1) Which of the following is not an advantage of issuing bonds instead of common
stock?
a.Stockholder control is not affected
b.Earnings per share on common stock may be lower
c.Income to common shareholders may increase
d.Tax savings result
2) Bacher Company developed the following reconciling information in preparing its
September bank reconciliation:
Cash balance per bank, 9/30$6,160
Note receivable collected by bank3,360
Outstanding checks3,200
Deposits in transit2,520
Bank service charge42
NSF check672
Using the above information, determine the cash balance per books (before
adjustments) for the Jeter Company.
a.$2,834
b.$5,480
c.$8,148
d.$8,828
3) All of the following statements are correct about management by exception except it
a.enables top management to focus on problem areas that need attention
b.means that management has to investigate every budget difference
c.requires that there must be some guidelines for identifying an exception
d.means that top management’s review of a budget report is focused primarily on
differences between actual results and planned objectives
4) Carson Stetson is the Bottle Division manager and her performance is evaluated by
executive management based on Division ROI. The current controllable margin for
Bottle Division is $92,000. Its current operating assets total $420,000. The division is
considering purchasing equipment for $80,000 that will increase sales by an estimated
$30,000, with annual depreciation of $30,000. If the equipment is purchased, what will
happen to the return on investment for the division?
a.An increase of 0.5%
b.A decrease of 0.5%
c.A decrease of 3.5%
d.It will remain unchanged
5) Each of the following is included in computing the acid-test ratio except
a.cash
b.inventory
c.receivables
d.short-term investments
6) The subtotal, “Cost of goods manufactured” appears on
a.a merchandising company’s income statement
b.a manufacturing company’s income statement
c.both a manufacturing and a merchandising company’s income statement
d.neither a merchandising nor a manufacturing company’s income statement
7) Under IFRS, bank overdrafts are classified as
a.operating activities
b.investing activities
c.financing activities
d.cash and cash equivalents
8) Herman Company has a debit balance of $5,000 in its Allowance for Doubtful
Accounts before any adjustments are made at the end of the year. Based on review and
aging of its accounts receivable at the end of the year, Herman estimates that $70,000 of
its receivables are uncollectible. The amount of bad debt expense which should be
reported for the year is:
a.$5,000
b.$65,000
c.$70,000
d.$75,000
9) In a partnership, mutual agency means
a.each partner acts on his own behalf when engaging in partnership business
b.the act of any partner is binding on all other partners, only if partners act within their
scope of authority
c.an act by a partner is judged as binding on other partners depending on whether the
act appears to be appropriate for the partnership
d.that partners must pay taxes on a mutual or combined basis
10) Joe Poultry uses a periodic inventory system. Its beginning inventory on May 1
consisted of 300 units of Product A at a cost of $6.25 per unit. During May, the
following purchases and sales were made:
PurchasesSales
May6300units at $7.20May4275units
14400units at $9.108300units
21100units at $11.5022400units
28 500units at $11.8024 225units
1,3001,200
Instructions: Compute the May 31 ending inventory and May cost of goods sold under
(a) Average Cost, (b) FIFO, and (c) LIFO. Provide appropriate supporting calculations.
1>Average Ending Inventory = $_;Cost of Goods Sold = $_.
2>FIFO Ending Inventory = $_;Cost of Goods Sold = $_.
3>LIFO Ending Inventory = $_;Cost of Goods Sold = $_.
11) The effect of the declaration of a cash dividend by the board of directors is to
IncreaseDecrease
a.Stockholders’ equityAssets
b.AssetsLiabilities
c.LiabilitiesStockholders’ equity
d.LiabilitiesAssets
12) The information in a statement of cash flows will not help investors to assess the
entity’s ability to
a.generate future cash flows
b.obtain favorable borrowing terms at a bank
c.pay dividends
d.pay its obligations when they become due
13) Raw materials inventory, January 1$ 20,000
Raw materials inventory, December 3110,000
Work in process, January 16,000
Work in process, December 319,000
Finished goods, January 116,000
Finished goods, December 3120,000
Raw materials purchases400,000
Direct labor200,000
Factory utilities75,000
Indirect labor45,000
Factory depreciation180,000
Selling and administrative expenses210,000
Assume your answer to question 7 above is $850,000. Cost of goods manufactured
equals:
a.$847,000
b.$850,000
c.$853,000
d.$854,000
14) Monthly and quarterly time periods are called
a.calendar periods
b.fiscal periods
c.interim periods
d.quarterly periods
15) Kahn Mining Company purchased a mine for $60 million which is estimated to
have 250,000 tons of ore and a salvage value of $10 million.
(a)In the first year, 50,000 tons of ore are extracted and sold. Prepare the journal entry
to record depletion expense for the first year.
(b)In the second year, 150,000 tons of ore are extracted but only 125,000 tons are sold.
Prepare the journal entry to record depletion expense for the second year.
(c)What amount and in what account are the tons of ore not sold reported?
16) Days in inventory is calculated by dividing
a.the inventory turnover by 365 days
b.average inventory by 365 days
c.365 days by the inventory turnover
d.365 days by average inventory
17) The final step in solving an ethical dilemma is to
a.identify and analyze the principal elements in the situation
b.recognize an ethical situation
c.identify the alternatives and weigh the impact of each alternative on stakeholders
d.recognize the ethical issues involved
18) Prepare the necessary journal entries for the following transactions:
(a)On September 1, Draper Company borrowed $180,000 from Dixion County Bank on
a 6-month, 8% note.
(b)On December 31, Draper Company accrued interest (assume adjusting entries are
only made at the end of the year).
19) The revenue recognition principle dictates that revenue should be recognized in the
accounting records
a.when cash is received
b.when the performance obligation is satisfied
c.at the end of the month
d.in the period that income taxes are paid
20) Direct materials and direct labor of a company total $9,000,000. If manufacturing
overhead is $4,000,000, what is direct labor cost?
a.$5,000,000
b.$9,000,000
c.$0
d.Cannot be determined from the information provided
21) As Mel Smith was doing his year-end accounting, he noticed that the bookkeeper
had made errors in recording several transactions. The erroneous transactions are as
follows:
(a)A check for $700 was issued for goods previously purchased on account. The
bookkeeper debited Accounts Receivable and credited Cash for $700.
(b)A check for $180 was received as payment on account. The bookkeeper debited
Accounts Payable for $810 and credited Accounts Receivable for $810.
(c)When making the entry to record the year’s depreciation expense, the bookkeeper
debited Accumulated DepreciationEquipment for $1,000 and credited Cash for $1,000.
(d)When accruing interest on a note payable, the bookkeeper debited Interest
Receivable for $200 and credited Interest Payable for $200.
Instructions
Prepare the appropriate correcting entries. (Do not reverse the original entries.)
22) Trudy, Inc. had the following bank reconciliation at March 31, 2014:
Balance per bank statement, 3/31/14$37,200
Add: Deposit in transit 6,300
43,500
Less: Outstanding checks 8,600
Balance per books, 3/31/14$34,900
Data per bank for the month of April 2014 follow:
Deposits$46,700
Disbursements49,700
All reconciling items at March 31, 2014 cleared the bank in April. Outstanding checks
at April 30, 2014 totaled $6,000. There were no deposits in transit at April 30, 2014 .
What is the cash balance per books at April 30, 2014?
a.$25,900
b.$31,900
c.$34,200
d.$38,500
23) The book value of an asset is equal to the
a.asset’s fair value less its historical cost
b.blue book value relied on by secondary markets
c.replacement cost of the asset
d.asset’s cost less accumulated depreciation
24) Paiva Corporation splits its common stock 2 for 1, when the market value is $80 per
share. Prior to the split, Paiva had 100,000 shares of $10 par value common stock
issued and outstanding. After the split, the par value of the stock
a.remains the same
b.is reduced to $2 per share
c.is reduced to $5 per share
d.is reduced to $20 per share
25) Flite Company reported income before taxes of $900,000 and an extraordinary loss
of $250,000. Assume that the companys tax rate is 35%. What amounts will be reported
on the income statement for income before irregular items and extraordinary items,
respectively?
a.$585,000 and $250,000
b.$585,000 and $162,500
c.$650,000 and $250,000
d.$650,000 and $162,500
26) Redding Company has budgeted sales revenues as follows:
June July August
Credit sales$135,000$145,000$ 90,000
Cash sales 90,000 255,000 195,000
Total sales$225,000$400,000$285,000
Past experience indicates that 60% of the credit sales will be collected in the month of
sale and the remaining 40% will be collected in the following month. Purchases of
inventory are all on credit and 50% is paid in the month of purchase and 50% in the
month following purchase. Budgeted inventory purchases are:
June$300,000
July250,000
August105,000
Other cash disbursements budgeted: (a) selling and administrative expenses of $48,000
each month, (b) dividends of $105,000 will be paid in July, and (c) purchase of
equipment in August for $30,000 cash.
The company wishes to maintain a minimum cash balance of $50,000 at the end of each
month. The company borrows money from the bank at 8% interest if necessary to
maintain the minimum cash balance. Borrowed money is repaid in months when there
is an excess cash balance. The beginning cash balance on July 1 was $50,000. Assume
that borrowed money in this case is for one month.
Instructions
Prepare a cash budget for the months of July and August. Prepare separate schedules for
expected collections from customers and expected payments for purchases of inventory.
27) Posting to control accounts in a costing system are made
a.monthly
b.daily
c.annually
d.semi-annually
28) Determine the impact on the balance sheet accounts if the following information is
not used to adjust the accounts of Mood Food Company for the month of January,
2014 . Round answers to the nearest dollar.
1>The company rents extra office space to Beulah, CPAs. Beulah pays the $6,000 rent
annually on January 1 .
2>The company has an outstanding loan to its President in the amount of $150,000. The
loan accrues interest at the annual rate of 6%. Principal and interest are due January 1,
2016 .
3>The company completed work on a project during January that was not yet billed to
the client. The client will be charged $3,100.
29) Pitt Corp. makes and sells a single product, widgets. Two pounds of sand are
needed to make one widget. Budgeted production of widgets for the next few months
follows:
September25,000 units
October31,000 units
The company wants to maintain monthly ending inventories of sand equal to 20% of
the following month’s production needs. On August 31, 10,000 pounds of sand were on
hand.
Instructions
How much sand should be purchased in September?
30) Match each item/event pair below with the indicated change in the item. An
individual classification may be used more than once, or not at all. For each dividend,
assume that both declaration and payment or distribution has occurred.
Classifications
Item increases
Item decreases
Item is unchanged
Direction of change cannot be determined
ItemEvent
____1>Par value per shareStock split
____2>Total retained earningsStock dividend
____3>Total stockholders equityPrior period adjustment increases last years
net income
____4>Earnings per common shareRestriction of retained Earnings
____5>Total retained earningsCash dividend
____6>Total paid-in capitalStock dividend
31) An adjusting entry recording accrued salaries for a period indicates that Salaries
Expense has been ________________ but has not yet been ________________ or
recorded.
32) Tim Stihl and Matt Jaffney are discussing how the market price of a bond is
determined. Tim believes that the market price of a bond is solely a function of the
amount of the principal payment at the end of the term of a bond. Is he right? Discuss.
33) For the items listed below, fill in the appropriate code letter to indicate whether the
item is an asset, liability, or owner’s equity item.
Code
AssetA
LiabilityL
Owner’s EquityOE
1>Rent Expense6>Cash
2>Equipment7>Accounts Receivable
3>Accounts Payable8>Owners Drawings
4>Owners Capital9>Service Revenue
5>Insurance Expense10>Notes Payable