1) The depreciation method that produces larger depreciation expense during the early
years of an asset’s life and smaller expense in the later years is a(an):
A.Accelerated depreciation method.
B.Book value depreciation method.
C.Straight-line depreciation method.
D.Units-of-production depreciation method.
E.Unrealized depreciation method.
2) T. Andrews contributed $14,000 in to the T & B Partnership. The journal entry to
record the transaction for the partnership is:
A.Debit Cash $14,000; credit T & B Partnership, Capital $14,000.
B.Debit Cash $14,000; credit T. Andrews, Capital $14,000.
C.Debit T & B Partnership $14,000; credit T. Andrews, Capital $14,000.
D.Debit T. Andrews, Capital $14,000; credit T & B Partnership, Capital $14,000.
E.Debit Cash $14,000; credit Common Stock $14,000.
3) When recording the journal entry for labor, the Work in Process Inventory account is
A.Debited for standard labor cost.
B.Debited for actual labor cost.
C.Credited for standard labor cost.
D.Credited for actual labor cost.
E.Not used.
4) Which of the following are classified as plant assets?
A.Office equipment.
B.Patent.
C.Cash.
D.Office supplies.
E.Merchandise inventory.
5) Maxwell Co. collected the following information about its production activities for
the current year.
a. Compute the direct materials price and quantity variances and indicate whether each
is favorable or unfavorable.
b. Prepare the journal entry to record the issuance of direct materials into production.
Actual costs and quantities:
Direct materials used 95,000 lbs. @ $6.30 per lb.
Units completed during the year, 50,000 units
Standard costs and quantities:
Price per lb. of direct material, $6.05
Two lbs. of direct material per unit
6) A company’s ledger accounts and their end-of-period balances before closing entries
are posted are shown below. What amount will be posted to Wilson Peters, Capital in
the process of closing the Income Summary account? (Assume all accounts have
normal balances.)
A.$16,780 debit.
B.$7,180 credit.
C.$16,780 credit.
D.$18,280 credit.
E.$23,780 credit.
7) The difference between actual price per unit of input and the standard price per unit
of input results in a:
A.Standard variance.
B.Quantity variance.
C.Volume variance.
D.Controllable variance.
E.Price variance.
8) A class of stock that can usually be issued at any price without creating a minimum
legal capital deficiency is called:
A.Convertible stock.
B.No-par stock.
C.Callable stock.
D.Noncumulative stock.
E.Discounted stock.
9) Which of the following events would cause a bank to debit a depositor’s account?
A.The depositor orders new checks through the bank at a cost of $50.
B.The bank collects a note receivable and related interest on the depositor’s behalf.
C.There are outstanding checks drawn on the account at month-end.
D.There are deposits in transit on the account at month-end.
E.The bank corrects an error from previous month by adding $75 to the depositor
account.
10) A company’s history indicates that 20% of its sales are for cash and the rest are on
credit. Collections on credit sales are 20% in the month of the sale, 50% in the next
month, 25% the following month, and 5% is uncollectible. Projected sales for
December, January, and February are $60,000, $85,000 and $95,000, respectively. The
February expected cash receipts from all current and prior credit sales is:
A.$57,000
B.$61,200
C.$66,400
D.$80,750
E.$90,250
11) Morgan Company issues 9%, 20-year bonds with a par value of $750,000 that pay
interest semi-annually. The current market rate is 8%. The amount of interest owed to
the bondholders for each semiannual interest payment is:
A.$60,000.
B.$33,750.
C.$67,500.
D.$30,000.
E.$375,000.
12) Flexibility of practice when applied to managerial accounting means that
A.The information must be presented in electronic format so that it is easily changed.
B.Managers must be willing to accept the information as the accountants present it to
them, rather than in the format they ask for.
C.The managerial accountants need to be on call twenty-four hours a day.
D.Managerial accounting system differ across companies depending on the nature of
the business and the arrangement of its internal operations.
E.Managers must be flexible with information provided in varying forms and using
inconsistent measures.
13) The discount rate that yields a net present value of zero for an investment is the:
A.Internal rate of return.
B.Accounting rate of return.
C.Net present value rate of return.
D.Zero rate of return.
E.Payback rate of return.
14) On December 31 of the current year, the unadjusted trial balance of a company
using the percent of receivables method to estimate bad debt included the following:
Accounts Receivable, debit balance of $95,250; Allowance for Doubtful Accounts,
credit balance of $921. What amount should be debited to Bad Debts Expense,
assuming 6% of outstanding accounts receivable at the end of the current year will be
uncollectible?
A.$5,715.
B.$6,636.
C.$4,794.
D.$5,770.
E.$5,660.
15) Holding a copyright:
A.Gives its owner the exclusive right to publish and sell a musical or literary work
during the life of the creator plus 70 years.
B.Gives its owner an exclusive right to manufacture and sell a patented item or to use a
process for 20 years.
C.Gives its owner an exclusive right to manufacture and sell a device or to use a
process for 50 years.
D.Indicates that the value of a company exceeds the fair market value of a company’s
net assets if purchased separately.
E.Gives its owner the exclusive right to publish and sell a musical or literary work
during the life of the creator plus 20 years.
16) The matching principle, as applied to bad debts, requires:
A.That expenses be ignored if their effect on the financial statements is unimportant to
users’ business decisions.
B.The use of the direct write-off method for bad debts.
C.The use of the allowance method of accounting for bad debts.
D.That bad debts be disclosed in the financial statements.
E.That bad debts not be written off.
17) General Co. entered into the following transactions involving short-term notes
payable.
On May 14, General purchased $40,000 merchandise from Steller Co., terms are 2/15,
n/30. General uses the perpetual inventory system. On May 29, General replaced the
May 14 account payable with a 60-day, $36,000 note bearing 8% annual along with
paying $4,000 in cash. On July 28, General paid the amount due on the note at maturity.
Prepare journal entries for all the preceding transactions and events.
18) The stockholders’ equity section of a corporation’s balance sheet follows:
(1) Assuming that the preferred stock is not callable and no dividends are in arrears,
compute the book values per preferred share and per common share.
(2) Assuming that the preferred stock has a call price of $30 per share and one year of
cumulative preferred dividends is in arrears, compute the book values per preferred
share and per common share.
19) Briefly describe the time value of money. Why is the time value of money
important in capital budgeting?
20) A company is considering two projects, Project A and Project B. The following
information is available for each project:
Calculate the profitability index for each project. Based on the profitability index,
which project should the company pursue and why?
21) _____________________ rejects the notions of “good enough” or “acceptable” and
challenges employees and managers to continuously experiment with new and
improved business practices.
22) A company that uses the perpetual inventory system purchased $8,500 of
merchandise on March 25 with credit terms of 2/10, n/30. The invoice was paid in full
on April 4. Prepare the journal entries to record the transactions on March 25 and April
4.
23) _____________________ bonds can be exchanged for a fixed number of shares of
the issuing corporation’s common stock.
24) Compute Chase Company’s current ratio using the following information:
25) Jerry’s Butcher Shop had the following assets and liabilities at the beginning and
end of the current year:
If Jerry invested an additional $12,000 in the business and withdrew $5,000 during the
year, what was the amount of net income earned by Jerry’s Butcher Shop?