1) Preferred stockholders must receive their current year dividends before the common
stockholders can receive any dividends.
2) If income from operations for a division is $6,000, invested assets are $25,000, and
sales are $30,000, the investment turnover is 5.
3) Cost plus methods determine the normal selling price by estimating a cost amount
per unit and adding a markup.
4) The first budget to be prepared is usually the production budget.
5) A purchase order establishes an initial record of the receipt of the inventory.
6) To determine cash payments for operating expenses for the cash flow statement using
the direct method, a decrease in prepaid expenses is added to operating expenses other
than depreciation.
7) The rate earned on total assets measures the profitability of total assets, without
considering how the assets are financed.
8) In determining the cash flows from operating activities for the statement of cash
flows by the indirect method, the depreciation expense for the period is added to the net
income for the period.
9) Total fixed costs change as the level of activity changes.
10) A process cost accounting system accumulates costs for each of the departments or
processes within the factory.
11) In net present value analysis for a proposed capital investment, the expected future
net cash flows are averaged and then reduced to their present values.
12) The partner capital accounts may change due to capital additions, net income, or
withdrawals.
13) If $475,000 of bonds payable are sold at 101, $475,000 would be reported in the
cash flows from financing activities section of the statement of cash flows.
14) Expenses are assets that are used up during the process of earning revenue.
15) Job order cost accounting systems can be used only for companies that manufacture
a product.
16) Purchased goods in transit, shipped FOB destination, should be excluded from
ending inventory of the buyer.
17) The most important output of the accounting cycle is the financial statements.
18) An operating lease is accounted for as if the lessee has purchased the asset.
19) When no-par stock is issued, the Common Stock account is credited for the selling
price of the stock issued.
20) Supervisor salaries, maintenance, and indirect factory wages would normally
appear in the factory overhead cost budget.
21) Assuming that the standard fixed overhead rate is based on full capacity, the cost of
available but unused productive capacity is indicated by the:
A.factory overhead cost volume variance
B.direct labor cost time variance
C.direct labor cost rate variance
D.factory overhead cost controllable variance
22) Glover Corporation issued $2,000,000 of 7.5%, 6-year bonds dated March 1, 2011,
with semiannual interest payments on September 1 and March 1. The bonds were issued
on March 1, 2011, at 97. Glovers year-end is December 31.
a) Were the bonds issued at a premium, a discount, or at par?
b) Was the market rate of interest higher, lower, or the same as the contract rate of
interest?
c) If the company uses the straight-line method of amortization, what is the amount of
interest expense Glover Corporation will show for the year ended December 31, 2011?
d) What is the carrying value of the bonds on December 31, 2011?
23) Procedures designed to protect cash from theft and misuse from the time it is
received until it can be deposited in a bank are called
A.accounting controls
B.cash controls
C.preventive controls
D.detective controls
24) The Income Statement will include the following accounts
A.Revenues less Expenses (ordered largest to smallest amount) with Miscellaneous
Expense listed last
B.Revenues less Expenses (ordered smallest to largest amounts) with Miscellaneous
Expense listed last
C.Revenues less Expenses (ordered in alphabetical order)
D.Revenues less Expenses (order is not important)
25) Which of the following is not a characteristic of a process cost system?
A.Manufacturing costs are grouped by departments
B.The system may use several Work-in-Process accounts
C.The system measures costs for each completed job
D.The system allocates costs between completed and partially completed units within a
department
26) Match the following elements of internal control:
1>Risk Assessment A. overall attitude of management and employees
2>Control Environment B. identify, analyze and assess likeliness of vulnerabilities
3>Information and Communication C. provides reasonable assurance that business
goals will be achieved
4>Monitoring D. used to locate weaknesses and improve controls
5>Control Procedures E. used by management for guiding operations and ensuring
compliance with requirements
27) Zither Co. manufactures a product called Zens in a three-process series. All
materials are introduced at the beginning of the first process. Zither uses the first-in,
first-out method of inventory costing. Unit and cost data for the first process
(Department A) for the month of October 2012 follow:
Prepare Zither’s Department A cost of production report for October.
28) Rosalba Manufacturing Company had the following account balance for 2012:
Collections on account were $625,000 in 2012.
Cost of goods sold was 68% of sales.
Direct materials purchased amounted to $90,000.
Factory overhead was 300% of the cost of direct labor.
Compute:
a) sales revenue (all sales were on account)
b) cost of goods sold
c) cost of goods manufactured
d) direct labor incurred
e) direct materials used
29) The asset section of the Balance Sheet normally presents assets in
A.alphabetical order
B.order of largest to smallest dollar amounts
C.in the order what will be converted into cash
D.any order
30) 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 investment turnover for Mason is:
A.1.08
B..93
C.6.57
D.7.07
31) A company used $35,000 of direct materials, incurred $73,000 in direct labor cost,
and $114,000 in factory overhead costs during the period. If beginning and ending work
in process inventories were $28,000 and $32,000 respectively, the cost of goods
manufactured was:
A.$218,000
B.$226,000
C.$190,000
D.$222,000
32) Equipment with a cost of $160,000, an estimated residual value of $40,000, and an
estimated life of 15 years was depreciated by the straight-line method for 4 years. Due
to obsolescence, it was determined that the useful life should be shortened by 3 years
and the residual value changed to zero. The depreciation expense for the current and
future years is
A.$11,636
B.$16,000
C.$11,000
D.$8,000
33) If bonds are issued at a discount, it means that the
A.bondholder will receive effectively less interest than the contractual rate of interest
B.market interest rate is lower than the contractual interest rate
C.market interest rate is higher than the contractual interest rate
D.financial strength of the issuer is suspect
34) Japan Company produces lamps that require 2.25 standard hours per unit at an
hourly rate of $15.00 per hour. If 7,700 units required 19,250 hours at an hourly rate of
$14.90 per hour, what is the direct labor (a) rate variance, (b) time variance, and (c) cost
variance?
35) Select the correct subsidiary ledger and appropriate posting for each of the
following customer and creditor activities.
1>Accounts receivable subsidiary ledger; Accounts receivable DR A. Sales on account
2>Accounts payable subsidiary ledger; Accounts payable DR B. Collections from
customers on account
3>Accounts receivable subsidiary ledger; Accounts receivable CR C. Purchases on
account
4>Accounts payable subsidiary ledger; Accounts payable CR D. Payments to creditors
on account
5>No subsidiary ledger posting E. Adjusting entry for expired insurance
36) A current liability is a debt that is reasonably expected to be paid
A.between 6 months and 18 months
B.out of currently recognized revenues
C.within one year
D.out of cash currently on hand
37) Which transaction is normally recorded in a special journal?
A.sales returns
B.depreciation expense
C.purchases on account
D.issued stock dividend
38) Jonathan Martin is the owner and operator of Martin Consultants. At December 31,
2011, Martin Consultants has assets of $430,000 and liabilities of $205,000. Using the
accounting equation and considering each case independently, determine the following:
a. Jonathan Martin, capital, as of December 31, 2011
b. Jonathan Martin, capital, as of December 31, 2012, assuming that assets increased by
$12,000 and liabilities increased by $15,000 in 2012
c. Jonathan Martin, capital, as of December 31, 2012, assuming that assets decreased by
$8,000 and liabilities increased by $14,000 during 2012
39) Production and sales estimates for June are as follows:
The number of units expected to be manufactured in June is:
A.15,500
B.17,500
C.16,500
D.13,500
40) Adjusting entries affect at least one
A.income statement account and one balance sheet account
B.revenue and the drawing account
C.asset and one owner’s equity account
D.revenue and one capital account
41) For which of the following businesses would a process cost system be appropriate?
A.An oil refinery
B.Yacht builder
C.Specialty furniture company
D.Custom electronics manufacturer
42) Merchandise inventory at the end of the year was inadvertently overstated. Which
of the following statements correctly states the effect of the error on net income, assets,
and owner’s equity?
A.net income is overstated, assets are overstated, owner’s equity is understated
B.net income is overstated, assets are overstated, owner’s equity is overstated
C.net income is understated, assets are understated, owner’s equity is understated
D.net income is understated, assets are understated, owner’s equity is overstated
43) The inventory data for an item for November are:
Using a perpetual system, what is the cost of the merchandise sold for November if the
company uses LIFO?
A.$610
B.$600
C.$590
D.$580
44) Which one of the following below is not a factor that influences a business’s control
environment?
A.management’s philosophy and operating style
B.organizational structure
C.proofs and security measurers
D.personnel policies
45) The Ukulele Company’s radio division currently is purchasing transistors from the
Xiang Co. for $3.50 each. The total number of transistors needed is 8,000 per month.
Ukulele Company’s electronics division can produce the transistors for a cost of $4.00
each and they have plenty of capacity to manufacture the units. The $4 is made up of
$3.25 in variable costs, and $0.75 in allocated fixed costs.
What should be the range of a possible transfer price?
A.No transfer should take place.
B.$3.51 to $3.99
C.$3.26 to $3.99
D.$3.26 to $3.49
46) Which of the following is NOT a special journal?
A.cash receipts
B.purchases
C.accounts receivable
D.cash payments
47) Super Security Company manufacturers home alarms. Currently it is manufacturing
one of its components at a variable cost of $45 and fixed costs of $15 per unit. An
outside provider of this component has offered to sell Safe Security the component for
$50. Determine the best plan and calculate the savings.
A.$5 savings per unit – Manufacture
B.$5 savings per unit – Purchase
C.$10 savings per unit – Manufacture
D.$15 savings per unit – Purchase
48) Short-term creditors are typically most interested in assessing
A.marketability
B.profitability
C.operating results
D.solvency
49) The Lucy Corporation purchased and used 129,000 board feet of lumber in
production, at a total cost of $1,548,000. Original production had been budgeted for
22,000 units with a standard material quantity of 5.7 board feet per unit and a standard
price of $12 per board foot. Actual production was 23,500 units.
Compute the material price variance.
A.0
B.59,400U
C.59,400F
D.6,000U
50) Determine the due date and amount of interest due at maturity on the following
notes:
51) When the corporation issuing the bonds has the right to repurchase the bonds prior
to the maturity date for a specific price, the bonds are
A.convertible bonds
B.unsecured bonds
C.debenture bonds
D.callable bonds
52) Which of the following would not lend itself to applying direct labor variances?
A.Help desk
B.Research and development scientist
C.Customer service personnel
D.Telemarketer
53) Accounts receivable from sales to customers amounted to $40,000 and $32,000 at
the beginning and end of the year, respectively. Income reported on the income
statement for the year was $110,000. Exclusive of the effect of other adjustments, the
cash flows from operating activities to be reported on the statement of cash flows is
A.$118,000
B.$110,000
C.$102,000
D.$150,000
54) Merchandise inventory at the end of the year was understated. Which of the
following statements correctly states the effect of the error?
A.net income is understated
B.net income is overstated
C.cost of merchandise sold is understated
D.merchandise inventory reported on the balance sheet isoverstated
55) Discontinuing a product or segment is a huge decision that must be carefully
analyzed. Which of the following would be a valid reason not to discontinue an
operation?
A.The losses are minimal
B.The variable costs are less than revenues
C.The variable costs are more than revenues
D.The allocated fixed costs are more than revenues
56) If a company records inventory purchases at standard cost and also records
purchase price variances, prepare the journal entry for a purchase of widgets that were
bought at $7.45 per unit and have a standard cost of $7.15. The total amount owed to
the vendor for this purchase is $33,525.
57) On the first day of the fiscal year, a company issues a $800,000, 6%, 5 year bond
that pays semi-annual interest of $24,000 ($800,000 6% 1/2), receiving cash of
$690,960. Journalize the entry to record the first interest payment and the amortization
of the related bond discount using the straight-line method.
58) A $500,000 bond issue on which there is an unamortized discount of $20,000 is
redeemed for $475,000. Journalize the redemption of the bonds.
59) The bookkeeper for Brockton Industries prepared the following journal entries and
posted the entries to the general ledger as indicated in the T accounts presented. Assume
that the dollar amounts and the descriptions of the entries are correct.
Journal entries:
Required: If you assume that all journal entries have been recorded correctly, use the
above information to:
(1) Identify the postings to the general ledger that were made incorrectly.
(2) Describe how the each incorrect posting should have been made.
60) Darius Company has the following information for the pay period of January 15 –
31, 20xx.
Assuming no employees are subject to ceilings for their earnings, calculate Salaries
Payable and Employer Payroll Taxes Payable.
61) Finch, Inc. has bought a new server and is having to decide what to do with the old
one. The cost of the old server was originally $60,000 and has been depreciated
$45,000. The company has received two offers that it must consider. One offer was
made to purchase the equipment outright for $18,500 less a 5% sales commission. The
other offer was to lease the equipment for $7,000 for the next five years but the
company will be required to provide maintenance and insurance totaling $3,000 per
year. What offer should Finch, Inc. accept?
62) The accountant for Franklin Company prepared the following list of account
balances from the companys records for the year ended December 31, 2011:
Determine the total assets at the end of 2011 for Franklin Company.
63) Sweet Dreams, Inc. manufactures bedding sets. The budgeted production is for
52,000 comforters in 2012. Each comforter requires 1.5 hours to cut and sew the
material. If cutting and sewing labor costs $11.00 per hour, determine the direct labor
budget for 2012.
64) The debits and credits from two transactions are presented in the following creditors
account:
NAME Windsurf, Inc.
ADDRESS 343 Coastline Road
Describe each transaction and the source of each posting.