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1) When old equipment is traded in for a new equipment, the difference between the list
price and the trade in allowance is called boot.
2) In a computerized accounting system, a work sheet may not be necessary because the
software program automatically posts entries to the accounts and prepares financial
statements.
3) The objective of transfer pricing is to encourage each division manager to transfer
goods and services between divisions if overall company income can be increased by
doing so.
4) Controllable expenses are those that can be influenced by the decisions of the profit
center management.
5) In preparing a bank reconciliation, the amount of an error indicating the recording of
a check in the journal for an amount larger than the amount of the check is added to the
balance per company's records.
6) Separation of businesses into more manageable operating units is termed
decentralization.
7) A partnership requires only an agreement between two or more persons to organize.
8) The first budget to be prepared is usually the cash budget.
9) A defined contribution plan promises employees a fixed annual pension benefit.
10) The post reference column of the revenue journal will reference the account number
of the customer.
11) A bank statement
A.is a credit reference letter written by the company's bank
B.lets a company know the financial position of the bank as of a certain date
C.is a bill from the bank for services rendered
D.shows the activity that increased or decreased the company's account balance
12) Cash flow per share is
A.required to be reported on the balance sheet
B.required to be reported on the income statement
C.required to be reported on the statement of cash flows
D.not required to be reported on any statement
13) The budget that needs to be completed first when preparing the master budget is
the:
A.Production Budget
B.Sales Budget
C.Cash Budget
D.Capital Expenditures Budget
14) A company is contemplating investing in a new piece of manufacturing machinery.
The amount to be invested is $150,000. The present value of the future cash flows
generated by the project is $145,000. Should they invest in this project?
A.yes, because the rate of return on the project exceeds the desired rate of return used to
calculate the present value of the future cash flows
B.no, because the rate of return on the project is less than the desired rate of return used
to calculate the present value of the future cash flows
C.no, because net present value is +$5,000
D.yes, because the rate of return on the project is equal to the desired rate of return used
to calculate the present value of the future cash flows
15) The unfavorable volume variance may be due to all of the following factors except:
A.failure to maintain an even flow of work
B.machine breakdowns
C.unexpected increases in the cost of utilities
D.failure to obtain enough sales orders
16) The operating budgets of a company include:
A.the cash budget
B.the capital expenditures budget
C.the financing budget
D.the production budget
17) Which of the items below does not appear on the work sheet?
A.adjusting entries
B.the unadjusted trial balance
C.closing entries
D.the drawing account
18) When comparing a retail business to a service business, the financial statement that
changes the most is the
A.Balance Sheet
B.Income Statement
C.Statement of Owner's Equity
D.Statement of Cash Flow
19) How does the purchase of equipment by signing a note affect the accounting
equation?
A.assets increase; assets decrease
B.assets increase; liabilities decrease
C.assets increase; liabilities increase
D.assets increase; owner's equity increases
20) Which of the following would not be used in preparing a cash budget for October?
A.Beginning cash balance on October 1
B.Budgeted salaries expense for October
C.Estimated depreciation expense for October
D.Budgeted sales and collections for October
21) When a corporation completes a 3-for-1 stock split
A.the ownership interest of current stockholders is decreased
B.the market price per share of the stock is decreased
C.the par value per share is decreased
D.b and c
22) Which intangible assets are amortized over their useful life?
A.trademarks
B.goodwill
C.patents
D.all of the above
23) Bonds Payable has a balance of $900,000 and Premium on Bonds Payable has a
balance of $10,000. If the issuing corporation redeems the bonds at 103, what is the
amount of gain or loss on redemption?
A.$1,200 loss
B.$1,200 gain
C.$17,000 loss
D.$17,000 gain
24) Which of the following is not considered a special journal?
A.purchases journal
B.cash receipts journal
C.general journal
D.cash payments journal
25) If fixed costs are $561,000 and the unit contribution margin is $8.00, what is the
break-even point in units if variable costs are decreased by $.50 a unit?
A.66,000
B.70,125
C.74,800
D.60,000
26) A corporation has 50,000 shares of $25 par value stock outstanding that has a
current market value of $120. If the corporation issues a 5-for-1 stock split, the par
value of the stock after the split will be:
A.$5
B.$60
C.$25
D.$24
27) An account is said to have a debit balance if
A.the amount of the debits exceeds the amount of the credits
B.there are more entries on the debit side than on the credit side
C.there are more entries on the credit side than on the debit side
D.the first entry of the accounting period was posted on the debit side
28) Carmelita Company sells 40,000 units at $18 per unit. Fixed costs are $62,000 and
income from operations is $258,000. Determine the (a) variable cost per unit, (b) unit
contribution margin, and (c) contribution margin ratio .
29) Which one of the following is not a difference between a retail business and a
service business?
A.in what is sold
B.the inclusion of gross profit in the income statement
C.accounting equation
D.merchandise inventory included in the balance sheet
30) The Flapjack Corporation had 8,200 actual direct labor hours at an actual rate of
$12.40 per hour. Original production had been budgeted for 1,100 units, but only 1,000
units were actually produced. Labor standards were 7.6 hours per completed unit at a
standard rate of $13.00 per hour.
Compute the labor time variance.
A.9,880F
B.9,880U
C.7,800U
D.7,800F
31) Which one of the following would not cause a bank to debit a company's account?
A.Bank service charge
B.Collection of a note receivable
C.Checks marked NSF
D.Wiring of funds to other locations
32) The point where the sales line and the total costs line intersect on the
cost-volume-profit chart represents:
A.the maximum possible operating loss
B.the maximum possible operating income
C.the total fixed costs
D.the break-even point
33) Teri, Doug, and Brian are partners with capital balances of $20,000, $30,000, and
$50,000 respectively. They share income in the ratio of 3:2:1. Income Summary with a
debit balance of $30,000 is closed to the capital accounts. Doug withdraws from the
partnership. How much cash does he get upon withdrawal?
A.$30,000
B.$20,000
C.$40,000
D.$24,000
34) Some organizations use internal service departments to provide like services to
several divisions or departments within an organization. Which of the following would
probably not lend itself as a service department?
A.Inventory Control
B.Payroll Accounting
C.Information Systems
D.Human Resources
35) Which of the accounts below would appear in the Balance Sheet columns of the
work sheet?
A.Service Revenue
B.Prepaid Rent
C.Supplies Expense
D.None are correct
36) Which of the following would not be considered a good managerial tool in making
a decision for determining a capital investment?
A.Further evaluate assets that are dissimilar in nature or have different useful lives
B.Using only quantitative measures to purchase an asset
C.Analyzing the lease vs purchase option
D.Considering income tax ramifications
37) Listed below are selected transactions completed by Ridge Company during March
of the current year.
(a) Record the transactions, using the accompanying revenue journal and cash receipts
journal.
(b) Total and rule the revenue and cash receipts journals.
(c) Indicate the method of posting the individual items and the columnar totals of the
revenue and cash receipts journals in the following manner:
(1) For individual items and totals to be posted to the subsidiary ledger or not to be
posted, insert a check mark in the Posting Reference column or below the totals.
(2) For individual items and totals to be posted to the general ledger, insert the letter
"G" (as a substitute for specific account numbers) in the Posting Reference column or
below the totals.
38) A project has estimated annual net cash flows of $90,000. It is estimated to cost
$324,000. Determine the cash payback period.
39) Companies like Enron, WorldCom, and Tyco International, Ltd. have been caught in
the midst of ethical lapses that led to fines, firings, and criminal and/or civil
prosecution. List and briefly describe three factors that are responsible for what went
wrong in these companies.
40) Georgia Company has a condensed income statement as shown::
REQUIRED:
Prepare a horizontal analysis of Georgia Companys income statements. Comment on
the trends, both favorable and unfavorable.
41) Jenson Co., is considering the following alternative plans for financing their
company:
Income tax is estimated at 40% of income.
Determine the earnings per share of common stock under the two alternative financing
plans, assuming income before bond interest and income tax is $1,000,000.
42) Journalize the following transactions for Solley Company that occurred during 2011
and 2012.
November 14, 2011 Received a $4,800.00, 90-day, 9% note from Alan Hibbetts in
payment of his account.
December 31, 2011 Accrued interest on the Hibbetts note.
February 12, 2012 Received the amount due from Hibbetts on his note.
43) Accompanying a bank statement for Marsh Land Properties is a credit memo for
payment on a $15,000 note receivable that had been collected by the bank. The rate of
interest on the note is 6%. Marsh Land Properties had been notified by the bank at the
time of collection, but had made no entries. Journalize the entry that should be made by
Marsh Land to bring the accounting records up to date.
44) Prepare closing entries from the following work sheet.
Lakendra Enterprises
Worksheet
For the Year Ended December 31, 2010
45) After the accounts have been adjusted at January 31, 2014, the end of the fiscal
year, the following balances are taken from the ledger of Taylor Pool Service Company:
Journalize the four entries required to close the accounts
46) Sorenson Co., is considering the following alternative plans for financing their
company:
Income tax is estimated at 40% of income.
Determine the earnings per share of common stock under the two alternative financing
plans, assuming income before bond interest and income tax is $1,000,000.
47) From the following data for Norton Company for the year ended December31, 2012
prepare a multiple-step income statement. Show parenthetically earnings per share for
the following: income from continuing operations, loss on discontinued operations (less
applicable income tax), income before extraordinary item, extraordinary item (less
applicable income tax), and net income.
