1) A loss on disposal of a plant asset is reported in the financial statements
a.in the Other Revenues and Gains section of the income statement
b.in the Other Expenses and Losses section of the income statement
c.as a direct increase to the capital account on the balance sheet
d.as a direct decrease to the capital account on the balance sheet
2) If unearned revenues are initially recorded in revenue accounts and not all the related
services been performed at the end of the accounting period, then failure to make an
adjusting entry will cause
a.liabilities to be overstated
b.revenues to be understated
c.revenues to be overstated
d.accounts receivable to be overstated
3) If the market interest rate is greater than the contractual interest rate, bonds will sell
a.at a premium
b.at face value
c.at a discount
d.only after the stated interest rate is increased
4) The following direct labor data pertain to the operations of Haieold Manufacturing
Company for the month of September:
Standard labor rate$10.00 per hr.
Actual hours incurred and used9,000
The standard cost card shows that 2.5 hours are required to complete one unit of
product. The actual labor rate incurred exceeded the standard rate by 8%. Four thousand
units were manu-factured in September.
Instructions
(a)Calculate the price, quantity, and total labor variances.
(b)Journalize the entries to record the labor variances.
5) On January 1, 2013, Doolittle Company purchased furniture for $7,560. The
company expects to use the furniture for 3 years. The asset has no salvage value. The
book value of the furniture at December 31, 2014 is
a.$0
b.$2,520
c.$5,040
d.$7,560
6) The authorized stock of a corporation
a.only reflects the initial capital needs of the company
b.is indicated in its by-laws
c.is indicated in its charter
d.must be recorded in a formal accounting entry
7) Under variable costing, fixed manufacturing costs are
a.charged to the product
b.not reported in the income statement
c.considered to be a period cost
d.reported on the balance sheet as a prepayment
8) A cash register tape shows cash sales of $5,000 and sales taxes of $300. The journal
entry to record this information is
a.Cash5,300
Sales Revenue5,300
b.Cash5,300
Sales Tax Revenue300
Sales Revenue5,000
c.Cash5,000
Sales Tax Expense300
Sales Revenue5,300
d.Cash5,300
Sales Revenue5,000
Sales Taxes Payable300
9) Unrealized gain on available-for-sale securities appears as an addition:
a.to revenues on the income statement
b.to total assets on the balance sheet
c.to expenses on the income statement
d.to stockholders’ equity on the balance sheet
10) Which of the following would not be classified as a contra account?
a.Sales Revenue
b.Sales Returns and Allowances
c.Accumulated Depreciation
d.Sales Discounts
11) A technique for evaluating financial statements that expresses the relationship
among selected items of financial statement data is
a.common size analysis
b.horizontal analysis
c.ratio analysis
d.vertical analysis
12) Toolworks has a standard of 1.5 pounds of materials per unit, at $6 per pound. In
producing 2,000 units, Toolwork’s used 3,100 pounds of materials at a total cost of
$17,980. Toolworks total variance is
a.$420 F
b.$20 F
c.$620 F
d.$600 U
13) Cassidy Industries reported the following items for 2014:
Income tax expense$ 60,000
Contribution margin200,000
Controllable fixed costs 90,000
Interest expense40,000
Total operating assets650,000
How much is controllable margin?
a.$110,000
b.$200,000
c.$50,000
d.$10,000
14) East Asian Imports, Inc. issued 15,000 shares of stock at a stated value of $8 per
share. The total issue of stock sold for $15 per share. The journal entry to record this
transaction would include a
a.debit to Cash for $120,000
b.credit to Common Stock for $120,000
c.credit to Paid-in Capital in Excess of Par for $125,000
d.credit to Common Stock for $125,000
15) Process costing is not used when
a.similar goods are being produced
b.large volumes are produced
c.jobs have distinguishing characteristics
d.a series of connected manufacturing processes is necessary
16) The following information pertains to Ortiz Company. Assume that all balance
sheet amounts represent both average and ending balance figures. Assume that all sales
were on credit.
Assets
Cash and short-term investments$ 45,000
Accounts receivable (net)30,000
Inventory20,000
Property, plant and equipment 210,000
Total Assets$305,000
Liabilities and Stockholders Equity
Current liabilities$ 50,000
Long-term liabilities95,000
Stockholders equitycommon 160,000
Total Liabilities and Stockholders Equity$305,000
Income Statement
Sales$ 120,000
Cost of goods sold 66,000
Gross profit54,000
Operating expenses 30,000
Net income$ 24,000
Number of shares of common stock6,000
Market price of common stock$20
Dividends per share.50
What is the current ratio for Ortiz?
a.1.90
b.1.50
c.1.30
d..53
17) IFRS treats the purchase of treasury stock as any of the following except
a.an increase to a contra equity account
b.a decrease to retained earnings
c.a decrease to share capital
d.a decrease to share premium
18) A truck was purchased for $180,000 and it was estimated to have a $36,000 salvage
value at the end of its useful life. Monthly depreciation expense of $3,000 was recorded
using the straight-line method. The annual depreciation rate is
a.20%
b.2%
c.8%
d.25%
19) For June, Darron Manufacturing estimated sales revenue at $400,000. It pays sales
commissions that are 4% of sales. The sales manager’s salary is $190,000, estimated
shipping expenses total 1% of sales, and miscellaneous selling expenses are $8,000.
How much are budgeted selling expenses for the month of July if sales are expected to
be $360,000?
a.$26,000
b.$216,000
c. $18,000
d.$218,000
20) If a purchaser using a perpetual system agrees to freight terms of FOB shipping
point, then the
a.Inventory account will be increased
b.Inventory account will not be affected
c.seller will bear the freight cost
d.carrier will bear the freight cost
21) On December 31, 2014 the adjusted trial balance of the Yellin Personnel Agency
shows the following selected data:
Accounts Receivable, $8,000
Service Revenue, $60,000
Interest Expense, $10,500
Interest Payable, $3,500
Utilities Expense, $4,800
Accounts Payable, $2,700
Analysis indicates that adjusting entries were made for (a) $8,000 of employment
commission revenue earned but not billed, (b) $3,500 of accrued but unpaid interest,
and (c) $2,700 of utilities expense accrued but not paid.
Instructions
(a)Prepare the closing entries at December 31, 2014 .
(b)Prepare the reversing entries on January 1, 2015 .
(c)Enter the adjusted trial balance data in T-accounts. Post the entries in (a) and (b) and
rule and balance the accounts.
(d)Prepare the entries to record (1) the collection of the accrued commission on January
8, (2) payment of the utility bill on January 10, and (3) payment of all the interest due
($4,000) on January 15 .
(e)Post the entries in (d) to the temporary accounts.
(f)What is the interest expense for the month of January 2015?
22) The balance sheet is frequently referred to as
a.an operating statement
b.the statement of financial position
c.the statement of cash flows
d.the statement of owner’s equity
23) Corporations invest excess cash for short periods of time in each of the following
except
a.equity securities
b.highly liquid securities
c.low-risk securities
d.government securities
24) The doubleentry accounting system is the basis of accounting systems
a.worldwide
b.worldwide, except for the U.S
c.in the U.S. only
d.neither internationally nor in the U.S
25) European companies rely
a.less on historical cost and more on fair values than U.S. companies
b.less on fair values and more on historical cost than U.S. companies
c.completely on fair values for financial reporting
d.completely on historical cost for financial reporting
26) Which one of the following is an optional step in the accounting cycle of a business
enterprise?
a.Analyze business transactions
b.Prepare a worksheet
c.Prepare a trial balance
d.Post to the ledger accounts
27) Which of the following would not result in unearned revenue?
a.Rent collected in advance from tenants
b.Services performed on account
c.Sale of season tickets to football games
d.Sale of two-year magazine subscriptions
28) A merchandising company that sells directly to consumers is a
a.retailer
b.wholesaler
c.broker
d.service company
29) Budgeted overhead for Mangini Company at normal capacity of 30,000 direct labor
hours is $6 per hour variable and $4 per hour fixed. In April, $310,000 of overhead was
incurred in working 31,500 hours when 32,000 standard hours were allowed. The
overhead volume variance is
a.$8,000 favorable
b.$11,000 favorable
c.$5,000 favorable
d.$10,000 favorable
30) The current source of “GAAP” in the United States is the
a.Securities Exchange Commission
b.Accounting Principles Board
c.International Accounting Standards Board
d.Financial Accounting Standards Board
31) Which one of the following is a privately held corporation?
a.Intel
b.General Electric
c.Caterpillar Inc
d.Cargill Inc
32) On January 1, 2014, Lark Corporation purchased 35% of the common stock
outstanding of Dinc Corporation for $700,000. During 2014, Dinc Corporation reported
net income of $200,000 and paid cash dividends of $100,000. The balance of the Stock
InvestmentsRun account on the books of Lark Corporation at December 31, 2014 is
a.$700,000
b.$735,000
c.$770,000
d.$665,000
33) Lotz Painting Company has the following production data for March:
Beginning work in process, 3,000 units
Units transferred out, 42,000
Units in ending work in process, 10,000, which are 80% complete for conversion costs
Materials are added only at the beginning of the process.
Instructions
Compute equivalent units of production for both materials and conversion costs.
34) Your friend, Angela, made this comment:
My major is biology and I plan to research for cures for major illnesses. Thus, I have no
need to study accounting.
What is your response to Angela?
35) A prior period adjustment is occasionally reported in company financial statements.
What is a prior period adjustment, and how is it reported in the financial statements?
36) The Assembly Department uses a process cost accounting system and a
weighted-average cost flow assumption. The department adds materials at the
beginning of the process and incurs conversion costs uniformly throughout the process.
During July, $190,000 of materials costs and $136,500 in conversion costs were
charged to the department. The beginning work in process inventory was $103,000 on
July 1, comprised of $80,000 of materials costs and $12,000 of conversion costs.
Other data for the month of July are as follows:
Beginning work in process inventory, 7/125,000 units(40% complete)
Units completed and transferred out90,000 units
Ending work in process inventory, 7/3130,000 units(30% complete)
Instructions
Answer the following questions and show computations to support your answers.
1>How many physical units have to be accounted for in July?
2>What are the equivalent units of production for materials and for conversion costs for
the month of July?
3>What is the total cost assigned to the 90,000 units that were transferred out of the
process in July?
4>What is the total cost of the July 31 inventory?
37) The declining-balance method is an accelerated method of depreciation. Briefly
explain what is meant by an accelerated method of depreciation and justify the choosing
of an accelerated method.
38) The following information is available for Westglow Corporation for the year ended
December 31, 2014:
Corrected overstatement of 2013 depreciation expense$ 15,000
Cost of goods sold700,000
Declared cash dividends50,000
Operating expenses170,000
Other expenses and losses40,000
Other revenues and gains50,000
Sales revenue1,200,000
Tax rate 40%
Instructions
Prepare a corporate income statement in good form.
39) On November 27, the board of directors of Beth Company declared a $.60 per share
dividend. The dividend is payable to shareholders of record on December 7 on
December 24 . Beth has 25,500 shares of $1 par common stock outstanding at
November 27 . Journalize the entries needed on the declaration and payment dates.
40) The following items are taken from the adjusted trial balance of Westley Company
for the month ending July 31, 2014:
Accounts payable$ 2,000
Accounts receivable3,300
Accumulated depreciation equipment8,000
Cash2,600
Depreciation expense2,000
Equipment54,000
Owners capital 7/1/1452,000
Service revenue33,000
Supplies1,200
Prepare the current assets section of Westleys classified balance sheet.
41) The Northeast Regional Division of Union Corp. has been requested to prepare a
quarterly budgeted income statement for 2013 . The regional manager expects that sales
in the first quarter of 2013 will increase by 10% over the same quarter of the preceding
year and will then increase by 5% for each succeeding quarter in 2013 .
The corporate head office has requested that the regional manager maintain an
inventory in dollars equal to 25% of the next quarter’s sales. Quarterly purchases
average 55% of quarterly sales. Budgeted ending inventory on December 31, 2012 is
$176,000. Quarterly salaries are $20,000 plus 5% of sales. All salaries are classified as
sales salaries. Other quarterly expenses are estimated to be as follows:
Rent expense$24,000
Depreciation on office equipment$12,000
Utilities expense$3,600
Miscellaneous expenses2% of sales
The income statement for the first quarter of 2012 was as follows:
Income Statement
For the Quarter Ended March 31, 2012
Sales$720,000
Cost of goods sold 396,000
Gross profit324,000
Operating expenses
Sales salaries$52,000
Rent expense24,000
Depreciation12,000
Utilities3,600
Miscellaneous 12,800
Total operating expenses 104,400
Net income$219,600
Instructions
Prepare a budgeted quarterly income statement in tabular form for the first quarter of
2013 . (Show computations.)
