1) A trademark is an exclusive right granted to its owner to publish and sell a musical,
literary, or artistic work during the life of the creator plus 70 years.
2) When the contract rate is above the market rate, a bond sells at a discount.
3) A direct labor cost variance can be divided into price and quantity variances, which
are almost always called controllable and volume variances.
4) Both direct and indirect labor costs are recorded on the individual job cost sheets.
5) If a company has the capacity to produce either 10,000 units of Product A or 10,000
units of Product B; assuming fixed costs are the same, production restrictions are the
same for both products, and the markets for both products are unlimited; the company
should commit 100% of its capacity to the product that has the higher contribution
margin.
6) The report that shows the pay period dates, hours worked, gross pay, deductions, and
net pay of each employee for every pay period is the payroll register.
7) No attempt is made to estimate bad debts expense under the allowance method of
accounting for uncollectible accounts receivable.
8) Even if partners devote their time and services to their partnership, their salaries are
not expenses on the income statement.
9) Depreciation does not measure the decline in market value of an asset each period.
10) A stock split is the distribution of additional shares of stock to stockholders
according to their percent of ownership.
11) Capital expenditures are expenditures that keep assets in normal, good operating
condition.
12) When factory payroll costs for labor are allocated in a job cost accounting system:
A.Factory Payroll is debited and Work in Process Inventory is credited.
B.Work in Process Inventory and Factory Overhead are debited and Factory Payroll is
credited.
C.Cost of Goods Manufactured is debited and Direct Labor is credited.
D.Direct Labor and Indirect Labor are debited and Factory Payroll is credited.
E.Work in Process Inventory is debited and Factory Payroll is credited.
13) Assume that the custodian of a $450 petty cash fund has $62.50 in coins and
currency plus $382.50 in receipts at the end of the month. The entry to replenish the
petty cash fund will include:
A.A debit to Cash for $377.50.
B.A debit to Cash Over and Short for $5.00.
C.A debit to Petty Cash for $382.50.
D.A credit to Cash for $382.50.
E.A debit to Cash for $387.50.
14) Estimated liabilities commonly arise from all of the following except:
A.Warranties.
B.Vacation benefits.
C.Income taxes.
D.Employee benefits.
E.Unearned revenues.
15) Romeo Corporation has accumulated the following accounting data for the year:
The cost of goods manufactured for the year is:
A.$21,400.
B.$11,000.
C.$15,000.
D.$17,400.
E.$10,200.
16) Alfarsi Industries uses the net present value method to make investment decisions
and requires a 15% annual return on all investments. The company is considering two
different investments. Each require an initial investment of $15,000 and will produce
cash flows as follows:
The present value factors of $1 each year at 15% are:
The present value of an annuity of $1 for 3 years at 15% is 2.2832
The net present value of Investment A is:
A.$18,266.
B.$(15,000).
C.$9,000.
D.$(20,549).
E.$3,266.
17) A company paid $200,000 ten years ago for a specialized machine that has no
salvage value and is being depreciated at the rate of $10,000 per year. The company is
considering using the machine in a new project that will have incremental revenues of
$28,000 per year and annual cash expenses of $20,000. In analyzing the new project,
the $200,000 original cost of the machine is an example of a(n):
A.Incremental cost.
B.Opportunity cost.
C.Variable cost.
D.Sunk cost.
E.Out-of-pocket cost.
18) A proxy is:
A.A document that delegates a stockholder’s voting rights to an agent.
B.A contractual commitment by an investor to purchase unissued shares of stock.
C.An amount of assets defined by state law that stockholders must invest and leave
invested in a corporation.
D.The right of common stockholders to protect their proportionate interests in a
corporation by having the first opportunity to purchase additional shares of common
stock issued by the corporation.
E.An arbitrary amount assigned to no-par stock by the corporation’s board of directors.
19) A payroll register does not include:
A.Pay period dates.
B.Hours worked.
C.Gross pay and net pay.
D.Deductions.
E.Employer tax expenses.
20) A journal that is used to record and post transactions of a similar type is a(n):
A.Perpetual journal.
B.Columnar journal.
C.Special journal.
D.General journal.
E.All-purpose journal.
21) The statement of changes in stockholders’ equity:
A.Is part of the statement of retained earnings.
B.Shows only the ending balances in stockholders’ equity.
C.Describes changes in paid-in capital and retained earnings subcategories.
D.Does not include changes in treasury stock.
E.Is reported by very few companies.
22) A statement of cash flows explains the differences between the beginning and
ending balances of:
A.Net income.
B.Equity.
C.Cash and cash equivalents.
D.Working capital.
E.Cash, cash equivalents, and short-term investments.
23) Bharrat Corporation purchased 40% of Ferris Corporation for $100,000 on January
1. On October 17 of the same year, Ferris Corporation declared total cash dividends of
$12,000. At year-end, Ferris Corporation reported net income of $60,000. The balance
in the Bharrat Corporation’s Long-Term Investment-Ferris account at December 31
should be:
A.$80,800.
B.$100,000.
C.$95,200.
D.$119,200.
E.$124,000.
24) Which of the following would not be used in preparing a cash budget for October?
A.Beginning cash balance on October 1
B.Budgeted sales and collections for October.
C.Estimated depreciation expense for October.
D.Budgeted salaries expense for October.
E.Budgeted capital equipment purchases for October.
25) Prepare journal entries to record the following transactions of a company during the
current year:
26) Define liabilities and explain the difference between current and long-term
liabilities.
27) The following transactions and events occurred during the year. Assuming that this
company uses the indirect method to report cash provided by operating activities,
indicate where each item would appear on its statement of cash flows by placing an x in
the appropriate column.
28) Times interest earned is computed by dividing income before interest expense and
income taxes by _______________________.
29) A company issued 10-year, 9% bonds with a par value of $500,000 when the market
rate was 9.5%. The company received $484,087 in cash proceeds. Prepare the issuer’s
journal entry to record the issuance of the bond.