1) The lower-of-cost-or-market method of determining the value of ending inventory
can be applied on an item by item, by major classification of inventory, or by the total
inventory.
2) Under the periodic inventory system, the merchandise inventory account
continuously discloses the amount of inventory on hand.
3) Any gains or losses on the sale of bonds normally would be reported in the Other
Income (Loss) section of the income statement.
4) A net loss is shown on the work sheet in the credit columns of both the Income
Statement columns and the Balance Sheet columns.
5) Revenues and expenses should be recorded in the same period to which they relate.
6) When you are interpreting financial ratios, it is useful to compare a company’s ratios
to some form of standard.
7) The Sarbanes-Oxley Act prohibits CPAs from providing nonaudit investment
banking services.
8) The ratio of sales to invested assets is termed the investment turnover component of
the rate of return on investment.
9) Bonds payable would be listed at their carrying value on the balance sheet.
10) One of the differences in accounting for a process costing system compared to a job
order system is that the amounts used to transfer goods from one department to the next
comes from the cost of production report instead of job cost cards.
11) The Weber Company purchased a mining site for $1,750,000 on July 1, 2014. The
company expects to mine ore for the next 10 years and anticipates that a total of
400,000 tons will be recovered. The estimated residual value of the property is
$150,000. During 2014 the company extracted 6,500 tons of ore. The depletion expense
for 2014 is
A.$17,500
B.$16,000
C.$26,000
D.$15,000
12) If sales are $525,000, variable costs are 53% of sales, and operating income is
$50,000, what is the contribution margin ratio?
A.47%
B.26.5%
C.9.5%
D.53%
13) A responsibility center in which the department manager is responsible for costs,
revenues, and assets for a department is called:
A.a cost center
B.a profit center
C.an operating center
D.an investment center
14) The management of Idaho Corporation is considering the purchase of a new
machine costing $430,000. The company’s desired rate of return is 10%. The present
value factors for $1 at compound interest of 10% for 1 through 5 years are 0.909, 0.826,
0.751, 0.683, and 0.621, respectively. In addition to the foregoing information, use the
following data in determining the acceptability in this situation:
The net present value for this investment is:
A.positive $16,400
B.positive $25,200
C.Negative $99,600
D.Negative $126,800
15) Production estimates for July are as follows:
For each unit produced, the direct materials requirements are as follows:
The total direct materials purchases of materials A and B (assuming no beginning or
ending material inventory) required for July production is:
A.$1,080,000 for A; $648,000 for B
B.$1,080,000 for A; $1,296,000 for B
C.$1,170,000 for A; $702,000 for B
D.$1,125,000 for A; $675,000 for B
16) Selected accounts with some debits and credits omitted are presented as follows:
If the balance of Work in Process at August 31 is $220,000, what was the amount
debited to Work in Process for direct materials in August?
A.$390,000
B.$170,000
C.$525,000
D.$580,000
17) When a company sells machinery at a price equal to its book value, this transaction
would be recorded with an entry that would include the following:
A.debit Cash and Accumulated Depreciation; credit Machinery
B.debit Machinery; credit Cash and Accumulated Depreciation
C.debit Cash and Machinery; credit Accumulated Depreciation
D.debit Cash and Depreciation Expense; credit Accumulated Depreciation
18) A business received an offer from an exporter for 20,000 units of product at $15 per
unit. The acceptance of the offer will not affect normal production or domestic sales
prices. The following data are available:
What is the differential revenue from the acceptance of the offer?
A.$300,000
B.$420,000
C.$120,000
D.$240,000
19) Assuming a 360-day year, the interest charged by the bank, at the rate of 9%, on a
90-day, discounted note payable of $100,000 is
A.$9,000
B.$2,250
C.$750
D.$1,000
20) The journal entry a company uses to record the issuance of a note for the purpose of
converting an existing account payable would be
A.debit Cash; credit Accounts Payable
B.debit Accounts, Payable; credit Cash
C.debit Cash; credit Notes Payable
D.debit Accounts Payable; credit Notes Payable
21) Numbers of times interest charges earned is computed as
A.Income before income taxes plus Interest Expense divided by Interest Expense
B.Income before income taxes less Interest Expense divided by Interest Expense
C.Income before income taxes divided by Interest Expense
D.Income before income taxes plus Interest Expense divided by Interest Revenue
22) Use the following worksheet to answer the following questions.
Based on the preceding trial balance, the entry to close expenses would be:
A.Wages Expense 63,000
Rent Expense 27,000
Depreciation Expense 15,000
Income Summary 105,000
B.Expenses 105,000
Income Summary 105,000
C.Wages Expense 63,000
Rent Expense 27,000
Depreciation Expense 15,000
C. Finley, Drawing 105,000
D.Income Summary 105,000
23) Earnings per share
A.is the net income per common share
B.must be reported by publicly traded companies
C.helps compare companies of different sizes
D.all of the above
24) The chart of account for the Corning Company includes some of the following
accounts:
On the journal page 3, the following transaction was found:
What is the post reference that will be found on the Prepaid Insurance account?
A.11
B.15
C.3
D.None
25) A note receivable due in 18 months is listed on the balance sheet under the caption
A.long-term liabilities
B.fixed assets
C.current assets
D.investments
26) Costs other than direct materials cost and direct labor cost incurred in the
manufacturing process are classified as:
A.factory overhead cost
B.miscellaneous expense
C.product costs
D.period cost
27) The reduction of par or stated value of stock by issuance of a proportionate number
of additional shares is termed a
A.liquidating dividend
B.stock split
C.stock option
D.preferred dividend
28) Mocha Company manufactures a single product by a continuous process, involving
three production departments. The records indicate that direct materials, direct labor,
and applied factory overhead for Department 1 were $100,000, $125,000, and
$150,000, respectively. The records further indicate that direct materials, direct labor,
and applied factory overhead for Department 2 were $55,000, $65,000, and $80,000,
respectively. In addition, work in process at the beginning of the period for Department
1 totaled $75,000, and work in process at the end of the period totaled $60,000.
The journal entry to record the flow of costs into Department 1 during the period for
applied overhead is:
A.Factory Overhead–Department 1150,000
Work in Process–Department 1150,000
B.Work in Process–Department 1125,000
Factory Overhead–Department 1125,000
C.Work in Process–Department 180,000
Factory Overhead–Department 180,000
D.Work in Process–Department 1150,000
Factory Overhead–Department 1150,000
29) Under the periodic inventory system, the journal entry to record the cost of
merchandise sold at the point of sale will include the following account
A.No entry is made.
B.Cost of merchandise sold
C.Inventory
D.Purchases
30) After all of the account balances have been extended to the Income Statement
columns of the work sheet, the totals of the debit and credit columns are $77,500 and
$83,900, respectively. What is the amount of the net income or net loss for the period?
A.$6,400 net income
B.$6,400 net loss
C.$83,900 net income
D.$77,500 net loss
31) 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
32) The following lots of a particular commodity were available for sale during the
year:
The firm uses the periodic system and there are 20 units of the commodity on hand at
the end of the year.
What is the amount of cost of goods sold for the year according to the LIFO method?
A.$1,380
B.$1,375
C.$1,510
D.$1,250
33) The Dayton Corporation began the current year with a retained earnings balance of
$32,000. During the year, the company corrected an error made in the prior year, which
was a failure to record depreciation expense of $3,000 on equipment. Also, during the
current year, the company earned net income of $12,000 and declared cash dividends of
$7,000. Compute the year end retained earnings balance.
A.$34,000
B.$37,000
C.$41,000
D.$44,000
34) Which of the following represents the factory overhead applied to a product?
A.Predetermined factory overhead rate times estimated activity base
B.Actual factory overhead rate times estimated activity base
C.Predetermined factory overhead rate times actual activity base
D.Actual factory overhead rate times actual activity base
35) On June 8, Alton Co. issued an $90,000, 6%, 120-day note payable to Seller Co.
Assuming a 360-day year for your calculations, what is the maturity value of the note?
A.$90,450
B.$90,000
C.$91,800
D.$95,400
36) A project has estimated annual cash flows of $95,000 for four years and is estimated
to cost $260,000. Assume a minimum acceptable rate of return of 10%. Using the
following tables determine the (a) net present value of the project and (b) the present
value index, rounded to two decimal places.
Below is a table for the present value of $1 at compound interest.
Below is a table for the present value of an annuity of $1 at compound interest.
37) Carter Co. sells two products, Arks and Bins. Last year Carter sold 14,000 units of
Arks and 56,000 units of Bins. Related data are:
What was Carter Co.’s weighted average unit contribution margin?
A.$24
B.$60
C.$92
D.$20
38) The following data is given for the Zoyza Company:
Overhead is applied on standard labor hours.
The factory overhead volume variance is:
A.$73,250U
B.$73,250F
C.$59,400F
D.$59,400U
39) Prior to the adjusting process, accrued revenue has
A.been earned and cash received
B.been earned and not recorded as revenue
C.not been earned but recorded as revenue
D.not been recorded as revenue but cash has been received
40) A corporation, which had 18,000 shares of common stock outstanding, declared
a3-for-1 stock split.
(a) What will be the number of shares outstanding after the split?
(b) If the common stock had a market price of $240 per share before the stock split,
what would be an approximate market price per share after the split?
(c) Journalize the entry to record the stock split.
41) Just-in-time operations attempt to significantly reduce
A.profits
B.inventory needed to produce products
C.inspection time and moving time
D.processing time
42) An installment note payable for a principal amount of $94,000 at 6% interest
requires Lawson Company to repay the principal and interest in equal annual payments
of $22,315 beginning December 31, 2014, for each of the next five years. After the final
payment, the carrying amount on the note will be
A.$ 1,263
B.$21,053
C.$22,315
D.$ 0
43) For Company A and Company B:
44) For each of the following notes receivables held by Rogers Company determine the
interest revenue to be reported on the income statements for 2011 and 2012. Round
answers to nearest whole dollar.
45) Describe the items which should be covered in a partnership agreement.
46) Callon Industries has projected sales of 67,000 machines for 2012. The estimated
January 1, 2012, inventory is 6,000 units, and the desired December 31, 2012, inventory
is 15,000 units. What is the budgeted production (in units) for 2012?
47) The income statement disclosed the following items for 2011:
Balances of the current assets and current liabilities accounts changed between
December 31, 2010 and December 31, 2011, as follows:
Required:
Prepare the Cash Flows for Operating Activities section of the statement of cash flows,
using the indirect method.
48) Bradenton Company reports the following for 2012:
* Net of any tax effect
Required:
49) Explain what subsidiary ledgers are and give examples of three types of subsidiary
ledgers that a business might use.
50) Journalize the entries to record the following:
Jun 1 Established a petty cash fund of $200
Jun 30 The amount of cash in the petty cash fund is now $57. The fund is replenished
based on the following receipts: postage, $25; entertainment $100; miscellaneous $20.
Record any discrepancy in the cash short and over account.
Journal
51) The Tulsa Company allocates overhead based on a predetermined overhead rate of
$9.00 per direct labor hour. Job S35 required 8 tons of direct material at a cost of
$600.00 per ton and took employees who earn $21.00 per hour a total of 80 hours to
complete. What is the total cost of Job S35?
52) If a company records inventory purchases at standard cost and also records
purchase price variances, prepare the journal entry for a purchase of 6,000 widgets that
were bought at $8.00 and have a standard cost of $8.15.
