1) If an actual cost exceeds the standard cost, the result is:
a.credited to a variance account
b.an unfavorable variance
c.carried as a liability on the balance sheet
d.carried as an asset on the balance sheet
2) Quasar Corporation had net income of $300,000 and paid dividends to common
stockholders of $40,000 in 2014 . The weighted average number of shares outstanding
in 2014 was 60,000 shares. Quasar Corporation’s common stock is selling for $35 per
share on the New York Stock Exchange.
Quasar Corporation’s price-earnings ratio is
a.5.7 times
b.7 times
c.14 times
d.8.1 times
3) Brekke and Fig decide to organize a partnership. Brekke invests $30,000 cash, and
Fig contributes $24,000 cash and equipment having a book value of $12,000. Choose
the entry to record Figs investment in the partnership assuming the equipment has a fair
value of $18,000.
a.Cash24,000
Equipment 12,000
Fig, Capital 36,000
b.Equipment 12,000
Fig, Capital 12,000
c.Cash24,000
Fig, Capital 24,000
d.Cash24,000
Equipment 18,000
Fig, Capital 42,000
4) A worksheet can be thought of as a(n)
a.permanent accounting record
b.optional device used by accountants
c.part of the general ledger
d.part of the journal
5) Inventoriable costs may be thought of as a pool of costs consisting of which two
elements?
a.The cost of beginning inventory and the cost of ending inventory
b.The cost of ending inventory and the cost of goods purchased during the year
c.The cost of beginning inventory and the cost of goods purchased during the year
d.The difference between the costs of goods purchased and the cost of goods sold
during the year
6) Two categories of expenses for merchandising companies are
a.cost of goods sold and financing expenses
b.operating expenses and financing expenses
c.cost of goods sold and operating expenses
d.sales and cost of goods sold
7) A business organized as a corporation
a.is not a separate legal entity in most states
b.requires that stockholders be personally liable for the debts of the business
c.is owned by its stockholders
d.terminates when one of its original stockholders dies
8) If actual costs are greater than standard costs, there is a(n)
a.normal variance
b.unfavorable variance
c.favorable variance
d.error in the accounting system
9) Sutton Inc. can produce 100 units of a component part with the following costs:
Direct Materials$130,000
Direct Labor103,000
Variable Overhead82,000
Fixed Overhead62,000
If Sutton Inc. can purchase the component part externally for $345,000 and only
$28,000 of the fixed costs can be avoided, what is the correct make-or-buy decision?
a.Make and save $99,000
b.Buy and save $4,000
c.Make and save $2,000
d.Buy and save $32,000
10) Switzer, Inc. has 8 computers which have been part of the inventory for over two
years. Each computer cost $600 and originally retailed for $900. At the statement date,
each computer has a current replacement cost of $400. How much loss should Switzer,
Inc., record for the year?
a.$1,600
b.$2,400
c.$3,200
d.$4,000
11) Which one of the following events would not require a formal journal entry on a
corporation’s books?
a.2 for 1 stock split
b.100% stock dividend
c.2% stock dividend
d.$1 per share cash dividend
12) The following items are taken from the financial statements of the Postal Service
for the year ending December 31, 2014:
Accounts payable$ 18,000
Accounts receivable11,000
Accumulated depreciation equipment28,000
Advertising expense21,000
Cash15,000
Owners capital (1/1/14)102,000
Owners drawings14,000
Depreciation expense12,000
Equipment210,000
Insurance expense3,000
Note payable, due 6/30/1570,000
Prepaid insurance (12-month policy)6,000
Rent expense17,000
Salaries and wages expense32,000
Service revenue133,000
Supplies4,000
Supplies expense6,000
What is the book value of the equipment at December 31, 2014?
a.$170,000
b.$182,000
c.$210,000
d.$238,000
13) Which one of the following is not a characteristic generally evaluated in analyzing
financial statements?
a.Liquidity
b.Profitability
c.Marketability
d.Solvency
14) In which journal would a customer’s partial payment on account be recorded?
a.Sales journal
b.Cash receipts journal
c.General journal
d.Cash payments journal
15) The predetermined overhead rate is based on the relationship between
a.estimated annual costs and actual activity
b.estimated annual costs and expected annual activity
c.actual monthly costs and actual annual activity
d.estimated monthly costs and actual monthly activity
16) Hanson Company manufactures a single product by a continuous process, involving
two production departments. The records indicate that $120,000 of direct materials
were issued to and $200,000 of direct labor was incurred by Department 1 in the
manufacture of the product. The factory overhead rate is $25 per machine hour;
machine hours were 5,000 in Department 1 . Work in process in the department at the
beginning of the period totaled $40,000; and work in process at the end of the period
was $25,000.
Instructions
Prepare entries to record
(a)The flow of costs into Department 1 for
(1)direct materials
(2)direct labor
(3)overhead
(b)The transfer of production costs to Department 2 .
17) What is true concerning an ABC philosophy?
a.Costs should be applied using one activity level for simplicity
b.Each overhead cost should respond proportionally to changes in the activity level of
its cost driver
c.One best cost driver should be selected
d.No work in process inventories should be used
18) Which board(s) has(have) faced bitter opposition when working to implement fair
value measurement for financial instruments?
a.FASB, but not IASB
b.IASB, but not FASB
c.both FASB and IASB
d.neither FASB nor IASB
19) Sales results that are evaluated by a static budget might show
1>favorable differences that are not justified.
2>unfavorable differences that are not justified.
a.1
b.2
c.both 1 and 2
d.neither 1 nor 2
20) When performing vertical analysis, the base amount for administrative expense is
generally
a.administrative expense in a previous year
b.net sales
c.gross profit
d.fixed assets
21) If the cost of goods manufactured is less than the cost of goods sold, which of the
following is correct?
a.Finished Goods Inventory has increased
b.Work in Process Inventory has increased
c.Finished Goods Inventory has decreased
d.Work in Process Inventory has decreased
22) Owner’s equity can be described as
a.creditorship claim on total assets
b.ownership claim on total assets
c.benefactor’s claim on total assets
d.debtor claim on total assets
23) Partners Julie and Casey have agreed to share profits and losses in a 60:40 ratio
respectively, after Julie is allowed a salary allowance of $40,000 and Casey is allowed a
salary allowance of $25,000. If the partnership had net income of $50,000 for 2012,
Casey’s share of the income would be:
a.$30,000
b.$25,000
c.$31,000
d.$19,000
24) If a company has both an inflow and outflow of cash related to property, plant, and
equipment, the
a.two cash effects can be netted and presented as one item in the investing activities
section
b.cash inflow and cash outflow should be reported separately in the investing activities
section
c.two cash effects can be netted and presented as one item in the financing activities
section
d.cash inflow and cash outflow should be reported separately in the financing activities
section
25) The concern about international companies adopting SOX-type standards centers on
a.cost-benefit analysis
b.ethics issues
c.the governing authorities
d.comparability
26) On January 1, 2014, Sunset Corporation issued $4,000,000, 8%, 5-year bonds dated
January 1, 2014, at 95 . The bonds pay semiannual interest on January 1 and July 1 .
The company uses the straight-line method of amortization and has a calendar year end.
Instructions
Prepare all the journal entries that Sunset Corporation would make related to this bond
issue through January 1, 2015. Be sure to indicate the date on which the entries would
be made.
27) The following direct labor data pertain to the operations of Nitro Manufacturing
Company for the month of April:
Actual labor rate$12.25 per hr.
Actual hours used18,000
Standard labor rate$12.00 per hr.
Standard hours allowed17,700
Instructions
Prepare a matrix and calculate the labor variances.
Price VarianceQuantity Variance
Total
Labor Variance
28) Venti Corporation had income from continuing operations of
$420,000 for the year ended December 31, 2014 . It also had the
following items (before income taxes):
1>Extraordinary flood loss of $100,000.
2>Loss of $50,000 on discontinuance of a division.
All items are subject to income taxes at a 25% tax rate.
Instructions
Prepare a partial income statement, beginning with income from continuing operations.
29) Martin Corporation prepared the following variance report.
MARTIN CORPORATION
Variance ReportPurchasing Department
for Week Ended January 9, 2014
Type ofQuantityActualStandardPrice
MaterialsPurchased Price Price Variance Explanation
Brown? lbs.$5.25$5.00$6,000 ?Price increase
Green8,000 oz.? 3.25 1,600 URush order
White22,000 units$0.44? 660 FBought larger quantity
Instructions
Fill in the appropriate amounts or letters for the question marks in the report.
30) Identify which of the following would be classified as current liabilities as of
December 31, 2014:
1>Salaries and Wages Payable
2>Bonds Payable, maturing in 2019
3>Interest Payable, due July 1, 2015
4>Sales Taxes Payable
5>Notes Payable, due January 30, 2016
31) If a company maintains special journals, sales of merchandise on credit should be
recorded in a _______________ whereas sales of merchandise for cash should be
recorded in the _______________.