1) The factor for the present value of an annuity for 6 years at 10% is 4.3553. This
implies that an annuity of six $2,000 payments at 10% would equal $8,710.60.
2) According to IRS guidelines, companies may use FIFO for financial reporting and
LIFO for tax reporting.
3) The Finishing Department transferred out completed units with a cost of $74,000.
This transfer should be recorded with the following entry:
4) When a partner leaves a partnership, the present partnership ends.
5) Liquidity and efficiency are the ability to meet short-term obligations and to
efficiently generate revenue.
6) In ranking choices with the break-even time (BET) method, the investment with the
longest BET gets the highest rank.
7) A useful measure used to evaluate the performance of an investment center is
investment center residual income.
8) Cash paid for merchandise is an operating activity.
9) When a company provides services for which cash will not be received until some
future date, the company should record the amount charged as accounts receivable.
10) A flexible budget is based on a single predicted amount of sales or other activity
measure.
11) To prepare consolidated financial statements when a U.S. parent company has an
international subsidiary, the international subsidiary’s financial statements must be
translated into U.S. dollars.
12) Although direct labor and raw materials costs are treated as manufacturing costs and
therefore make up part of the finished goods inventory cost, factory overhead is charged
to expense as it is incurred because it is a period cost.
13) The term “process costing system” is used in reference to the number of trained
individuals and computers required to process the collected cost information.
14) Purchasing treasury stock reduces the corporation’s assets and stockholders’ equity
by unequal amounts.
15) A plant asset’s useful life is the length of time it is productively used in a company’s
operations.
16) Havermill Co. establishes a $250 petty cash fund on September 1. On September
30, the fund is replenished. The accumulated receipts on that date represent $73 for
Office Supplies, $137 for merchandise inventory, and $22 for miscellaneous expenses.
The fund has a balance of $18. On October 1, the accountant determines that the fund
should be increased by $50. The journal entry to record the establishment of the fund on
September 1 is:
A.Debit Cash $250; credit Petty Cash $250.
B.Debit Petty Cash $250; credit Accounts Payable $250.
C.Debit Miscellaneous Expense $250; credit Cash $250.
D.Debit Petty Cash $250; credit Cash $250.
E.Debit Cash $250; credit Accounts Payable $250.
17) Reporting the details of notes is consistent with which accounting principle that
requires financial statements (including footnotes) to report all relevant information?
A.Relevance.
B.Full disclosure.
C.Evaluation.
D.Materiality.
E.Matching.
18) Minstrel Manufacturing uses a job order costing system. During one month
Minstrel purchased $198,000 of raw materials on credit; issued materials to production
of $195,000 of which $30,000 were indirect. Minstrel incurred a factory payroll of
$150,000, paid in cash, of which $40,000 was indirect labor. Minstrel uses a
predetermined overhead rate of 150% of direct labor cost. The journal entry to record
the purchase of materials is:
A.Debit Raw Materials Inventory $198,000; credit Accounts Payable $198,000.
B.Debit Work in Process Inventory $198,000; credit Accounts Payable $198,000.
C.Debit Raw Materials Inventory $198,000; credit Work in Process Inventory
$198,000.
D.Debit Work in Process Inventory $195,000; credit Raw Materials Inventory
$195,000.
E.Debit Raw Materials Inventory $198,000; credit Finished Goods Inventory $198,000.
19) Cox, North, and Lee form a partnership. Cox contributes $180,000, North
contributes $150,000, and Lee contributes $270,000. Their partnership agreement calls
for a 5% interest allowance on the partner’s capital balances with the remaining income
or loss to be allocated equally. If the partnership reports income of $150,000 for its first
year, what amount of income is credited to North’s capital account?
A.$50,000.
B.$63,500.
C.$61,500.
D.$47,500.
E.$45,000.
20) The currency in which a company presents its financial statements is known as the:
A.Multinational currency.
B.Price-level-adjusted currency.
C.Specific currency.
D.Reporting currency.
E.Historical cost currency.
21) The accounting equation for Long Company shows an increase in its assets and an
increase in its liabilities. Which of the following transactions could have caused that
effect?
A.Cash was received from providing services to a customer.
B.Cash was received as an owner investment.
C.Equipment was purchased on credit.
D.Supplies were purchased for cash.
E.Advertising expense for the month was paid in cash.
22) Drew Castle is an insurance appraiser. Shown below are (a) several accounts in his
ledger with each account preceded by an identification number, and (b) several
transactions completed by Castle. Indicate the accounts debited and credited when
recording each transaction by placing the proper account identification numbers to the
right of each transaction.
23) The following is a partially completed lower section of a departmental expense
allocation spreadsheet for Brickland. It reports the total amounts of direct and indirect
expenses for the four departments. Purchasing department expenses are allocated to the
operating departments on the basis of purchase orders. Maintenance department
expenses are allocated based on square footage. Compute the amount of Maintenance
department expense to be allocated to Fabrication.
A.$6,400.
B.$9,900.
C.$8,100.
D.$9,000.
E.$25,600.
24) Outstanding checks refer to checks that have been:
A.Written, recorded, sent to payees, and received and paid by the bank.
B.Written and not yet recorded in the company books.
C.Held as blank checks.
D.Written, recorded on the company books, sent to the payee, but not yet paid by the
bank.
E.Issued by the bank.
25) Barber and Atkins are partners in an accounting firm and share net income and loss
equally. Barber’s beginning partnership capital balance for the current year is $285,000,
and Atkins’ beginning partnership capital balance for the current year is $370,000. The
partnership had net income of $250,000 for the year. Barber withdrew $90,000 during
the year and Atkins withdrew $100,000. What is Barber’s return on equity?
A.41.3%
B.43.9%
C.32.7%
D.33.8%
E.36.5%
26) Maxwell and Smart are forming a partnership. Maxwell is investing a building that
has a market value of $180,000. However, the building carries a $56,000 mortgage that
will be assumed by the partnership. Smart is investing $120,000 cash. The balance of
Maxwell’s Capital account will be:
A.$180,000.
B.$124,000.
C.$56,000.
D.$64,000.
E.$60,000.
27) Barnes Company holds $50,000 of 8% bonds that mature in six years as a
held-to-maturity security. Which of the following is the correct journal entry to record
the receipt of the semiannual interest payment?
A.debit Cash, $4,000; credit Long-Term Investments-HTM, $4,000.
B.debt Cash, $2,000; credit Long-Term Investments-HTM, $2000.
C.debit Cash, $2,000; credit Interest Revenue, $2,000.
D.debit Unrealized Gain-Equity, $2,000; credit Cash, $2,000.
E.debit Cash, $4,000; credit Unrealized Gain-Equity, $4,000.
28) Fargo Company’s outstanding stock consists of 400 shares of noncumulative 5%
preferred stock with a $10 par value and 3,000 shares of common stock with a $1 par
value. During the first three years of operation, the corporation declared and paid the
following total cash dividends.
The amount of dividends paid to preferred and common shareholders in 2015 is:
A.$200 preferred; $19,800 common.
B.$4,000 preferred; $16,000 common.
C.$17,000 preferred; $3,000 common.
D.$10,000 preferred; $10,000 common.
E.$20,000 preferred; $0 common.
29) The appropriate section in the statement of cash flows for reporting the issuance of
common stock for cash is:
A.Operating activities.
B.Financing activities.
C.Investing activities.
D.Schedule of noncash investing or financing activity.
E.This is not reported on the statement of cash flows.
30) A company issued 60 shares of $100 par value common stock for $7,000 cash. The
total amount of paid-in capital in excess of par is:
A.$100.
B.$600.
C.$1,000.
D.$6,000.
E.$7,000.
31) Clarksen Company uses a process costing system. The company requisitioned
$93,000 of materials for Department A and $67,000 of materials for Department D. The
entry to record the use of the direct materials by these two departments is:
A.Debit Raw Materials Inventory $160,000; credit Accounts Payable $160,000.
B.Debit Work in Process Inventory—Dept. A $93,000; debit Work in Process
Inventory—Dept. D $67,000; credit Raw Materials Inventory $160,000.
C.Debit Factory overhead $160,000; credit Raw Materials Inventory $160,000.
D.Debit Raw Materials Inventory—Dept. A $93,000; debit Raw Materials
Inventory—Dept. D $67,000; credit Work in Process Inventory $160,000.
E.Debit Work in Process Inventory—Dept. A $93,000; debit Work in Process
Inventory—Dept. D $67,000; credit Accounts Payable $160,000.
32) The Mixed Nuts Division of Yummy Snacks, Inc. had the following operating
results last year:
Yummy expects identical operating results in the division this year. The Mixed Nuts
Division has the ability to produce and sell 200,000 pounds of product annually.
Assume that the Trail Mix Division of Yummy wants to purchase an additional 20,000
pounds of nuts from the Mixed Nuts Division. Mixed Nuts will be able to increase its
profit by accepting any transfer price above:
A.$0.25 per pound
B.$0.08 per pound
C.$0.15 per pound
D.$0.30 per pound
E.$0.10 per pound
33) Bloom and Plant organize a partnership on January 1. Bloom’s initial investment
consists of $800 cash, $1,700 equipment and a $500 note payable reflecting a bank loan
for the new business. Plant’s initial investment is cash of $2,000. These amounts are the
values agreed on by both partners. The journal entry to record Plant’s investment is:
A.Debit Cash $1,500; debit Note Payable $500; credit Plant, Capital $2,000.
B.Debit Cash $2,000; credit Note Payable $500, credit Plant, Capital $1,500.
C.Debit Bloom, Capital $2,000; credit Cash $2,000.
D.Debit Cash $2,500; credit Note Payable $500; credit Plant, Capital $2,500.
E.Debit Cash $2,000; credit Plant, Capital $2,000.
34) Internal control procedures for cash receipts do not require that:
A.Custody over cash is kept separate from its recordkeeping.
B.All collections for sales are be received immediately upon making the sales.
C.Clerks having access to cash in a cash register should not have access to the register
tape or file.
D.An employee with no access to cash receipts should compare the total cash recorded
by the register with the record of cash receipts reported by the cashier.
E.Cash sales should be recorded on a cash register at the time of each sale.
35) Information for Eastman Industries is presented below. Compute the cost of goods
manufactured.
36) Health Co. Company uses special journals to record transactions. Health Co. uses
the perpetual inventory system. Journalize the following transactions in the appropriate
special journal. All credit sales have 2/10, n/30 terms.
37) Winterland, Inc., produces two types of skis, downhill skis and cross country skis.
Product and production information about the two items is shown below:
Required:
1> If Winterland uses the traditional two-stage method of allocating overhead costs
based on direct labor hours, what is the amount of indirect costs per set of skis for each
of the two types of skis?
2> If Winterland uses activity based costing, what is the total amount of indirect costs
per set of skis for each of the two types of skis? Assume that depreciation is allocated
based on machine hours, setup costs based on the number of setups, and miscellaneous
costs based on the number of direct labor hours.
38) FreshFoods, Inc. sells American gourmet foods to merchandisers in Singapore.
Prepare the journal entries for FreshFoods, to record the following transactions. Include
any year-end adjustments.
39) Express the following income statement information in common-size percentages
(round to nearest whole percent). Comment on the results.
40) Austin’s Pub Supply uses the periodic inventory system and had the following sales
transactions during August:
Prepare the journal entries that Austin’s Pub Supply must make to record these
transactions.
41) The comparison of a company’s financial condition and performance across time is
known as ____________________.