1) Before a stock dividend can be declared or paid, there must be sufficient cash.
2) Purchasing equipment by issuing a six-month note should be shown on the statement
of cash flows under the investing activities section.
3) The dividends account is an example of an expense.
4) In a just-in-time (JIT) environment, the journal entry to record raw materials
purchases would include a credit to the raw materials inventory account.
5) Examples of temporary accounts are supplies and prepaid expenses which are in the
ledger for just a short time before they expire.
6) In a just-in-time (JIT) system, there are fewer transactions to record than there are in
a traditional system.
7) Solvency analysis focuses on the ability of a business to pay its current and
noncurrent liabilities.
8) Accruals are needed when an unrecorded expense has been incurred or an unrecorded
revenue has been earned.
9) The difference between the standard cost of a product and its actual cost is called a
variance.
10) A contra asset account for Land will normally appear in the balance sheet.
11) Property tax expense for a department store’s store equipment is an example of a
direct expense.
12) The cash budget presents the expected inflow and outflow of cash for a specified
period of time.
13) It is not necessary to post the closing entries to the general ledger.
14) If a department that applies FIFO process costing starts the reporting period with
50,000 physical units that were 25% complete with respect to direct materials and 40%
complete with respect to conversion, it must add 12,500 equivalent units of direct
materials and 20,000 equivalent units to direct labor to complete them.
15) If total assets decreased by $30,000 during a specific period and stockholders equity
decreased by $35,000 during the same period, the period’s change in total liabilities was
an $65,000 increase.
16) Journalizing transactions using the double-entry bookkeeping system will eliminate
fraud.
17) By matching revenues and expenses in the same period in which they incur
A.net income or loss will always be underestimated
B.net income or loss will always be overestimated
C.net income or loss will be properly reported on the income statement
D.net income or loss will not be determined
18) What pricing concept is used if all costs are considered and a fair mark-up is added
to determine the selling price?
A.Total cost concept
B.Demand-based concept
C.Variable cost concept
D.Fixed cost concept
19) Consider the following budget information: materials to be used totals $64,750;
direct labor totals $198,400; factory overhead totals $394,800; work in process
inventory January 1, 2012, was expected to be $189,100; and work in progress
inventory on December 31, 2012, is expected to be $197,600. What is the budgeted cost
of goods manufactured?
A.$649,450
B.$657,950
C.$197,600
D.$1,044,650
20) Classify the following items as: (1) prepaid expense, (2) unearned revenue, (3)
accrued expense, or (4) accrued revenue.
a) Fees received but not yet earned.
b) Fees earned but not yet received.
c) Accumulated depreciation.
d) Property tax accrual
21) Prepare adjusting entries for the following transactions:
(a) The beginning balance of the Supplies account was $245. During the month, the
company bought additional supplies in the amount of $735. At the end of the month, a
physical inventory showed $343 of unused supplies.
(b) The company has a 12% note payable in the amount of $17,000 due in 6 months.
The interest expense for the month has not been recorded.
(c) The company has two employees. The manager is paid on the 15th of every month
for work performed during the first half of the month and on the 1st of the following
month for the work performed during the second half of the month. His monthly salary
is $5,500. The other employee is paid $650 for each 5-day work week (Monday –
Friday). The last day of the month fell on Thursday.
(d) The unearned revenue account shows a balance of $46,000. According to the
manager, 60% of that amount has been earned.
(e) At the end of the month, $5,700 of services have been performed but not yet billed.
22) Which of the following is not a correct rule of debits and credits?
A.assets, expenses, and dividends are increased by debits
B.assets are decreased by credits and have a normal debit balance
C.liabilities, revenues, and retained earnings are increased by credits
D.the normal balance for revenues and expenses is a credit
23) Which one of the statements below is not a purpose for the journal?
A.to show increases and decreases in accounts
B.to show a chronological order by date
C.to show a complete transaction in one place
D.to help posting transactions to ledger
24) The unexpired insurance at the end of the fiscal period represents
A.an accrued asset
B.an accrued liability
C.an accrued expense
D.a deferred expense
25) Which of the following should be reported net of the related income tax effect on
the income statement?
A.sale of an inventory item at a loss
B.loss due to sale of fixed assets
C.loss due to a discontinued operations of the business
D.sale of a temporary investment at a loss
26) Another name for variable costing is:
A.indirect costing
B.process costing
C.direct costing
D.differential costing
27) Partridge Co. can further process Product J to produce Product D. Product J is
currently selling for $21 per pound and costs $15.75 per pound to produce. Product D
would sell for $38 per pound and would require an additional cost of $9.25 per pound to
produce.
What is the differential revenue of producing Product D?
A.$6.75 per pound
B.$9.25 per pound
C.$17 per pound
D.$5.25 per pound
28) Glover Corporation issued $2,000,000 of 7.5%, 6-year bonds dated March 1, 2011,
with semiannual interest payments on September 1 and March 1 . The bonds were
issued on March 1, 2011, at 97. Glovers year-end is December 31
a) Were the bonds issued at a premium, a discount, or at par?
b) Was the market rate of interest higher, lower, or the same as the contract rate of
interest?
c) If the company uses the straight-line method of amortization, what is the amount of
interest expense Glover Corporation will show for the year ended December 31, 2011?
d) What is the carrying value of the bonds on December 31, 2011?
29) On the statement of cash flows, a $7,500 gain on the sale of fixed assets would be
A.added to net income in converting the net income reported on the income statement
to cash flows from operating activities
B.deducted from net income in converting the net income reported on the income
statement to cash flows from operating activities
C.added to dividends declared in converting the dividends declared to the cash flows
from financing activities related to dividends
D.deducted from dividends declared in converting the dividends declared to the cash
flows from financing activities related to dividends
30) Costs that are treated as assets until the product is sold are called:
A.product costs
B.period costs
C.conversion costs
D.selling expenses
31) The Cardinal Company had a finished goods inventory of 55,000 units on January
1. Its projected sales for the next four months were: January – 200,000 units; February –
180,000 units; March – 210,000 units; and April – 230,000 units. The Cardinal Company
wishes to maintain a desired ending finished goods inventory of 20% of the following
months sales.
What would be the budgeted inventory for March 31st?
A.46,000
B.36,000
C.Cannot be determined from the data given
D.42,000
32) On the first day of the fiscal year, a new walk-in cooler with a list price of $58,000
was acquired in exchange for an old cooler and $44,000 cash. The old cooler had a cost
of $25,000 and accumulated depreciation of $16,000.
Assume the transaction has commercial substance.
33) For each of the following, calculate the cost of inventory reported on the balance
sheet.
(a) The total merchandise on hand at the end of the year as determined by taking a
physical inventory is $62,000. Of the $62,000, $8,000 has been sold FOB destination
and is awaiting pickup by the carrier.
(b) The total merchandise inventory counted at the end of the year was $63,000.
Purchases for $6,000 are in transit under FOB shipping point terms.
(c) The total merchandise inventory counted at the end of the year was $75,000.
Purchases for $5,000 are in transit under FOB destination terms.
34) Which of the following are two methods of analyzing capital investment proposals
that both ignore present value?
A.Internal rate of return and average rate of return
B.Net present value and average rate of return
C.Internal rate of return and net present value
D.Average rate of return and cash payback method
35) The Reagan Corporation issues 1,000, 10-year, 8%, $1,000 bonds dated January 1,
2014, at 92. The journal entry to record the issuance will show a
A.credit to Discount on Bonds Payable for $80,000
B.debit to Cash of $1,000,000
C.credit to Bonds Payable for $1,000,000
D.credit to Cash for $920,000
36) An aid in internal control over payrolls that indicates employee attendance is
A.time card
B.voucher system
C.payroll register
D.employee’s earnings record
37) Another term often used to refer to factory overhead is:
A.surplus
B.period cost
C.supervisory cost
D.factory burden
38) All nine transactions for Dalton Survey Company for September, the first month of
operations, are recorded in the following T accounts:
Indicate the following for each debit and each credit:
39) Which of the following ratios provides a solvency measure that shows the margin of
safety of bondholders and also gives an indication of the potential ability of the
business to borrow additional funds on a long-term basis?
A.ratio of fixed assets to long-term liabilities
B.ratio of net sales to assets
C.number of days’ sales in receivables
D.rate earned on stockholders’ equity
40) The objectivity concept requires that
A.business transactions must be consistent with the objectives of the entity
B.the Financial Accounting Standards Board must be fair and unbiased in its
deliberations over new accounting standards
C.accounting principles must meet the objectives of the Security and Exchange
Commission
D.amounts recorded in the financial statements must be based on independently
verifiable evidence
41) On January 1, 2011, Zero Company obtained a $52,000, four-year, 6.5% installment
note from Regional Bank. The note requires annual payments of $15,179, beginning on
December 31, 2011. The December 31, 2012 carrying amount in the amortization table
for this installment note will be equal to:
A.$26,000
B.$27,635
C.$21,642
D.$28,402
42) The expected average rate of return for a proposed investment of $500,000 in a
fixed asset, with a useful life of four years, straight-line depreciation, no residual value,
and an expected total net income of $240,000 for the 4 years, is:
A.18%
B.48%
C.24%
D.12%
43) An indication that the work sheet columns are in balance and the work sheet is
completed is
A.the word “Total” is written at the bottom of each pair of columns
B.each pair of columns is double underlined
C.each pair of columns has the totals circled
D.the final figures are written in ink
44) The estimated total factory overhead cost and total machine hours for Department
40 for the current year are $250,000 and 56,250 respectively. During January, the first
month of the current year, actual machine hours used totaled 5,100 and factory
overhead cost incurred totaled $22,000.
(a) Determine the factory overhead rate based on machine hours.
(b) Present the entry to apply factory overhead to production in Department 40 for
January.
(c) What is the balance of Factory Overhead – Department 40 at January 31?
(d) Does the balance of Factory Overhead – Department 40 at January 31 represent
overapplied or underapplied factory overhead?
Round total cost to nearest dollar value.
45) Which of the following accounts should be closed to Income Summary at the end of
the fiscal year?
A.Merchandise Inventory
B.Accumulated Depreciation
C.Drawing
D.Cost of Merchandise Sold
46) Cameron Manufacturing Co.’s static budget at 5,000 units of production includes
$40,000 for direct labor and $5,000 for variable electric power. Total fixed costs are
$20,000. At 8,000 units of production, a flexible budget would show:
A.variable costs of $64,000 and $25,000 of fixed costs
B.variable costs of $64,000 and $20,000 of fixed costs
C.variable costs of $72,000 and $20,000 of fixed costs
D.variable and fixed costs totaling $104,000
47) The recording of the jobs shipped and customers billed would include a debit to:
A.Accounts Payable
B.Cash
C.Finished Goods
D.Cost of Goods Sold
48) Define ideal and currently attainable standards. Which type of standard should be
used and why?
49) The treasurer of Systems Company has accumulated the following budget
information for the first two months of the coming year:
The company expects to sell about 35% of its merchandise for cash. Of sales on
account, 80% are expected to be collected in full in the month of the sale and the
remainder in the month following the sale. One-fourth of the manufacturing costs are
expected to be paid in the month in which they are incurred and the other three-fourths
in the following month. Depreciation, insurance, and property taxes represent $6,400 of
the probable monthly selling and administrative expenses. Insurance is paid in February
and a $40,000 installment on income taxes is expected to be paid in April. Of the
remainder of the selling and administrative expenses, one-half are expected to be paid
in the month in which they are incurred and the balance in the following month. Capital
additions of $250,000 are expected to be paid in March.
Current assets as of March 1 are composed of cash of $45,000 and accounts receivable
of $51,000. Current liabilities as of March 1 are composed of accounts payable of
$121,500 ($102,000 for materials purchases and $19,500 for operating expenses).
Management desires to maintain a minimum cash balance of $20,000.
Prepare a monthly cash budget for March and April.
50) Calculate the gross profit for Jonas Company based on the data given below:
51) 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> paid cash dividends, $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 reconciliation.)
52) Beachside Realty rents condominiums and furnishings. Its adjusted trial balance at
December 31, 2011, is as follows:
Prepare the entry required to close the expense accounts at the end of the period.
53) Airflow Company sells a product in a competitive marketplace. Market analysis
indicates that their product would probably sell at $28.00 per unit. Airflow management
desires a profit equal to a 20% rate of return on invested assets of $1,400,000. They
anticipate selling 50,000 units. Their current full cost per unit for the product is $25 per
unit.
(1) What is the amount of profit per unit?
(2) What is the target cost per unit if they meet the market dictated price and
managements desired profit?