1) A bond is simply a form of an interest bearing note.
2) At year-end, the balance in the prepaid insurance account, prior to any adjustments,
is $6,000. The amount of the journal entry required to record insurance expense will be
$4,000 if the amount of unexpired insurance applicable to future periods is $2,000.
3) If the adjustment of the unearned rent account at the end of the period to recognize
the amount of rent earned is inadvertently omitted, the net income for the period will be
understated.
4) Even if a business sells six products, it is possible to estimate the break-even point.
5) A fiscal year that ends when business activities have reached their lowest point is
called the natural business year.
6) A seller may grant a buyer a reduction in selling price and this is called a sales
allowance.
7) In using the product cost concept of applying the cost-plus approach to product
pricing, selling expenses, administrative expenses, and profit are covered in the markup.
8) If the dividend amount of preferred stock, $50 par value, is quoted as 8%, then the
dividends per share would be $4.
9) The Other Accounts column in the Cash Receipts journal is used for recording debits
to any account for which there is no special debit column.
10) Any difference between the fair market values of the securities and their cost is a
realized gain or loss.
11) Goal conflict can be avoided if budget goals are carefully designed for consistency
across all areas of the organization.
12) Revenue accounts are increased by credits.
13) If the adjustment to recognize expired insurance at the end of the period is
inadvertently omitted, the assets at the end of the period will be understated.
14) The adjusted trial balance verifies that total debits equals total credits before the
adjusting entries are prepared.
15) A decentralized business organization is one in which all major planning and
operating decisions are made by top management.
16) A Limited Liability Company is a business entity form designed to overcome some
of the disadvantages of the partnership form.
17) If the profit margin for a division is 11% and the investment turnover is 1.5, the rate
of return on investment is 7.3%.
18) In the merchandising income statement, sales will be reduced by sales discounts
and sales returns and allowances to arrive at net sales.
19) Each partner has a separate capital and withdrawal account.
20) The ratio of the sum of cash, receivables, and marketable securities to current
liabilities is referred to as the current ratio.
21) Data for Divisions A, B, C, D, and E are as follows:
(a) Determine the missing items, identifying each by number.
(b) Which division is most profitable in terms of income from operations?
(c) Which division is most profitable in terms of rate of return on investment?
Round percentage values to one decimal point.
22) Kristins Boutiques has identified the following items for possible inclusion in its
December 31, 2010 inventory. Which of the following would not be included in the
year end inventory?
A.Merchandise purchased FOB shipping point was picked up by the freight company
but had still not arrived at Kristins Boutique as of December 31, 2010
B.Kristin has in its warehouse merchandise on consignment from Abby Co
C.Kristin has sent merchandise to various retailers on a consignment basis
D.Kristin has merchandise on hand which has been returned by customers because of
wrong size
23) Roseland Design borrowed $700,000 on a 90-day note from CorpOne Funding
Company. CorpOne discounts the note at 8%. (Assume a 360-day year is used for
interest calculations.)
Required:
24) A manufacturing company applies factory overhead based on direct labor hours. At
the beginning of the year, it estimated that factory overhead costs would be $360,000
and direct labor hours would be 30,000. Actual factory overhead costs incurred were
$377,200, and actual direct labor hours were 36,000. What is the amount of overapplied
or underapplied manufacturing overhead at the end of the year?
A.$6,000 overapplied
B.$6,000 underapplied
C.$54,800 overapplied
D.$54,800 underapplied
25) The standard costs and actual costs for direct labor for the manufacture of 2,500
actual units of product are as follows:
The amount of the direct labor rate variance is:
A.$2,960 unfavorable
B.$4,500 favorable
C.$2,960 favorable
D.$4,500 unfavorable
26) The cash account in the company’s ledger is a(n)
A.asset with a debit balance
B.asset with a credit balance
C.liability with a debit balance
D.liability with a credit balance
27) When a company replaces a component of property, plant and equipment, which
statement below does not account for one of the steps in the process?
A.book value of the replaced component is written off to depreciation expense
B.the asset cost of the replaced component is credited
C.any cost to remove the old component is charged to expense
D.the identifiable direct costs associated with the new component are capitalized
28) Round-tripping is when
A.a selling company sells to a customer company with huge discounts
B.a selling company pretends to sell to a fictitious company with the intent of inflating
revenues
C.a selling company lends money to a customer company to increase assets
D.a selling company lends money to a customer company to be used to purchase goods
from the selling company
29) Comparative information taken from the Koda Company financial statements is
shown below:
2012 _ 2011
(a) Notes receivable $ 10,000 $ -0-
(b) Accounts receivable 106,200 90,000
(c) Retained earnings 30,000 (40,000)
(d) Sales 654,000 600,000
(e) Operating expenses 160,000 200,000
(f) Income taxes payable 28,000 20,000
Instructions
Using horizontal analysis, show the percentage change from 2011 to 2012 with 2011 as
the base year.
30) After an accounting system has been set up, what is the next step?
A.Analysis
B.Feedback
C.Implementation
D.Internal controls
31) The controlling account in the general ledger that summarizes the debits and credits
to the individual customers accounts in the subsidiary ledger is entitled
A.Purchases
B.Accounts Payable
C.Fees Earned
D.Accounts Receivable
32) Match each of the following terms with the best definition given.
1>Combines market-based pricing with a cost reduction emphasis A. Production
bottleneck
2>Only costs of manufacturing are included in product cost per unit B. Target costing
3>Constraint C. Product cost concept
4>Sets the price according to competitors D. Competition-based concept
5>Sets the price according to demand E. Demand-based concept
33) Harris Company had checks outstanding totaling $15,400 on its May bank
reconciliation. In June, Harris Company issued checks totaling $64,900. The June bank
statement shows that $47,600 in checks cleared the bank in June. A check from one of
Harris Company’s customers in the amount of $300 was also returned marked “NSF.”
The amount of outstanding checks on Harris Company’s June bank reconciliation
should be
A.$49,500
B.$63,000
C.$47,600
D.$32,700
34) The direct labor and overhead costs of providing services to clients are accumulated
in:
A.finished services expense
B.work in process
C.administrative salaries expense
D.overhead
35) Of the following financial reports, which one is the one that will determine if the
accounting equation is in balance?
A.Journal entry
B.Income statement
C.Trial balance
D.Account reconciliation
36) In an investment center, the manager has responsibility and authority for making
decisions that affect:
A.costs
B.revenues
C.assets
D.costs, revenues, and assets
37) Hampton Co. took a physical count of its inventory on December 31. In addition, it
had to decide whether or not the following items should be added to this count.
(a) Merchandise on hand had been sold earlier in the year but had been returned by
customers for various warranty repairs.
(b) Hampton Co. sent merchandise on a consignment basis on December 31 just prior to
the physical count.
(c) On December 22, Hampton Co. ordered merchandise on FOB destination terms. The
merchandise was shipped by the supplier on December 30 but had not been received by
December 31.
(d) On December 27, Hampton Co. ordered merchandise on FOB shipping point terms.
The merchandise was shipped on December 29 but had not been received by December
31.
(e) Merchandise sold FOB shipping point on December 31 was picked up by the freight
company just before closing on December 31.
(f) Merchandise shipped to a customer FOB destination was picked up by the freight
company on December 28 but had not arrived at its destination as of December 31.
Indicate which items should be added to (answer: yes) and which items should not be
added to (answer: no) the December 31 inventory count.
38) Determine the amount to be added to Allowance for Doubtful Accounts in each of
the following cases and indicate the ending balance in each case.
39) Which of the following conditions would cause the break-even point to increase?
A.Total fixed costs decrease
B.Unit selling price increases
C.Unit variable cost decreases
D.Unit variable cost increases
40) Merchandise inventory at the end of the year is overstated. Which of the following
statements correctly states the effect of the error?
A.owner’s equity is overstated
B.cost of merchandise sold is overstated
C.gross profit is understated
D.net income is understated
41) 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
42) A loss due to a discontinued operation should be reported in the income statement
A.above income from continuing operations
B.without related tax effect
C.below income from continuing operations
D.as an operating expense
43) Which of the following is not a factory overhead cost?
A.materials used directly in the manufacturing process of the product
B.insurance on factory equipment
C.salaries of production supervisors
D.property tax on factory building
44) The Craig-Doran Partnership owns inventory that was purchased for $85,000, has a
current replacement cost of $54,500, and is priced to sell for $98,000. At what amount
should the inventory be recorded in the accounts of the new partnership if Alexis is to
be admitted?
A.$98,000
B.$54,500
C.$85,000
D.$79,167
45) The subsidiary ledger that includes customer account activity is called the
A.asset ledger
B.accounts payable ledger
C.expense ledger
D.accounts receivable ledger
46) The price at which a stock can be sold depends upon a number of factors. Which
statement below is not one of those factors?
A.the financial condition, earnings record, and dividend record of the corporation
B.investor expectations of the corporation’s earning power
C.how high the par value is
D.general business and economic conditions and prospects
47) For the past year, Pedi Company had fixed costs of $70,000, unit variable costs of
$32, and a unit selling price of $40. For the coming year, no changes are expected in
revenues and costs, except that property taxes are expected to increase by $10,000.
Determine the break-even sales (units) for (a) the past year and (b) the coming year.
48) A financial statement user would determine if a company was profitable or not
during a specific period of time by reviewing
A.the Income Statement
B.the Balance Sheet
C.the Statement of Cash Flows
D.cannot be determined
49) Because accountants have financial expertise, they are the only ones that are able to
set standard costs for the production area.
50) A company had net income of $252,000. Depreciation expense is $26,000. During
the year, Accounts Receivable and Inventory increased by $15,000 and $40,000,
respectively. Prepaid Expenses and Accounts Payable decreased by $2,000 and $4,000,
respectively. There was also a loss on the sale of equipment of $3,000. How much cash
was provided by operating activities?
A.$217,000
B.$224,000
C.$284,000
D.$305,000
51) The Sharpe Company reports the following information for 2012:
52) On June 1, the cash account balance was $96,750. During June, cash receipts
totaled $305,000 and the June 30 balance was $75,880. Determine the cash payments
made during June.
53) On the basis of the details of the common stock account presented below, calculate
the total amount to be recorded in financing section of the statement of cash flows.
Indicate whether the amount results in an increase or decrease in cash.
54) Using the following data taken from Hsus Imports Inc., determine the gross profit
to be reported on the income statement for the year ended March 31, 2011.
Gross Profit = Sales – COMS = $1,860,000 $1,042,300* = $817,700
55) On March 5th, Blowout Sales makes $22,500.00 in sales on the companys own
credit cards. The cost of merchandise sold are $16,825.00. Journalize the sales and
recognition of the cost of merchandise sold.
56) On April 15, Compton Co. paid $2,800 to upgrade a delivery truck and $125 for an
oil change. Journalize the entries for the upgrade to delivery truck and oil change
expenditures.
57) The Cavy Company estimates that the factory overhead for the following year will
be $1,470,000. The company has decided that the basis for applying factory overhead
should be machine hours, which is estimated to be 40,000 hours. Calculate the
predetermined overhead rate to apply factory overhead.
58)
