1) The balanced scorecard approach attempts to maintain as little inventory on hand as
possible.
2) Accountants believe that the write down from cost to market should not be made in
the period in which the price decline occurs.
3) Internal control over payroll is not necessary because employees will complain if
they do not receive the correct amount on their payroll checks.
4) Sales resulting from the use of Visa and MasterCard are considered credit sales by
the retailer.
5) A working knowledge of accounting is not relevant to a lawyer or an architect.
6) Bond interest paid by a corporation is an expense, whereas dividends paid are not an
expense of the corporation.
7) Common size analysis expresses each item within a financial statement in terms of a
percent of a base amount.
8) The manufacturing overhead budget shows the expected manufacturing overhead
costs.
9) The number of common shares outstanding can never be greater than the number of
shares issued.
10) Sales returns and allowances and sales discounts are subtracted from sales in
reporting net sales in the income statement.
11) A cash receipts journal can be used to record all transactions involving cash coming
into the business, regardless of the source.
12) The number of years of income statement information to be presented is
a.2 years under both GAAP and IFRS
b.3 years under both GAAP and IFRS
c.2 years under GAAP and 3 years under IFRS
d.3 years under GAAP and 2 years under IFRS
13) Jeff Retailers accepted $75,000 of Citibank Visa credit card charges for
merchandise sold on July 1 . Citibank charges 2% for its credit card use. The entry to
record this transaction by Jeff Retailers will include a credit to Sales Revenue of
$75,000 and a debit(s) to
a.Cash $73,500 and Service Charge Expense $1,500
b.Accounts Receivable $73,500 and Service Charge Expense $1,500
c.Cash $73,500 and Interest Expense $1,500
d.Accounts Receivable $75,000
14) The total variance is $35,000. The total materials variance is $8,000. The total labor
variance is twice the total overhead variance. What is the total overhead variance?
a.$4,500
b.$9,000
c.$13,500
d.$8,000
15) In incremental analysis,
a.costs are not relevant if they change between alternatives
b.all costs are relevant if they change between alternatives
c.only fixed costs are relevant
d.only variable costs are relevant
16) A debit is not the normal balance for which of the following?
a.Asset account
b.Drawing account
c.Expense account
d.Capital account
17) The Mayer and Rodin partnership agreement stipulates that profits and losses will
be shared equally after salary allowances of $400,000 for Mayer and $200,000 for
Rodin. At the beginning of the year, Mayers Capital account had a balance of $800,000,
while Rodins ‘ Capital account had a balance of $700,000. Net income for the year was
$500,000. The balance of Rodins Capital account at the end of the year after closing is
a.$950,000
b.$200,000
c.$850,000
d.$900,000
18) A static budget is:
a.modified or adjusted for changes in activity during the year
b.applicable to cost budgets but not to a sales budget
c.appropriate in evaluating a manager’s effectiveness in controlling fixed costs
d.appropriate in evaluating a manager’s effectiveness in controlling variable costs
19) Swiss Clothing Store had a balance in the Accounts Receivable account of
$920,000 at the beginning of the year and a balance of $980,000 at the end of the year.
Net credit sales during the year amounted to $6,650,000. The average collection period
of the receivables in terms of days was
a.53.7 days
b.52.1 days
c.30 days
d.50.7 days
20) Presented below are various receivable transactions entered into by Beran Tool
Company. Indicate whether the receivables are reported as accounts receivable, notes
receivable, or other receivables on the balance sheet.
a.Loaned a company officer $5,000.
b.Accepted a $3,000 promissory note from a customer as payment on account.
c.Determined that a $10,000 income tax refund is due from the IRS.
d.Sold goods to a customer on account for $4,000.
e.Recorded $500 accrued interest on a note receivable due next year.
f.Advanced $1,400 to a trusted employee.
21) Your friend, Dean, has opened a movie theater. Dean states that he does not have
time to develop and implement a system of internal controls.
a.Provide Dean with the objectives of a system of internal controls.
b.Explain to Dean why he should develop a system of internal controls.
22) A basic assumption of accounting assumes that the dollar is
a.unrelated to business transactions
b.a poor measure of economic activities
c.the common unit of measure for all business transactions
d.useless in measuring an economic event
23) The collection of a $1,500 account after the 2 percent discount period will result in
a
a.debit to Cash for $1,470
b.debit to Accounts Receivable for $1,500
c.debit to Cash for $1,500
d.debit to Sales Discounts for $30
24) In performing a vertical analysis, the base for sales revenues on the income
statement is
a.net sales
b.sales
c.net income
d.cost of goods available for sale
25) At January 1, 2014, Benny Enterprises reported a balance in the Equipment account
of $45,000. During the year the company purchased equipment with a cost of $60,000
and sold equipment with a book value of $30,000. The company reported a loss on the
sale of equipment of $4,000. Assume the indirect method is used.
Instructions
Determine what amount will be reported in (a) the operating activities section and (b)
the investing activities section with regard to the purchase and sale of equipment.
26) The accounting for warranty cost is based on the expense recognition principle,
which requires that the estimated cost of honoring warranty contracts should be
recognized as an expense
a.when the product is brought in for repairs
b.in the period in which the product was sold
c.at the end of the warranty period
d.only if the repairs are expected to be made within one year
27) Inigo Company prepared the following adjusting entries at year end on December
31, 2014:
(a)Interest Expense250
Interest Payable250
(b)Interest Receivable450
Interest Revenue450
(c)Salaries and Wages Expense3,500
Salaries and Wages Payable3,500
In an effort to minimize errors in recording transactions, Inigo Company utilizes
reversing entries. Prepare reversing entries on January 1, 2015 .
28) On January 1, Layline Corporation had 160,000 shares of $10 par value common
stock outstanding. On June 17, the company declared a 15% stock dividend to
stockholders of record on June 20 . Market value of the stock was $15 on June 17 . The
entry to record the transaction of June 17 would include a
a.debit to Stock Dividends for $360,000
b.credit to Cash for $360,000
c.credit to Common Stock Dividends Distributable for $360,000
d.credit to Common Stock Dividends Distributable for $120,000
29) Which of the following would not be recorded in the entry for the formation of a
partnership?
a.Accumulated depreciation
b.Allowance for doubtful accounts
c.Accounts receivable
d.All of these would be recorded
30) Match the items in the two columns below by entering the appropriate code letter in
the space provided.
A.Cost accountingF.Process cost system
B.Materials requisition slipG.Job cost sheets
C.Time ticketH.Predetermined overhead rate
D.Cost accounting systemI.Overapplied overhead
E.Job order cost systemJ.Underapplied overhead
_____1>Used to apply manufacturing overhead to jobs.
_____2>Measures, records, and reports product costs.
_____3>When actual manufacturing overhead costs are greater than the overhead
applied to products.
_____4>Manufacturing cost accounts are fully integrated into the general ledger.
_____5>Source document which authorizes issuance of raw materials to production.
_____6>Appropriate when products have distinguishing and heterogeneous
characteristics.
_____7>Constitute a subsidiary ledger for Work in Process Inventory.
_____8>Indicates number of hours that employees work and the account to be charged.
_____9>Appropriate when products are similar and are produced continuously.
_____10>When actual manufacturing overhead costs are less than the overhead applied
to products.
31) Financial statements are prepared directly from the
a.general journal
b.ledger
c.trial balance
d.adjusted trial balance
32) Detailed records of goods held for resale are not maintained under a
a.perpetual inventory system
b.periodic inventory system
c.double entry accounting system
d.single entry accounting system
33) Fire Red Company is authorized to issue 20,000 shares of 8%, $100 par value
preferred stock and 1,000,000 shares of no-par common stock with a stated value of $1
per share. If Fire Red issues 10,000 shares of preferred stock for land with an asking
price of $1,020,000 and a market value of $1,080,000, which of the following would be
the journal entry for Fire Red to record?
a.Land1,000,000
Preferred Stock1,000,000
b.Land1,080,000
Preferred Stock1,080,000
c. Land1,200,000
Preferred Stock1,000,000
Paid-in Capital in Excess of Par-Preferred200,000
d. Land1,080,000
Preferred Stock1,000,000
Paid-in Capital Excess of Par-Preferred80,000
34) Cotter pins and lubricants used irregularly in a production process are classified as
a.miscellaneous expense
b.direct materials
c.indirect materials
d.nonmaterial materials
35) Bonds that are not registered are
a.bearer bonds
b.debentures
c.registered bonds
d.transportable bonds
36) Sales taxes collected by the retailer are recorded as a(n)
a.revenue
b.liability
c.expense
d.asset
37) The asset turnover is computed by dividing
a.net income by average total assets
b.net sales by average total assets
c.net income by ending total assets
d.net sales by ending total assets
38) Aldo Manufacturing recorded operating data for its auto accessories division for the
year.
Sales revenue$750,000
Contribution margin150,000
Total direct fixed costs90,000
Average total operating assets400,000
How much is ROI for the year if management is able to identify a way to improve the
contribution margin by $40,000, assuming fixed costs are held constant?
a.47.5%
b.25.0%
c.15.0%
d.13.3%
39) An analysis of the transactions made by Cookie Mountain Legal & Co., a law firm,
for the month of July is shown below. Each increase and decrease in owners equity is
explained.
Accounts AccountsOwner’s
Cash +Receivable + Supplies + Equipment = Payable +Capital
1> +$15,000 +$15,000 Investment
2> – 2,000 +$5,000 +$3,000
3> – 750 +$750
4> + 2,500 +$6,600 + 9,100 Service Revenue
5> – 1,500 – 1,500
6> – 2,500 – 2,500 Drawings
7> – 750 – 750 Rent Expense
8> + 550 – 550
9> – 4,500 – 4,500 Salaries Expense
10> + 500 – 500 Utilities Expense
Instructions
(a) Prepare an income statement for the month ending July 31, 2014 .
(b) Prepare an owners equity statement for the month ending July 31, 2014 .
40) A company has a policy of having sufficient direct materials inventory on hand at
the end of each month equal to 20% of next month’s budgeted production needs. The
company has budgeted production of 7,500 units of product in June and 10,000 units in
July. It takes 2 pounds of direct materials to produce one unit of product and 3,000
pounds of direct materials were on hand on May 31 . How many pounds of direct
materials should be purchased in the month of June?
a.14,000 pounds
b.15,000 pounds
c.16,000 pounds
d.19,000 pounds
41) The existing balance in Allowance for Doubtful Accounts is considered in
computing bad debt expense in the
a.direct write-off method
b.percentage of receivables basis
c.percentage of sales basis
d.percentage of receivables and percentage of sales basis
42) IFRS allows companies to revalue plant assets to fair value. Which of the following
statements is true regarding revaluation?
a.At the time a company purchases an asset it must decide whether to follow
revaluation procedures for the asset; once the election is made, it must be followed for
the remainder of the assets useful life
b.Assets that are experiencing rapid price changes must be revalued quarterly, other
assets can be revalued on an annual basis
c.The journal entry to record a revaluation when the assets price has increased includes
a credit to the account revaluation surplus
d.All of the choices are correct regarding revaluation of plant assets
43) If a company had a contribution margin of $750,000 and a contribution margin ratio
of 40%, total variable costs must have been
a.$1,125,000
b.$450,000
c.$1,875,000
d.$300,000
44) The third (final) step in preparing the statement of cash flows is to
a.analyze changes in noncurrent asset and liability accounts
b.compare the net change in cash with the change in the cash account reported on the
balance sheet
c.determine net cash provided by operating activities
d.list the noncash activities
45) At March 1, 2014, Minutemen Corp. had supplies on hand of $500. During the
month, Minutemen purchased supplies of $1,200 and used supplies of $1,500. The
March 31 adjusting journal entry should include a
a.debit to the supplies account for $1,500
b.credit to the supplies account for $500
c.debit to the supplies account for $1,200
d.credit to the supplies account for $1,500
46) In liquidating a partnership, it is necessary to convert ______________ into cash
and to allocate any ______________ or ______________ to the partners based on their
income ratios.
47) On January 1, 2014, Mink Company purchased 5,000 shares of Kusher Company
stock for $360,000. Minks investment represents 30 percent of the total outstanding
shares of Kusher. During 2014, Kusher paid total dividends of $100,000 and reported
net income of $300,000. What revenue does Mink report related to this investment and
what is the amount to be reported as an investment in Kusher stock at December 31?
48) The cost of producing a particular job under a job cost system is accumulated on a
record called a ___________________.
49) On October 1, 2014, Ellington Company establishes an imprest petty cash fund by
issuing a check for $200 to Erin Angelo, the custodian of the petty cash fund. On
October 31, 2014, Erin Angelo submitted the following paid petty cash receipts for
replenishment of the petty cash fund when there is $32 cash in the fund:
Freight-In$28
Supplies Expense42
Entertainment of Clients65
Postage Expense30
Instructions
Prepare the journal entries required to establish the petty cash fund on October 1 and
the replenishment of the fund on October 31 .
50) Separate _________________ accounts are maintained for each production
department or manufacturing process in a process cost system.
51) Hunter Companys manufacturing costs for August when production was 2,000 units
appear below:
Direct material$14 per unit
Direct labor$13,000
Variable overhead10,000
Factory depreciation18,000
Factory supervisory salaries15,600
Other fixed factory costs5,000
Instructions
Compute the flexible budget manufacturing cost amount for a month when 1,600 units
are produced.
52) Iverson Company purchased a delivery truck for $45,000 on January 1, 2014 . The
truck was assigned an estimated useful life of 5 years and has a residual value of
$10,000. Compute depreciation expense using the double-declining-balance method for
the years 2014 and 2015 .
53) The following information is available for Hildebrand Corporation:
Dividends paid to common stockholders$ 45,000
Dividends paid to preferred stockholders20,000
Net income295,000
Weighted average common shares outstanding100,000
Instructions
Compute the earnings per share of common stock.
54) An accounting period that is one year in length is referred to as a ______________
year.
55) Charlie Company uses a perpetual inventory system. During May, the following
transactions and events occurred.
May13Sold 8 motors at a cost of $45 each to Scruffy Brothers Supply Company, terms
4/10, n/30. The motors cost Charlie $26 each.
May16One defective motor was returned to Charlie.
May 23Received payment in full from Scruffy Brothers. Round to nearest dollar.
Instructions
Journalize the May transactions for Charlie Company (seller) assuming that Charlie
uses a perpetual inventory system. You may omit explanations. Round amounts to
nearest dollar.