1) A bond’s par value is not necessarily the same as its market value.
2) Operating activities include long-term borrowing and repaying cash from lenders,
and cash investments or withdrawals by the owner.
3) Managerial accounting assists in analysis, planning, and control of costs.
4) A department that is responsible for maximizing revenues is known as a profit center.
5) Owner’s equity is increased when cash is received from customers in payment of
previously recorded accounts receivable.
6) A lawsuit is an example of a contingent liability for the defendant.
7) Natural resources are often called wasting assets because they are physically
consumed when used.
8) Neither the payback period nor the accounting rate of return methods of evaluating
investments considers the time value of money.
9) The statement of cash flows shows the net effect of revenues and expenses for a
reporting period.
10) Intangible assets are nonphysical assets used in operations that confer on their
owners long-term rights, privileges, or competitive advantages.
11) A time ticket is a source document an employee uses to record the number of hours
at work and that is used each pay period to determine the total labor cost.
12) A maker who dishonors a note is one who does not pay it at maturity.
13) A sales journal is used to record cash sales.
14) A company’s fiscal year must correspond with the calendar year.
15) Financial accounting relies on accepted principles that are enforced through an
extensive set of rules and guidelines; on the other hand, managerial accounting systems
are flexible.
16) The balance sheet shows a company’s net income or loss due to earnings activities
over a period of time.
17) The contribution margin ratio is the percent by which the margin of safety exceeds
the break-even point.
18) Internal controls include policies to direct operations toward common goals,
procedures to ensure reliable financial reports, safeguards to protect company assets
and methods to achieve compliance with laws and regulations.
19) A company is considering a new project that will cost $19,000. This project would
result in additional annual revenues of $6,000 for the next 5 years. The $19,000 cost is
an example of a(n):
A.Sunk cost
B.Fixed cost
C.Incremental cost
D.Uncontrollable cost
E.Opportunity cost
20) A company has inventory of 10 units at a cost of $10 each on June 1. On June 3, it
purchased 20 units at $12 each. 12 units are sold on June 5. Using the FIFO periodic
inventory method, what is the cost of the 12 units that were sold?
A.$120
B.$124
C.$128
D.$130
E.$140
21) Williams Company began business on May 1. They use the periodic inventory
method. The following transactions involving purchases and cash disbursements
occurred during the first week of May.
a. Use the purchases journal and the cash disbursements journal to record these
transactions.
b. Prepare a schedule of accounts payable. There was no accounts payable balance on
May 1.
22) Curvilinear costs always increase:
A.With decreases in volume
B.In constant proportion to changes in production levels
C.When management performs break-even analysis
D.When volume increases, but not at a constant rate
E.On a per unit basis when volume of activity goes down
23) Keegan Company manufactures a single product and has a JIT policy that ending
inventory must equal 10% of the next month’s sales. It estimates that May’s ending
inventory will consist of 20,000 units. June and July sales are estimated to be 280,000
and 290,000 units, respectively. Compute the number of units to be produced that
would appear on the company’s production budget for the month of June.
A.288,000
B.260,000
C.289,000
D.280,000
E.309,000
24) A company issued 5-year, 7% bonds with a par value of $100,000. The company
received $97,947 for the bonds. Using the straight-line method, the amount of interest
expense for the first semiannual interest period is:
A.$3,294.70
B.$3,500.00
C.$3,705.30
D.$7,000.00
E.$7,410.60
25) Barrett’s Fashions forecasts sales of $125,000 for the quarter ended December 31.
Its gross profit rate is 20% of sales, and its September 30 inventory is $32,500. If the
December 31 inventory is targeted at $41,500, budgeted purchases for the fourth quarter
should be:
A.$134,000
B.$109,000
C.$91,500
D.$25,000
E.$91,000
26) A company may retire bonds by:
A.Exercising a call option
B.The holders converting them to stock
C.Purchasing the bonds on the open market
D.Paying them off at maturity
E.All of these
27) In horizontal analysis the percent change is computed by:
A.Subtracting the analysis period amount from the base period amount
B.Subtracting the base period amount from the analysis period amount
C.Subtracting the analysis period amount from the base period amount, dividing the
result by the base period amount, then multiplying that amount by 100
D.Subtracting the base period amount from the analysis period amount, dividing the
result by the base period amount, then multiplying that amount by 100
E.Subtracting the base period amount from the analysis amount, then dividing the result
by the analysis period amount
28) The carrying value of bonds at maturity is always equal to:
A.the amount of cash originally received in exchange for the bonds
B.the par value that the issuer pays the holder
C.the amount of discount or premium
D.the amount of cash originally received in exchange for the bonds plus any
unamortized discount or less any premium
E.$0
29) Which of the following costs is not included in factory overhead?
A.Payroll taxes on the wages of supervisory factory workers
B.Indirect labor
C.Depreciation of manufacturing equipment
D.Manufacturing supplies used
E.Direct materials
30) Unearned revenue is reported in the financial statements as:
A.A revenue on the balance sheet
B.A liability on the balance sheet
C.An unearned revenue on the income statement
D.An asset on the balance sheet
E.An operating activity on the statement of cash flows
31) The inventory valuation method that has the advantages of assigning an amount to
inventory on the balance sheet that approximates its current cost, and also mimics the
actual flow of goods for most businesses is:
A.FIFO
B.Weighted average
C.LIFO
D.Specific identification
E.All of these
32) PPW Co. leased a portion of its store to another company for eight months
beginning on October 1, at a monthly rate of $800. This other company paid the entire
$6,400 cash on October 1, which PPW Co. recorded as unearned revenue. The journal
entry made by PPW Co. at year-end on December 31 would include:
A.A debit to Rent Earned for $2,400
B.A credit to Unearned Rent for $2,400
C.A debit to Cash for $6,400
D.A credit to Rent Earned for $2,400
E.A debit to Unearned Rent for $4,000
33) Using the information below, calculate the cost of goods manufactured for the
period.
A.$553,000
B.$536,000
C.$549,000
D.$527,000
E.$525,000
34) A machine costs $180,000 and is expected to yield an after-tax net income of
$10,800 each year. Management estimates the machine will have a ten-year life, a
$20,000 salvage value, and straight-line depreciation is used. Compute the accounting
rate of return for the investment.
A.12.0%
B.26.8%
C.11.8%
D.10.8%
E.28.8%
35) Embark produces mulch for landscaping use. The following information
summarizes production operations for June. The journal entry to record June production
activities for direct material usage is:
A.Debit Raw Materials Inventory $87,000; credit Accounts Payable $87,000
B.Debit Raw Materials Inventory $87,000; credit Finished Goods Inventory $87,000
C.Debit Cost of Goods Sold $87,000; credit Finished Goods Inventory $87,000
D.Debit Goods in Process Inventory $87,000; credit Raw Materials Inventory $87,000
E.Debit Goods in Process Inventory $87,000; credit Cost of Goods Sold $87,000
36) The following two separate situations require adjusting journal entries to prepare
financial statements as of the fiscal year ended April 30. For each situation, present both
the April 30 adjusting entry and the subsequent entry during May to record the payment
of the accrued expenses or receipt of the accrued revenue.
a. Cage Company has 10 employees, who earn a total of $2,900 in salaries each
working day. They are paid on Monday for the five-day workweek ending on the
previous Friday. Assume that fiscal year ended April 30, is a Thursday and all
employees will be paid salaries for five full days on the following Monday. All
employees worked each day.
b. Services of $4,000 have been performed for a client through April 30. The client will
pay the entire amount of the contract when services are completed on May 23.
c. Paid the employees salaries on May 4
d. Received payment from the client in the amount of $11,500 for services that are now
completed on May 23.
37) Depreciation:
A.Measures the decline in market value of an asset
B.Measures physical deterioration of an asset
C.Is the process of allocating to expense the cost of a plant asset
D.Is an outflow of cash from the use of a plant asset
E.Is applied to land
38) The debt ratio is used:
A.To measure the ratio of equity to expenses
B.To assess the risk associated with a company’s use of liabilities
C.Only by banks when a business applies for a loan
D.To determine how much debt a firm should pay off
E.To determine how much debt a company should borrow
39) An example of a financing activity is:
A.Buying office supplies
B.Obtaining a long-term loan
C.Buying office equipment
D.Selling inventory
E.Buying land
40) The statement of cash flows reports:
A.Assets, liabilities, and equity
B.Revenues, gains, expenses, and losses
C.Cash inflows and cash outflows for an accounting period
D.Equity, net income, and dividends
E.Changes in equity
41) Under the alternative method for accounting for unearned revenue, which of the
following pairs of journal entry formats is correct?
A.Choice A
B.Choice B
C.Choice C
D.Choice D
E.Choice E
42) Fairfield 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
43) A cash equivalent is an investment that:
A.Is readily convertible to a known amount of cash
B.Is sufficiently close to its maturity date so its market value is unaffected by interest
rate changes
C.Generally is within 3 months of its maturity date
D.Is highly liquid
E.All of these
44) Estimated liabilities commonly arise from:
A.Warranties
B.Vacation benefits
C.Income taxes
D.Employee benefits
E.All of these
45) A company has established 5 pounds of Material M at $2 per pound as the standard
for the material in its Product A. The company has just produced 1,000 units of this
product, using 5,200 pounds of Material M that cost $9,880.The direct materials price
variance is:
A.$520 unfavorable
B.$400 unfavorable
C.$120 favorable
D.$520 favorable
E.$400 favorable
46) A company uses the weighted average method for inventory costing. During a
period, a production department had 20,000 units in beginning goods in process
inventory which were 40% complete; the department completed and transferred
165,000 units. At the end of the period, 22,000 units were in the ending goods in
process inventory and are 75% complete. All of these are with respect to labor. The
production department had labor costs in the beginning goods is process inventory of
$99,000 and total labor costs added during the period are $726,825. Compute the
equivalent cost per unit for labor.
A.$4.40
B.$4.76
C.$4.19
D.$4.55
E.$4.61
47) What is a profit center?
48) Define standard costs. How do they assist management?
49) A company’s January 1 goods in process inventory contained 30,000 units that were
25% complete with respect to direct labor. The beginning inventory was completed this
year and another 120,000 units were started. Of those started, 80,000 were finished and
the remaining 40,000 were left 20% complete. Calculate the equivalent units of
production for the year using the weighted average method.
50) Briefly describe a CVP chart, including its major components.
51) A company purchased a special purpose machine on August 1 of the past year, and
it was installed and ready to run on January 1 of this year. The following costs were
incurred in the purchase and installation of the machine.
Determine the total cost of the machine.