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1) Senior executives cannot be criminally prosecuted for the wrong doings they commit
on behalf of the companies where they work.
2) The proceeds from discounting a $20,000, 60-day, note payable at 6% is $20,200.
3) The responsibility for coordinating the preparation of a master budget should be
assigned to the CEO of a firm.
4) A decrease in the ratio of liabilities to stockholders' equity indicates an improvement
in the margin of safety for creditors.
5) Once the useful life of a depreciable asset has been estimated and the amount to be
depreciated each year has been determined, the amounts can not be changed.
6) Average rate of return equals estimated average annual income divided by average
investment.
7) If income from operations for a division is $5,000, invested assets are $25,000, and
sales are $30,000, the profit margin is 20%.
8) The stock dividends distributable account is listed in the current liability section of
the balance sheet.
9) Although Allowance for Doubtful Accounts normally has a credit balance, it may
have either a debit or a credit balance before adjusting entries are recorded at the end of
the accounting period.
10) Direct labor cost is an example of a period cost.
11) When minor errors occur in the estimates used in the determination of depreciation,
the amounts recorded for depreciation expense in the past should be corrected.
12) The ending merchandise inventory for 2010 is the same as the beginning
merchandise inventory for 2011.
13) Most employers are required to withhold federal unemployment taxes from
employee earnings.
14) Cash flows from investing activities, as part of the statement of cash flows, include
payments for the acquisition of fixed assets.
15) The dividend yield rate is equal to the dividends per share divided by the par value
per share of common stock.
16) The balance of the account can be determined by adding all of the debits, adding all
of the credits, and adding the amounts together.
17) Standards are set for only direct labor and direct materials.
18) The maturity value of a 12%, 60-day note for $5,000 is $5,600.
19) Inventory errors, if not discovered, will self-correct in two years.
20) For a month's transactions for a typical medium-sized business, the accounts
payable account is likely to have only credit entries.
21) Manley Co. manufactures office furniture. During the most productive month of the
year, 4,500 desks were manufactured at a total cost of $86,625. In its slowest month, the
company made 1,800 desks at a cost of $49,500. Using the high-low method of cost
estimation, total fixed costs are:
A.$61,875
B.$33,875
C.$24,750
D.cannot be determined from the data given
22) Cost of goods manufactured is equal to:
A.total manufacturing costs plus ending materials inventory less beginning materials
inventory
B.cost of goods sold plus beginning work in process inventory less ending work in
process inventory
C.total manufacturing costs plus ending work in process inventory less beginning work
in process inventory
D.total manufacturing costs plus beginning work in process inventory less ending work
in process inventory
23) What is the major difference between the unadjusted trial balance and the adjusted
trial balance?
A.The adjusted trial balance will show the net income (loss) as an additional account
B.Unlike the Adjusted Trial Balance, the Unadjusted Trial Balance will continue with
the end-of-period processing even if it is not in balance
C.The adjusted trial balance includes the postings of the adjustments for the period in
the balance of the accounts
D.The adjusted trial balance will be used to record the adjustments for the period
24) On July 1st, Harding Construction purchases a bulldozer for $228,000. The
equipment has a 8 year life with a residual value of $16,000. Harding uses straight-line
depreciation.
(a) Calculate the depreciation expense and provide the journal entry for the first year
ending December 31st.
(b) Calculate the third years depreciation expense and provide the journal entry for the
third year ending December 31st.
(c) Calculate the last years depreciation expense and provide the journal entry for the
last year.
25) 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 dividends account
26) The portion of whole units that were completed with respect to either materials or
conversion costs within a given accounting period is the definition of
A.units started and completed
B.equivalent units
C.conversion costs
D.ending work in process
27) The Sarbanes-Oxley Act of 2002 prohibits employment of auditors by their clients
for what period after their last audit of the client?
A.indefinitely
B.one year
C.two years
D.none of these
28) Match the following terms with the best definition given.
1>Occurs when employee self-interests are different from company goals. A. Directing
2>Compare actual performance against budgeted goals. B. Planning
3>Setting goals. C. Budget padding
4>Actions to achieve budgeted goals. D. Goal conflict
5>Occurs when budgets are too loose. E. Controlling
29) The recording of the jobs completed would include a credit to:
A.Factory Overhead
B.Finished Goods
C.Work in Process
D.Cost of Goods Sold
30) Which of the following is not an internal control activity for cash?
A.The number of persons who have access to cash should be limited
B.All cash receipts should be recorded promptly
C.The functions of record keeping and maintaining custody of cash should be combined
D.Surprise audits of cash on hand should be made occasionally
31) Which of the following statements best describes the relationship among the costs
of quality?
A.Spending more on prevention and appraisal costs will reduce the total overall costs of
quality
B.Spending more on prevention and appraisal costs will increase the total overall costs
of quality
C.Adequate spending on prevention and appraisal costs will eliminate all internal and
external failure costs
D.The amount spent on prevention and appraisal costs has no impact on the amount
spent on internal and external failure costs
32) If there is a balance in the prepaid rent account after adjusting entries are made, it
represents a(n)
A.deferral
B.accrual
C.revenue
D.liability
33) The following errors took place in journalizing and posting transactions:
Journalize the entries to correct the errors. Omit the explanations.
34) Which of the following is NOT a disadvantage of decentralized operation?
A.Competition among managers decreases profits
B.Duplication of operations
C.Price cutting by departments that are competing in the same product market
D.Top management freed from everyday tasks to do strategic planning
35) A common measure of liquidity is
A.ratio of net sales to assets
B.dividends per share of common stock
C.receivable turnover
D.profit margin
36) Two income statements for PS Enterprises are shown below:
(a) Prepare a vertical analysis of PS Enterprises income statements.
(b) Does the vertical analysis indicate a favorable or unfavorable trend?
37) Some items are omitted from each of the following condensed divisional income
statements of Demi Inc.
38) Which of the following is NOT an example of a cost that varies in total as the
number of units produced changes?
A.Electricity per KWH to operate factory equipment
B.Direct materials cost
C.Straight-line depreciation on factory equipment
D.Wages of assembly worker
39) Which of the statements below indicates that a company earned a net income for the
period?
A.The sum of the credits exceeds the sum of the debits in the Balance Sheet columns on
the work sheet
B.The sum of the credits exceeds the sum of the debits in the Income Statement
columns on the work sheet
C.The sum of the debits exceeds the sum of the credits in the Income Statement
columns on the work sheet
D.Cash inflows exceeded cash outflows
40) 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 October from accounts receivable are:
A.$246,400
B.$262,500
C.$210,000
D.$294,500
41) Which of the following does not represent an outflow of cash and therefore would
not be reported on the statement of cash flows as a use of cash?
A.purchase of noncurrent assets
B.purchase of treasury stock
C.discarding an asset that had been fully depreciated
D.payment of cash dividends
42) Harris Company had checks outstanding totaling $15,400 on its May bank
reconciliation. In June, Harris Company issued checks totaling $64,900. The June bank
statement shows that $47,600 in checks cleared the bank in June. A check from one of
Harris Company's customers in the amount of $300 was also returned marked "NSF."
The amount of outstanding checks on Harris Company's June bank reconciliation
should be
A.$49,500
B.$63,000
C.$47,600
D.$32,700
43) Which of the following is the correct formula to calculate the predetermined factory
overhead rate?
A.Estimated total factory overhead costs divided by estimated activity base
B.Actual total factory overhead costs divided by estimated activity base
C.Estimated total factory overhead costs divided by actual activity base
D.Actual total factory overhead costs divided by actual activity base
44) Falcon Inc. manufactures Product B, incurring variable costs of $15.00 per unit and
fixed costs of $70,000. Falcon desires a profit equal to a 12% rate of return on assets,
$785,000 of assets are devoted to producing Product B, and 100,000 units are expected
to be produced and sold.
Round your intermediate calculations and final answer to two decimal places.
45) The two categories of cost comprising conversion costs are:
A.direct labor and indirect labor
B.direct labor and factory overhead
C.factory overhead and direct materials
D.direct labor and direct materials
46) Roseland Design borrowed $700,000 on a 90-day note from CorpOne Funding
Company. CorpOne discounts the note at 8%. (Assume a 360-day year is used for
interest calculations.)
Required:
47) Heedy Company is trying to decide how many units of merchandise to order each
month. The company policy is to have 20% of the next months sales in inventory at the
end of each month. Projected sales for August, September, and October are 30,000
units, 20,000 units, and 40,000 units, respectively. How many units must be purchased
in September?
A.24,000
B.18,000
C.28,000
D.22,000
48) Rogers Company reported net income of $35,000 for the year. During the year,
accounts receivable increased by $7,000, accounts payable decreased by $3,000 and
depreciation expense of $8,000 was recorded. Net cash provided by operating activities
for the year is
A.$53,000
B.$47,000
C.$33,000
D.$37,000
49) Cash was paid by Aris Alarm Service to creditors on account. Which of the
following entries for Aris Alarm Service records this transaction?
A.Cash, debit; Retained Earnings, credit
B.Accounts Payable, debit; Cash, credit
C.Accounts Receivable, debit; Cash, credit
D.Accounts Payable, debit; Account Receivable, credit
50) A business is operating at 90% of capacity and is currently purchasing a part used in
its manufacturing operations for $15 per unit. The unit cost for the business to make the
part is $20, including fixed costs, and $12, not including fixed costs. If 30,000 units of
the part are normally purchased during the year but could be manufactured using
unused capacity, what would be the amount of differential cost increase or decrease
from making the part rather than purchasing it?
A.$150,000 cost increase
B.$ 90,000 cost decrease
C.$150,000 cost increase
D.$ 90,000 cost increase
51) A fixed asset with a cost of $52,000 and accumulated depreciation of $47,500 is
traded for a similar asset priced at $60,000 in a transaction with commercial substance.
Assuming a trade-in allowance of $5,000, the cost basis of the new asset is
A.$54,000
B.$59,500
C.$60,000
D.$60,500
52) Ruben Company purchased $100,000 of Evans Company bonds at 100 plus $1,500
in accrued interest. The bond interest rate is 8% and interest is paid semi-annually. The
journal entry to record the purchase would be:
A.Debit: Investment in Bonds $101,500; Credit: Cash $101,500
B.Debit: Investment in Bonds $100,000; Credit: Interest Revenue $1,500 and Cash
$98,500
C.Debit: Investment in Bonds $100,000 and Interest Receivable $1,500; Credit: Cash
$101,500
D.Investment in Bonds $100,000; Credit: Cash $100,000
53) When a company exchanges machinery and receives a trade-in allowance greater
than the book value, this transaction would be recorded with the following entry
(assuming the exchange was considered to have commercial substance):
A.debit Machinery and Accumulated Depreciation; credit Machinery, Cash, and Gain
on Disposal
B.debit Machinery and Accumulated Depreciation; credit Machinery and Cash
C.debit Cash and Machinery; credit Accumulated Depreciation
D.debit Cash and Machinery; credit Accumulated Depreciation and Machinery
54) The bank statement for Gatlin Co. indicates a balance of $7,735.00 on June30,
2010. After the journals for June had been posted, the cash account had a balance of
$4,098.00.
(a) Cash sales of $742.00 had been erroneously recorded in the cash receipts journal as
$724.
(b) Deposits in transit not recorded by bank, $425.00.
(c) Bank debit memo for service charges, $35.00.
(d) Bank credit memo for note collected by bank, $2,475 including $75 interest.
(e) Bank debit memo for $256.00 NSF (not sufficient funds) check from Janice Smith, a
customer.
(f) Checks outstanding, $1,860.00.
Record the appropriate journal entries that would be necessary for Gatlin Co.
55) Materials purchased on account during the month amounted to $180,000. Materials
requisitioned and placed in production totaled $165,000. From the following, select the
entry to record the transaction on the day the materials were bought.
A.Materials165,000
Accounts Payable165,000
B.Materials180,000
Accounts Payable180,000
C.Materials180,000
Cash 180,000
D.Accounts Payable180,000
Materials180,000
56) Retained earnings will be reduced by all of the following except
A.revenues
B.expenses
C.dividends
D.all of these
57) Which of the following is not an internal control procedure for payroll?
A.observe clocking in and out time for the employees
B.payroll depends on a fired employee's supervisor to notify them when an employee
has been fired
C.payroll requires employees to show identification when picking up their paychecks
D.changes in pay rates on a computerized system must be tested by someone
independent of payroll
58) Cash receipts received from the issuance of a mortgage notes payable would be
classified as
A.investing activities
B.operating activities
C.either financing or investing activities
D.financing activities
59) On March 29th, customers who owe $10,500.00 for purchases made on Sonic Sales
Company submit payments of $4,250.00. Journalize this event.
60) On the first day of the fiscal year, a company issues a $1,000,000, 7%, 5 year bond
that pays semi-annual interest of $35,000 ($1,000,000 7% 1/2), receiving cash of
$884,171. Journalize the entry to record the issuance of the bonds.
61) On October 1, 2012, Marcus Corporation purchased $20,000 of 6% bonds of
Roberts Corporation, due in 8 1/2 years. The bonds were purchased at a price of
$17,561 plus interest of $300 accrued from July 1, 2012, the date of the last
semi-annual interest payments. Journalize the purchase.
62) On January 2, Todd Company acquired 40% of the outstanding stock of McGuire
Company for $205,000. For the year ending, December 31, McGuire earned income of
$48,000 and paid dividends of $14,000.
Required:
Prepare the entries for Todd Company for the purchase of the stock, share of McGuire
income and dividends received from McGuire.
63) The following are all the steps in the accounting cycle. List them in the order in
which they should be done.
- Closing entries are journalized and posted to the ledger.
- An unadjusted trial balance is prepared.
- An optional end-of-period spreadsheet (work sheet) is prepared.
- A post-closing trial balance is prepared.
- Adjusting entries are journalized and posted to the ledger.
- Transactions are analyzed and recorded in the journal.
- Adjustment data are assembled and analyzed.
- Financial statements are prepared.
- An adjusted trial balance is prepared.
- Transactions are posted to the ledger.
64) Finewood Cabinet Manufacturers uses flexible budgets that are based on the
following manufacturing data for the month of July:
Prepare a flexible budget for Finewood based on production of 10,000, 15,000, and
20,000 units.
65) What is the cost of the land, based upon the following data?
66) If a company records inventory purchases at standard cost and also records
purchase price variances, prepare the journal entry for a purchase of 6,000 widgets that
were bought at $8.00 and have a standard cost of $8.15.
67) The following items are reported on a companys balance sheet:
Required:
Determine (1) the current ratio and (2) the quick ratio. Round to one decimal place.
68) Cost of merchandise sold reported on the income statement was $155,000. The
accounts payable balance increased $5,000, and the inventory balance increased by
$11,000 over the year. Determine the amount of cash paid for merchandise.
