1) When a partner leaves a partnership, the present partnership ends, but the business
can still continue to operate.
2) A pension plan is a contractual agreement between an employer and its employees to
provide benefits to employees after they retire.
3) The price at which a share of stock is bought or sold is known as par value.
4) Plant assets refer to nonphysical assets that are used in the operations of a business.
5) The cash basis of accounting is an accounting system in which revenues are recorded
when earned and expenses are recorded when incurred.
6) Natural resources may be reported under either plant assets or their own separate
category on the balance sheet.
7) In a process costing system, companies typically end each period with only Finished
Goods Inventory.
8) The matching principle is used to determine how much of the cost of goods available
for sale is deducted from sales and how much is carried forward as inventory.
9) Since a predetermined overhead rate is established before a period begins, this rate is
revised many times during the period to compensate for inaccurate estimates previously
made.
10) An unfavorable variance is recorded with a debit because it reflects additional costs
higher than the standard cost.
11) A company had sales of $350,000 and cost of goods sold of $200,000. Its gross
profit equals $150,000.
12) Betterments are a type of capital expenditure.
13) The accounting cycle refers to the sequence of steps used in preparing the work
sheet.
14) Flagstaff Company has budgeted production units of 7,900 for July and 8,100 for
August. The direct materials requirement per unit is 2 ounces. The company has
determined that it wants to have safety stock of direct materials on hand at the end of
each month to complete 20% of the units budgeted in the following month. There was
3,160 ounces of direct material in inventory at the start of July. The total cost of direct
materials purchases for the July direct materials budget, assuming the materials cost
$1.15 per ounce, is:
A.$18,262.
B.$21,896.
C.$14,536.
D.$18,078.
E.$18,170.
15) Which of the following accounts would be included in a post-closing trial balance?
A.Accounts Receivable.
B.S. Stills, Withdrawal.
C.Consulting Fees Earned.
D.Depreciation Expense-Equipment.
E.Salaries Expense.
16) Common uses of the statement of cash flows include all but which of the following?
A.Management prediction of future cash flows for decision making.
B.Investor assessment of cash flows before buying and selling stock.
C.Creditor evaluation of a company’s ability to generate cash to cover debt.
D.Government assessment of whether company is able to pay taxes as they become
due.
E.Management determination of the specific sources and uses of cash.
17) The following information is available for the Topper Company for the month of
July.
a. On July 31, after all transactions have been recorded, the balance in the company’s
Cash account has a balance of $15,244.
b. The company’s bank statement shows a balance on July of $16,450.
c. Outstanding checks at July total $2,063.
d. A credit memo included with the bank statement indicates that the bank collected
$570 on a note receivable for Topper. The $570 includes $550 principle and $20
interest.
e. A debit memo included with the bank statement shows a $107 NSF check from a
customer, P. Flank.
f. A deposit placed in the bank’s night depository on July 31 totaling $1,275 did not
appear on the bank statement.
h. Included with the bank statement was a debit memorandum in the amount of $45 for
check printing charges that have not been recorded on the company’s books.
Prepare the July bank reconciliation for the Topper Company.
18) A company uses a process costing system. Its Welding Department completed and
transferred out 100,000 units during the current period. The ending inventory in the
Welding Department consists of 30,000 units (75% complete with respect to direct
materials and 40% complete with respect to conversion costs).
Determine the equivalent units of production for the Welding Department for direct
materials and conversion costs assuming the weighted average method.
A.130,000; 130,000
B.130,000; 112,000
C.107,500; 118,000
D.122,500; 112,000
E.112,500; 130,000
19) A company that uses a job order costing system would make the following entry to
record the flow of direct materials into production:
A.debit Work in Process Inventory, credit Cost of Goods Sold.
B.debit Work in Process Inventory, credit Raw Materials Inventory.
C.debit Work in Process Inventory, credit Factory Overhead.
D.debit Factory Overhead, credit Raw Materials Inventory.
E.debit Finished Goods Inventory, credit Raw Materials Inventory.
20) A bond sells at a discount when the:
A.Contract rate is above the market rate.
B.Contract rate is equal to the market rate.
C.Contract rate is below the market rate.
D.Bond has a short-term life.
E.Bond pays interest only once a year.
21) Long-term investments can not include:
A.Held-to-maturity debt securities.
B.Securities with maturity dates within one operating cycle.
C.Available-for-sale equity securities.
D.Equity securities giving an investor significant influence over an investee.
E. Available-for-sale debt securities.
22) On July 1of the current calendar year, Plum Co. paid $7,500 cash for management
services to be performed over a two-year period. Plum follows a policy of recording all
prepaid expenses to asset accounts at the time of cash payment. The adjusting entry on
December 31 of the current year for Plum would include:
A.A debit to an expense and a credit to a prepaid expense for $5,625.
B.A debit to a prepaid expense and a credit to Cash for $5,625.
C.A debit to an expense and a credit to a prepaid expense for $1,875.
D.A debit to a prepaid expense and a credit to an expense for $1,875.
E.A credit to a liability and a debit to a prepaid expense for $1,875.
23) If overhead applied is less than actual overhead incurred, it is:
A.Fully applied.
B.Underapplied.
C.Overapplied.
D.Expected.
E.Normal.
24) A company must repay the bank a single payment of $20,000 cash in 3 years for a
loan it entered into. The loan is at 8% interest compounded annually. The present value
factor for 3 years at 8% is 0.7938. The present value of the loan (rounded) is:
A.$15,877.
B.$12,400.
C.$5,592.
D.$9,200.
E.$47,630.
25) A company bought new heating system for $42,000 and was given a trade-in of
$2,000 on an old heating system, so the company paid $40,000 cash with the trade-in.
The old system had an original cost of $37,000 and accumulated depreciation of
$34,000. If the transaction has commercial substance, the company should record the
new heating system at:
A.$2,000.
B.$3,000.
C.$40,000.
D.$42,000.
E.$43,000.
26) A formal statement of future plans, usually expressed in monetary terms, is a:
A.Variance report.
B.Position statement.
C.Budget.
D.Prospectus.
E.Variance analysis.
27) Use the following selected information from Wheeler, LLC to determine the 2015
and 2014 common size percentages for cost of goods sold using Net sales as the base.
A.36.4% for 2015 and 41.1% for 2014.
B.55.0% for 2015 and 56.0% for 2014.
C.119.4% for 2015 and 100.0% for 2014.
D.117.2% for 2015 and 100.0% for 2014.
E.65.1% for 2015 and 56.0% for 2014.
28) Which of the following represents the correct formula for calculating cycle time for
a manufacturer?
A.Process time + inspection time – move time – wait time.
B.Process time – inspection time + move time + wait time.
C.Process time + inspection time + move time + wait time.
D.Process time – inspection time – move time – wait time.
E.Process time + inspection time + move time – wait time.
29) Use the information in the adjusted trial balance presented below to calculate
current assets for Taron Company:
A.$21,200.
B.$45,600.
C.$24,400.
D.$95,600.
E.$41,200.
30) Comparative statements for Warmer Corporation are shown below:
Calculate trend percentages for all income statement amounts shown and comment on
the results. Use 2014 as the base year. Comment on the results.
31) Draft Co. purchased 14,000 shares of Hamburg Corporation’s 40,000 shares of
common stock on January 1. This represented 35% of Hamburg’s outstanding shares
and gave Draft Co. significant influence over Hamburg’s management and operations.
On October 11, Hamburg declared and paid cash dividends of $30,000. On December
31, Hamburg reported net income of $125,000 for the year. Prepare the journal entries
Draft Co. should record to account for the dividends received and the earnings reported
by Hamburg Corporation.
32) In the process of preparing department income statements, a company uses there are
three steps before the statements can be completed. Describe those steps.
33) A company purchased a machine on January 1 of the current year for $750,000.
Calculate the annual depreciation expense for each year of the machine’s life (estimated
at 5 years or 20,000 hours, with a salvage value of $75,000) using each of the
below-mentioned methods. During the machine’s 5-year life its hourly usage was:
3,000; 4,000; 5,000; 5,000; and 3,000 hours.
34) A record containing all the separate accounts for a company as well as all of their
balances is called the ___________________.
35) Using the table below, indicate the impact of the following errors made during the
adjusting entry process. Use a “+” for overstatements, a “-” for understatements, and a
“0” for no effect. The first one is provided as an example.
36) __________________ implies that each partner in a partnership can be called on to
personally pay a partnership’s debts.
37) There are three major types of business activities. ________________ activities are
the means organizations use to pay for resources such as land, building, and equipment
to carry out plans.
38) ____________________ bonds reduce a bondholder’s risk by requiring the issuer to
create a fund of assets set aside as specified amounts and dates to repay the bonds.
39) Explain variance analysis. Describe how variance analysis assists managers.