1) If a department that applies process costing starts the reporting period with 50,000
physical units that were 25% complete with respect to direct materials and 40%
complete with respect to direct labor, it must add 12,500 equivalent units of direct
materials and 20,000 equivalent units of direct labor to complete them.
2) Budgets are normally more effective when all levels of management are involved in
the budgeting process.
3) The equity section of the balance sheet of a partnership can report the separate
capital account balances of each partner.
4) Product costs are expenditures necessary and integral to finished products.
5) Premium on Bonds Payable is an adjunct or accretion liability account.
6) If a department that uses process costing starts the reporting period with 100,000
physical units that were 20% complete with respect to direct labor, the equivalent units
of direct labor in Work in Process are 20,000.
7) A company’s board of directors votes to declare a cash dividend of $1.00 per share on
its 12,000 common shares outstanding. The journal entry to record the payment of the
cash dividend is:
A.Debit Dividend Expense $12,000; credit Cash $12,000.
B.Debit Dividend Expense $12,000; credit Common Dividend Payable $12,000.
C.Debit Common Dividend Payable $12,000; credit Cash $12,000.
D.Debit Retained Earnings $12,000; credit Common Dividend Payable $12,000.
E.Debit Common Dividend Payable $12,000; credit Retained Earnings $12,000.
8) Match the following definitions and terms by placing the letter that identifies the best
definition in the blank space next to the term.
1>A company’s chronological record of each transaction in one place that shows debits
and credits for each transaction.
2>Verifiable evidence that transactions have occurred used to record accounting
information.
3>A list of accounts and their balances at a point in time.
4>An increase in an asset and expense account, and decrease in a liability, owner’s
capital, and revenue account; recorded on the left side of a T-account.
5>A representation of a ledger account used to understand the effects of transactions.
6>A record containing all the accounts of a company and their balances.
7>Decrease in an asset, owner withdrawal and expense account, and increase in a
liability, owner’s capital and revenue account; recorded on the right side of a T-account.
8>The process of transferring journal entry information to the ledger accounts.
9>A record of the increases and decreases in a specific asset, liability, equity, revenue,
or expense item.
10>An accounting system where each transaction affects and is recorded in at least two
accounts; the sum of the debits for each entry must equal the sum of its credits.
A. Credit
B. Ledger
C. Double-entry accounting
D. Journal
E. Debit
F. Account
G. T-account
H. Trial balance
I. Posting
J. Source documents
9) Ultimo Co. operates three production departments as profit centers. The following
information is available for its most recent year. Department 1’s contribution to
overhead as a percent of sales is:
A.$210,000.
B.$350,000.
C.$10,000.
D.$260,000.
E.$150,000.
10) Presented below are the year-end balances at December 31 of Becca’s Dry Cleaning
Service. (All accounts have normal balances.)
(a) Prepare the necessary closing entries at December 31.
(b) Prepare a post-closing trial balance at December 31.
11) The indirect method for the preparation of the operating activities section of the
statement of cash flows:
A.Separately lists each major item of operating cash receipts.
B.Separately lists each major item of operating cash payments.
C.Reports net income and then adjusts it for items necessary to determine net cash
provided or used by operating activities.
D.Is required if the company is a merchandiser.
E.Must not be used in all circumstances.
12) Memphis Company’s May sales budget calls for sales of $900,000. The store
expects to begin May with $50,000 of inventory and to end the month with $55,000 of
inventory. Gross margin is typically 45% of sales. Compute the budgeted cost of
merchandise purchases for May.
A.$550,000.
B.$500,000.
C.$495,000.
D.$460,000.
E.$490,000.
13) Match the following terms with the definitions.
A. Merchandise purchases budget
B. Budgeted balance sheet
C. Sales budget
D. Budgeted income statement
E. Safety stock
F. Master budget
G. Budget
H. General and administrative expense budget
I. Cash budget
14) On January 4, Year 1, Barber Company purchased 5,000 shares of Convell
Company for $59,500 plus a broker’s fee of $1,000. Convell Company has a total of
25,000 shares of common stock outstanding and it is presumed the Barber Company
will have a significant influence over Convell. During each of the next two years,
Convell declared and paid cash dividends of $0.85 per share, and its net income was
$72,000 and $67,000 for Year 1 and Year 2, respectively. The January 12, Year 3, entry
to record Barber’s sale of 3,000 shares of Convell Company stock, which represents
60% of Barber’s total investment, for $39,000 cash should be:
A.Debit Cash $39,000; debit Loss on Sale of Investment $8,200; credit Long-Term
Investments $47,280.
B.Debit Cash $39,000; debit Loss on Sale of Investment $8,880; credit Long-Term
Investments $47,880.
C.Debit Cash $39,000; credit Gain on Sale of Investment $2,700; credit Long-Term
Investments $36,300.
D.Debit Cash $39,000; credit Gain on Sale of Investment $8,750; credit Long-Term
Investments $30,250.
E.Debit Cash $39,000; debit Loss on Sale of Investment $21,500; credit Long-Term
Investments $60,500.
15) A company made an error in calculating and reporting amortization expense in
2015. The error was discovered in 2016. The item should be reported as a prior period
adjustment:
A.on the 2015 statement of retained earnings.
B.on the 2015 income statement.
C.on the 2016 statement of retained earnings.
D.on the 2016 income statement.
E.accounted for with a cumulative “catch-up” adjustment in 2016.
16) A contingent liability is:
A.Always of a specific amount.
B.A potential obligation that depends on a future event arising from a past transaction
or event.
C.An obligation not requiring future payment.
D.An obligation arising from the purchase of goods or services on credit.
E.An obligation arising from a future event.
17) The correct adjusting entry for accrued and unpaid employee salaries of $9,000 on
December 31 is:
A.debit Salary Expense, $9,000; credit Cash, $9,000
B.debit Salary Expense, $9,000; credit Fees Earned, $9,000
C.debit Salary Expense, $9,000; credit Prepaid Salary, $9,000
D.debit Salary Expense, $9,000; credit Salaries Payable, $9,000
E.debit Salaries Payable, $9,000; credit Salary Expense $9,000
18) Short-term investments in held-to-maturity debt securities are accounted for using
the:
A.Fair value method with fair value adjustment to income.
B.Fair value method with fair value adjustment to equity.
C.Cost method with amortization.
D.Cost method without amortization.
E.Equity method.
19) Canfield Technical School allocates administrative costs to its respective
departments based on the number of students enrolled, while maintenance and utilities
are allocated per square feet of the classrooms. Based on the information below, what is
the total amount allocated to the Welding Department (rounded to the nearest dollar) if
administrative costs for the school were $50,000, maintenance fees were $12,000, and
utilities were $6,000?
A.$0.
B.$17,000.
C.$18,500.
D.$22,667.
E.$30,000.
20) A plan that lists dollar amounts to be received from disposing of plant assets and
dollar amounts to be spent on purchasing additional plant assets is called a:
A.Cash budget.
B.Capital expenditures budget.
C.Rolling budget.
D.Sales budget.
E.Production budget.
21) Comprehensive income includes all except:
A.Revenues and expenses reported in the income statement.
B.Dividends paid to shareholders.
C.Unrealized gains and losses on long-term available-for-sale securities.
D.All changes in equity for a period except those due to investments and distributions
to owners.
E.Gains and losses reported in the income statement.
22) Wang Company provides the following data for the current year:
Required:
a. Calculate the predetermined overhead allocation rate based on direct labor.
b. Determine the amount of overhead applied to production.
c. Prepare the journal entry to apply factory overhead to Work in Process.
23) In a firm that manufactures clothing, the department that is responsible for actually
assembling the garments could best be described as a(n):
A.Service department.
B.Operating or production department.
C.Cost center.
D.Department in which all of the costs incurred are direct expenses.
E.Department in which all of the costs incurred are indirect expenses.
24) Retained earnings:
A.Generally consists of a company’s cumulative net income less any net losses and
dividends declared since its inception.
B.Can only be appropriated by setting aside a cash fund.
C.Represent an amount of cash available to pay shareholders.
D.Are never adjusted for anything other than net income or dividends.
E.Represents the amount shareholders are guaranteed to receive upon company
liquidation.
25) The wage bracket withholding table is used to:
A.Compute social security withholding.
B.Compute Medicare withholding.
C.Compute federal income tax withholding.
D.Prepare the W-4.
E.Compute unemployment taxes.
26) Mercks accepts the Discovery credit card for credit card sales. Mercks sends credit
card receipts to Discovery on a weekly basis. Discovery charges Mercks a 3% fee.
Mercks usually receives payment from Discovery within a week. Prepare journal
entries to record the following transactions.
27) During the closing process, partner’s capital accounts are _______________ for
their share of net income and _________________ for their share of net loss.
28) Felton Corporation purchased $4,000 in merchandise from Marita Co. Felton signed
a 60-day, 10%, $4,000 promissory note. Marita should record the sale with a journal
entry debiting ____________________ for ________ and crediting
__________________ for ________.
29) A standard that takes into account the reality that some loss usually occurs with any
process under normal application of the process is known as a _______________
standard.
30) Review the transactions below and identify with an “X” those that would be posted
as a credit in the ledger (The first one has been done for you):
__X__ 1> Salary Payable was increased
____ 2> Cash was decreased
____ 3> Equipment was increased
____ 4> Owner, Capital was increased
____ 5> Salaries Expense was increased
____ 6> Accounts Receivable was decreased
____ 7> Unearned Revenue was increased
____ 8> Owner, Withdrawals was increased
____ 9> Supplies was increased
____ 10> Building was increased
____ 11> Utilities Expense was increased
____ 12> Service Revenue was increased
31) Identify and describe three common tools of financial statement analysis.
32) What are some of the considerations management should make when assessing the
accounts receivable turnover ratio?
33) Westport Company reports the following in millions: net sales of $25,300 for 2016
and $22,640 for 2015; end-of-year total assets of $14,875 for 2016 and $13,680 for
2015 . Compute its total asset turnover for 2016 and assess its level if competitors
average a total asset turnover of 2.0 times.