 times
E.6.28 times
22) Which of the following is not true about the Allowance for Doubtful Accounts?
A.It is a contra asset account.
B.It is used instead of reducing accounts receivable directly.
C.It is debited when uncollectible accounts are written off.
D.It is a liability account.
E.It is credited when bad debts expense is estimated and recorded.
23) Following are seven items a through g that would cause Rembrandt Company’s
book balance of cash to differ from its bank statement balance of cash.
a. A service charge imposed by the bank.
b. A check listed as outstanding on the previous period’s reconciliation and still
outstanding at the end of this month.
c. A customer’s check returned by the bank is marked “Not Sufficient Funds (NSF)”.
d. A deposit mailed to the bank on the last day of the current month and not recorded on
this month’s bank statement.
e. A check paid by the bank at its correct $190 amount recorded in error in the
company’s check register at $109.
f. An unrecorded credit memorandum indicating that bank collected a note receivable
for Rembrandt Company and deposited the proceeds in the company’s account.
g. A check written in the current period that is not yet paid or returned by the bank.
Indicate where each item, letters a-g, would appear on Rembrandt Company’s bank
reconciliation by placing its identifying letter in the parentheses in the proper section of
the form below.
24) All of the following statements regarding accounting for trading securities under
U.S. GAAP are true except:
A.The entire portfolio of trading securities is reported at fair value.
B.An unrealized gain or loss from a change in fair value is reported on the income
statement.
C.A realized gain or loss is recorded when the securities are sold and reported on the
income statement.
D.When the period-end fair value adjustment for the portfolio of trading securities is
computed, it includes the cost and fair value of any securities sold.
E.Any prior period fair value adjustment to the portfolio is not used to compute the gain
or loss from sale of individual transactions.
25) Stormer Company reports the following amounts on its statement of cash flow: Net
cash provided by operating activities was $28,000; net cash used in investing activities
was $10,000 and net cash used in financing activities was $12,000. If the beginning
cash balance is $5,000, what is the ending cash balance?
A.$55,000.
B.$45,000.
C.$31,000.
D.$6,000.
E.$11,000.
26) A plan that lists the types and amounts of selling expenses expected during the
budget period is called a(n):
A.Sales budget.
B.General and administrative budget.
C.Capital expenditures budget.
D.Selling expense budget.
E.Purchases budget.
27) A company uses the perpetual inventory system and recorded the following entry:
This entry reflects a:
A.Purchase of merchandise on credit.
B.Return of merchandise.
C.Sale of merchandise on credit.
D.Payment of the account payable less a 2% cash discount taken.
E.Payment of the account payable less a 1% cash discount taken.
28) Flagstaff Company has budgeted production units for July of 7,900 units. Variable
factory overhead is $1.20 per unit. Budgeted fixed factory overhead is $19,000, which
includes $3,000 of factory equipment depreciation. Compute the total budgeted
overhead to be reported on the factory overhead budget for the month.
A.$25,480.
B.$19,000.
C.$23,900.
D.$28,480.
E.$9,480.
29) The insufficient capacity of a company’s plant asset to meet the company’s
productive demands is called ______________________.
30) Widmer Corp. requires a minimum $10,000 cash balance. If necessary, loans are
taken to meet this requirement at a cost of 1% interest per month (paid monthly). If the
ending cash balance exceeds the minimum, the excess will be applied to repaying any
outstanding loan balance. The cash balance on July 1 is $10,400. Cash receipts other
than for loans received for July, August, and September are forecasted as $24,000,
$32,000, and $40,000, respectively. Payments other than for loan or interest payments
for the same period are planned at $28,000, $30,000, and $32,000, respectively at July
1, there are no outstanding loans.
Required:
Prepare a cash budget for July, August, and September.
31) Describe the journal entries required to record the issuance of bonds at a discount
and the payment of bond interest, including any applicable amortization.
32) Explain the purpose of financial statement analysis for both external and internal
users.
33) A process cost summary involves computations and analysis at four sequential
steps. These are (1) _________, (2) _____________, (3) _______________, and (4)
______________.