1) If a company sells a fixed asset for an amount which is less than its book value, a
gain must be recognized.
2) The payment of utilities expense in cash would affect the operating activities in the
statement of cash flows and the income statement but not the balance sheet.
3) Assuming that the quantities of inventory on hand during the current year were
sufficient to meet all demands for sales, a decrease in the inventory turnover for the
current year when compared with the turnover for the preceding year indicates an
improvement in the management of inventory.
4) If the average rate of return on an asset exceeds the minimum rate of return for
investments, the asset should be purchased.
5) Purchase requisitions for Purchasing and the number of payroll checks for Payroll
Accounting are examples of activity bases.
6) Under the accrual basis of accounting, net cash flows from operating activities on the
statement of cash flows will normally be the same as net income.
7) John Deere is a leading manufacturer of agricultural machinery in the world
producing products that serve unique market needs. Therefore, John Deere is an
example of a company that uses a premium-price emphasis to attract customers.
8) The cost of materials entering directly into the manufacturing process is classified as
factory overhead cost.
9) The relationship of 120 to 100 can be expressed as 1.2, 1.2:1, or 120%.
10) The FIFO method of costing inventory is based on the assumption that costs should
be charged against revenues in the reverse order in which they were incurred.
11) When an account receivable is collected in cash, the total assets of the business
increase.
12) The product with the highest contribution margin per scarce resource is the most
profitable.
13) The Sarbanes-Oxley Act of 2002 applies to all publicly held companies.
14) When the petty cash fund is replenished, the petty cash account is adjusted for the
total of all expenditures made since the fund was last replenished.
15) After the accounts are adjusted at the end of the fiscal year, Accounts Receivable
has a balance of $430,000 and Allowance for Doubtful Accounts has a balance of
$30,000. What is the net realizable value of the receivables?
A.$30,000
B.$460,000
C.$430,000
D.$400,000
16) Which of the following is a characteristic of deferred income tax payable?
A.Deferred income tax payable is often generated due to timing differences
B.Deferred income tax payable may be either a current or long-term liability
C.Deferred income tax payable represents the deferred payment of taxes to later years
through tax planning techniques
D.All of these are characteristics of deferred income tax payable
17) The budget process involves all of the following except:
A.establishing specific goals
B.executing plans to achieve the goals
C.periodically comparing actual results with the goals
D.dismissing all managers who fail to achieve operational goals specified in the budget
18) In capital rationing, alternative proposals that survive initial screening and further
analysis using present value methods are normally evaluated in terms of:
A.net income
B.qualitative factors
C.maximum cost
D.net cash flow
19) The interest rate specified in the bond indenture is called the:
A.discount rate
B.contract rate
C.market rate
D.effective rate
20) A to Z Corporation purchased a building for $80,000 cash. On the Statement of
Cash Flows, the transaction would be classified as:
A.Cash Flows from Operating Activities
B.Cash Flows from Investing Activities
C.Cash Flows from Financing Activities
D.Noncash transaction
21) Which of the following accounts is reported in the noncurrent liabilities section of
the corporate balance sheet?
A.Bonds Payable
B.Common Stock
C.Dividends Payable
D.Cash
22) If merchandise inventory is being valued at cost and the price level is steadily
falling, which method of costing will yield the largest gross profit?
A.Average cost
B.LIFO
C.FIFO
D.All methods will generate the same gross profit
23) EFT:
A.means Efficient Funds Transfer
B.can process certain cash transactions at less cost than by using the mail
C.makes it easier to document purchase and sale transactions
D.means Effective Funds Transfer
24) Which one of the following should be added to net income in calculating net cash
flow from operating activities using the indirect method?
A.A gain on the sale of land
B.A decrease in accounts payable
C.An increase in accrued liabilities
D.Dividends paid on common stock
25) With the aid of computer software, managers can vary assumptions regarding
selling prices, costs, and volume and can immediately see the effects of each change on
the break-even point and profit. Such an analysis is called:
A.”what if” or sensitivity analysis
B.vary the data analysis
C.computer-aided analysis
D.data gathering
26) Which of the following businesses is most likely to use process cost accounting
system?
A.Custom cabinet manufacturer
B.Dress designer
C.Lumber mill
D.Printing firm
27) If the cost of an item of inventory is $60 and the current replacement cost is $65,
the amount included in inventory according to the lower-of-cost-or market method is:
A.$5
B.$60
C.$65
D.$125
28) Assuming that the desired rate of return is 6%, determine the present value of
$10,000 to be received in one year, using the following partial table of present value of
$1 at compound interest.
A.$9,430
B.$9,000
C.$9,090
D.$8,930
29) Which of the following expenses incurred by the sporting goods department of a
department store is a direct expense?
A.Depreciation expense–office equipment
B.Insurance on inventory of sporting goods
C.Uncollectible accounts expense
D.Office salaries
30) Which of the following is not reported as revenue on the income statement?
A.Unearned revenue
B.Fees revenue
C.Commissions revenue
D.Rent revenue
31) Merchandise is ordered on November 12; the merchandise is shipped by the seller
and the invoice is prepared, dated, and mailed by the seller on November 15; the
merchandise is received by the buyer on November 17; the transaction is recorded in
the buyer’s accounts on November 18 . The credit period begins with what date?
A.November 12
B.November 15
C.November 17
D.November 18
32) Vest Food Co. has the following operating data:
The company is contemplating moving to another state where direct labor costs can be
reduced, thereby reducing the unit variable cost by 10%. The state where the company
currently operates has offered to reduce property taxes to encourage Vest to stay. The
minimum amount of property tax savings necessary to keep the company, assuming no
other changes, would be:
A.$152,016
B.$240,000
C.$208,696
D.$125,217
33) A company reports the following:
Determine the (a) accounts receivable turnover and (b) number of days sales in
receivables. Round your answers to one decimal place.
34) Rouney Co. has budgeted that factory supervisors salary will increase by 10%. If
selling prices and all other cost relationships are held constant, next year’s break-even
point would:
A.decrease by 10%
B.increase by 10%
C.remain constant
D.increase at a rate greater than 10%
35) Which of the following describes the behavior of the fixed cost per unit?
A.Decreases with increase in production
B.Decreases with decrease in production
C.Remains constant with changes in production
D.Increases with increase in production
36) If title to merchandise purchases passes to the buyer when the goods are delivered
to the buyer, the terms are:
A.consigned
B.n/30
C.FOB shipping point
D.FOB destination
37) One of the objectives of internal control is to:
A.control the internal organization of the accounting department personnel and
equipment
B.provide reasonable assurance that assets are safeguarded
C.prevent fraud and promote the social interest of the company
D.provide control over “internal-use only” reports and employee internal conduct
38) If a $15,000 purchase of equipment for cash is incorrectly recorded as an increase
to equipment and as an increase to cash, at the end of the period assets will:
A.exceed liabilities and stockholders’ equity by $15,000
B.equal liabilities and stockholders’ equity
C.exceed liabilities and stockholders’ equity by $30,000
D.exceed liabilities and stockholders’ equity by $40,000
39) Granger Co. can further process Product B to produce Product C. Product B is
currently selling for $55 per pound and costs $42 per pound to produce. Product C
would sell for $82 per pound and would require an additional cost of $13 per pound to
produce. What is the differential revenue of producing and selling Product C?
A.$15 per pound
B.$42 per pound
C.$45 per pound
D.$27 per pound
40) The purpose of an audit is to:
A.determine whether or not a company is a good investment
B.render an opinion on the fairness of the statements
C.determine whether or not a company complies with income tax regulations
D.determine whether or not a company has a good credit risk
41) An employee receives an hourly rate of $27, with time and a half for all hours
worked in excess of 40 during a week. Payroll data for the current week are as follows:
hours worked, 46; federal income tax withheld, $350; cumulative earnings for year
prior to current week, $99,700; social security tax rate, 6.0% on maximum of $106,800;
and Medicare tax rate, 1.5% on all earnings. What is the net pay for the employee?
A.$798.85
B.$873.77
C.$953.16
D.$1,223.77
42) Relevant revenues and costs focus on:
A.activities that occurred in the past
B.monies already earned and/or spent
C.last year’s net income
D.differences between the alternatives being considered
43) An employee receives an hourly rate of $27, with time and a half for all hours
worked in excess of 40 during a week. Payroll data for the current week are as follows:
hours worked, 46; federal income tax withheld, $350; cumulative earnings for year
prior to current week, $99,700; social security tax rate, 6.0% on maximum of $106,800;
and Medicare tax rate, 1.5% on all earnings. What is the gross pay for the employee?
A.$798.85
B.$873.77
C.$1,242.00
D.$1,323.00
44) Internal control does not consist of policies and procedures that:
A.guarantee the company will not go bankrupt
B.ensure that laws and regulations are being followed
C.protect assets from misuse
D.ensure that business information is accurate
45) Which type of depreciation occurs when an asset can no longer provide services for
which it was intended?
A.Physical depreciation
B.Market depreciation
C.Cost depreciation
D.Functional depreciation
46) On June 1, Green Pea, Inc. purchased $1,200 worth of supplies on account. Prior to
the purchase, the balance in the supplies account was $200. On December 31, the fiscal
year-end for Green Pea, it is determined that $700 of supplies still remain. What is the
amount to be recorded in the adjusting entry?
A.$0
B.$700
C.$500
D.$1,200
47) If the market rate of interest is greater than the contractual rate of interest, bonds
will sell:
A.at a premium
B.at face value
C.at a discount
D.only after the stated rate of interest is increased
48) The percent of fixed assets to total assets is an example of:
A.vertical analysis
B.solvency analysis
C.profitability analysis
D.horizontal analysis
49) Currently, fixed costs are $810,000, the unit selling price is $60, and the unit
variable cost is $48. What would be the break-even sales (in units), if fixed costs are
reduced by $51,000?
A.15,834 units
B.67,500 units
C.62,500 units
D.63,250 units
50) Which of the following statement is true about intangible assets?
A.They are usually presented in the balance sheet as fixed assets
B.They are short-lived assets
C.They are not held for resale
D.They have physical existence
51) Heedy Winery accumulates the costs incurred in the labeling process in an activity
cost pool. Costs for the labeling process are estimated to be $320,000, and the winery
expects to generate 640,000 labels for the coming year. Production for its top-selling
wine is estimated at 160,000 bottles. How much overhead from the labeling process
will be allocated to this particular variety of wine?
A.$40,000
B.$80,000
C.$160,000
D.$320,000
52)
Refer to Cokes balance sheet. Does it appear that Coke uses the cash or accrual basis of
accounting?
53) Selected data from the ledger of Wiles Co. after adjustment at June 30, the end of
the fiscal year, are listed as follows:
Prepare a single-step income statement for the year ended June 30, 2013 .
54) Compute the standard cost for one hat, based on the following standards for each
hat:
55) Explain why one person should not be permitted to purchase, receive, and pay for
supplies.
56) Identify the type of adjustment necessary (the type of item involved) and record the
transaction for the event. Make sure to include the ending balances after adjustment.
Assume that on June 1, 2013, Tasty Sausage Corp. has a balance of $100 for supplies.
On June 6 it purchased $600 in supplies for cash. On June 30, at the end of the
accounting period, there are $300 of supplies on hand. The June 30 adjustment is:
57) List the objectives of internal control and give an example of how each is
implemented.
58) On April 1, 10,000 shares of $20 par common stock were issued at $24. Illustrate
the effects on the accounts and the financial statements.
59) The units of Product YY2 available for sale during the year were as follows:
There are 15 units of the product in the physical inventory at March 31 . The periodic
inventory system is used. Determine the difference in gross profit between the LIFO
and FIFO inventory cost systems.
60) On May 1, the cash account balance was $72,600. During May, cash receipts
totaled $345,600 and the May 31 balance was $95,230. Determine the cash payments
made during May.
61) A 5-year project is estimated to cost $700,000 and have no residual value. If the
straight-line depreciation method is used and estimated total income is $231,000,
determine the average rate of return giving effect to depreciation on the investment.
