1) The matching concept requires expenses be recorded in the same period that the
related revenue is recorded.
2) To determine the balance in a prepaid expense account, subtract credits from debits.
3) The amortization of a premium on bonds payable decreases bond interest expense.
4) The process of measuring and reporting operating data by areas of responsibility is
termed responsibility accounting.
5) The work sheet and the financial statements both require dollar signs.
6) On a common-sized income statement, all items are stated as a percent of total assets
or equities at year-end.
7) If the cost of materials is not a significant portion of the total product cost, the
materials may be classified as part of factory overhead cost.
8) The post reference notation used in the ledger is the account number.
9) Hill Co. can further process Product O to produce Product P. Product O is currently
selling for $60 per pound and costs $42 per pound to produce. Product P would sell for
$82 per pound and would require an additional cost of $13 per pound to produce.
The differential cost of producing Product P is $55 per pound.
10) When using the analysis of receivables method for estimating uncollectible
receivables, the amount computed in the analysis is usually the amount that would be
recorded in the end-of-period adjusting entry.
11) Liabilities are increased with debits and decreased with credits.
12) In a service firm, it may be necessary to have several activity bases to properly
match the change in costs with the changes in various activities.
13) Estimated activity-base usage quantities are the total activity-base quantities related
to each product.
14) Title to merchandise shipped FOB shipping point passes to the buyer upon delivery
of the merchandise to the buyer’s place of business.
15) In a just-in-time (JIT) environment, operations only respond to customer orders.
16) Under the direct write-off method of accounting for uncollectible accounts, Bad
Debts Expense is debited
A.at the end of each accounting period
B.when a credit sale is past due
C.whenever a pre-determined amount of credit sales have been made
D.when an account is determined to be worthless
17) Free cash flow is cash from operations, less cash for
A.dividends and cash for fixed assets needed to maintain productivity
B.dividends and cash to redeem bonds payable
C.fixed assets needed to maintain productivity
D.fixed assets needed to maintain productivity, and cash to redeem bonds payable
18) The following data is given for the Bahia Company:
Overhead is applied on standard labor hours.
The factory overhead volume variance is:
A.$65U
B.$65F
C.$540U
D.$540F
19) Which of the following should be deducted from net income in calculating net cash
flow from operating activities using the indirect method?
A.depreciation expense
B.gain on sale of land
C.a loss on the sale of equipment
D.dividends declared and paid
20) Jay Company uses the total cost concept of applying the cost-plus approach to
product pricing. The costs and expenses of producing and selling 38,400 units of
Product E are as follows:
Jay desires a profit equal to a 14% rate of return on invested assets of $640,000.
(a) Determine the amount of desired profit from the production and sale of Product E.
(b) Determine the total costs and the cost amount per unit for the production and sale of
38,400 units of Product E.
(c) Determine the markup percentage for Product E.
(d) Determine the selling price of Product E.
21) By converting dollars to be received in the future into current dollars, the present
value methods take into consideration that money:
A.has an international rate of exchange
B.is the language of business
C.is the measure of assets, liabilities, and stockholders’ equity on financial statements
D.has a time value
22) A machine with a cost of $75,000 has an estimated residual value of $5,000 and an
estimated life of 4 years or 18,000 hours. What is the amount of depreciation for the
second full year, using the double declining-balance method?
A.$17,500
B.$37,500
C.$18,750
D.$16,667
23) Inventory costing methods place primary emphasis on assumptions about
A.flow of goods
B.flow of costs
C.flow of goods or flow of costs depending on the method
D.neither flow of goods or flow of costs
24) Materials used by Jefferson Company in producing Division C’s product are
currently purchased from outside suppliers at a cost of $10 per unit. However, the same
materials are available from Division A. Division A has unused capacity and can
produce the materials needed by Division C at a variable cost of $8.50 per unit. A
transfer price of $9.50 per unit is negotiated and 25,000 units of material are
transferred, with no reduction in Division A’s current sales.
How much would Division A’s income from operations increase?
A.$0
B.$75,000
C.$25,000
D.$50,000
25) A capital expenditure results in a debit to
A.an expense account
B.a capital account
C.a liability account
D.an asset account
26) The profit margin for Atlantic Division is 28% and the investment turnover is 2.8.
What is the rate of return on investment for Atlantic Division?
A.20%
B.28%
C.14%
D.78.4%
27) A fixed asset with a cost of $41,000 and accumulated depreciation of $36,000 is
traded for a similar asset priced at $50,000. Assuming a trade-in allowance of $4,000,
the cost basis of the new asset is
A.$54,000
B.$45,000
C.$51,000
D.$50,000
28) Which of the following errors would cause the trial balance totals to be unequal?
A.A transaction was not posted
B.A payment of $67 for insurance was posted as a debit of $76 to Prepaid Insurance and
a credit of $76 to Cash
C.A payment of $4,450 to a creditor was posted as a debit of $4,500 to Accounts
Payable and a credit of $450 to Accounts Receivable
D.Cash received from customers on account was posted as a debit of $720 to Cash and
a credit of $720 to Accounts Payable
29) Which of the following conditions would cause the break-even point to increase?
A.Total fixed costs decrease
B.Unit selling price increases
C.Unit variable cost decreases
D.Unit variable cost increases
30) A characteristic of a fixed asset is that it is
A.intangible
B.used in the operations of a business
C.held for sale in the ordinary course of the business
D.a short-term investment
31) Increases and decreases in various types of accounts are listed below. In each case,
indicate by “Dr.” or “Cr.” (a) whether the change in the account would be recorded as a
debit or a credit and (b) whether the normal balance of the account is a debit or a credit.
32) When a company changes from one acceptable accounting method to another, the
change is reported
A.in the statement of retained earnings, as a correction to the beginning balance
B.in the income statement, below income from continuing operations
C.in the income statement, above income from continuing operations
D.through a retroactive restatement of prior period earnings
33) Mandy Corporation sells a single product. Budgeted sales for the year are
anticipated to be 640,000 units, estimated beginning inventory is 98,000 units, and
desired ending inventory is 80,000 units. The quantities of direct materials expected to
be used for each unit of finished product are given below.
Material A .50 lb. per unit @ $ .60 per pound
Material B 1.00 lb. per unit @ $1.70 per pound
Material C 1.20 lb. per unit @ $1.00 per pound
The dollar amount of direct material C used in production during the year is:
A.$746,400
B.$724,800
C.$824,400
D.$758,160
34) If the direct write-off method of accounting for uncollectible receivables is used,
what general ledger account is debited to write off a customer’s account as
uncollectible?
A.Uncollectible Accounts Receivable
B.Accounts Receivable
C.Allowance for Doubtful Accounts
D.Bad Debts Expense
35) On January 1, 2014, the Horton Corporation issued 10% bonds with a face value of
$200,000. The bonds are sold for $192,000. The bonds pay interest semiannually on
June 30 and December 31 and the maturity date is December 31, 2018. Horton records
straight-line amortization of the bond discount. The bond interest expense for the year
ended December 31, 2014, is
A.$10,800
B.$18,400
C.$21,600
D.$28,000
36) The actual price for a product was $50 per unit, while the planned price was $44 per
unit. The volume increased by 4,000 to 60,000 total units. Determine (a) the quantity
factor and (b) the price factor for sales.
37) Factors contributing to a decline in the usefulness of a fixed asset may be divided
into the following two categories
A.salvage and functional
B.physical and functional
C.residual and salvage
D.functional and residual
38) Two methods of accounting for uncollectible accounts are the
A.direct write-off method and the allowance method
B.allowance method and the accrual method
C.allowance method and the net realizable method
D.direct write-off method and the accrual method
39) An entity that is organized according to state or federal statutes and in which
ownership is divided into shares of stock is a
A.proprietorship
B.corporation
C.partnership
D.governmental unit
40) Contractors who sell to government agencies would be most likely to use which of
the following cost concepts in pricing their products?
A.Variable cost
B.Product cost
C.Total cost
D.Fixed cost
41) Identify which of the following accounts appear on a balance sheet.
(a) Cash
(b) Fees Earned
(c) Capital Stock
(d) Wages Payable
(e) Rent Expense
(f) Prepaid Advertising
(g) Land
42) Which account would not appear in the Balance Sheet columns of the work sheet?
A.Dividends
B.Rent Earned
C.Unearned Revenue
D.Dividends and Unearned Revenue
43) The cost per equivalent units of direct materials and conversion in the Bottling
Department of Beverages on Jolt Company is $.47 and $.15, respectively. The
equivalent units to be assigned costs are as follows.
The beginning work in process inventory had a cost of $3,500. Determine the cost of
completed and transferred out production, and the ending work in process inventory.
44) Define and discuss the two main types of cost accounting systems for
manufacturing operations. What are their similarities and differences?
45) Aqua Construction installs swimming pools. They calculate that warranty
obligations are 5% of gross sales. For the year just ending Aquas gross sales were
$1,500,000. Due to previous quarter recognitions, the Warranty Liability account has a
credit balance of $48,700. Determine the years total warranty liability and journalize
any necessary value to establish the years liability at December 31st.
Due to sales, $1,500,000, warranty liability is $75,000 ($1,500,000 5%) . Since $48,700
has already been recognized, $26,300 ($75,000 – $48,700) must still be recognized.
46) The Magnolia Company Division A has income from operations of $80,000 and
assets of $400,000. The minimum acceptable rate of return on assets is 12%. What is
the residual income for the division?
47) (1) Discuss factors contributing to the trend to fair value accounting.
(2) What are some of the disadvantages associated with using fair value?
48) The board of directors declared cash dividends total $168,000 during 2014. The
comparative balance sheet indicated dividends payable of $46,000 at the beginning of
the year and $42,000 at the end of the year. What was the amount of cash payment to
stockholders during the year?
49) The accountant for Franklin Company prepared the following list of account
balances from the companys records for the year ended December 31, 2011:
Determine the total liabilities at the end of 2011 for Franklin Company.
50) On July 1 of the current year, the assets and liabilities of Wong Company are as
follows: Cash, $27,000; Accounts Receivable, $12,300; Supplies, $3,100; Land,
$35,000; Accounts Payable, $13,900. What is the amount of stockholders equity as of
July 1 of the current year?
51) Journalize the entries to record the following selected bond investment transactions
for Southwest Bank:
52) The following items may appear on a bank statement:
Indicate whether the item would appear as debit or credit memo on the bank statement
and whether the item would increase or decrease the balance of your account. Use the
following format: