1) An accounting system is the methods and procedures used to collect, classify,
summarize, and report the businesses financial information
2) On the income statement, miscellaneous expenses are usually presented as the last
item without regard to the dollar amount.
3) A process cost accounting system is best used by manufacturers of like units of
product that are not distinguishable from each other during a continuous production
process.
4) The objectives of budgeting are (1) establishing specific goals for future operations,
(2) executing plans to achieve the goals, and (3) periodically comparing actual results
with these goals.
5) Payroll taxes levied against employers become an employer liability at the time the
employee wages are incurred.
6) Services provided for cash is recorded in the revenue journal.
7) If a firm has a current ratio of 2, the subsequent receipt of a 60-day note receivable
on account will cause the ratio to decrease.
8) A partnership is a legal entity separate from its owners.
9) Gilbert Corporation had 25,000 finished units and 8,000 units were 35% complete.
The equivalent units totaled 30,200.
10) An extraordinary loss of $300,000 that results in income tax savings of $90,000
should be reported as an extraordinary loss (net of tax) of $210,000 on the income
statement.
11) The cost of new equipment is called a revenue expenditure because it will help
generate revenues in the future.
12) A corporation has 50,000 shares of $28 par value stock outstanding that has a
current market value of $150. If the corporation issues a 4-for-1 stock split, the market
value of the stock will fall to approximately
A.$7.00
B.$112.00
C.$37.50
D.$600.00
13) On which financial statement will Income Summary be shown?
A.Statement of Owners Equity
B.Balance Sheet
C.Income Statement
D.No financial statement
14) Computer equipment (office equipment) purchased 6 1/2 years ago for $170,000,
with an estimated life of 8 years and a residual value of $10,000, is now sold for
$60,000 cash. (Appropriate entries for depreciation had been made for the first six years
of use.) Journalize the following entries:
(a) Record the depreciation for the one-half year prior to the sale, using the straight-line
method.
(b) Record the sale of the equipment.
(c) Assuming that the equipment had been sold for $25,000 cash, prepare the entry for
(b) above to record the sale.
15) Department R had 5,000 units in work in process that were 75% completed as to
labor and overhead at the beginning of the period, 30,000 units of direct materials were
added during the period, 32,000 units were completed during the period, and 3,000
units were 40% completed as to labor and overhead at the end of the period. All
materials are added at the beginning of the process. The first-in, first-out method is used
to cost inventories. The number of equivalent units of production for conversion costs
for the period was:
A.32,450
B.29,450
C.31,950
D.26,000
16) Journalize the following merchandise transactions:
17) Which of the following entries records the acquisition of office supplies on
account?
A.Office Supplies, debit; Cash, credit
B.Cash, debit; Office Supplies, credit
C.Office Supplies, debit; Accounts Payable, credit
D.Accounts Receivable, debit; Office Supplies, credit
18) Which of the following measures the length of time it takes to acquire, sell and
replace inventory?
A.inventory turnover
B.number of days sales in inventory
C.retail method of inventory costing
D.gross profit method of inventory costing
19) Which of the following should be classified as an extraordinary item on the income
statement?
A.Gain on a sale of a long term investment
B.Loss due to discontinued operations
C.Restructuring charges
D.Loss resulting from an infrequent natural disaster
20) Addison, Inc. uses a perpetual inventory system. The following is information about
one inventory item for the month of September:
If Addison uses FIFO, the cost of the ending merchandise inventory on September 30 is
A.$800
B.$650
C.$750
D.$700
21) During the taking of its physical inventory on December 31, 2014, Barrys Bike
Shop incorrectly counted its inventory as $350,000 instead of the correct amount of
$280,000. The effect on the balance sheet and income statement would be as follows:
A.assets overstated by $70,000;retained earnings understated by $70,000; net income
statement understated by $70,000
B.assets overstated by $70,000;retained earnings understated by $70,000; no effect on
the income statement
C.assets and retained earnings overstated by $70,000; net income overstated by $70,000
D.assets and retained earnings overstated by $70,000; net income understated by
$70,000
22) The comparative balance sheet of Posner 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 $60,000 was scrapped, no salvage, and
equipment was purchased for $183,200.
(b) Bonds payable for $100,000 were retired by payment at their face amount.
(c) 5,000 shares of common stock were issued at $13 for cash.
(d) Cash dividends declared and paid, $25,000.
Prepare a statement of cash flows, using the indirect method of reporting cash flows
from operating activities.
23) Month-end posting to controlling accounts in a computerized accounting system is
not required because
A.controlling accounts are not used in computerized systems
B.transactions are posted to accounts immediately
C.the input operator can choose to post to accounts at any time
D.computerized accounting posts entry at the end of the financial year
24) If $1,000,000 of 8% bonds are issued at 103 1/2, the amount of cash received from
the sale is
A.$1,080,000
B.$965,000
C.$1,000,000
D.$1,035,000
25) Douglas pays Selena $45,000 for her 30% interest in a partnership with total net
assets of $125,000. Following this transaction, Douglas capital account should have a
credit balance of
A.$37,500
B.$45,000
C.$13,500
D.more than $45,000
26) The following selected account balances appeared on the financial statements of the
Washington Company:
The Washington Company uses the direct method to calculate net cash flow from
operating activities.
Cash paid to suppliers is
A.$39,000
B.$33,000
C.$29,000
D.$23,000
27) A debit signifies a decrease in
A.assets
B.expenses
C.drawing
D.revenues
28) The journal entry a company uses to record the payment of a discounted note is
A.debit Notes Payable and Interest Expense; credit Cash
B.debit Notes Payable; credit Cash
C.debit Cash; credit Notes Payable
D.debit Accounts Payable; credit Cash
29) Zipee Inc.’s unit selling price is $90, the unit variable costs are $40.50, fixed costs
are $170,000, and current sales are 12,000 units. How much will operating income
change if sales increase by 5,000 units?
A.$125,000 decrease
B.$175,000 increase
C.$75,000 increase
D.$247,500 increase
30) Below is a table for the present value of $1 at compound interest.
Below is a table for the present value of an annuity of $1 at compound interest.
Using the tables above, if an investment is made now for $20,000 that will generate a
cash inflow of $7,000 a year for the next 4 years, what would be the present value
(rounded to the nearest dollar) of the investment cash inflows, (assuming an earnings
rate of 12%)?
A.$20,352
B.$3,969
C.$22,190
D.$21,259
31) The manufacturing cost of Mocha Industries for three months of the year are
provided below:
Using the high-low method, determine the (a) variable cost per unit, and (b) the total
fixed costs.
32) The term cash includes
A.coins, currency (paper money), checks
B.money orders, and money on deposit that is available for unrestricted withdrawal
C.short-term receivables
D.both a and b
33) Indicate whether each of the following would be reported in the section of financial
statements identified as (a) current asset, (b) property, plant, and equipment, (c) current
liability, (d) revenue, or (e) expense:
34) Which of the following accounts should be closed to Income Summary at the end of
the fiscal year?
A.Supplies Expense
B.Accumulated Depreciation
C.Prepaid Insurance
D.Unearned Rent
35) The following data are available from the accounting records of Suwanee Co. for
the month ended May 31, 2012. 17,000 units were manufactured and sold during the
accounting period at a price of $60 per unit. There was no beginning inventories and all
units were completed (no work in process).
36) The recording of the jobs shipped and customers billed would include a credit to:
A.Accounts Payable
B.Cash
C.Finished Goods
D.Cost of Goods Sold
37) Which of the following is required to be withheld from employee’s gross pay?
A.both federal and state unemployment compensation
B.only federal unemployment compensation tax
C.only federal income tax
D.only state unemployment compensation tax
38) Which of the following is always recorded in the general journal?
A.services rendered for cash
B.correction of error in billing client
C.purchases of equipment on account
D.purchases of equipment for cash
39) Revenue should be recognized when
A.cash is received
B.the service is performed
C.the customer places an order
D.the supplier charges an order
40) An example of a preventive control is
A.a single person handles the responsibilities for operations, custody of assets, and
accounting
B.separation of the Purchasing Department and Accounting Department personnel
C.bonding employees who handle cash
D.accepting payment in currency only
41) Finch Company began its operations on March 31 of the current year. Finch Co. has
the following projected costs:
(1) 3/4 of the manufacturing costs are paid for in the month they are incurred. 1/4 is
paid in the following month.
(2) Insurance expense is $1,000 a month, however, the insurance is paid four times
yearly in the first month of the quarter, i.e. January, April, July, and October.
(3) Property tax is paid once a year in November.
The cash payments for Finch Company in the month of April are:
A.$122,600
B.$120,600
C.$123,100
D.$121,100
42) The bank reconciliation
A.should be prepared by an employee who records cash transactions
B.is part of the internal control system
C.is for information purposes only
D.is sent to the bank for verification
43) A debit balance in the Allowance for Doubtful Accounts
A.is the normal balance for that account
B.indicates that actual bad debt write-offs have been less than what was estimated
C.cannot occur if the percentage of receivables method of estimating bad debts is used
D.indicates that actual bad debt write-offs have exceeded previous provisions for bad
debts
44) You have just received notice that a customer of yours with an Account Receivable
balance of $100 has gone bankrupt and will not make any future payments. Assuming
you use the allowance method, the entry you make is to
A.debit Bad Debt Expense and credit Allowance for Doubtful Accounts
B.debit Bad Debt Expense and credit Accounts Receivable
C.debit Allowance for Doubtful Accounts and credit Accounts Receivable
D.debit Allowance for Doubtful Accounts and credit Bad Debt Expense
45) Carolwood Company manufactures widgets and uses process costing. The status of
their beginning and ending inventory is as follows:
Direct materials are added to the manufacturing process in stages. None are added when
production begins. Approximately 1/2 of the materials are added when the product is
25% complete. The other half is added when the product is 50% complete.
What percentage complete are Beginning Inventory and Ending Inventory with respect
to Direct materials(DM) and Conversion Costs(CC)?
A.Beg.Inventory DM-50% CC-30%
End.Inventory DM-100% CC-55%
B.Beg.Inventory DM-50% CC-30%
End.Inventory DM-55% CC-55%
C.Beg.Inventory DM-30% CC-30%
End.Inventory DM-55% CC-55%
D. Beg.Inventory DM-50% CC-70%
End.Inventory DM-100% CC-45%
46) Paul and Roger are partners who share income in the ratio of 3:2. Their capital
balances are $90,000 and $130,000 respectively. Income Summary has a credit balance
of $50,000. What is Pauls capital balance after closing Income Summary to Capital?
A.$108,000
B.$120,000
C.$115,000
D.$180,000
47) As part of the initial investment, a partner contributes equipment that had originally
cost $125,000 and on which accumulated depreciation of $100,000 has been recorded.
If similar equipment would cost $150,000 to replace and the partners agree on a
valuation of $38,000 for the contributed equipment, what amount should be debited to
the equipment account?
A.$38,000
B.$150,000
C.$125,000
D.$100,000
48) The capital accounts of Harrison and Marti have balances of $160,000 and
$110,000, respectively, on January 1, 2014, the beginning of the current fiscal year. On
April 10, Harrison invested an additional $20,000. During the year, Harrison and Marti
withdrew $96,000 and $78,000, respectively, and net income for the year was $264,000.
The articles of partnership make no reference to the division of net income.
Based on this information, the statement of partners equity for 2010 would show what
amount as total capital for the partnership on December 31, 2010?
A.$228,000
B.$176,000
C.$404,000
D.$752,000
49) Based on the following information: compute (a) Inventory turnover; (b) Average
daily cost of merchandise sold; and (c) Number of days’ sales in inventory for 2011.
Use a 365-day year. (d) If an inventory turnover of 12 is average for the industry, how is
this company doing?
50) The Bottling Department of Mountain Springs Water Company had 4,000 liters in
beginning work in process inventory (40% complete). During the period, 66,000 liters
were completed. The ending work in process inventory was 3,000 liters (70%
complete). What are the equivalent units for conversion costs, using the FIFO method?
51) What is the cost of the land, based upon the following data?
52) On January 1st, Power House Co. prepays the years rent, $10,140 to its landlord.
Prepare the journal entry by recording the prepayment to an asset account.
53) An employee receives an hourly rate of $15, 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, 46; federal income tax withheld, $120; cumulative earnings for
the year prior to this week, $5,500; Social security tax rate, 6% 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. Prepare the journal entries to record the salaries expense and the
employer payroll tax expense.
54) Define and discuss the two main types of cost accounting systems for
manufacturing operations. What are their similarities and differences?