1) A company has the following per unit original costs and replacement costs for its
inventory. LCM is applied to individual items.
Part A: 50 units with a cost of $5, and replacement cost of $4.50
Part B: 75 units with a cost of $6, and replacement cost of $6.50
Part C: 160 units with a cost of $3, and replacement cost of $2.50
Under the lower of cost or market method, the total value of this company’s ending
inventory is:
A.$1,180.00.
B.$1,075.00.
C.$1,112.50.
D.$1,217.50.
E.$1,137.50.
2) Investing activities include: (a) the purchase and sale of long-term assets, (b) lending
and collecting on notes receivable, and (c) the purchase and sale of short-term
investments in the securities of other entities, other than cash equivalents and trading
securities.
3) Classified balance sheets commonly include the following categories.
a. Current assets
b. Long-term investments
c. Plant assets
d. Intangible assets
e. Current liabilities
f. Long-term liabilities
g. Equity.
Indicate the typical classification of each item below by placing the letter of the correct
balance sheet category a through g in the blank space next to the item.
1) ____ Equipment used in business operations
2) ____ Store Supplies
3) ____ Investment maturing in two years
4) ____ Long-term Note Payable
5) ____ Prepaid Rent
6) ____ D. Flanders, Capital
7) ____ Accounts Payable
8) ____ Current portion of long-term debt
9) ____ Trademarks
10) ____ Wages Payable
11) ____ Accounts Receivable
12) ____ Cash
4) A key idea in process costing that refers to the number of units that could have been
started and completed given the costs incurred during the period is known as:
A.Manufacturing overhead.
B.Units in process.
C.A job cost sheet.
D.Equivalent units of production.
E.Process cost summary.
5) All of the following statements regarding accounting for trading securities under U.S.
GAAP are true except:
A.The entire portfolio of trading securities is reported at is fair value.
B.An unrealized gain or loss from a change in fair value is reported on the income
statement.
C.An unrealized gain or loss is recorded with an adjusting entry when the securities are
sold.
D.An unrealized gain or loss is recorded with an adjusting entry at the end of each
period.
E.Unrealized gains and losses are recorded in a temporary account that is closed to
Income Summary at the end of the period.
6) Noncash investing and financing activities may be disclosed in:
A.A note in the financial statements or a schedule attached to the statement of cash
flows.
B.The operating activities section of the statement of cash flows.
C.The investing activities section of the statement of cash flows.
D.The financing activities section of the statement of cash flows.
E.The reconciliation of cash balance section.
7) Of the following, which one affects cash during a period?
A.The payment of interest expense accrued in a previous accounting period.
B.Writing off an uncollectible account receivable.
C.The declaration of a cash dividend.
D.An adjusting entry recognizing the expiration of prepaid insurance.
E.The declaration of a stock dividend.
8) The target cost for a job using job costing is calculated as
A.direct costs + desired profit.
B.direct costs – desired profit.
C.expected selling price – direct costs.
D.expected selling price – desired profit.
E.expected selling price + desired profit.
9) If a company reports profit margin of 31.6% and investment turnover of 1.30 for one
of its investment centers, the return on investment must be:
A.24.3%.
B.41.1%.
C.32.9%.
D.30.3%.
E.4.11%.
10) A company purchased and installed equipment on January 1 at a total cost of
$72,000. Straight-line depreciation was calculated based on the assumption of a
five-year life and no salvage value. The equipment was disposed of on July 1 of the
fourth year. The company uses the calendar year.
1. Prepare the general journal entry to update depreciation to July 1 in the fourth year.
2. Prepare the general journal entry to record the disposal of the equipment under each
of these three independent situations:
a. The equipment was sold for $22,000 cash.
b. The equipment was sold for $15,000 cash.
c. The equipment was totally destroyed in a fire and the insurance company settled the
claim for $18,000 cash.
11) The current FUTA tax rate is 0.6%, and the SUTA tax rate is 5.4%. Both taxes are
applied to the first $7,000 of an employee’s pay. Assume that an employee earned total
wages of $2,900 in the current period and had cumulative pay for prior periods of
$5,800. What is the amount of unemployment taxes the employer must pay on this
employee’s wages for the current period?
A.$420.00.
B.$348.00.
C.$72.00.
D.$174.00.
E.$0.00.
12) A company’s employees earn a total of $10,000 per week for a 5-day week that
begins on Monday. December 31 of Year 1 is a Monday, and all 20 employees worked
that day.
a) Prepare the required adjusting journal entry to record accrued salaries on December
31, Year 1.
b) Prepare the journal entry to record the payment of salaries on January 4, Year 2.
13) A bondholder that owns a $1,000, 10%, 10-year bond has:
A.Ownership rights in the issuing company.
B.The right to receive $10 per year until maturity.
C.The right to receive $1,000 at maturity.
D.The right to receive $10,000 at maturity.
E.The right to receive dividends of $1,000 per year.
14) Which of the following statements about budgeting is false?
A.Budgeting is an aid to planning and control.
B.Budgets create standards for performance evaluation.
C.Budgets help coordinate the activities of the entire organization.
D.Budgeting forces managers to think ahead and formalize future objectives.
E.The master budget should only be prepared by top management.
15) A post-closing trial balance reports:
A.All permanent ledger accounts with balances.
B.All nominal ledger accounts with balances.
C.All temporary and permanent ledger accounts with balances.
D.Only revenue and expense accounts.
E.Only asset accounts.
16) Marian Corporation has two separate divisions that operate as profit centers. The
following information is available for the most recent year:
The Black Division occupies 20,000 square feet in the plant. The Navy Division
occupies 30,000 square feet. Rent is an indirect expense and is allocated based on
square footage. Rent expense for the year was $50,000. Compute departmental income
for the Black and Navy Divisions, respectively.
A.$52,000; $163,000.
B.$172,000; $352,000.
C.$72,000; $163,000.
D.$72,000; $193,000.
E.$100,000; $241,000.
17) Quick assets divided by current liabilities is the:
A.Acid-test ratio.
B.Current ratio.
C.Working capital ratio.
D.Current liability turnover ratio.
E.Quick asset turnover ratio.
18) The Gardner Company expects sales for October of $248,000. Experience suggests
that 45% of sales are for cash and 55% are on credit. The company collects 50% of its
credit sales in the month of sale and 50% in the month following sale. Budgeted
Accounts Receivable on September 30 is $67,000. What is the amount of Accounted
Receivables on the October 31 budgeted balance sheet?
A.$111,600.
B.$124,000.
C.$67,000.
D.$68,200.
E.$136,400.
19) A company has net sales of $1,200,000 and average accounts receivable of
$400,000. What is its accounts receivable turnover for the period?
A.0.20
B.5.00
C.20.0
D.73.0
E.3.0
20) Expenditures that flow directly to the current income statement and are not reported
as assets are ___________________ costs.
21) Explain the purpose of and method of depreciation for partial years.
22) The following data is available for the Janitorial Services Department of Glitterol
Co.
Required:
Calculate departmental contribution to overhead for the Janitorial Services Department,
including the department’s contribution as a percentage of revenues.
24) Given the following information about a corporation’s current year activities,
compute the retained earnings for the current year.
25) A company purchased mining property for $1,560,000. The property was estimated
to contain 13,000,000 tons of ore. In the current year, the company removed and sold
263,000 tons of ore. Calculate the depletion expense for the current year.
26) ______________ bonds are bonds that are scheduled for maturity on one specified
date.
27) Explain the difference between short-term and long-term investments. Cite
examples of each.