1) One way to report revenue earned by a company is to present it by the different
segments of business.
2) If the amount of a bond premium on an issued 11%, 4-year, $100,000 bond is
$12,928, the annual interest expense is $5,500.
3) A restriction/appropriation of retained earnings establishes cash assets that are set
aside for a specific purpose.
4) Unusual items affecting the prior periods income statement consist of errors and
change in accounting principles.
5) If a corporation is liquidated, preferred stockholders are paid before the creditors and
before the common stockholders.
6) The initial owners of stock of a newly formed corporation are called directors.
7) The document that serves as the basis for recording direct labor on a job cost sheet is
the time card.
8) Goods that are partway through the manufacturing process, but not yet complete, are
referred to as materials inventory.
9) The worksheet and the financial statements both require dollar signs.
10) The cost of production report reports the cost of the goods sold.
11) Which of the following can be found on the statement of cash flows?
A.cash flows from operating activities
B.total assets
C.total changes in stockholders’ equity
D.changes in retained earnings
12) The gross increases in owner’s equity attributable to business activities are called
A.assets
B.liabilities
C.revenues
D.expenses
13) Increases and decreases in various types of accounts are listed below. In each case,
indicate by “Dr.” or “Cr.” (a) whether the change in the account would be recorded as a
debit or a credit and (b) whether the normal balance of the account is a debit or a credit.
14) Processing methods:
A.are the policy and procedures that protect assets from misuse
B.must be computerized
C.are the means by which the accounting system reports information
D.ensure that business laws and regulations are followed
15) Which of the following is not an assumption underlying cost-volume-profit
analysis?
A.The break-even point will be passed during the period
B.Total sales and total costs can be represented by straight lines
C.Costs can be accurately divided into fixed and variable components
D.The sales mix is constant
16) The Cardinal Company had a finished goods inventory of 55,000 units on January
1. Its projected sales for the next four months were: January – 200,000 units; February –
180,000 units; March – 210,000 units; and April – 230,000 units. The Cardinal Company
wishes to maintain a desired ending finished goods inventory of 20% of the following
months sales.
What would be the budgeted inventory for March 31st?
A.46,000
B.36,000
C.Cannot be determined from the data given
D.42,000
17) Merchandise with a sales price of $6,000 is sold on account with term 2/10, n/30.
The journal entry to record the sale would include a
A.debit to Cash for $6,000
B.Debit to Sales Discounts for $120
C.Credit to Sales for $6,000
D.Debit to Accounts Receivable for $5,880
18) Which of the following accounts will not be found on the Cost of Merchandise Sold
section on the Income Statement?
A.Purchases
B.Freight In
C.Sales Returns and Allowances
D.Merchandise Inventory
19) Cost flow is in the reverse order in which costs were incurred when using
A.weighted average
B.last-in, first-out
C.first-in, first-out
D.average cost
20) Abbott Company uses the allowance method of accounting for uncollectible
accounts. Abbott estimates that 3% of net credit sales will be uncollectible. On January
1, 2010, the Allowance for Doubtful Accounts had a credit balance of $2,400. During
2010, Abbott wrote-off accounts receivable totaling $1,800 and made credit sales of
$100,000. There were no Sales Returns or Sales Discounts during the year. After the
adjusting entry, the December 31, 2010, balance in the Bad Debt Expense would be
A.$1,200
B.$3,000
C.$3,600
D.$7,200
21) Given the following costs and activities for Downing Company electrical costs, use
the high-low method to calculate Downings variable electrical costs per machine hour.
A.$2.08
B.$6.00
C.$0.60
D.$1.20
22) What pricing concept is used if all costs are considered and a fair mark-up is added
to determine the selling price?
A.Total cost concept
B.Demand-based concept
C.Variable cost concept
D.Fixed cost concept
23) On January 1, 2015, Yeargan Company obtained an $125,000, seven year 5%
installment note from Farmers Bank. The note requires annual payments of $21,602,
with the first payment occurring on the last day of the fiscal year. The first payment
consists of $6,250 interest and principal repayment of $15,352.
Requirement:
24) Corporate annual reports typically do not contain which of the following?
A.management discussion and analysis
B.SEC statement expressing an opinion
C.accompanying foot notes
D.auditor’s report
25) A check drawn by a company in payment of a voucher for $965 was recorded in the
journal as $695. This item would be included in the bank reconciliation as a(n)
A.deduction from the balance per the company’s records
B.addition to the balance per the bank statement
C.deduction from the balance per the bank statement
D.addition to the balance per the company’s records
26) A business is operating at 90% of capacity and is currently purchasing a part used in
its manufacturing operations for $15 per unit. The unit cost for the business to make the
part is $20, including fixed costs, and $12, not including fixed costs. If 30,000 units of
the part are normally purchased during the year but could be manufactured using
unused capacity, what would be the amount of differential cost increase or decrease
from making the part rather than purchasing it?
A.$150,000 cost increase
B.$ 90,000 cost decrease
C.$150,000 cost increase
D.$ 90,000 cost increase
27) A net loss appears on the work sheet in the
A.debit column of the Balance Sheet columns
B.credit column of the Balance Sheet columns
C.debit column of the Income Statement columns
D.credit column of the Adjustments columns
28) Under the direct write-off method of accounting for uncollectible accounts, Bad
Debts Expense is debited
A.at the end of each accounting period
B.when a credit sale is past due
C.whenever a pre-determined amount of credit sales have been made
D.when an account is determined to be worthless
29) Production and sales estimates for June are as follows:
The budgeted total sales for June is:
A.$200,000
B.$400,000
C.$380,000
D.$250,000
30) Several months ago, Jones Company experienced a spill of hazardous materials into
the White River from one of its plants. As a result, the Environmental Protection
Agency (EPA) fined the company $405,000. The company contested the fine. In
addition, an employee is seeking $180,000 damages related to the spill. Finally, a
homeowner has sued the company for $260,000. Although the homeowner lives 30
miles downstream from the plant, he believes that the spill has reduced his homes resale
value by $260,000.
Jones legal counsel believes the following will happen in relationship to these incidents:
(a) It is probable that the EPA fine will stand.
(b) An out-of-court-settlement for $165,000 has recently been reached with the
employee, with the final papers to be signed next week.
(c) Counsel believes that the homeowners case is much weaker and will be decided in
favor of Jones Company.
(d) Other litigation related to the spill is possible, but the damage amounts are
uncertain.
Required:
31) The following information relates to manufacturing overhead for the Chapman
Company:
Standards:
Total fixed factory overhead – $450,000
Estimated production – 25,000 units (100% of capacity)
Overhead rates are based on machine hours.
Standard hours allowed per unit produced – 2
Fixed overhead rate – $9.00 per machine hour
Variable overhead rate – $3.50 per hour
Actual:
Fixed factory overhead – $450,000
Production – 24,000 units
Variable overhead – $170,000
Required:
(a) Compute the volume variance.
(b) Compute the controllable variance.
(c) Compute the total factory overhead cost variance.
32) During its first year of operations, a company granted employees vacation
privileges and pension rights estimated at a cost of $21,500 and $15,000. The vacations
are expected to be taken in the next year and the pension rights are expected to be paid
in the future 5-30 years. What is the total cost of vacation pay and pension rights to be
recognized in the first year?
A.$15,000
B.$36,500
C.$6,500
D.$21,500
33) What effect will this adjustment have on the accounting records?
A.Increase net income
B.Increase revenues reported for the period
C.Decrease liabilities
D.All of these are true
34) A voucher
A.is received from customers to explain the purpose of a payment
B.is normally prepared in the Accounting Department
C.system is used to control cash receipts
D.system is an internal control procedure to verify that the assets in the ledger are the
ones the company owns
35) Bob and Sons’ static budget for 10,000 units of production includes $50,000 for
direct materials, $44,000 for direct labor, variable utilities of $5,000, and supervisor
salaries of $25,000. A flexible budget for 12,000 units of production would show:
A.the same cost structure in total
B.direct materials of $60,000, direct labor of $52,800, utilities of $6,000, and supervisor
salaries of $30,000
C.total variable costs of $148,000
D.direct materials of $60,000, direct labor of $52,800, utilities of $6,000, and
supervisor salaries of $25,000
36) Below is budgeted production and sales information for Flushing Company for the
month of December:
The unit selling price for product XXX is $5 and for product ZZZ is $15.
Budgeted production for product XXX during the month is:
A.498,000 units
B.502,000 units
C.534,000 units
D.566,000 units
37)
What is the best explanation for this journal entry?
A.Received cash for services performed
B.Received cash for services to be performed in the future
C.Paid cash in advance for services to be done
D.Paid cash for services to be performed
38) The income statement should be prepared
A.before the statement of owners equity and balance sheet
B.after the statement of owners equity and before the balance sheet
C.after the statement of owners equity and balance sheet
D.after the balance sheet and before the statement of owners equity
39) Isaac Co. sells merchandise on credit to Sonar Co in the amount of $9,600. The
invoice is dated on April 15 with terms of 1/15, net 45. If Sonar Co. chooses not to take
the discount, by when should the payment be made?
A.April 30
B.May 30
C.May 15
D.April 25
40) Proof that the dollar amount of the debits equals the dollar amount of the credits in
the ledger means
A.all of the information from the journal was correctly transferred to the ledger
B.all accounts have their correct balances in the ledger
C.only the journal is accurate; the ledger may be incorrect
D.only that the debit dollar amounts equal the credit dollar amounts
41) When a borrower receives the face amount of a discounted note less discount, this
amount is known as:
A.the note proceeds
B.the note discount
C.the note deferred interest
D.the note principal
42) A company purchases a one-year insurance policy on June 1 for $2,760. The
adjusting entry on December 31 is
A.debit Insurance Expense, $1,380 and credit Prepaid Insurance, $1,380
B.debit Insurance Expense, $1,150 and credit Prepaid Insurance, $1,150
C.debit Insurance Expense, $1,610, and credit Prepaid Insurance, $1,610
D.debit Prepaid Insurance, $1,380, and credit Cash, $1,380
43) The following is the adjusted trial balance for Sandeep Company.
Prepare closing entries and the post closing trial balance.
44) Eric Wood, CPA, was organized on January 1, 2011, as a proprietorship. List the
errors that you find in the following financial statements and prepare the corrected
statements for the three months ended March 31, 2011
Errors in the Eric Wood, CPA, financial statements include the following:
45) Define and describe an accounting system.
46) Cavy Company completed 26,000 units during the year at a cost of $2,139,800. The
beginning finished goods inventory was 5,000 units at $405,000. Determine the cost of
goods sold for 20,000 units, assuming a FIFO cost flow.
47) Selected data taken from the accounting records of Laser Inc. for the current year
ended December 31, are as follows:
During the current year, the cost of merchandise sold was $448,500, and the operating
expenses other than depreciation were $78,000. The direct method is used for
presenting the cash flows from operating activities on the statement of cash flows.
Required:
Determine the amount reported on the statement of cash flows for:
(1) Cash payments for merchandise; and
(2) Cash payments for operating expenses.