1) The statement of cash flows is an optional financial statement.
2) The percentage analysis of increases and decreases in corresponding items in
comparative financial statements is referred to as horizontal analysis.
3) Bonds may be purchased directly from the issuing corporation or through one of the
bond exchanges.
4) The cost of merchandise inventory is limited to the purchase price less any purchase
discounts.
5) The matching concept supports matching expenses with the related revenues.
6) It is not necessary for a company to use the same depreciation method for financial
statements and for determining income taxes.
7) A major disadvantage of the indirect method of reporting cash flows from operating
activities is that the difference between the net amount of cash flows from operating
activities and net income is emphasized.
8) Adjusting journal entries are dated on the last day of the period.
9) The amount of the depreciation expense for the second full year of use of a fixed
asset costing $100,000, with an estimated residual value of $5,000 and a useful life of 4
years, is $25,000 by the declining-balance method at twice the straight-line rate.
10) The minimum amount of desired divisional income from operations is set by top
management by establishing a maximum rate of return considered acceptable for
invested assets.
11) Conversion costs are the combination of direct labor, direct material and factory
overhead costs.
12) If in evaluating a proposal by use of the net present value method there is an excess
of the present value of future cash inflows over the amount to be invested, the rate of
return on the proposal is less than the rate used in the analysis.
13) The amount of detail presented in a budget performance report for a cost center
depends upon the level of management to which the report is directed.
14) In a process costing system, the cost per equivalent unit is computed before
computing equivalent units.
15) Which of the following entries records the receipt of cash from patients on account?
A.Accounts Payable, debit; Fees Earned, credit
B.Accounts Receivable, debit; Fees Earned, credit
C.Accounts Receivable, debit; Cash, credit
D.Cash, debit; Accounts Receivable, credit
16) Principal components of a master budget include which of the following?
A.Production budget
B.Sales budget
C.Capital expenditures budget
D.All of the above
17) All of the following occur with a double-entry accounting system except:
A.The accounting equation remains in balance
B.The sum of all debits is always equal to the sum of all credits in each journal entry
C.Each business transaction will have only two entries
D.Every transaction affects at least two accounts
18) Of the following which istrue about assets?
A.Assets include physical and intangible assets
B.Assets include only physical assets
C.Assets are owned solely by the owner of the company
D.Assets are the result of selling products or services to customers
19) The target cost approach assumes that:
A.markup is added to total cost
B.the selling price is set by the marketplace
C.markup is added to variable cost
D.markup is added to product cost
20) 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 average cost method?
A.$655
B.$620
C.$690
D.$659
21) How does receiving a bill to be paid next month for services received affect the
accounting equation?
A.assets decrease; owner’s equity decreases
B.assets increase; liabilities increase
C.liabilities increase; owner’s equity increases
D.liabilities increase; owner’s equity decreases
22) Hazard Company is considering the acquisition of a machine that costs $525,000.
The machine is expected to have a useful life of 6 years, a negligible residual value, an
annual cash flow of $150,000, and annual operating income of $87,500. What is the
estimated cash payback period for the machine?
A.3 years
B.4.3 years
C.3.5 years
D.5 years
23) The following financial information was summarized from the accounting records
of Train Corporation for the current year ended December 31:
The net income for Train Corporation is:
A.$83,180
B.$35,940
C.$48,390
D.$60,840
24) The capital accounts of Hope and Indiana have balances of $115,000 and $95,000,
respectively. Clint and Casey are to be admitted to the partnership. Clint buys one-fifth
of Hopes interest for $30,000 and one-fourth of Indianas interest for $20,000. Casey
contributes $45,000 cash to the partnership, for which he is to receive an ownership
equity of $45,000.
Required:
(1) Journalize the entries to record the admission of (a) Clint and (b) Casey.
(2) What are the capital balances of each partner after the admission of the new
partners?
25) Department G had 3,600 units, 40% completed at the beginning of the period,
12,000 units were completed during the period, 2,000 units were one-fifth completed at
the end of the period, and the following manufacturing costs were debited to the
departmental work in process account during the period:
Assuming that all direct materials are placed in process at the beginning of production
and that the first-in, first-out method of inventory costing is used, what is the equivalent
units for materials and conversion costs, respectively.
A.14,000 and 12,160
B.10,400 and 10,960
C.14,000 and 13,600
D.10,400 and 10,240
26) A form prepared periodically for each processing department summarizing (1) the
units for which the department is accountable and the units to be assigned costs and (2)
the costs charged to the department and the allocation of these costs is termed a:
A.factory overhead production report
B.manufacturing cost report
C.process cost report
D.cost of production report
27) The characteristic of a partnership that gives the authority to any partner to legally
bind the partnership and all other partners to business contracts is called
A.unlimited liability
B.ease of formation
C.mutual agency
D.dissolution
28) The internal rate of return method is used to analyze a $946,250 capital investment
proposal with annual net cash flows of $250,000 for each of the six years of its useful
life.
29)
Calculate the Total Direct Labor Variance using the above information
A.$2,051.25 Favorable
B.$2,051.25 Unfavorable
C.$2,362.50 Unfavorable
D.$2,362.50 Favorable
30) a) The aging of Torme Designs shown below. Calculate the amount of each
periodicity range that is deemed to be uncollectible.
b) If the Allowance for Doubtful Accounts has a credit balance of $1,135.00, record the
adjusting entry for the bad debt expense for the year.
31) How does paying a liability in cash affect the accounting equation?
A.assets increase; liabilities decrease
B.assets increase; liabilities increase
C.assets decrease; liabilities decrease
D.liabilities decrease; owner’s equity increases
32) The entries to record cost and sale of a finished good on account is:
A.debit Cost of Goods Sold, credit Finished Goods
B.debit Cost of Goods Sold, credit Finished Goods, debit Accounts Receivable, credit
Sales
C.debit Sales Expense, credit Finished Goods, credit Cash, credit Accounts Receivable
D.debit Work in Process, credit Finished Goods, debit Accounts Receivable, credit
Sales
33) Which of the following accounts will be found on the income statement?
A.inventory
B.work in process
C.finished goods
D.cost of goods sold
34) For February, sales revenue is $700,000; sales commissions are 5% of sales; the
sales manager’s salary is $96,000; advertising expenses are $80,000; shipping expenses
total 2% of sales; and miscellaneous selling expenses are $2,500 plus 1/2 of 1% of
sales. Total selling expenses for the month of February are:
A.$151,000
B.$227,500
C.$225,000
D.$231,000
35) The use of standards for nonmanufacturing expenses is:
A.not as common as it is for manufacturing costs
B.as common as it is for manufacturing costs
C.not useful
D.impossible
36) An adjustment resulting from a creditor charging too much for merchandise would
be recorded in the:
A.general journal
B.purchases journal
C.cash payments journal
D.cash receipts journal
37) The balance in Allowance for Doubtful Accounts will directly impact the end of
period adjustment for the bad debt expense when using which of the following
methods?
A.Allowance method
B.Direct write-off method
C.Accrual method
D.declining value method
38)
What effects does this journal entry have on the accounts?
A.Increase Cash and increase Land
B.Increase Land and decrease Cash
C.Decrease Cash and decrease Land
D.Increase Cash and decrease Land
39) The amount of increase or decrease in cost that is expected from a particular course
of action as compared with an alternative is termed:
A.period cost
B.product cost
C.differential cost
D.discretionary cost
40) A company is preparing its their Cash Budget. The following data has been
provided for cash receipts and payments.
The companys cash balance at January 1st is $290,000. This company desires a
minimum cash balance of $340,000.
What is the amount of excess cash or deficiency of cash (after considering the
minimum cash balance required) for February?
A.$109,100 deficiency
B.$10,900 excess
C.$900 deficiency
D.$109,100 excess
41) Prepare the following journal entries and calculations:
(a) A patent that was acquired for $410,000 at the beginning of the current year expires
in 15 years and is expected to have value for 4 years. Present the adjusting entry to
amortize the patent for the current year.
(b) Mineral rights on an ore deposit estimated at 4,000,000 tons of ore were acquired
for $2,800,000. Present the adjusting entry to record depletion for the current year,
during which 350,000 tons of ore were removed.
(c) Legal costs incurred to defend the rights that a patent provided in (a) were $60,000.
At the time the patent had been in existence for 5 years. Determine the amount to be
amortized for the current fiscal year.
42) Which of the following accounts will not be closed to Income Summary at the end
of the fiscal year?
A.Salaries Expense
B.Fees Earned
C.Unearned Rent
D.Depreciation Expense
43) The balance of Material Q on May 1 and the receipts and issuances during May are
as follows:
Determine the cost of each of the issuances under a perpetual system, using the first-in,
first-out method.
44) Complete the following data taken from the condensed income statements for
merchandising Companies A, B, & C.
45) Earned by profit centers. C. Profit margin
4>Ratio of income from operations to sales D. Controllable revenues
5>Income from operations divided by invested assets E. Investment turnover
46) The assets and liabilities of S&P Day Spa at December 31, 2014 and expenses for
the year are listed below. The capital of the owner was $68,000 at January 1, 2014. The
owner invested an additional $10,000 during the year. Net income for 2014 is $45,625.
Prepare an income statement for the current year ended December 31, 2014.
47) A summary of cash flows for Alex Design Services for the year ended December
31, 2012, is shown below.
Prepare a statement of cash flows for Alex Design Services for the year ended
December 31, 2012.
48) List at least three things that indicate a receivable may be uncollectible.
49) Greyson Company produced 8,300 units of their product that required 4.25 standard
hours per unit. Determine the standard fixed overhead cost per unit at 27,000 hours,
which is 100% of normal capacity, if the favorable fixed factory overhead volume
variance is $14,895.
50) List the 4 most common special journals used in accounting and describe the
transaction recorded in each journal.
51) Morgan Company has the following segment revenues for fiscal 2014 and 2013.
Prepare a horizontal analysis of the segment data using 2013 as the base year.
52) Carillion Company is considering the disposal of equipment that is no longer
needed for operations. The equipment originally cost $600,000 and accumulated
depreciation to date totals $460,000. An offer has been received to lease the machine for
its remaining useful life for a total of $310,000, after which the equipment will have no
salvage value. The repair, insurance, and property tax expenses that would be incurred
by Carillion Company on the machine during the period of the lease are estimated at
$75,800. Alternatively, the equipment can be sold through a broker for $230,000 less a
10% commission.
Prepare a differential analysis report, dated June 15 of the current year, on whether the
equipment should be leased or sold.