1) Planning is the process of developing the companys objectives or goals and
translating these objectives into courses of action.
2) A company pays $36,000 for twelve month’s rent on October 1. The adjusting entry
on December 31 is debit Rent Expense, $9,000 and credit Prepaid Rent, $9,000.
3) The entry to record the disposal of fixed assets will include a credit to accumulated
depreciation.
4) Cash equivalents are short -term investments that will be converted to cash within
120 days.
5) Care must be taken involving capital investment decisions, since normally a
long-term commitment of funds is involved and operations could be affected for many
years.
6) The total interest expense over the entire life of a bond is equal to the sum of the
interest payments plus the total discount or minus the total premium related to the bond.
7) Money orders are considered cash.
8) When a plant asset is traded for another similar asset, losses on the asset traded are
not recognized.
9) Operating expenses are product costs and are expensed when the product is sold.
10) When a bottleneck occurs between two products, the company must determine the
contribution margin for each product and manufacture the product that has the highest
contribution margin per bottleneck hour.
11) When the market rate of interest is less than the contract rate for a bond, the bond
will sell for a premium.
12) Internal controls for cash payments also apply to payrolls.
13) Bondholders are creditors of the issuing corporation.
14)
The balance in the capital account on the worksheet will equal the amount presented in
the balance sheet.
15) A company is planning to purchase a machine that will cost $24,000, have a
six-year life, and have no salvage value. The company expects to sell the machines
output of 3,000 units evenly throughout each year. Total income over the life of the
machine is estimated to be $12,000. The machine will generate cash flows per year of
$6,000. The accounting rate of return for the machine is 50%.
16) Computerized accounting systems
A.is a tedious form of recordkeeping process
B.improve the timeliness of reporting
C.prevent all journalizing errors
D.are only used in medium and large businesses
17) Who are the individuals charged with the responsibility for directing the day-to-day
operations of a business?
A.Investors
B.Managers
C.Shareholders
D.Customers
18) The classification and normal balance of the drawing account is
A.an expense with a credit balance
B.an expense with a debit balance
C.a liability with a credit balance
D.owner’s equity with a debit balance
19) If Beginning Inventory (BI) + Purchases (P) – Ending Inventory (EI) = Cost of
Goods Sold (COGS), an equivalent equation can be written as?
A.BI + P = COGS – EI
B.BI – P = COGS + EI
C.BI + P = COGS + EI
D.EI + P = COGS – BI
20) Watson purchased one-half of Daltons interest in the Patton and Dalton partnership
for $45,000. Prior to the investment, land was revalued to a market value of $135,000
from a book value of $93,000. Patton and Dalton share net income equally. Dalton had
a capital balance of $35,000 prior to these transactions.
Required:
a. Provide the journal entry for the revaluation of land.
b. Provide the journal entry to admit Watson.
21) Herberto Company had a net income of $74,000, and other comprehensive loss of
$8,500 for 2012. On January 1, 2012, the Retained Earnings balance was $425,000 and
the Accumulated Other Comprehensive Income balance was $52,000. Determine the (a)
comprehensive income for 2012, (b) Retained Earnings balance on December 31, 2012,
and (c) the Accumulated Other Comprehensive Income on December 31, 2012.
22) A 60-day, 12% note for $7,000, dated April 15, is received from a customer on
account. The face value of the note is
A.$6,860
B.$7,140
C.$7,840
D.$7,000
23) On the statement of cash flows prepared by the indirect method, a $50,000 gain on
the sale of investments would be
A.deducted from net income in converting the net income reported on the income
statement to cash flows from operating activities
B.added to net income in converting the net income reported on the income statement to
cash flows from operating activities
C.added to dividends declared in converting the dividends declared to the cash flows
from financing activities related to dividends
D.deducted from dividends declared in converting the dividends declared to the cash
flows from financing activities related to dividends
24) Harper Company lends Hewell Company $40,000 on March 1, accepting a
four-month, 6% interest note. Harper Company prepares financial statements on March
31. What adjusting entry should be made before the financial statements can be
prepared?
A.Cash 200
Interest Revenue 200
B. Interest Receivable 800
Interest Revenue 800
C.Interest Receivable 200
Interest Revenue 200
D.Note Receivable 40,000
25) Each year there is a ceiling for the amount that is subject to all of the following
except
A.social security tax
B.federal income tax
C.federal unemployment tax
D.state unemployment tax
26) Immediately prior to the admission of Abbott, the Smith-Jones Partnership assets
had been adjusted to current market prices, and the capital balances of Smith and Jones
were $40,000 and $60,000 respectively. If the parties agree that the business is worth
$120,000, what is the amount of bonus that should be recognized in the accounts at the
admission of Abbott?
A.$60,000
B.$80,000
C.$40,000
D.$20,000
27) Cool-It Company manufactures and sells commercial air conditioners. Because of
current trends, it expects to increase sales by 10 percent next year. If this expected level
of production and sales occurs and plant expansion is not needed, how should this
increase affect next years total amounts for the following costs.
Variable Costs Fixed Costs Mixed Costs
A. increase increase increase
B. increase no change increase
C. no change no change increase
D. decrease increase increase
28) Identify which of the following accounts should be closed with a debit or a credit to
Income Summary at the end of the fiscal year. If it is not closed to Income Summary,
mark as n/a.
1> Utilities Payable
2> Utilities Expense
3> Supplies
4> Supplies Expense
5> Fees Earned
6> Unearned Fees
7> Accounts Receivable
8> Jason Hill, Drawing
9> Jason Hill, Capital
10> Accumulated Depreciation – Equipment
11> Depreciation Expense – Equipment
12> Equipment
13> Prepaid Insurance
14> Insurance Expense
29) Horizontal analysis is a technique for evaluating financial statement data
A.for one period of time
B.over a period of time
C.on a certain date
D.as it may appear in the future
30) A credit may signify a
A.decrease in assets
B.decrease in liabilities
C.decrease in capital
D.decrease in revenue
31) If fixed costs increased and variable costs per unit decreased, the break-even point
would:
A.increase
B.decrease
C.remain the same
D.cannot be determined from the data provided
32) Mason Corporation had $650,000 in invested assets, sales of $700,000, income
from operations amounting to $99,000, and a desired minimum rate of return of 15%.
The residual income for Mason is:
A.$0
B.$84,150
C.($6,000)
D.$1,500
33) Which of the following items would not be classified as part of factory overhead?
A.Direct labor used
B.Amortization of manufacturing patents
C.Production supervisors’ salaries
D.Factory supplies used
34) Income from operations for Division K is $220,000, and income from operations
before service department charges is $975,000. Therefore:
A.total operating expenses are $755,000
B.total manufacturing expenses are $755,000
C.direct materials, direct labor, and factory overhead total $755,000
D.total service department charges are $755,000
35) A $135 petty cash fund has cash of $28 and receipts of $110. The journal entry to
replenish the account would include a
A.credit to Petty Cash for $110
B.debit to Cash for $110
C.credit to Cash Over and Short for $3
D.credit to Cash for $82
36) A person authorized to write checks drawn on a checking account at a bank must
sign and have on file with the bank a
A.signature card
B.deposit ticket
C.checkbook
D.bank card
37) Entries are made to the Petty Cash account when
A.making payments out of the fund
B.recording shortages in the fund
C.replenishing the petty cash fund
D.establishing the fund
38) Use the following information in the adjusted trial balance for Stockton Company
to answer the following questions.
Determine the current assets.
A.$23,030
B.$9,330
C.$21,930
D.$8,630
39) Which of the following costs would be included in merchandise inventory?
(a) Purchase price
(b) Insurance in transit FOB shipping point
(c) Freight for delivery FOB shipping point
(d) Repair due to negligence of receiving clerk
(e) Receiving Department employee salary
(f) Cost of processing purchase orders
40) Xavier and Yolanda have original investments of $50,000 and $100,000
respectively in a partnership. The articles of partnership include the following
provisions regarding the division of net income: interest on original investment at 20%,
salary allowances of $34,000 and $26,000 respectively, and the remainder equally. How
much of the net income of $100,000 is allocated to Xavier?
A.$49,000
B.$51,000
C.$50,000
D.$56,000
41) The management of River Corporation is considering the purchase of a new
machine costing $380,000. The company’s desired rate of return is 6%. The present
value factor for an annuity of $1 at interest of 6% for 5 years is 4.212. In addition to the
foregoing information, use the following data in determining the acceptability in this
situation:
The cash payback period for this investment is:
A.4 years
B.5 years
C.20 years
D.3 years
42) Division X reported income from operations of $975,000 and total service
department charges of $575,000. Therefore:
A.net income was $400,000
B.the gross profit margin was $400,000
C.income from operations before service department charges was $1,550,000
D.consolidated net income was $400,000
43) Department E had 4,000 units in Work in Process that were 40% completed at the
beginning of the period at a cost of $12,500. Of the $12,500, $8,000 was for material
and $4,500 was for conversion costs. 14,000 units of direct materials were added during
the period at a cost of $28,700. 15,000 units were completed during the period, and
3,000 units were 75% completed at the end of the period. All materials are added at the
beginning of the process. Direct labor was $32,450 and factory overhead was $18,710.
If the average cost method is used the material cost per unit (to the nearest cent) would
be:
A.$2.04
B.$1.59
C.$1.91
D.$2.00
44) Which of the following is an advantage of a general partnership when compared to
a corporation?
A.A partnership is more likely to have a positive net income
B.The partnership is relatively inexpensive to organize
C.Creditors to a partnership cannot attach personal assets of partners
D.The partnership usually hires professional managers
45) Beginning inventory, purchases and sales data for hammers are as follows:
Assuming the business maintains a perpetual inventory system, complete the inventory
cards and calculate the cost of merchandise sold and ending inventory under the
following assumptions:
a. First-in, first-out
b. Last-in, first-out
46) The following lots of a particular commodity were available for sale during the
year:
The firm uses the periodic system and there are 25 units of the commodity on hand at
the end of the year.
What is the amount of the inventory at the end of the year using the average cost
method?
A.$1,685
B.$1,575
C.$1,805
D.$3,705
47) Penny, Inc. employs a process costing system. Direct materials are added at the
beginning of the process. Here is information about Julys activities:
Using the FIFO method, the number of units started and completed in July was
A.14,250
B.15,000
C.13,400
D.15,740
48) The following are inputs and outputs to the help desk.
Operator training
Number of calls per day
Maintenance of computer equipment
Number of operators
Number of complaints
Identify whether each is an input or an output to the help desk.
49) Match the following terms with the best definition given below.
50) Lamar Industries warrants its products for one year. The estimated product warranty
is 3% of sales. Assume that sales were $190,000 for June. In July, a customer received
warranty repairs requiring $185 of parts and $50 of labor.
Required:
51) Warmfeet manufactures comforters. Assume the estimated inventories on January 1,
2012, for finished goods, work in process, and materials were $51,000, $28,000 and
$33,000 respectively. Also assume the desired inventories on December 31, 2012, for
finished goods, work in process, and materials were $48,000, $35,000 and $29,000
respectively. Direct material purchases were $555,000. Direct labor was $252,000 for
the year. Factory overhead was $176,000. Prepare a cost of goods sold budget for
Warmfeet, Inc.
52) Discuss the following statement:
Operating cycles for all merchandising businesses are the same, with similar profit
margins.
Include an example(s) to illustrate your explanation.
53) Describe at least five benefits of budgeting.
54) Ski Master Company pays weekly salaries of $18,000 on Friday for a five-day week
ending on that day. Journalize the necessary adjusting entry at the end of the accounting
period, assuming that the period ends on Wednesday.