1) Under the cost method, when treasury stock is purchased by the corporation, the par
value and the price at which the stock was originally issued are important.
2) The post-closing trial balance will generally have fewer accounts than the trial
balance.
3) When no-par common stock with a stated value is issued for cash, the common stock
account is credited for an amount equal to the cash proceeds.
4) Responsibility accounting reports for profit centers are normally in the form of
income statements.
5) If payment is due by the end of the month in which the sale is made, the invoice
terms are expressed as n/30.
6) The difference between the balance of a fixed asset account and the balance of its
related accumulated depreciation account is termed the book value of the asset.
7) Standard cost variances are usually not reported in reports to stockholders.
8) The amortization of discounts or premiums are recorded as part of interest income on
the income statement.
9) Cash flows from investing activities, as part of the statement of cash flows, include
payments for the purchase of treasury stock.
10) A process whereby the effect of fluctuations in the level of activity is built into the
budgeting system is referred to as flexible budgeting.
11) The book value of a fixed asset reported on the balance sheet represents its market
value on that date.
12) Hill Co. can further process Product O to produce Product P. Product O is currently
selling for $60 per pound and costs $42 per pound to produce. Product P would sell for
$82 per pound and would require an additional cost of $13 per pound to produce.
The differential cost of producing Product P is $55 per pound.
13) A budget performance report compares actual results with the budgeted amounts
and reports differences for possible investigation.
14) One of the two internal control procedures over inventory is to properly report
inventory on the financial statements.
15) There is a loss on redemption of bonds when bonds are redeemed above carrying
value.
16) Next years sales forecast shows that 20,000 units of Product A and 22,000 units of
Product B are going to be sold for prices of $10 and $12 per unit, respectively. The
desired ending inventory of Product A is 20% higher than its beginning inventory of
2,000 units. The beginning inventory of Product B is 2,500 units. The desired ending
inventory of B is 3,000 units.
Budgeted purchases of Product B for the year would be:
A.24,500 units
B.22,500 units
C.26,500 units
D.23,200 units
17) An element of internal control is
A.risk assessment
B.journals
C.subsidiary ledgers
D.controlling accounts
18) As of January 1 of the current year, the Grackle Company had accounts receivables
of $50,000. The sales for January, February, and March of 2012 were as follows:
$120,000, $140,000 and $150,000. 20% of each months sales are for cash. Of the
remaining 80% (the credit sales), 60% are collected in the month of sale, with
remaining 40% collected in the following month. What is the accounts receivable
balance as of March 31?
A.$72,000
B.$48,000
C.$58,720
D.$$60,000
19) Which one of the accounts below would likely be included in an accrual adjusting
entry?
A.Insurance Expense
B.Prepaid Rent
C.Interest Expense
D.Unearned Rent
20) How is treasury stock shown on the balance sheet?
A.as an asset
B.as a decrease in stockholders’ equity
C.as an increase in stockholders’ equity
D.treasury stock is not shown on the balance sheet
21) The objectives of internal control are to
A.control the internal organization of the accounting department personnel and
equipment
B.provide reasonable assurance that operations are managed to achieve goals, financial
reports are accurate, and laws and regulations are complied with
C.prevent fraud, and promote the social interest of the company
D.provide control over “internal-use only” reports and employee internal conduct
22) Indicate whether each of the following would be reported in the financial statements
as a(n) (a) current asset, (b) current liability, (c) revenue, or (d) expense:
23) A company, using the periodic inventory system, has merchandise inventory costing
$175 on hand at the beginning of the period. During the period, merchandise costing
$635 is purchased. At year-end, merchandise inventory costing $160 is on hand. The
cost of merchandise sold for the year is
A.$970
B.$650
C.$300
D.$620
24) The trial balance is out of balance and the accountant suspects that a transposition
or slide error has occurred. What will the accountant do to find the error?
A.Determine the amount of the error and look for that amount on the trial balance
B.Determine the amount of the error and divide by two, then look for that amount on
the trial balance
C.Determine the amount of the error and refer to the journal entries for that amount
D.Determine the amount of the error and divide by nine. If the result is evenly divided,
then this type of error is likely
25) If variable costs per unit decreased because of a decrease in utility rates, the
break-even point would:
A.decrease
B.increase
C.remain the same
D.increase or decrease, depending upon the percentage increase in utility rates
26) Beginning work in process is equal to:
A.cost of goods manufactured plus ending work in process minus manufacturing costs
incurred during the current period
B.cost of goods manufactured minus ending work in process plus manufacturing costs
incurred during the current period
C.ending work in process plus manufacturing costs incurred during the current period
D.manufacturing costs incurred during the current period minus ending work in process
27) Most operating decisions of management focus on a narrow range of activity called
the:
A.relevant range of production
B.strategic level of production
C.optimal level of production
D.tactical operating level of production
28) The transfer price which uses a variety of cost concepts is the
A.Negotiated price approach
B.Standard cost approach
C.Cost price approach
D.Market price approach
29) The classification and normal balance of the accounts payable account is
A.an asset with a credit balance
B.a liability with a credit balance
C.owner’s equity with a credit balance
D.revenue with a credit balance
30) The present value factor for an annuity of $1 is determined using which of the
following formulas?
A.Amount to be invested/Annual average net income
B.Annual net cash flow/Amount to be invested
C.Annual average net income/Amount to be invested
D.Amount to be invested/Equal annual net cash flows
31) Which of the following stock investments should be accounted for using the cost
method?
A.investments of less than 20%
B.investments between 20 % and 50%
C.investments of less than 20% and investments between 20% and 50%
D.all stock investments should be accounted for using the cost method
32) E-commerce
A.accounts for less than 1% of all retail sales
B.only relates to transactions between a company and a consumer
C.can improve the speed and efficiency of transactions
D.increases paperwork
33) Hummingbird Company uses the product cost concept of applying the cost-plus
approach to product pricing. The costs and expenses of producing 25,000 units of
Product K are as follows:
Hummingbird desires a profit equal to a 5% rate of return on invested assets of
$642,500.
(a) Determine the amount of desired profit from the production and sale of Product K.
(b) Determine the total manufacturing costs and the cost amount per unit for the
production and sale of 25,000 units of Product K.
(c) Determine the markup percentage for Product K.
(d) Determine the selling price of Product K.
Round your markup percentage to one decimal place, and other intermediate
calculations and final answer to two decimal places.
34) When the market rate of interest was 12%, Halprin Corporation issued $1,000,000,
11%, 10-year bonds that pay interest annually. The selling price of this bond issue was
A.$ 321,970
B.$1,000,000
C.$ 943,494
D.$621,524
35) The unexpired insurance at the end of the fiscal period represents
A.an accrued asset
B.an accrued liability
C.an accrued expense
D.a deferred expense
36) All of the following are examples of activity bases except:
A.salaries of supervisors
B.quality inspections of products
C.number of machine setups
D.raw materials storage
37) Which of the following conditions normally would not indicate that standard costs
should be revised?
A.The engineering department has revised product specifications in responding to
customer suggestions
B.The company has signed a new union contract which increases the factory wages on
average by $5.00 an hour
C.Actual costs differed from standard costs for the preceding week
D.The world price of raw materials increased
38) Materials purchased on account during the month amounted to $180,000. Materials
requisitioned and placed in production totaled $165,000. From the following, select the
entry to record the transaction on the day the materials were bought.
A.Materials165,000
Accounts Payable165,000
B.Materials180,000
Accounts Payable180,000
C.Materials180,000
Cash 180,000
D.Accounts Payable180,000
Materials180,000
39) The posting references in the following purchases journal are indicated by letters.
Identify each posting reference [(a) through (i)] as representing (1) a posting to a
general ledger account, (2) a posting to a subsidiary ledger account, or (3) that no
posting is required.
PURCHASES JOURNAL )
Date AccountCredited Post.Ref. AccountsPayableCr. OfficeSuppliesDr.
StoreSuppliesDr. )))
July )
3 Morton Company (a) 1,150 ….. 1,150 )
7 Jackson Co. (b) 4,800 4,800 ….. )
14 Fallon Inc. (c) 7,000 7,000 ….. )
26 Simpson Bros. (d) 2,350 ….. ….. )
31 15,300 11,800 1,150 )
(e) (f) (g) )
40) In which journal would you find cash revenues recorded?
A.cash payments journal
B.general journal
C.revenues journal
D.cash receipts journal
41) The entry to record the flow of direct labor costs into production in a job order cost
accounting system is:
A.debit Factory Overhead, credit Work in Process
B.debit Finished Goods, credit Wages Payable
C.debit Work in Process, credit Wages Payable
D.debit Factory Overhead, credit Wages Payable
42) The benefits of comparing actual performance of the operations against planned
goals include all of the following except:
A.providing prompt feedback to employees about their performance relative to the goal
B.preventing unplanned expenditures
C.helping to establish spending priorities
D.determining how managers are performing against prior years’ actual operating
results
43) Which of the following should be deducted from net income in calculating net cash
flow from operating activities using the indirect method?
A.a decrease in inventory
B.a decrease in accounts payable
C.preferred dividends declared and paid
D.a decrease in accounts receivable
44) On September 1, the company pays rent for twelve months in advance and debits an
asset account. At year end, the adjusting entry on the work sheet would
A.increase an expense account
B.decrease a liability account
C.increase an asset account
D.decrease an expense account
45) Partridge Co. can further process Product J to produce Product D. Product J is
currently selling for $21 per pound and costs $15.75 per pound to produce. Product D
would sell for $38 per pound and would require an additional cost of $9.25 per pound to
produce.
What is the differential revenue of producing Product D?
A.$6.75 per pound
B.$9.25 per pound
C.$17 per pound
D.$5.25 per pound
46) A project is estimated to cost $248,400 and provide annual cash flows of $50,000
for eight years. Determine the internal rate of return for this project, using the following
table.
47) Big Wheel, Inc. collects 25% of its sales on account in the month of the sale and
75% in the month following the sale. If sales on account are budgeted to be $150,000
for March and receipts from sales on account total $162,500 in April, what are budgeted
sales on account for April?
48) Each of the following transactions for Morrison Company requires an adjusting
entry, which if omitted, will overstate or understate assets, liabilities, owners equity,
revenues, expenses, or net income. Indicate the amount and direction of the
misstatement that would result if the end of period adjusting entry suggested by the
transaction was omitted. Place your results in the table following the transactions and
use (+) for overstate, (-) for understate, and (NE) for no effect.
1> Morrison purchased supplies on December 1 for $900. On December 31, $350 of
supplies were on hand.
2> Prepaid insurance had a debit balance of $5,400 on December 1, which represented
a prepayment for 2 years of insurance.
3> The unearned rent revenue account has a credit balance of $390 on December 1,
which represents 3 months rent.
49) Selected accounts and amounts appear below. Journalize the closing entry,
assuming a perpetual inventory system.
50) Laramie Technologies had the following data:
Cost of Materials Used $50,000
Direct Labor costs $56,000
Factory Overhead $28,000
Work in Process, beg. $45,000
Work in Process, end. $32,000
51) Hakik Enterprises offers rug cleaning services to business clients. Below is the trial
balance for Hakik Enterprises, which was prepared on the end of period spreadsheet
(work sheet) for the year ended July 31, 2010.
REQUIRED: Enter the adjustment data in the work sheet for the transactions shown
below and place the balances in the Adjusted Trial Balance columns.
52) Given the following data, prepare the journal entry to record interest expense and
any related amortization on December 31st of the first year using the effective method.
Assume interest is paid annually on January 1. The bonds were issued on January 1 for
$7,411,233.
Bonds Payable $8,000,000 (matures in 10 years)
Contract rate = 5%
Yield = 6%
Round answers to nearest dollar.