1) About 90% of the businesses in the United States are organized as corporations.
2) The process of recording a transaction in the journal is called journalizing.
3) A notation in the post reference column of the general journal indicates that the
amount has been posted to the ledger.
4) Assuming no other changes, operating income will be the same under both the
variable and absorption costing methods when the number of units manufactured equals
the number of units sold.
5) Freight-in is considered a cost of purchasing inventory.
6) The average cost inventory method is the rarely used with a perpetual inventory
system.
7) Period costs include direct materials and direct labor.
8) Job order cost accounting systems may be used to evaluate a company’s efficiency.
9) The DuPont formula uses financial and nonfinancial information to measure the
performance of a business.
10) The anticipated purchase of a fixed asset for $400,000, with a useful life of 5 years
and no residual value, is expected to yield total net income of $300,000 for the 5 years.
The expected average rate of return is 30%.
11) Details of the division of partnership income should normally be disclosed in the
financial statements.
12) When an accounts payable account is paid in cash, the owner’s equity in the
business decreases.
13) In the retail inventory method, the cost to retail ratio is equal to the cost of goods
sold divided by the retail price of the good sold.
14) Variable costs are costs that vary in total in direct proportion to changes in the
activity level.
15) The prices of bonds are quoted as a percentage of the bonds’ market value.
16) On the income statement in the single-step form, the total of all expenses is
deducted from the total of all revenues.
17) A physical inventory should be taken at the end of every month.
18) One of the prerequisites to paying a cash dividend is sufficient retained earnings.
19) In a cost-volume-profit chart, the
A.total cost line begins at zero
B.slope of the total cost line is dependent on the fixed cost per unit
C.total cost line begins at the total fixed cost value on the vertical axis
D.total cost line normally ends at the highest sales value
20) Generally accepted accounting principles requires that companies use the ____ of
accounting.
A.cash basis
B.deferral basis
C.accrual basis
D.account basis
21) Which of the following is a present value method of analyzing capital investment
proposals?
A.Average rate of return
B.Cash payback method
C.Accounting rate of return
D.Net present value
22) When the three sections of a balance sheet are presented on a page in a downward
sequence, it is called the
A.account form
B.comparative form
C.horizontal form
D.report form
23) Which of the following is not a part of comprehensive income?
A.foreign currency items
B.cash flows from stock investments
C.unrealized gains and losses
D.pension liability adjustments
24) Data for an adjusting entry described as “accrued wages, $2,020” means to debit
A.Wages Expense and credit Wages Payable
B.Wages Payable and credit Wages Expense
C.Accounts Receivable and credit Wages Expense
D.Drawing and credit Wages Payable
25) When Bayou Corporation was formed on January 1, 20xx, the corporate charter
provided for 100,000 share of $10 par value common stock. The following transaction
was among those engaged in by the corporation during its first month of operation: The
corporation issued 9,000 shares of stock at a price of $23 per share.
The entry to record the above transaction would include a
A.debit to Cash for $90,000
B.credit to Common Stock for $207,000
C.credit to Paid in Capital in Excess of Par for $117,000
D.debit to Common Stock for $90,000
26) The Swan Company produces their product at a total cost of $43 per unit. Of this
amount $8 per unit is selling and administrative costs. The total variable cost is $30 per
unit The desired profit is $20 per unit.
Determine the mark up percentage on variable cost.
A.100%
B.110%
C.80%
D.46.5%
27) Which of the following are basic phases of the management process?
A.Supervising and directing
B.Decision making and supervising
C.Organizing and directing
D.Planning and controlling
28) Notes may be issued
A.when assets are purchased
B.to creditor’s to temporarily satisfy an account payable created earlier
C.when borrowing money
D.all of the above
29) What is the total stockholders’ equity based on the following data?
A.$1,070,000
B.$1,005,000
C.$940,000
D.$565,000
30) The aspects of the management process are listed below. Match each phase to the
appropriate description.
Planning
Directing
Controlling
Improving
Decision making
a) Used by managers for continuous improvement
b) Managers must decide how to respond to unfavorable performances
c) Used by management to develop the organizations objectives and goals
d) Monitoring the operating results of implemented plans and comparing actual results
e) Managers run their day to day activities
31) Which of the following entries records the payment of rent for the current month?
A.Cash, debit; Rent Expense, credit
B.Rent Expense, debit; Cash, credit
C.Rent Expense, debit; Accounts Receivable, credit
D.Accounts Payable, debit; Rent Expense, credit
32) In which of the following types of accounts are decreases recorded by credits?
A.liabilities
B.owner’s capital
C.drawing
D.revenues
33) What is the term applied to the excess of net revenue from sales over the cost of
merchandise sold?
A.gross profit
B.income from operations
C.net income
D.gross sales
34) Which of the following is important when evaluating long-term investments?
A.Investments must earn a reasonable rate of return
B.The useful life of the asset
C.Proposals should match long term goals
D.All of the above
35) When using the allowance method to estimate uncollectible accounts receivable
based on an analysis of receivables shows that $640 of accounts receivables are
uncollectible. The Allowance for Doubtful Accounts has a debit balance of $110. The
adjusting entry at the end of the year will include a credit to Allowance for Doubtful
Accounts in the amount of:
A.$110
B.$640
C.$530
D.$750
36) Which of the following below is not a characteristic of a Limited Liability
Company?
A.unlimited life
B.limited legal liability
C.taxable
D.moderate ability to raise capital
37)
Based on the above data, what is the amount of working capital?
A.$213,000
B.$113,000
C.$153,000
D.$39,000
38) Managerial accounting information includes both historical and estimated data.
39) The following lots of a particular commodity were available for sale during the
year:
The firm uses the periodic system and there are 20 units of the commodity on hand at
the end of the year. What is the amount of inventory at the end of the year according to
the LIFO method?
A.$655
B.$620
C.$690
D.$659
40) Which of the following is not a reason for a direct materials quantity variance?
A.Malfunctioning equipment
B.Purchasing of inferior raw materials
C.Increased material cost per unit
D.Spoilage of materials
41) During a bank reconciliation process,
A.Outstanding checks and deposits in transit are added to the bank statement balance
B.Outstanding checks are subtracted and deposits in transit are added to the bank
statement balance
C.Outstanding checks and deposits in transit are subtracted from the bank statement
balance
D.Outstanding checks are added and deposits in transit are subtracted from the bank
statement balance
42) 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
43) Identify each of the following expenditures as chargeable to (a) Land, (b) Land
Improvements, (c) Buildings, (d) Machinery and Equipment, or (e) other account.
44) The following is a list of various costs of producing sweatshirts. Classify each cost
as either a variable, fixed, or mixed cost for units produced and sold.
(a) Leather used to make a handbag.
(b) Warehouse rent of $8,000 per month plus $.50 per square foot of storage used.
(c) Thread.
(d) Electricity costs of $.038 per kilowatt-hour.
(e) Janitorial costs of $4,000 per month.
(f) Advertising costs of $12,000 per month.
(g) Accounting salaries.
(h) Color dyes for producing different colors of sweatshirts.
(i) Salary of the production supervisor.
(j) Straight-line depreciation on sewing machines.
(k) Patterns for different designs. Patterns typically last many years before being
replaced.
(l) Hourly wages of sewing machine operators.
(m) Property taxes on factory, building, and equipment.
(n) Cotton and polyester cloth.
(o) Maintenance costs with sewing machine company. The cost is $2,000 per year plus
$.001 for each machine hour of use.
45) Which of the following is not included in the computation of the quick ratio?
A.inventory
B.marketable securities
C.accounts receivable
D.cash
46) Mallard Corporation uses the product cost concept of product pricing. Below is cost
information for the production and sale of 45,000 units of its sole product. Mallard
desires a profit equal to a 12% rate of return on invested assets of $800,000.
The dollar amount of desired profit from the production and sale of the company’s
product is:
A.$105,840
B.$225,000
C.$96,000
D.$220,500
47) An unsecured bond is the same as a
A.debenture bond
B.zero coupon bond
C.term bond
D.bond indenture
48) The actual cash received during the week ended October 31 for cash sales was
$23,447.00 and the amount indicated by the cash register total was $23,457.00.
Journalize the entry to record the cash receipts and cash sales.
Journal
49) Each of the events below may have an effect on the statement of cash flows.
Designate how the event should be reported within the statement of cash flows using
the codes provided below. Codes may be used more than once, or not at all.
Codes
Events
50) Following is data for the available-for-sale securities held by AdBrand Company as
of December 31, 2012.
Required:
(1) Complete the table above to find the total cost and fair value for the companys
available-for-sale securities portfolio.
(2) Calculate and record the required December 31, 2012 adjustment.
(3) Explain how the adjustment from step (2) is reported on AdBrands 2012 financial
statements.
51) Using the following data taken from Martinez Inc., determine the gross profit to be
reported on the income statement for the year ended May 31, 2011.
Gross profit = Sales – COMS = $2,060,000 $1,554,300* = $505,700
52) Schultz Tax Services, a tax preparation business had the following transactions
during the month of June:
1> Received cash for providing accounting services, $3,000.
2> Billed customers on account for providing services, $7,000.
3> Paid advertising expense, $800.
4> Received cash from customers on account, $3,800.
5> Owner made a withdrawal, $1,500.
6> Received telephone bill, $220.
7> Paid telephone bill, $220
Based on the information given above, calculate the balance of Cash at June 30. (Hint:
Use the following reconcilitation.)
Cash, June 1 $25,000
Plus: cash receipts for June ____________
Minus: cash payments for June ____________
Cash, June 30 ____________
53) Journalize the following transactions using the allowance method of accounting for
uncollectible receivables.
April 1 Sold merchandise on account to Jim Dobbs, $7,200. The cost of the
merchandise is $5,400.
June 10 Received payment for one-third of the receivable from Jim Dobbs and wrote
off the remainder.
Oct. 11 Reinstated the account of Jim Dobbs and received cash in full payment.
54) Using the following information, prepare the Stockholders Equity section of the
balance sheet. Seventy thousand shares of common stock are authorized and 7,000
shares have been reacquired.
55) The debits and credits from two transactions are presented in the following
suppliers (creditors) account:
NAME: Xample, Inc.
Address: 567 Harrison Blvd.
Describe each transaction and the source of each posting.
56) Using the following accounts and their amounts, prepare in good format an Income
Statement for Bright Futures Company, month ended August 31, 2011:
