1) Job order cost accounting systems may be used for planning and controlling a service
business.
2) When merchandise inventory is shown on the balance sheet, both the method of
determining the cost of the inventory and the method of valuing the inventory should be
shown.
3) A work sheet heading is dated for a period of time.
4) Bondholders claims on the assets of the corporation rank ahead of stockholders.
5) Most employers are required to withhold federal unemployment taxes from
employee earnings.
6) Only a single line, which represents the difference between total sales revenues and
total costs, is plotted on the profit-volume chart.
7) During periods of increasing costs, an advantage of the LIFO inventory cost method
is that it matches more recent costs against current revenues.
8) The master budget is an integrated set of budgets that tie together a companys
operating, financing and investing activities into an integrated plan for the coming year.
9) A capital expenditures budget is prepared before the operating budgets.
10) Using vertical analysis of the income statement, a company’s net income as a
percentage of net sales is 15%; therefore, the cost of goods sold as a percentage of sales
must be 85%.
11) When specialized journals are used, the general journal is not necessary.
12) The ending merchandise inventory for 2010 is the same as the beginning
merchandise inventory for 2011.
13) The denominator of the rate of return on total assets ratio is the average total assets.
14) If the unit selling price is $40, the volume of sales is $3,000,000, sales at the
break-even point amount to $2,500,000, and the maximum possible sales are
$3,300,000, the margin of safety is 11,500 units.
15) The T account got its name because it resembles the letter T.
16) The expected period of time that will elapse between the date of a capital
investment and the complete recovery in cash of the amount invested is called the
discount period.
17) The computations involved in the net present value method of analyzing capital
investment proposals are less involved than those for the average rate of return method.
18) When companies sell their receivables to other companies, the transaction is called
factoring.
19) Variable costs as a percentage of sales are equal to 100% minus the contribution
margin ratio.
20) The manager of the furniture department of a leading retailer does not control the
salaries of departmental personnel.
21) Match the term with the correct definition.
1>The length of time it will take to recover through cash inflows the dollars of a capital
outlay. A. accounting rate of return
2>A measure of profitability computed by dividing the average operating income that
an asset generates by the average amount of the investment in the asset. B. net present
value
3>The decision model that computes the expected net monetary gain or loss from a
project by discounting all expected future cash inflows and outflows to their present
value, using a minimum desired rate of return. C. annuity
4>A formal means of analyzing long-range investment decisions. D. capital investment
analysis
5>The rate of return that makes the net present value of a project equal to zero. E.
internal rate of return
6>A stream of equal cash flow amounts. F. payback period
22) Excel Products Inc. pays its employees semimonthly. The summary of the payroll
for December 31, 2012 indicated the following:
For the year ended 2012, $40,000 of the December 31 payroll is subject to social
security tax of 6%; $120,000 is subject to Medicare tax of 1.5%; $10,000 is subject to
state unemployment tax of 4.3% and federal unemployment tax of 0.8%. As of January
1, 2013 all of the $120,000 is subject to all payroll taxes. Present the journal entries for
payroll tax expense if the employees are paid (a) December 31 of the current year, (b)
January 2 of the following year.
23) During the period, labor costs incurred on account amounted to $275,000 including
$200,000 for production orders and $75,000 for general factory use. In addition, factory
overhead applied to production was $32,000. From the following, select the entry to
record the factory overhead applied to production.
A.Work in Process75,000
Factory Overhead 75,000
B.Factory Overhead32,000
Work in Process32,000
C.Work in Process32,000
Factory Overhead32,000
D.Factory Overhead75,000
Accounts Payable75,000
24) The standard costs and actual costs for factory overhead for the manufacture of
2,500 units of actual production are as follows:
The amount of the factory overhead controllable variance is:
A.$2,000 unfavorable
B.$3,000 favorable
C.$0
D.$3,000 unfavorable
25) Two methods of accounting for uncollectible accounts are the
A.direct write-off method and the allowance method
B.allowance method and the accrual method
C.allowance method and the net realizable method
D.direct write-off method and the accrual method
26) The posting references in the following revenue journal are indicated by letters.
Identify each posting reference [(a) through (h)] as representing (1) a posting to a
general ledger account, (2) a posting to a subsidiary ledger account, or (3) that no
posting is required.
REVENUE JOURNAL
Post Acct. Rec. Dr.
Date Invoice No. Account Debited Ref. Fees Earned Cr.
April 3 190 Hill Company (a) 4,750
8 191 North Supply (b) 5,025
13 192 Macon Inc. (c) 2,100
17 193 White Products (d) 6,000
25 194 Easton Supply (e) 2,250
30 195 Karson Enterprises (f) 3,750
30 23,875
(g) (h)
27) Rent expense incurred on a factory building would be treated as a(n):
A.indirect cost
B.period cost
C.product cost
D.both A and C are correct
28) Magpie Corporation uses the total cost concept of product pricing. Below is cost
information for the production and sale of 60,000 units of its sole product. Magpie
desires a profit equal to a 25% rate of return on invested assets of $700,000.
The dollar amount of desired profit from the production and sale of the company’s
product is:
A.$175,000
B.$67,200
C.$73,500
D.$96,000
29) Which of the following does not represent an outflow of cash and therefore would
not be reported on the statement of cash flows as a use of cash?
A.purchase of noncurrent assets
B.purchase of treasury stock
C.discarding an asset that had been fully depreciated
D.payment of cash dividends
30) Cost of goods manufactured is equal to:
A.total manufacturing costs plus ending materials inventory less beginning materials
inventory
B.cost of goods sold plus beginning work in process inventory less ending work in
process inventory
C.total manufacturing costs plus ending work in process inventory less beginning work
in process inventory
D.total manufacturing costs plus beginning work in process inventory less ending work
in process inventory
31) Land acquired so it can be resold in the future is listed in the balance sheet as a(n)
A.fixed asset
B.current asset
C.investment
D.intangible asset
32) Which of the following is a disadvantage of decentralization?
A.Decisions made by one manager may negatively affect the profitability of the entire
company
B.Helps retain quality managers
C.Decision making by managers closest to the operations
D.Managers are able to acquire expertise in their areas of responsibility
33) Using the following information, what is the amount of cost of merchandise sold?
A.$26,900
B.$20,530
C.$30,210
D.$28,130
34) If the owner wanted to know how money flowed into and out of the company, what
financial statement would she use?
A.Income Statement
B.Statement of Cash Flows
C.Balance Sheet
D.None are correct
35) Harriet, Mickey, and Zack decide to liquidate their partnership. All assets are sold
and the liabilities are paid. Following these transactions, the capital balances and profit
and loss percentages are as follows: Harriet, $27,000 and 30%; Mickey, $(12,000) and
40%; Zack, $43,000 and 30%. Mickey is unable to contribute any assets to reduce the
deficit. How much cash will Harriet receive as a results of the partnership liquidation?
A.$27,000
B.$21,000
C.$23,400
D.$15,000
36) If the allowance method of accounting for uncollectible receivables is used, what
general ledger account is debited to write off a customer’s account as uncollectible?
A.Uncollectible Accounts Expense
B.Allowance for Doubtful Accounts
C.Accounts Receivable
D.Interest Expense
37) The numerator of the rate earned on common stockholders’ equity ratio is equal to
A.net income
B.net income minus preferred dividends
C.income before income tax
D.operating income minus interest expense
38) The collection of an account that had been previously written off under the
allowance method of accounting for uncollectibles
A.will increase net income in the period it is collected
B.will decrease net income in the period it is collected
C.does not affect net income in the period it is collected
D.requires a correcting entry for the period in which the account was written off
39) Sales for the year were $600,000. Accounts receivable were $100,000 and $80,000
at the beginning and end of the year. Cash received from customers to be reported on
the cash flow statement using the direct method is
A.$700,000
B.$600,000
C.$580,000
D.$620,000
40) The following data are taken from the management accounting reports of Dulcimer
Co.:
If an incentive bonus is paid to the manager who achieved the highest income from
operations before service department charges, it follows that:
A.Division A’s manager is given the bonus
B.Division B’s manager is given the bonus
C.Division C’s manager is given the bonus
D.The managers of Divisions B and C divide the bonus
41) Which of the following would be subtracted from the balance per bank on a bank
reconciliation?
A.Outstanding checks
B.Deposits in transit
C.Notes collected by the bank
D.Service charges
42) The Crafter Company had the following assets and liabilities as of December 31,
2012:
Determine the quick ratio for the end of the year (rounded to one decimal point).
A.5.3
B.3.6
C.3.3
D.2.3
43) Wonder Sales is authorized to issue 100,000 shares of $100 par, 2% preferred stock
and 1,000,000 shares of $10 par common stock.
(a) On January 2nd, Wonder Sales issues 5,000 shares of preferred stock for $110 per
share and 65,000 shares of common stock at $10 per share. Journalize this issuance.
(b) On January 25th, Wonder Sales issued 250 shares of preferred stock to a Morton
Law Firm for settlement of an invoice for incorporation services. The invoice was for
$36,000. Journalize this issuance.
(c) On January 31st, Wonder Sales issues 500 shares of common stock to Setup Inc. for
fixtures. The fixtures have a fair market value of $8,500. Journalize this issuance.
44) 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
45) 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 manufacturing overhead costs incurred
were $377,200, and actual direct labor hours were 36,000. What is the predetermined
overhead rate per direct labor hour?
A.$12.00
B.$10.00
C.$12.57
D.$10.48
46) Managers of what type of decentralized units have authority and responsibility for
revenues, costs, and assets invested in the unit?
A.Profit center
B.Investment center
C.Production center
D.Cost center
47) What is the last account that should be listed in the Post Closing Trial Balance?
A.Income Summary
B.Capital account
C.Cash
D.Fees Earned
48) Bar code scanners are now being used to track incoming materials and to
electronically transmit this data. Scanners have replaced which of the following:
A.receiving report
B.materials requisition
C.materials ledger
D.job cost sheet
49) Operating expenses directly traceable to or incurred for the sole benefit of a specific
department and usually subject to the control of the department manager are termed:
A.miscellaneous administrative expenses
B.direct expenses
C.indirect expenses
D.fixed expenses
50) When using the product cost concept of applying the cost-plus approach to product
pricing, what is included in the markup?
A.Desired profit
B.Total fixed manufacturing costs, total fixed selling and administrative expenses, and
desired profit
C.Total costs plus desired profit
D.Total selling and administrative expenses plus desired profit
51) On the chart of accounts, the balance sheet accounts are normally listed in the
following order
A.liabilities, assets, owners equity
B.assets, liabilities, owners equity
C.owners equity, assets, liabilities
D.assets, owners equity, liabilities
52) Department A had 4,000 units in work in process that were 60% completed as to
labor and overhead at the beginning of the period, 29,000 units of direct materials were
added during the period, 31,000 units were completed during the period, and 2,000
units were 80% 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.30,200
B.29,800
C.33,800
D.33,000
53) Paint Company manufactures Paint X and Paint Y and can sell all it can make of
either. Based on the following data, assuming the number of hours is a constraint, which
statement is true,?
A.X is more profitable than Y
B.Y is more profitable than X
C.Neither X nor Y is profitable
D.X and Y are equally profitable
54) The statement of owner’s equity shows
A.only net income, beginning and ending capital
B.only total assets, beginning and ending capital
C.only net income, beginning capital, and withdrawals
D.all the changes in the owner’s capital as a result of net income, net loss, additional
investments, and withdrawals
55) Most manufacturing plants are considered cost centers because they have control
over
A.sales and costs
B.fixed assets and costs
C.costs only
D.fixed assets and sales
56) If bonds are issued at a premium, the stated interest rate is
A.higher than the market rate of interest
B.lower than the market rate of interest
C.too low to attract investors
D.adjusted to a higher rate of interest
57) The management of River Corporation is considering the purchase of a new
machine costing $380,000. The company’s desired rate of return is 6%. The present
value factor for an annuity of $1 at interest of 6% for 5 years is 4.212. In addition to the
foregoing information, use the following data in determining the acceptability in this
situation:
The net present value for this investment is:
A.Positive $20,140
B.Negative $20,140
C.Positive $19,875
D.Negative $19,875
58) Listed below are accounts to use for transactions (a) through (j), each identified by
a number. Following this list are the transactions. You are to indicate for each
transaction the accounts that should be debited and credited by placing the account
number(s) in the appropriate box.
Transactions Account(s) Debited Account(s) Credited
a. Utility bill is received; payment will be made in 10 days.
b. Paid the utility bill previously recorded in transaction (a).
c. Bought a three year insurance policy and paid in full.
d. Made an entry to adjust for the expired portion of the insurance premium (for the
policy mentioned in transaction (c).
e. Received $7,000 from a contract to perform accounting services over the next two
years.
f. Made an entry to adjust for half of the services performed in (e).
g. Purchased office supplies, paying part cash and charging the balance on account.
h. Borrowed money from a bank and signed a note payable due in six months.
i. Recorded one-months accrued interest on the note payable in (h).
j. Depreciation is recorded on office equipment.
59) Xavier and Yolanda have original investments of $50,000 and $100,000
respectively in a partnership. The articles of partnership include the following
provisions regarding the division of net income: interest on original investment at 20%,
salary allowances of $27,000 and $18,000 respectively, and the remainder equally. How
much of the net income of $91,000 is allocated to Yolanda?
A.$26,500
B.$46,000
C.$45,000
D.$45,500
60) The following units of a particular item were available for sale during the year:
The firm uses the perpetual inventory system and there are 240 units of the item on
hand at the end of the year. What is the total cost of ending inventory according to
LIFO?
61) Prepare an Income Statement using the following data for Young Adventures for the
year ended December 31, 2012:
62) The following information is from Madison Corporations accounting records for
May 20XX. Check # 3269 was returned as a double payment and voided. Checks that
have not cleared the bank include 3252, 3260, and series 3275-3278.
In addition to the above list of the checks, Madison had check #2264 for $32.98 and
check #2655 for $45.99 outstanding previously that have not cleared.
1>Create an outstanding checks list for Madison at the end of May 20XX.
2> What is the total amount of checks that cleared the bank (written in May)?
63) Determine the total value of the merchandise using Net Realizable Value:
64) Read each transaction and identify the appropriate journal that it should be recorded
in;
1> Owner withdrew supplies
2> Sale made on account
3> Payment to vendor on account
4> Payment received from customer on account
5> Purchases on account
6> Adjusting journal entry for supplies used
7> Owner withdrew cash
8> Company borrows money from bank
9> Record monthly depreciation
10> Close revenue accounts at month end
65) Beginning inventory, purchases and sales data for widgets are as follows:
Complete the inventory cost card assuming the business maintains a perpetual
inventory system and calculates the cost of merchandise sold and ending inventory
using FIFO.
