1) If Division Q’s income from operations was $30,000 on invested assets of $200,000,
the rate of return on investment is 15%.
2) The usual presentation of the statement of owner’s equity is (1) Beginning capital, (2)
Net income or loss, (3) Drawing, (4) Owner’s contributions, (5) Ending capital.
3) Budget performance reports prepared for the vice-president of production would
generally contain less detail than reports prepared for the various plant managers.
4) Factory overhead cost is sometimes referred to as factory burden.
5) Held-to-maturity securities are reported on the balance sheet at fair market value.
6) The interest portion of an installment note payment is computed by multiplying the
interest rate by the carrying amount of the note at the end of the period.
7) During periods of decreasing costs the use of the LIFO method of costing inventory
will result in a lower amount of net income than would result from the use of the FIFO
method.
8) If cash dividends of $135,000 were paid during the year and the company sold 1,000
shares of common stock at $30 per share, the statement of cash flows would report net
cash flow from financing activities as $165,000.
9) If income from operations for a division is $5,000, invested assets are $25,000, and
sales are $30,000, the profit margin is 20%.
10) Generally accepted accounting principles (GAAP) require the use of fair value
accounting for all assets and liabilities.
11) Notes payable may be issued to creditors to satisfy accounts payable created earlier.
12) Double taxation is a disadvantage of a corporation because the same party has to
pay taxes twice on the income.
13) A sale of treasury stock may result in a decrease in paid-in-capital. All decreases
should be charged to the Paid-In-Capital from Sale of Treasury account.
14) When bonds held as long-term investments are purchased at a price other than the
face value, the premium or discount should be amortized over the remaining life of the
bonds.
15) The use of a separate payroll bank account is not an advantageous control, because
it creates more complexity in reconciliation functions for a company and invites theft.
16) The relative distribution of sales among the various products sold by a business is
termed the:
A.business’s basket of goods
B.contribution margin mix
C.sales mix
D.product portfolio
17) The finished goods account is the controlling account for the:
A.cost ledger
B.materials ledger
C.work in process ledger
D.stock ledger
18) List the internal control objectives illustrated by the following:
(a) keeping the inventory storeroom locked
(b) counting the inventory at the end of the accounting period and comparing it with the
inventory ledger clerk’s records
(c) using subsidiary ledgers and a perpetual inventory system
19) If the market rate of interest is 10%, a $10,000, 12%, 10-year bond that pays
interest semiannually would sell at an amount
A.less than face value
B.equal to the face value
C.greater than face value
D.that cannot be determined
20) Which of the following is not an advantage of a computerized system over a manual
system?
A.transactions are recorded and posted at the same time
B.accuracy is usually better with a computerized system
C.current balances are always available
D.internal controls are optional to the computerized system
21) Which of the following measures the relationship between cost of merchandise sold
and the amount of inventory carried during the period?
A.inventory turnover
B.Fixed asset turnover
C.retail method of inventory costing
D.gross profit method of inventory costing
22) Harold Corporation just started business in January 2012. They had no beginning
inventories. During 2012 they manufactured 12,000 units of product, and sold 10,000
units. The selling price of each unit was $20. Variable manufacturing costs were $4 per
unit, and variable selling and administrative costs were $2 per unit. Fixed
manufacturing costs were $24,000 and fixed selling and administrative costs were
$6,000.
What would be the Harold Corporations Net income for 2012 using variable costing?
A.$114,000
B.$110,000
C.$4,000
D.$106,000
23) The objectivity concept requires that
A.business transactions must be consistent with the objectives of the entity
B.the Financial Accounting Standards Board must be fair and unbiased in its
deliberations over new accounting standards
C.accounting principles must meet the objectives of the Security and Exchange
Commission
D.amounts recorded in the financial statements must be based on independently
verifiable evidence
24) Equipment with a cost of $220,000 has an estimated residual value of $30,000 and
an estimated life of 10 years or 19,000 hours. It is to be depreciated by the straight-line
method. What is the amount of depreciation for the first full year, during which the
equipment was used 2,100 hours?
A.$19,000
B.$21,000
C.$22,000
D.$30,000
25) Match the following terms with the best definition given.
1>An accounting report that presents predicted amounts of the companys assets,
liabilities, and equity as of the end of the budget period. A. budgeted balance sheet
2>A formal statement of future plans, usually expressed in monetary terms. B. budget
3>A plan showing the number of units to be produced each month. C. sales budget
4>A plan that shows the expected cash inflows and outflows during the budget period,
including receipts from loans needed to maintain a minimum cash balance and
repayments of such loans. D. capital expenditure budget
5>A plan that lists dollar amounts to be both received from disposing of plant assets and
spent on purchasing additional pant assets to carry out the budgeted business activities.
E. production budget
6>A plan showing the units of goods to be sold and the sales to be derived; usually the
starting point in the budgeting process. F. cash budget
26) In a cost center, the manager has responsibility and authority for making decisions
that affect:
A.revenues
B.assets
C.both costs and revenues
D.costs
27) If a company mistakenly counts less items during a physical inventory than actually
exist, how will the error affect the cost of merchandise sold?
A.Understated
B.Overstated
C.No change
D.Only inventory is affected
28) The inventory costing method that reports the earliest costs in ending inventory is
A.FIFO
B.LIFO
C.Average cost
D.Specific identification
29) Which of the following is NOT an example of a cost that varies in total as the
number of units produced changes?
A.Electricity per KWH to operate factory equipment
B.Direct materials cost
C.Straight-line depreciation on factory equipment
D.Wages of assembly worker
30) When purchases of merchandise are made for cash, the transaction may be recorded
with the following entry
A.debit Cash; credit Merchandise Inventory
B.debit Merchandise Inventory; credit Cash
C.debit Merchandise Inventory; credit Cash Discounts
D.debit Merchandise Inventory; credit Purchases
31) Using the following partial table of present value of $1 at compound interest,
determine the present value of $30,000 to be received three years hence, with earnings
at the rate of 12% a year:
A.$14,240
B.$16,800
C.$21,360
D.$15,840
32) By converting dollars to be received in the future into current dollars, the present
value methods take into consideration that money:
A.has an international rate of exchange
B.is the language of business
C.is the measure of assets, liabilities, and stockholders’ equity on financial statements
D.has a time value
33) A retailer purchases merchandise with a catalog list price of $25,000. The retailer
receives a 30% trade discount and credit terms of 2/10, n/30. What amount should the
retailer debit to the Merchandise Inventory account?
A.$7,500
B.$17,500
C.$25,000
D.$17,250
34) When the amount of use of a fixed asset varies from year to year, the method of
determining depreciation expense that best matches allocation of cost with revenue is
A.declining-balance
B.straight-line
C.units-of-production
D.MACRS
35) Journal entries based on the bank reconciliation are required in the company’s
accounts for
A.outstanding checks
B.deposits in transit
C.bank errors
D.book errors
36) The total earnings of an employee for a payroll period is referred to as
A.take-home pay
B.pay net of taxes
C.net pay
D.gross pay
37) On December 31, Strike Company has decided to sell one of its batting cages. The
initial cost of the equipment was $310,000 with an accumulated depreciation of
$260,000. Depreciation has been taken up to the end of the year. The company found a
company that is willing to buy the equipment for $20,000. What is the amount of the
gain or loss on this transaction?
A.Gain of $20,000
B.Loss of $30,000
C.No gain or loss
D.Cannot be determined
38) Which of the following budgets provides the starting point for the preparation of the
direct labor cost budget?
A.Direct materials purchases budget
B.Cash budget
C.Production budget
D.Sales budget
39) The relationship of $325,000 to $125,000, expressed as a ratio, is
A.2.0 to 1
B.2.6 to 1
C.2.5 to 1
D.0.45 to 1
40) An asset was purchased for $58,000 and originally estimated to have a useful life of
10 years with a residual value of $3,000. After two years of straight line depreciation, it
was determined that the remaining useful life of the asset was only 2 years with a
residual value of $2,000.
a) Determine the amount of the annual depreciation for the first two years.
b) Determine the book value at the end of the 2nd year.
c) Determine the depreciation expense for each of the remaining years after revision.
41) Under the corporate form of business organization
A.ownership rights are easily transferred
B.a stockholder is personally liable for the debts of the corporation
C.stockholders acts can bind the corporation even though the stockholders have not
been appointed as agents of the corporation
D.stockholders wishing to sell their corporation shares must get the approval of other
stockholders
42) The supplies account has a balance of $2,100 at the beginning of the year and was
debited during the year for $2,300, representing the total of supplies purchased during
the year. If $400 of supplies are on hand at the end of the year, the supplies expense to
be reported on the income statement for the year is
A.$400
B.$200
C.$4,800
D.$4,000
43) If sales are $914,000, variable costs are $498,130, and operating income is
$260,000, what is the contribution margin ratio?
A.52.2%
B.28.4%
C.54.5%
D.45.5%
44) The process by which management allocates available investment funds among
competing investment proposals is called:
A.investment capital
B.investment rationing
C.cost-volume-profit analysis
D.capital rationing
45) Which of the following statements is not true about liabilities?
A.Liabilities are debts owed to outsiders
B.Account titles of liabilities often include the term payable
C.Cash received before services are performed are considered to be liabilities
D.Liabilities do not include wages owed to employees of the company
46) The following is an example of:
A.product analysis
B.vertical analysis
C.horizontal analysis
D.percentage analysis
47) An alternative name for Bad Debt Expense is
A.Collection Expense
B.Credit Loss Expense
C.Uncollectible Accounts Expense
D.Deadbeat Expense
48) Assuming no employees are subject to ceilings for their earnings, Jensen Company
has the following information for the pay period of January 15 – 31, 20xx.
Salaries Payable would be recorded in the amount of:
A.$8,200
B.$6,830
C.$8,630
D.$7,450
49) Jay Company uses the total cost concept of applying the cost-plus approach to
product pricing. The costs and expenses of producing and selling 38,400 units of
Product E are as follows:
Jay desires a profit equal to a 14% rate of return on invested assets of $640,000.
(a) Determine the amount of desired profit from the production and sale of Product E.
(b) Determine the total costs and the cost amount per unit for the production and sale of
38,400 units of Product E.
(c) Determine the markup percentage for Product E.
(d) Determine the selling price of Product E.
50) When posting the column totals of a cash payments journal, a debit should be
posted to
A.Cash
B.Accounts Payable
C.Sales Discounts
D.Unearned Revenue
51) Which of the following accounts will only be found in the chart of accounts of a
merchandising company?
A.Sales
B.Accounts Receivable
C.Merchandise Inventory
D.Accounts Payable
52) Global Publishers has collected the following data for recent months:
Month Issues published Total cost
March 20,500 $20,960
April 21,800 22,464
May 17,750 18,495
June 21,200 21,395
Required:
a. Using the high-low method, find variable cost per unit, total fixed costs, and the total
cost equation.
b. What is the estimated cost for a month in which 19,000 issues are published?
53) The following information was taken from Slater Companys balance sheet:
Determine the companys (a) Ratio of fixed assets to long-term liabilities, and (b) ratio
of liabilities to stockholders equity. Round your answer to one decimal place.
54) Franco and Jason share income and losses in a 2:1 ratio after allowing for salaries to
Franco of $15,000 and $30,000 to Jason. If the partnership suffers a $15,000 loss, by
how much would Jasons capital account increase?
A.$10,000
B.$20,000
C.$40,000
D.$25,000
55) Name and describe the four primary financial statements for a proprietorship.
56) The following information was extracted from the Stone Companys records.
Gross Sales $232,566
Gross Profit $87,990
Sales Discounts $1,125 (= 1/2 % of Net Sales)
Total Operating Expenses $88, 440
Selling Expenses $33, 560
Complete the following:
57) The Grant Company has sales of $300,000, and the break-even point in sales dollars
if $225,000. Determine the companys margin of safety percentage.
58) The following two situations are independent of each other.
1> On June 1, the cash account balance was $45,750. During June, cash payments
totaled $243,910 and the June 30 balance was $53,200. Determine the cash receipts
during June and show your calculation.
2> On March 1, the supplies account balance was $1,800. During March, supplies of
$2,450 were purchased and $630 of supplies were on hand as of March 31. Determine
the supplies expense for March and show your calculation.
59) Two income statements for PS Enterprises are shown below:
60) Carrolton, Inc. currently sells widgets for $80 per unit. The variable cost is $30 per
unit and total fixed costs equal $240,000 per year. Sales are currently 20,000 units
annually.
The company is considering a 20% drop in selling price that they believe will raise
units sold by 20%. Assuming all costs stay the same, what is the impact on income if
they make this change?
61) Rosser Company produces a container that requires 4 yds. of material per unit. The
standard price of one yard of material is $4.50. During the month, 9,500 chairs were
manufactured, using 37,300 yards.
Required: Journalize the entry to record the standard direct materials used in
production.
62) A business pays bi-weekly salaries of $20,000 every other Friday for a ten-day
period ending on that day. The last pay day of December is Friday, December 27.
Assuming the next pay period begins on Monday, December 30 and the proper
adjusting entry is journalized at the end of the fiscal period (December 31). Journalize
the entry for the payment of the payroll on Friday, January 10.
63) Carmen Flores weekly gross earnings for the week ending Dec. 7th were $2,500,
and her federal income tax withholding was $525. Prior to this week Flores had earned
$98,000 for the year. Assuming the social security rate is 6% on the first $100,000 of
annual earnings and Medicare is 1.5% of all earnings, what is Flores net pay?
64) List the objectives of internal control and give an example of how each is
implemented.
Internal control provides reasonable assurance that