1) The most effective means of presenting standard factory overhead cost variance data
is through a factory overhead cost variance report.
2) In a company’s annual report, the section called management discussion and analysis
provides critical information in interpreting the financial statements and assessing the
future of the company.
3) Unrealized gains and losses on trading securities are not included in the calculation
of net income.
4) Computerized systems can be used to capture accounting information such as
accounts receivable, inventory items, accounts payable, and sales.
5) The drawing account is closed to the income summary account.
6) A post-closing trial balance contains only asset and liability accounts.
7) The excess of the cash flowing in from revenues over the cash flowing out for
expenses is termed net cash flow.
8) The proceeds of a discounted note are equal to the face value of the note.
9) The excess of divisional income from operations over a minimum amount of desired
income from operations is termed the residual income.
10) If employees are given bonuses for exceeding normal standards, the standards may
be very effective in motivating employees.
11) Mia Enterprises sells a product for $90 per unit. The variable cost is $40 per unit,
while fixed costs are $75,000. Determine the (a) break-even point in sales units, and (b)
break-even point in sales units if the selling price increased to $100 per unit.
12) The following information pertains to Auburn Company. Assume that all balance
sheet amounts represent both average and ending balance figures. Assume that all sales
were on credit.
Assets
Liabilities and Stockholders Equity
Income Statement
What is the rate earned on stockholders equity? Round answer to a single decimal point.
A.9.3%
B.15.9%
C.24.0%
D.40.9%
13) Which of the following entities would probably use a process costing system?
A.A custom boat builder
B.A custom furniture manufacturer
C.A one of a kind jewelry creator
D.An oil refinery
14) Dorman Co. sold merchandise to Smith Co. on account, $23,500, terms 2/15, net
45. The cost of the merchandise sold is $16,000. Dorman Co. issued a credit memo for
$1,750 for merchandise returned that originally cost $1,400. The Smith Co. paid the
invoice within the discount period. What is amount of net sales from the above
transactions?
A.$23,030
B.$21,750
C.$21,315
D.$13,808
15) Which account would normally not require an adjusting entry?
A.Wages Expense
B.Accounts Receivable
C.Accumulated Depreciation
D.Smith, Capital
16) If a company uses special journals
A.it must have one for cash, receivables, and payables
B.it may have no more than four
C.the quantity and design depend on the needs of the company
D.the design must comply with the FASB requirements
17) An entity that is organized according to state or federal statutes and in which
ownership is divided into shares of stock is a
A.proprietorship
B.corporation
C.partnership
D.governmental unit
18) Yankton Company began the year without an investment portfolio. During the year
they purchased investments classified as available-for-sale securities at a cost of
$13,000. At the end of the year, the market value of the securities was $11,000. The
Yankton Company’s financial statements for the current year should show
A.a loss of $2,000 on the income statement and available-for-sale securities of $13,000
on the balance sheet
B.no loss on the income statement and available-for-sale securities of $13,000 on the
balance sheet
C.no loss on the income statement, available-for-sale securities of $11,000 and an
unrealized loss of $2,000 as a stockholders equity adjustment on the balance sheet
D.a loss of $2,000 on the income statement and temporary investments of $11,000 on
the balance sheet
19) To calculate income from operations, total service department charges are:
A.added to income from operations before service department charges
B.subtracted from operating expenses
C.subtracted from income from operations before service department charges
D.subtracted from gross profit margin
20) Carmelita Inc., has the following information available:
At the beginning of the period, there were 500 units in process that were 60 percent
complete as to conversion costs and 100 percent complete as to direct materials costs.
During the period 4,500 units were started and completed. Ending inventory contained
340 units that were 30 percent complete as to conversion costs and 100 percent
complete as to materials costs. (Assume that the company uses the FIFO process cost
method. Round cost per unit figures to two cents, i.e. $2.22 when calculating total
costs.)
The total costs that will be transferred into Finished Goods for units started and
completed were
A.$161,775
B.$156,960
C.$162,855
D.$161,505
21) On April 3rd, Snappy Sales decides to establish a $135.00 Petty Cash Account to
relieve the burden on Accounting.
(a) Journalize this event.
(b) On April 11th, the petty cash fund has receipts for mail and postage of $32.75,
contributions and donations of $25.25, meals and entertainment of $68.00 and $9.75 in
cash. Journalize the replenishment of the fund.
(c) On April 12th, Snappy Sales decides to increase petty cash to $175.00. Journalize
this event.
22) If fixed costs are $46,800, the unit selling price is $42, and the unit variable costs
are $24, what is the break-even sales (unit ) if the variable costs are decreased by $2?
A.2,127
B.1,114
C.2,340
D.1,950
23) The Lowery Co. uses the direct write-off method of accounting for uncollectible
accounts receivable. Lowery has a customer whose accounts receivable balance has
been determined to likely be uncollectible. The entry to write off this account would be
which of the following?:
A.debit Allowance for Doubtful Accounts; credit Accounts Receivable
B.debit Sales Returns and Allowance, credit Accounts Receivable
C.debit Bad Debt Expense; credit Allowance for Doubtful Accounts
D.debit Bad Debt Expense; credit Accounts Receivable
24) Solare Company acquired mineral rights for $60,000,000. The diamond deposit is
estimated at 6,000,000 tons. During the current year, 2,300,000 tons were mined and
sold.
a. Determine the depletion rate.
b. Determine the amount of depletion expense for the current year.
c. Journalize the adjusting entry to recognize the depletion expense.
25) A sporting goods store purchased $7,000 of ski boots in October. The store had
$3,000 of ski boots in inventory at the beginning of October, and expects to have
$2,000 of ski boots in inventory at the end of October to cover part of anticipated
November sales. What is the budgeted cost of goods sold for October?
A.$10,000
B.$5,700
C.$8,000
D.$9,500
26) Which of the following is not a prime cost?
A.Supervisors wages
B.Direct labor wages
C.Machine operator wages
D.Assembly line wages
27) The worksheet
A.is an integral part of the accounting cycle
B.eliminates the need to rewrite the financial statements
C.is a working paper that is required
D.is used to summarize account balances and adjustments for the financial statements
28) Responsibility accounting reports for profit centers will include
A.costs
B.revenues
C.expenses and fixed assets
D.revenues, expenses, net income or loss from operations
29) The comparative balance sheet of Colson Company, for 2011 and the preceding
year ended December 31, 2010 appears below in condensed form:
The income statement for the current year is as follows:
Additional data for the current year are as follows:
(a) Fully depreciated equipment costing $39,000 was scrapped, no salvage, and
equipment was purchased for $157,000.
(b) Bonds payable for $100,000 were retired by payment at their face amount.
(c) 5,000 shares of common stock were issued at $15 for cash.
(d) Cash dividends declared were paid $28,000.
(e) All sales are on account.
Prepare a statement of cash flows, using the direct method of reporting cash flows from
operating activities.
30) Assume that Penguin Co. is considering disposing of equipment that cost $50,000
and has $40,000 of accumulated depreciation to date. Penguin Co. can sell the
equipment through a broker for $25,000 less 5% commission. Alternatively, Teal Co.
has offered to lease the equipment for five years for a total of $48,750. Penguin will
incur repair, insurance, and property tax expenses estimated at $10,000. At lease-end,
the equipment is expected to have no residual value. The net differential income from
the lease alternative is:
A.$15,000
B.$ 5,000
C.$25,000
D.$12,500
31) An acceleration in the collection of receivables will tend to cause the accounts
receivable turnover to
A.decrease
B.remain the same
C.either increase or decrease
D.increase
32) Samuel and Darci are partners. The partnership capital for Samuel is $50,000 and
for Darci is $60,000. Josh is admitted as a new partner by investing $50,000 cash. Josh
is given a 20% interest in return for his investment. The amount of the bonus to the old
partners is
A.$0
B.$18,000
C.$8,000
D.$10,000
33) A number of major structural repairs completed at the beginning of the current
fiscal year at a cost of $1,000,000 are expected to extend the life of a building 10 years
beyond the original estimate. The original cost of the building was $6,552,000, and it
has been depreciated by the straight-line method for 25 years. Estimated residual value
is negligible and has been ignored. The related accumulated depreciation account after
the depreciation adjustment at the end of the preceding fiscal year is $4,550,000.
(a) What has the amount of annual depreciation been in past years?
(b) What was the original life estimate of the building?
(c) To what account should the $1,000,000 be debited?
(d) What is the book value of the building after the extraordinary repairs have been
made?
(e) What is the expected remaining life of the building after the extraordinary repairs
have been made?
(f) What is the amount of straight-line depreciation for the current year, assuming that
the repairs were completed at the very beginning of the current year? Round to the
nearest dollar.
34) The capital accounts of Hogan and Moss have balances of $90,000 and $65,000,
respectively on January 1, 2011, the beginning of the current fiscal year. On April 10,
Hogan invested an additional $8,000. During the year, Hogan and Moss withdrew
$40,000 and $32,000, respectively, and net income for the year was $98,000. The
articles of partnership make no reference to the division of net income.
Required:
35) Champion Company purchased and installed carpet in its new general offices on
March 30 for a total cost of $18,000. The carpet is estimated to have a 15-year useful
life and no residual value.
36) An employee receives an hourly rate of $45, with time and a half for all hours
worked in excess of 40 during the week. Payroll data for the current week are as
follows: hours worked, 48; federal income tax withheld, $950; Social security tax rate,
6.5% on maximum of $100,000; and Medicare tax rate, 1.5% on all earnings; state
unemployment compensation tax, 3.4% on the first $7,000; federal unemployment
compensation tax, .8% on the first $7,000.
Calculate the employer’s payroll tax expense if:
a. this is the first payroll of the year and the employee has no cumulative earnings for
the year to date.
b. the employees cumulative earnings for the year prior to this week equal $6,200.
c. the employees cumulative earnings for the year prior to this week equal $98,700.
Employee wages = (40 x $45 + 8 x $67.50) $2,340
37) The following data relate to direct materials costs for November:
What is the direct materials quantity variance?
A.$3,600 favorable
B.$1,240 favorable
C.$3,600 favorable
D.$1,240 unfavorable
38) Benson and Orton are partners who share income in the ratio of 1:3 and have capital
balances of $70,000 and $30,000 respectively. Ramsey is admitted to the partnership
and is given a 40% interest by investing $20,000. What is Ortons capital balance after
admitting Ramsey?
A.$20,000
B.$9,000
C.$70,000
D.$63,000
39) Which of the following is most associated with managerial accounting?
A.Must follow GAAP
B.May rely on estimates and forecasts
C.Is prepared for users outside the organization
D.Always reports on the entire entity
40) If the seller is to pay the freight costs of delivering merchandise, the delivery terms
are stated as
A.FOB shipping point
B.FOB destination
C.FOB n/30
D.FOB seller
41) The debit side of an account
A.depends on whether the account is an asset, liability or owner’s equity
B.can be either side of the account depending on how the accountant set up the system
C.is the right side of the account
D.is the left side of the account
42) The management of Indiana Corporation is considering the purchase of a new
machine costing $400,000. The company’s desired rate of return is 10%. The present
value factors for $1 at compound interest of 10% for 1 through 5 years are 0.909, 0.826,
0.751, 0.683, and 0.621, respectively. In addition to the foregoing information, use the
following data in determining the acceptability in this situation:
The average rate of return for this investment is:
A.18%
B.21%
C.53%
D.10%
43) S. Stephens and J. Perez are partners in Space Designs. Stephens and Perez share
income equally. D. Fredricks will be admitted to the partnership. Prior to the admission,
equipment was revalued downward by $8,000. The capital balances of each partner are
$100,000 and $139,000, respectively, prior to the revaluation.
Required:
44) In accordance with the debit and credit rules, which of the following is true?
A.Debits increase assets
B.Credits increase assets
C.Debits increase both assets and capital
D.Credits increase both assets and liabilities
45) Garrison Company uses the retail method of inventory costing. They started the
year with an inventory that had a retail cost of $45,000. During the year they purchased
an inventory with a retail cost of $300,000. After performing a physical inventory, they
calculated their inventory cost at retail to be $80,000. The mark up is 100% of cost.
Determine the ending inventory at its estimated cost.
A.$160,000
B.$80,000
C.$40,000
D.$45,000
46) The adjusting entry for rent earned that was previously recorded in the unearned
rent account is
A.debit Unearned Rent; credit Rent Revenue
B.debit Rent Revenue; credit Unearned Rent
C.debit Unearned Rent; credit Prepaid Rent
D.debit Rent Expense; credit Unearned Rent
47) Match the correct term with the statement that describes it.
1>Prime costs A. FIFO method
2>A process costing method that costs each periods equivalent units of work with that
periods costs per equivalent unit B. equivalent units
3>Costs incurred in a previous process that are carried forward as part of the products
cost when it moves to the next department C. direct labor and factory overhead
4>Conversion costs D. cost of production report
5>Costing system used by a company producing by a company producing custom
window treatments E. process costing
6>Summary of the activity in a processing department for a specific period F. direct
labor and direct materials
7>Costing system used by a company producing computer chips F. transferred-in costs
8>Measure of the work done during a production period, expressed in terms of fully
complete units of output G. job costing
48) A department store has budgeted sales of 12,000 mens suits in September.
Management wants to have 6,000 suits in inventory at the end of the month to prepare
for the winter season. Beginning inventory for September is expected to be 4,000 units.
What is the dollar amount of the purchase of suits? Each suit has a cost of $75.
A.$900,000
B.$1,050,000
C.$1,350,000
D.$1,200,000
49) All of the following are typically included in the Managements Discussion and
Analysis in annual reports except:
A.explanations of any significant changes between the current and prior years financial
statements
B.managements assessment of liquidity
C.journal entries
D.off-balance-sheet arrangements
50) Discuss how job order cost information is used in decision making. What are some
possible reasons that actual cost of materials would exceed expected costs for a job?
51) Peaches, Inc. reported the following data in its December 31, 2011 annual report:
Cash and cash equivalents $460,000
Cash flow from operations (240,000)
Required:
(1) What is the companys cash burn per month?
(2) What is the companys ratio of cash to monthly cash expenses?
52) The following is the adjusted trial balance for Nadia Company.
Prepare an Income Statement, Balance Sheet, and Statement of Owners Equity. Assume
that the capital account started with a beginning balance of $10,000.
53) Using the data from the Terrace Industries, determine the divisional income from
operations for Districts 1 & 2.
Allocate service department expenses proportional to the sales of each district.
54) On October 30th Damien Lawson withdraws $3,330 from JumpStart for personal
use. Journalize this event.