1) Under a periodic inventory system, the merchandise on hand at the end of the year is
determined by a physical count of the inventory.
2) An adjusting entry to accrue an incurred expense will affect total liabilities.
3) The erroneous moving of an entire number one or more spaces to the right or left,
such as writing $85 as $850, is called a transposition.
4) After a bank reconciliation is completed, adjusting entries are prepared for items in
the balance per company’s records as well as items in the balance per bank statement.
5) The cumulative effects of other comprehensive income items must be reported
separately from retained earnings and paid-in capital, on the balance sheet, as
accumulated other comprehensive income.
6) Part of the cash budget is based on information drawn from the capital expenditures
budget.
7) Held-to-maturity securities maturing beyond a year are reported as noncurrent assets.
8) If divisional income from operations is $75,000, invested assets are $737,500, and
the minimum rate of return on invested assets is 6%, the residual income is $36,750.
9) When a property, plant, and equipment asset is sold for cash, any gain or loss on the
asset sold should be recorded.
10) Proper reporting of revenues and expenses in a period is due to the accounting
period concept.
11) On the balance sheet for a manufacturing business, the cost of direct materials,
direct labor, and factory overhead are categorized as either materials inventory, work in
process inventory, or finished goods inventory.
12) For income tax purposes most companies use an accelerated deprecation method
called double declining balance.
13) A company is considering the purchase of a new piece of equipment for $90,000.
Predicted annual cash inflows from the investment are $36,000 (year 1), $30,000 (year
2), $18,000 (year 3), $12,000 (year 4), and $6,000 (year 5). The average income from
operations over the 5-year life is $20,400. The payback period is 3.5 years.
14) When a merchandising business is compared to a service business, the financial
statement that is not affected by that change is the Statement of Owner’s Equity.
15) The standard cost is how much a product should cost to manufacture.
16) The following unit data were assembled for the assembly process of the Super Co.
for the month of June. Direct materials are added at the beginning of the process.
Conversion costs are added uniformly over the production process. The company uses
the FIFO process.
The number of equivalent units produced with respect to conversion costs is:
A.50,200
B.48,000
C.53,000
D.47,200
17) Flyer Company sells a product in a competitive marketplace. Market analysis
indicates that their product would probably sell at $48 per unit. Flyer management
desires a 12.5% profit margin on sales. Their current full cost per unit for the product is
$44 per unit.
What is the target cost of the companys product?
A.$44
B.$42
C.$43
D.$40
18) Match the following cost flow assumption to their inventory costing method:
1>Cost flow is in the reverse order in which the cost were incurred. A. Average Cost
2>Cost flow matches the unit sold to the unit purchased. B. Last-in, Last-out (LIFO)
3>Cost flow is an average of the costs. C. Specific Identification
4>Cost flow is in the order in which the costs were incurred. D. First-in, First-out
(FIFO)
19) After all of the account balances have been extended to the Balance Sheet columns
of the work sheet, the totals of the debit and credit columns show debits of $37,686 and
the credits of $41,101. This indicates that
A.neither net income or loss can be calculated because it is found on the income
statement
B.the company has a net loss of $3,415 for the period
C.the company has a net income of $3,415 for the period
D.The amounts are out of balance and need to be corrected
20) When using a perpetual inventory system, the journal entry to record the cost of
merchandise sold is:
A.debit Cost of Merchandise Sold; credit Sales
B.debit Cost of Merchandise Sold; credit Merchandise Inventory
C.debit Merchandise Inventory; credit Cost of Merchandise Sold
D.No journal entry is made to record the cost of merchandise sold
21) Characteristics of a corporation include
A.shareholders who are mutual agents
B.direct management by the shareholders (owners)
C.its inability to own property
D.shareholders who have limited liability
22) Free cash flow is cash from operations, less cash for
A.dividends and cash for fixed assets needed to maintain productivity
B.dividends and cash to redeem bonds payable
C.fixed assets needed to maintain productivity
D.fixed assets needed to maintain productivity, and cash to redeem bonds payable
23) Sensational Soft Drinks makes three products: iced tea, soda, and lemonade. The
following data are available:
Sensational is experiencing a bottleneck in one of its processes that affects each product
as follows:
24) Prior to liquidating their partnership, Samuel and Brian had capital accounts of
$60,000 and $240,000, respectively. The partnership assets were sold for $120,000. The
partnership had no liabilities. Samuel and Brian share income and losses equally.
Required:
a. Determine the amount of Samuels deficiency.
b. Determine the amount distributed to Brian, assuming Samuel is unable to satisfy the
deficiency.
25) The capital accounts of Hawk and Martin have balances of $160,000 and $140,000,
respectively, on January 1, 2010, the beginning of the current fiscal year. On April 10,
Hawk invested an additional $10,000. During the year, Hawk and Martin withdrew
$86,000 and $68,000, respectively, and net income for the year was $258,000. The
articles of partnership make no reference to the division of net income.
Based on this information, the statement of partners equity for 2010 would show what
amount in the capital account for Martin on December 31, 2010?
A.$173,000
B.$211,000
C.$201,000
D.$232,000
26) Which of the following systems provides for a separate record of the cost of each
particular quantity of product that passes through the factory?
A.Job order cost system
B.General cost system
C.Replacement cost system
D.Process cost system
27) The portion of whole units that were completed with respect to either materials or
conversion costs within a given accounting period is the definition of
A.units started and completed
B.equivalent units
C.conversion costs
D.ending work in process
28) The net book value of a fixed asset is determined by
A.Original cost less accumulated depreciation
B.Original cost less depreciation expense
C.Original cost less accumulated depreciation plus depreciation expense
D.Original cost plus accumulated depreciation
29) Use the following worksheet to answer the following questions.
Based on the preceding trial balance, the entry to close C. Finley, Drawing would be:
A.debit C. Finley, Capital $3,000, credit C. Finley, Drawing $3,000
B.debit C. Finley, Capital $12,000, credit C. Finley, Drawing $12,000
C.debit C. Finley, Drawing $3,000; credit C. Finley, Capital $3,000
D.debit C. Finley, Drawing $12,000; credit C. Finley, Capital $12,000
30) The journal entry a company uses to record the issuance of a discounted note for the
purpose of borrowing funds for the business is
A.debit Cash and Interest Expense; credit Notes Payable
B.debit Cash and Interest Payable; credit Notes Payable
C.debit Accounts Payable; credit Notes Payable
D.debit Notes Payable; credit Cash
31) What cost concept used in applying the cost-plus approach to product pricing
includes only total manufacturing costs in the “cost” amount to which the markup is
added?
A.Variable cost concept
B.Total cost concept
C.Product cost concept
D.Opportunity cost concept
32) Henry Jones contributed equipment, inventory, and $44,000 cash to the partnership.
The equipment had a book value of $35,000 and market value of $28,000. The
inventory has a book value of $25,000, but only had a market value of $12,000. due to
obsolescence. The partnership also assumed a $15,000 note payable owed by Henry that
was originally used to purchase the equipment.
What amount should Henrys capital account be recorded?
A.$104,000
B.$89,000
C.$69,000
D.$84,000
33) Sabas Company has 20,000 shares of $100 par, 2% cumulative preferred stock and
100,000 shares of $50 par common stock. The following amounts were distributed as
dividends:
Determine the dividends per share for preferred and common stock for the second year.
A.$2.25 and $0.00
B.$2.25 and $0.45
C.$0.00 and $0.45
D.$2.00 and $0.45
34) Work in process inventory on December 31, 2011, is $42,000. Work in process
inventory decreased by 40% during 2011. Total manufacturing costs incurred in 2011
amount to $260,000. What is cost of goods manufactured?
A.$232,000
B.$302,000
C.$288,000
D.$190,000
35) Notes or accounts receivables that result from sales transactions are often called
A.non-trade receivables
B.trade receivables
C.merchandise receivables
D.sales receivables
36) Hakik Enterprises offers rug cleaning services to business clients. Below are the
adjustments data for the year ended July 31, 2010. REQUIRED: Using this information
along with the spreadsheet below, record the adjusting entries in proper general journal
form.
Adjustments:
a) The equipment is estimated to last for 5 years with no salvage value. The asset will
be depreciated evenly over its useful life. Please record one months depreciation.
b) Accrued Wages $2.
c) Unused supplies on hand $8.
d) Of the unearned revenue, 75% has been earned.
e) Unexpired insurance remaining at the end of the month, $9.
37) Safari Co. sells two products, Orks and Zins. Last year Safari sold 21,000 units of
Orks and 14,000 units of Zins. Related data are:
Calculate the following:
a. Safari Co.s sales mix
b. Safari Co.s weighted average unit selling price
c. Safari Cos weighted average unit contribution margin
d. Safari Cos break-even point assuming that last years fixed costs were $160,000.
38) Cash equivalents include
A.checks
B.coins and currency
C.money market accounts and commercial paper
D.stocks and short-term bonds
39) A retailer purchases merchandise with a catalog list price of $30,000. The retailer
receives a 15% trade discount and credit terms of 2/10, n/30. How much cash will be
needed to pay this invoice within the discount period?
A.$30,000
B.$24,900
C.$29,400
D.$24,990
40) Everett, Miguel, and Ramona are partners, sharing income 1:2:3. After selling all of
the assets for cash, dividing losses on realization, and paying liabilities, the balances in
the capital accounts are as follows: Everett, $50,000 Cr.; Miguel, $40,000 Dr.; and
Ramona, $30,000 Cr. How much cash should be distributed to Everett assuming that
Miguel pays the deficiency?
A.$50,000
B.$20,000
C.$30,000
D.$40,000
41) When the market rate of interest on bonds is higher than the contract rate, the bonds
will sell at
A.a premium
B.their face value
C.their maturity value
D.a discount
42) Dotterel Corporation uses the variable cost concept of product pricing. Below is
cost information for the production and sale of 35,000 units of its sole product. Dotterel
desires a profit equal to a 11.2% rate of return on invested assets of $350,000.
The markup percentage for the sale of the company’s product is:
A.14%
B.5.6%
C.45.71%
D.11.2%
43) Prepare entries to record the following:
(a) Issued 1,000 shares of $10 par common stock at $56 for cash.
(b) Issued 1,400 shares of common stock in exchange for equipment with a fair market
price of $21,000.
(c) Purchased 100 shares of treasury stock at $25.
(d) Sold 100 shares of treasury stock at $30.
44) On January 1, 2014, Gemstone Company obtained a $165,000, 10-year, 7%
installment note from Guarantee Bank. The note requires annual payments of $23,492,
with the first payment occurring on the last day of the fiscal year. The first payment
consists of interest of $11,550 and principal repayment of $11,942. The journal entry to
record the issuance of the installment note for cash on January 1, 2014 would include:
A.a debit to Interest Expense of $11,550
B.a credit to Interest Payable of $11,550
C.a credit to Notes Payable of $165,000
D.a debit to Notes Payable of $165,000
45) Prepaid advertising, representing payment for the next quarter, would be reported
on the balance sheet as a(n)
A.asset
B.liability
C.contra asset
D.capital
46) The process by which management plans, evaluates, and controls long-term
investment decisions involving fixed assets is called:
A.absorption cost analysis
B.variable cost analysis
C.capital investment analysis
D.cost-volume-profit analysis
47) Utilizing the Revenue Journal, below, journalize the following five transactions of
Porshe Creations:
(a) On March 20th Porshe sells 25 cell phone covers to Xtreme at $4.50 per cover on
invoice 887.
(b) On March 21st Porshe sells 5 cell phone covers to Sidekick for $7.50 per cover on
invoice 908.
(c) On March 22nd Porshe sells 18 cell phone covers to Rock-On at $4.25 per cover on
invoice 938.
(d) On March 26th Porshe sells 200 cell phone covers to Micro at $3.75 each on invoice
959.
(e) On March 29th Porshe sells 6 cell phone covers to Charmers for $8.35 each on
invoice 997.
48) In capital rationing, alternative proposals that survive initial and secondary
screening are normally evaluated in terms of:
A.present value
B.non-financial factors
C.maximum cost
D.net cash flow
49) Which of the following activity bases would be the most appropriate for food costs
of a hospital?
A.Number of cooks scheduled to work
B.Number of x-rays taken
C.Number of patients who stay in the hospital
D.Number of scheduled surgeries
50) Xavier and Yolanda have original investments of $50,000 and $100,000
respectively in a partnership. The articles of partnership include the following
provisions regarding the division of net income: interest on original investment at 20%,
salary allowances of $34,000 and $26,000 respectively, and the remainder equally. How
much of the net income of $100,000 is allocated to Yolanda?
A.$49,000
B.$51,000
C.$50,000
D.$56,000
51) The primary ledger containing all the balance sheet and income statement accounts
is the
A.general ledger
B.creditors ledger
C.customers ledger
D.subsidiary ledger
52) The following are all product costs except:
A.Direct materials
B.Sales and administrative expenses
C.Direct labor
D.Factory overhead
53) When posting a column total in the purchases journal, a credit should be posted to
A.Merchandise Inventory
B.Accounts Payable
C.Sales Returns and Allowances
D.Cash
54) Prepaid insurance is reported on the balance sheet as a
A.current asset
B.fixed asset
C.current liability
D.long-term liability
55) A summary of the time tickets for August follows:
Present the journal entries to record (a) the labor cost incurred and (b) the application of
factory overhead to production for August. The factory overhead rate is 70% of direct
labor cost.
56) Selected data from the Carmen Company at year end are presented below:
Instructions
Calculate the profitability ratios that can be computed from the above
information.Assume the company had no preferred stock or interest expense. Round
percentage value to one decimal place and dollar value to zero decimal place.
57) Fill in the missing amounts from the chart below regarding the calculation of Bean
Corporations estimated inventory using the retail method of estimation.
58) Dorman Company reported the following data:
Prepare the Cash Flows from Operating Activities section of the statement of cash flows
using the indirect method.
59) Explain the interrelationship between the Balance Sheet and the Statement of Cash
Flows.
60) Using the following table, what is the present value of $5,000 to be received 5
years, if the market rate is 10% compounded annually?
61) The partnership of Abraham Associates began operations on January 1, 2010, with
contributions from two partners as follows:
The following additional partner transactions took place during the year:
Required:
Prepare a statement of partnership equity for the year ended December 31, 2010.
