1) The budgeted balance sheet assumes that all operating and financing plans are met.
2) The unadjusted, adjusted, and post-closing trial balances are the three types of trial
balances prepared in an accounting cycle.
3) The factory superintendent’s salary would be included as part of the cost of products
manufactured under the variable costing concept.
4) A large public corporation normally uses registrars and transfer agents to maintain
records of the stockholders.
5) Employee involvement in a product-oriented factory emphasizes employee teams,
rather than individual employees.
6) The Accumulated Depreciation’s account balance is the sum of the depreciation
expense recorded in past periods.
7) Under a periodic inventory system, the merchandise on hand at the end of the year is
determined by a physical count of the inventory.
8) Companies that use the average costing method for process costing have unit costs
that include costs from more that one accounting period.
9) Accounting for the sale of stock is the same for both the cost and the equity methods
of accounting for investments.
10) Long-lived assets that are intangible in nature, used in the operations of the
business, and not held for sale in the ordinary course of business are called fixed assets.
11) Balance Sheet accounts are not considered real accounts.
12) Rental charges of $40,000 per year plus $3 for each machine hour over 18,000
hours is an example of a fixed cost.
13) The process of recording a transaction in the journal is called journalizing.
14) Match the following terms with the best definition given below.
1>Income from operations divided by invested assets A. Residual income
2>Ratio of income from operations to sales B. Rate of return on investments
3>Ratio of sales to invested assets C. Profit margin
4>Income from operations minus minimum acceptable income from operations D.
Controllable revenues
5>Earned by profit centers. E. Investment turnover
15) Which of the following is not a business transaction?
A.make a sales offer
B.sell goods for cash
C.receive cash for services to be rendered later
D.pay for supplies
16) Purchased $400,000 of ABC Co. 5% bonds at 100 plus accrued interest of $4,500.
Sold $250,000 of bonds at 97 plus accrued interest. The journal entry for the sale would
include:
A.a debit to Cash for $242,500
B.a credit to Loss on Sale for $7,500
C.a credit to Gain on Sale for $7,500
D.a debit to Cash for $244,300
17) The basis for recording direct and indirect labor costs incurred is a summary of the
period’s:
A.job order cost sheets
B.time tickets
C.employees’ earnings records
D.clock cards
18) Parker Company owns 83% of the outstanding stock of Tadeo Company. Parker
Company is referred to as the
A.parent
B.minority interest
C.affiliate
D.subsidiary
19) A summary of the time tickets for August follows:
Present the journal entries to record (a) the labor cost incurred and (b) the application of
factory overhead to production for August. The factory overhead rate is 70% of direct
labor cost.
20) Which one of the following is the authoritative body in the United States having the
primary responsibility for developing accounting principles?
A.FASB
B.IRS
C.SEC
D.
21) The net book value of a fixed asset is determined by
A.original cost less accumulated depreciation
B.original cost less depreciation expense
C.original cost less accumulated depreciation plus depreciation expense
D.original cost plus accumulated depreciation
22) Which of the following is best suited to providing timely and focused performance
information?
A.non-financial information
B.financial accounting information
C.cost accounting information
D.variance analysis
23) A manufacturing company applies factory overhead based on direct labor hours. At
the beginning of the year, it estimated that factory overhead costs would be $360,000
and direct labor hours would be 30,000. Actual factory overhead costs incurred were
$377,200, and actual direct labor hours were 36,000. What is the amount of overapplied
or underapplied manufacturing overhead at the end of the year?
A.$6,000 overapplied
B.$6,000 underapplied
C.$54,800 overapplied
D.$54,800 underapplied
24) The balance sheet should be prepared
A.before the income statement and the retained earnings statement
B.before the income statement and after the retained earnings statement
C.after the income statement and the retained earnings statement
D.after the income statement and before the retained earnings statement
25) The unfavorable volume variance may be due to all of the following factors except:
A.failure to maintain an even flow of work
B.machine breakdowns
C.unexpected increases in the cost of utilities
D.failure to obtain enough sales orders
26) When the maturities of a bond issue are spread over several dates, the bonds are
called
A.serial bonds
B.bearer bonds
C.debenture bonds
D.term bonds
27) The ____ is where a transaction can first be found on the accounting records.
A.chart of accounts
B.income statement
C.balance sheet
D.journal
28) A company is contemplating investing in a new piece of manufacturing machinery.
The amount to be invested is $100,000. The present value of the future cash flows at the
companys desired rate of return is $105,000. The IRR on the project is 12%. Which of
the following statements is true?
A.The project should not be accepted because the net present value is negative.
B.The desired rate of return used to calculate the present value of the future cash flows
is less than 12%.
C.The desired rate of return used to calculate the present value of the future cash flows
is more than 12%.
D.The desired rate of return used to calculate the present value of the future cash flows
is equal to 12%.
29) If a manufacturer ships merchandise to a retailer on consignment, the unsold
merchandise should be included in the inventory of the
A.consignee
B.retailer
C.manufacturer
D.shipper
30) If merchandise sold on account is returned to the seller, the seller may inform the
customer of the details by issuing a
A.sales invoice
B.purchase invoice
C.credit memo
D.debit memo
31) Under a perpetual inventory system
A.accounting records continuously disclose the amount ofinventory
B.increases in inventory resulting from purchases are debitedto Purchases
C.there is no need for a year-end physical count
D.the purchase returns and allowances account is credited when goods are returned to
vendors
32) Identify the following costs as (a) prime cost, (b) conversion cost, (c) or both for a
cake factory.
1> Frosting
2> Wages of the baker
3> Sprinkles for the topping (considered an indirect material)
4> Depreciation on oven
33) A corporation has 50,000 shares of $25 par value stock outstanding that has a
current market value of $150. If the corporation issues a 5-for-1 stock split, the market
value of the stock after the split will be approximately:
A.$25
B.$150
C.$5
D.$30
34) Prepare (a) a single-step income statement, (b) a statement of owner’s equity, and
(c) a balance sheet in report form from the following data for Kooper Co., taken from
the ledger after adjustment on December 31, 2010 the end of the fiscal year.
35) If variable costs per unit increased because of an increase in hourly wage rates, the
break-even point would:
A.decrease
B.increase
C.remain the same
D.increase or decrease, depending upon the percentage increase in wage rates
36) Identify each of the following as relating to (a) the control environment, (b) risk
assessment, or (c) control procedures.
1> Mandatory vacations
2> Personnel policies
3> Report of outside consultants on future market changes
37) The interest expense recorded on an interest payment date is increased
A.only if the market rate of interest is less than the stated rate of interest on that date
B.by the amortization of premium on bonds payable
C.by the amortization of discount on bonds payable
D.only if the bonds were sold at face value
38) Which of the following is not a commonly used approach to setting transfer prices?
A.Market price approach
B.Revenue price approach
C.Negotiated price approach
D.Cost price approach
39) Generally accepted accounting principles requires that companies use the ____ of
accounting.
A.cash basis
B.deferral basis
C.accrual basis
D.account basis
40) Which of the following is not a factory overhead cost?
A.materials used directly in the manufacturing process of the product
B.insurance on factory equipment
C.salaries of production supervisors
D.property tax on factory building
41) According to the just-in-time philosophy,
A.finished goods should always be available in case a customer wants something
B.employees should be expert at one function rather than be cross-trained for multiple
functions
C.movement of the product and material is reduced
D.the product moves from process to process until completion
42) 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
43) Nuthatch Corporation began its operations on September 1 of the current year.
Budgeted sales for the first three months of business are $260,000, $375,000, and
$400,000, respectively, for September, October, and November. The company expects
to sell 30% of its merchandise for cash. Of sales on account, 80% are expected to be
collected in the month of the sale and 20% in the month following the sale.
The cash collections in November from accounts receivable are:
A.$280,000
B.$316,400
C.$295,200
D.$276,500
44) Allowance for Doubtful Accounts has a debit balance of $2,500 at the end of the
year (before adjustment), and bad debt expense is estimated at 4% of net credit sales. If
net credit sales are $800,000, the amount of the adjusting entry to record the estimate of
the uncollectible accounts is
A.$29,500
B.$34,500
C.$32,000
D.cannot be determined
45) A company had net income of $252,000. Depreciation expense is $26,000. During
the year, Accounts Receivable and Inventory increased by $15,000 and $40,000,
respectively. Prepaid Expenses and Accounts Payable decreased by $2,000 and $4,000,
respectively. There was also a loss on the sale of equipment of $3,000. How much cash
was provided by operating activities?
A.$217,000
B.$224,000
C.$284,000
D.$305,000
46) What term is used to refer to the cost of changing direct materials into a finished
manufactured product?
A.Factory overhead cost
B.Period cost
C.Conversion cost
D.Direct labor cost
47) Ulmer Company is considering the following alternative financing plans:
Income tax is estimated at 35% of income. Dividends of $1 per share were declared and
paid on the preferred stock.
Required: Determine the earnings per share of common stock, assuming income before
bond interest and income tax is $600,000.
48) The company determines that the interest expense on a note payable for period
ending December 31st is $775. This amount is payable on January 1st. Prepare the
journal entries required on December 31st and January 1st.
49) Why would you or why wouldnt you compare an organization like Ford Motor
Company to the local car dealer Johnson City Ford/Lincoln/Mercury in vertical and
horizontal analysis?
50) The accountant for Franklin Company prepared the following list of account
balances from the companys records for the year ended December 31, 2011:
Determine the total assets at the end of 2011 for Franklin Company.
51) On January 1, 2011 a company had the following data:
– issued 10,000 shares of $2.00 par value common stock for $12.00 per share
– issued 3,000 shares of $50 par value 6% cumulative preferred stock for $70 per share
– purchased 1,000 shares of previously issued common stock for $15.00 per share
The company had the following dividend information available:
2011 – No dividend paid
2012 – Paid a $2,000 total dividend
2013 – Paid a $17,000 total dividend
2014 – paid a $32,000 total dividend
Using the following format, fill in the correct values for each year;
2011 2012 2013 2014
Common stock dividend
Preferred stock dividend
Dividends in arrears
