1) The internal rate of return method of analyzing capital investment proposals uses the
present value concept to compute an internal rate of return expected from the proposals.
2) The journal entry to record the cost of warranty repairs that were incurred during the
current period, but related to sales made in prior years, includes a debit to Warranty
Expense.
3) If direct materials cost per unit increases, the break-even point will increase.
4) An example of a general-purpose financial statement would be a report about
projected price increases related to transportation costs.
5) Long lived assets held for sale are classified as fixed assets.
6) Growth firms generally pay regular dividends to stockholders.
7) Both Accounts Receivable and Notes Receivable represent claims that are expected
to be collected in cash.
8) In the periodic inventory system, purchases of merchandise for resale are debited to
the Purchases account.
9) For a period during which the quantity of inventory at the end equals the inventory at
the beginning, income from operations reported under variable costing will be smaller
than income from operations reported under absorption costing.
10) Direct materials cost that varies with the number of units produced is an example of
a fixed cost of production.
11) Prime costs consist of factory overhead and direct labor.
12) The cost of merchandise sold during the year was $45,000. Merchandise inventories
were $13,500 and $10,500 at the beginning and end of the year, respectively. Accounts
payable were $7,000 and $5,000 at the beginning and end of the year, respectively.
Using the direct method of reporting cash flows from operating activities, cash
payments for merchandise total
A.$46,000
B.$44,000
C.$50,000
D.$40,000
13) A debit signifies a decrease in
A.assets
B.expenses
C.dividends
D.revenues
14) Put the following in the order of the flow of manufacturing costs for a company
a. Closing under/over applied factory overhead to cost of goods sold
b. Materials purchased
c. Factory labor used and factory overhead incurred in production
d. Completed jobs moved to finished goods
e. Factory overhead applied to jobs according to the predetermined overhead rate
f. Materials requisitioned to jobs
g. Selling of finished product
h. Preparation of financial statements to determine gross profit
15) Three identical units of Item Magnesium XP are purchased during May, as shown
below.
Assume that two units are sold on May 23 for $313. Determine the gross profit for May
and ending inventory on May 31 using (a) FIFO, (b) LIFO, and (c) average cost
methods.
16) In performing a vertical analysis, the base for cost of goods sold is
A.total selling expenses
B.net sales
C.total expenses
D.gross profit
17) Costs on the income statement for both a merchandiser and a manufacturer would
include:
A.operating expenses
B.direct materials
C.direct labor incurred
D.cost of goods manufactured
18) Which of the following is an example of a prepaid expense?
A.Supplies
B.Accounts Receivable
C.Unearned Subscriptions
D.Unearned Fees
19) Assuming that the Morocco Desk Co. purchases 6,000 feet of lumber at $6.00 per
foot and the standard price for direct materials is $5.00, the entry to record the purchase
and unfavorable direct materials price variance is:
A.Direct Materials 30,000
Direct Materials Price Variance 6,000
Accounts Payable36,000
B.Direct Materials30,000
Accounts Payable30,000
C.Direct Materials36,000
Direct Materials Price Variance 6,000
Accounts Payable 30,000
D.Work in Process36,000
Direct Materials Price Variance 6,000Accounts Payable 30,000
20) Which of the following will have no effect on an employees take-home pay?
A.Social security tax
B.Unemployment tax
C.Marital status
D.Number of exemptions claimed
21) The collection of an account that had been previously written off under the
allowance method of accounting for uncollectibles
A.will increase net income in the period it is collected
B.will decrease net income in the period it is collected
C.does not affect net income in the period it is collected
D.requires a correcting entry for the period in which the account was written off
22) During May, Blast sold 650 portable CD players for $50 each. Each CD player cost
Blast $25 to purchase and carried a one-year warranty. If 10 percent of the goods sold
typically need to be replaced over the warranty period, what amount should Blast debit
Product Warranty Expense for in May?
A.$3,250
B.$1,625
C.$ 650
D.$1,300
23) Standards that represent levels of operation that can be attained with reasonable
effort are called:
A.theoretical standards
B.ideal standards
C.variable standards
D.normal standards
24) Encore Consulting is completing the accounting information processing at the end
of the companys first fiscal year, December 31, 2011. The following trial balances are
available.
A. Reconstruct the adjusting entries and give a brief explanation of each.
B. What is the amount of net income?
25) The Cardinal Company had a finished goods inventory of 55,000 units on January
1. Its projected sales for the next four months were: January – 200,000 units; February –
180,000 units; March – 210,000 units; and April – 230,000 units. The Cardinal Company
wishes to maintain a desired ending finished goods inventory of 20% of the following
months sales.
What would be the budgeted production for March?
A.256,000
B.206,000
C.214,000
D.298,000
26) A debit balance in the Allowance for Doubtful Accounts
A.is the normal balance for that account
B.indicates that actual bad debt write-offs have been less than what was estimated
C.cannot occur if the percentage of receivables method of estimating bad debts is used
D.indicates that actual bad debt write-offs have exceeded previous provisions for bad
debts
27) Zeke Company is a manufacturing company that has worked on several production
jobs during the 1st quarter of the year. Below is a list of all the jobs for the quarter:
Job 356, 357, 358 & 359 were completed. Jobs 356 & 357 were sold at a profit of $500
on each job.
What is the ending balance of Cost of Goods sold for Zeke Company as of the end of
the 1st quarter?
A.$456
B.$2,685
C.$1,685
D.$685
28) A variant of fiscal-year budgeting whereby a twelve-month projection into the
future is maintained at all times is termed:
A.flexible budgeting
B.continuous budgeting
C.zero-based budgeting
D.master budgeting
29) Calculate the following:
30) The balance in the supplies account, before adjustment at the end of the year is
$6,250. The proper adjusting entry if the amount of supplies on hand at the end of the
year is $1,500 would be
A.debit Supplies $1,500, credit Supplies Expense $1,500
B.debit Supplies Expense $4,750, credit Supplies $4,750
C.debit Supplies Expense $1,500, credit Supplies $1,500
D.debit Supplies $4,750, credit Supplies Expense $4,750
31) Which of the following is not showed on the retained earnings statement of a
company?
A.Ending balance of retained earnings
B.Net income of the company
C.Dividends paid by the company
D.Additional capital stock issued by the company
32) The cost of wages paid to employees directly involved in the manufacturing process
in converting materials into finished product is classified as:
A.factory overhead cost
B.direct labor cost
C.miscellaneous costs
D.direct materials cost
33) A fiscal year
A.ordinarily begins on the first day of a month and ends on the last day of the following
twelfth month
B.for a business is determined by the federal government
C.always begins on January 1 and ends on December 31 of the same year
D.should end at the height of the business’s annual operating cycle
34) Which of the following group of companies are all examples of a merchandising
business?
A.Delta Airlines, Marriott, Gap
B.Gap, Amazon, NIKE
C.GameStop, Sony, Dell
D.GameStop, Best Buy, Gap
35) What cost concept used in applying the cost-plus approach to product pricing
covers selling expenses, administrative expenses, and desired profit in the “markup”?
A.Total cost concept
B.Product cost concept
C.Variable cost concept
D.Sunk cost concept
36) Which one of the following below would not be classified as an operating activity?
A.interest expense
B.income taxes
C.payment of dividends
D.selling expenses
37) Alma Corp. issues 1,000 shares of $10 par value common stock at $14 per share.
When the transaction is recorded, credits are made to:
A.Common Stock $14,000
B.Common Stock $10,000 and Paid-in Capital in Excess of Par Value $4,000
C.Common Stock $4,000 and Paid-in Capital in Excess of Stated Value $10,000
D.Common Stock $10,000 and Retained Earnings $4,000
38) Which of the following are the two most common allocation bases for factory
overhead?
A.Total overhead dollars and machine hours
B.Direct labor hours and machine hours
C.Direct labor hours and factory expenses
D.Machine hours and factory expenses
39) Organize the following accounts into the usual sequence of a chart of accounts.
Miscellaneous Expense
Accounts Payable
Retained Earnings
Accounts Receivable
Cash
Capital Stock
Fees Earned
Prepaid Rent
Salaries Expense
Unearned Revenue
Dividends
40) Journalize the entries to record the following selected equity investment
transactions completed by Flurry Company during 2012. Flurrys purchase represents
less than 20% of the total outstanding Braxter stock.
41) Fellows Corporation has determined that the $2,700 accounts receivable due from
Andrew Stevens is uncollectible. Compare the journal entry that is required under the
direct write-off method to the journal entry that is required using the allowance method.
42) Dixon Sales has seven sales employees which receive weekly paychecks. Each
earns $10.25 per hour and each has worked 40 hours in the pay period. Each employee
pays 12% of gross in Federal Income Tax, 3% in State Income Tax, 6% of gross in
Social Security Tax, 1.5% of gross in Medicare Tax, and 1/2% in State Disability
Insurance. Journalize the recognition of the pay period ending January 19th which will
be paid to the employees January 26th. (Keep in mind that none of the employees is
subject to a ceiling amount for social security.)
43) Prepare a monthly flexible selling expense budget for PineTree Company for sales
volumes of $300,000, $350,000, and $400,000, based on the following data:
44) Equipment acquired on January 2, 2011 at a cost of $273,500 has an estimated
useful life of eight years and an estimated residual value of $35,500.
Required:
45) Journalize the following transactions (Assume a 360-day year when calculating
interest.):