1) Internal control is defined, in part, as a plan that safeguards
a.all balance sheet accounts
b.assets
c.liabilities
d.capital stock
2) The per share amount normally assigned by the board of directors to a small stock
dividend is
a.the market value of the stock on the date of declaration
b.the average price paid by stockholders on outstanding shares
c.the par or stated value of the stock
d.zero
3) Which of the following is reported in the retained earnings statement as an
adjustment to the beginning balance?
a.Extraordinary items
b.Discontinued operations
c.Other revenues and expenses
d.Prior period adjustments
4) The following monthly data are available for Hepburn, Inc. which produces only one
product: Selling price per unit, $42; Unit variable expenses, $14; Total fixed expenses,
$84,000; Actual sales for the month of June, 4,000 units. How much is the margin of
safety for the company for June?
a.$84,000
b.$42,000
c.$126,000
d.$1,000
5) If errors occur in the recording process, they
a.should be corrected as adjustments at the end of the period
b.should be corrected as soon as they are discovered
c.should be corrected when preparing closing entries
d.cannot be corrected until the next accounting period
6) Which of the following is not a financial budget?
a.Capital expenditure budget
b.Cash budget
c.Manufacturing overhead budget
d.Budgeted balance sheet
7) Ellis Corporation had net income of $500,000 and paid dividends of $100,000 to
common stockholders and $20,000 to preferred stockholders in 2014 . Ellis
Corporations common stockholders equity at the beginning and end of 2014 was
$1,740,000 and $2,260,000, respectively. There are 400,000 weighted-average shares of
common stock outstanding.
Ellis Corporations earnings per share for 2014 was
a.$6.20
b.$1.20
c.$1.25
d.$5.00
8) Jill and Smita have partnership capital account balances of $1,056,000 and $792,000,
respectively and share profits and losses equally. Sierra is admitted to the partnership by
investing $440,000 for a one-fourth ownership interest. The balance of Smitas Capital
account after Sierra is admitted is
a.$726,000
b.$792,000
c.$858,000
d.$572,000
9) Which of the following statements is false?
a.A standard cost is more accurate than a budgeted cost
b.A standard is a unit amount
c.In concept, standards and budgets are essentially the same
d.The standard cost of a product is equivalent to the budgeted cost per unit of product
10) The trial balances of Orton Company follow with the accounts arranged in
alphabetic order. Analyze the data and prepare (a) the adjusting entries and (b) the
closing entries made by Orton Company.
Trial Balances
UnadjustedAdjustedPost-Closing
Accounts Payable$10,000$10,000$10,000
Accounts Receivable2,2003,2003,200
Accumulated DepreciationEquipment13,00017,00017,000
Advertising Expense016,3000
Cash60,00060,00060,000
Depreciation Expense04,0000
Equipment75,00075,00075,000
Owners Capital82,20082,200102,400
Owners Drawings11,00011,0000
Prepaid Advertising17,8001,5001,500
Prepaid Rent15,00011,00011,000
Rent Expense04,0000
Service Revenue96,000105,0000
Supplies3,200700700
Supplies Expense2,0004,5000
Unearned Service Revenue23,00015,00015,000
Salaries and Wages Expense38,00045,0000
Salaries and Wages Payable07,0007,000
11) Jason Gomi has worked 44 hours this week. He worked in excess of 8 hours each
day. His regular hourly wage is $9 per hour. What are Jason’s gross wages for the week?
(The company Jan works for is in compliance with the Fair Labor Standards Act.)
a.$396
b.$414
c.$594
d.$432
12) Gains on an exchange of plant assets that has commercial substance are
a.deducted from the cost of the new asset acquired
b.deferred
c.not possible
d.recognized immediately
13) Within the relevant range, the variable cost per unit
a.differs at each activity level
b.remains constant at each activity level
c.increases as production increases
d.decreases as production increases
14) During September, the capital expenditure budget indicates a $280,000 purchase of
equipment. The ending September cash balance from operations is budgeted to be
$40,000. The company wants to maintain a minimum cash balance of $20,000. What is
the minimum cash loan that must be planned to be borrowed from the bank during
September?
a.$220,000
b.$240,000
c.$260,000
d.$300,000
15) Two bases for estimating uncollectible accounts are:
a.percentage of assets and percentage of sales
b.percentage of receivables and percentage of total revenue
c.percentage of current assets and percentage of sales
d.percentage of receivables and percentage of sales
16) The IASB and FASB are working on a converged statement of financial position
using the headings of
a.assets, liabilities, and owner’s equity
b.revenues and expenses
c.assets, liabilities, revenues, expenses and owner’s equity
d.operating, investing, and financing
17) A managerial accountant
1>does not participate in the standard setting process.
2>provides knowledge of cost behaviors in the standard setting process.
3>provides input of historical costs to the standard setting process.
a.only 1
b.only 2
c.only 3
d.both 2 and 3
18) Which of the following is not true of ordinary repairs?
a.They primarily benefit the current accounting period
b.They can be referred to as revenue expenditures
c.They maintain the expected productive life of the asset
d.They increase the productive capacity of the asset
19) Financial and managerial accounting are similar in that both
a.have the same primary users
b.produce general-purpose reports
c.have reports that are prepared quarterly and annually
d.deal with the economic events of an enterprise
20) In most companies, current liabilities are paid within
a.one year through the creation of other current liabilities
b.the operating cycle through the creation of other current liabilities
c.one year or the operating cycle out of current assets
d.the operating cycle out of current assets
21) On August 1, 2014, a company borrowed cash and signed a one-year
interest-bearing note on which both the face value and interest are payable on August 1,
2015 . How will the note payable and the related interest be classified in the December
31, 2014, balance sheet?
Note PayableInterest Payable
a.Current liabilityNoncurrent liability
b.Noncurrent liabilityCurrent liability
c.Current liabilityCurrent liability
d.Noncurrent liabilityNot shown
22) On November 2, 2014, Kasdan Company has cash sales of $6,000 from
merchandise having a cost of $3,600. The entries to record the day’s cash sales will
include:
a.a $3,600 credit to Cost of Goods Sold
b.a $6,000 credit to Cash
c.a $3,600 credit to Inventory
da $6,000 debit to Accounts Receivable
23) A trial balance is a listing of
a.transactions in a journal
b.the chart of accounts
c.general ledger accounts and balances
d.the totals from the journal pages
24) The first required step in the accounting cycle is
a.reversing entries
b.journalizing transactions in the book of original entry
c.analyzing transactions
d.posting transactions
25) A company shows a balance in Salaries and Wages Payable of $38,000 at the end of
the month. The next payroll amounting to $48,000 is to be paid in the following month.
What will be the journal entry to record the payment of salaries?
a.Salaries and Wages Expense48,000
Salaries and Wages Payable48,000
b.Salaries and Wages Expense48,000
Cash48,000
c.Salaries and Wages Expense10,000
Cash10,000
d.Salaries and Wages Expense10,000
Salaries and Wages Payable38,000
Cash48,000
26) Match the items below by entering the appropriate code letter in the space provided.
A.BudgetF.Production budget
B.Financial budgetsG.Cash budget
C.Budget committeeH.Long-range planning
D.Master budgetI.Direct materials budget
E.Sales forecastJ.Sales budget
____1>A selection of strategies to achieve long-term goals.
____2>An estimate of expected sales for the budget period.
____3>Budgets that indicate the cash resources needed for expected operations and
planned capital expenditures.
____4>The projection of potential sales for the industry and the company’s expected
share of such sales.
____5>Management’s plans expressed in financial terms for a specified future time
period.
____6>A projection of anticipated cash flows.
____7>A group responsible for coordinating the preparation of the budget.
____8>A projection of production requirements to meet expected sales.
____9>A set of interrelated budgets that constitute a plan of action for a specified time
period.
____10>An estimate of the quantity and cost of direct materials to be purchased.
27) A company purchases a remote site building for computer operations. The building
will be suitable for operations after some expenditures. The wiring must be replaced to
computer specifications. The roof is leaky and must be replaced. All rooms must be
repainted and recarpeted and there will also be some plumbing work done. Which of the
following statements is true?
a.The cost of the building will not include the repainting and recarpeting costs
b.The cost of the building will include the cost of replacing the roof
c.The cost of the building is the purchase price of the building, while the additional
expenditures are all capitalized as Building Improvements
d.The wiring is part of the computer costs, not the building cost
28) In preparing a bank reconciliation, outstanding checks are
a.added to the balance per bank
b.deducted from the balance per books
c.added to the balance per books
d.deducted from the balance per bank
29) Cody Industries owns 35% of Macarthy Company. For the current year, Macarthy
reports net income of $250,000 and declares and pays a $60,000 cash dividend. Which
of the following correctly presents the journal entries to record Cody’s equity in
Macarthy’s net income and the receipt of dividends from Macarthy?
a.Dec. 31Stock Investments 87,500
Revenue from Stock Investments . 87,500
Dec. 31Cash 21,000
Stock Investments 21,000
b.Dec. 31Stock Investments 87,500
Revenue from Stock Investments . 87,500
Dec. 31Cash 60,000
Stock Investments 60,000
c.Dec. 31Stock Investments 66,500
Revenue from Stock Investments 66,500
d.Dec. 31Revenue from Stock Investments . 87,500
Stock Investments 87,500
Dec. 31Stock Investments 21,000
Cash 21,000
30) Assuming that there is a net loss for the period, debits equal credits in all but which
section of the worksheet?
a.Income statement columns
b.Adjustments columns
c.Trial balance columns
d.Adjusted trial balance columns
31) Which of the following statements about liabilities in incorrect?
Companies sometimes show
a.liabilities before assets
b.long-term liabilities before current assets
c.current liabilities netted against current assets
d.liabilities in order of magnitude
32) Which of the following is not another name for the term manufacturing overhead?
a.Factory overhead
b.Pervasive costs
c.Burden
d.Indirect manufacturing costs
33) The financial statement columns of the worksheet for Booer Company as of
December 31, 2014 are as follows:
BOOER COMPANY
Worksheet
For the Year Ended December 31, 2014
Income Statement Balance Sheet
Accounts Debit Credit Debit Credit
Cash8,000
Accounts Receivable26,000
Supplies4,500
Prepaid Insurance7,000
Equipment41,000
Accumulated DepreciationEquipment4,800
Patents7,500
Accounts Payable22,200
Notes Payable (due 2018)20,000
Owners Capital43,300
Owners Drawings4,200
Service Revenue26,400
Salaries and Wages Expense5,200
Depreciation Expense4,800
Insurance Expense5,000
Interest Expense 3,500
Totals18,50026,40098,20090,300
Net Income 7,900 7,900
26,40026,40098,200 98,200
Instructions
Prepare a classified balance sheet for Booer Company.
34) Christoph Company uses the periodic inventory method and had the following
inventory information available for the month of March.
DateTransactionUnitsUnit Cost
3/1Beginning inventory100$2
3/5Purchase No. 1200$3
3/12Sale No. 1150
3/18Purchase No. 2200$3.5
3/25Sale No. 2250
3/30Purchase No. 3100$4
A physical count of units on March 31 revealed that 200 units were on hand.
Instructions: Answer the following independent questions and show computations
supporting your answers.
1>Assume that the company uses the average cost method. What is the dollar value of
the ending inventory on March 31?
2>Assume that the company uses the LIFO inventory method. What is the dollar value
of the cost of goods sold during March?
3>Assume that the company uses the FIFO inventory method. The dollar value of the
ending inventory on March 31 is:
35) The use of budgets in controlling operations is known as ________________.
36) Compute the net income for 2014 based on the following amounts presented on the
adjusted trial balance of D-Lay Company.
Accumulated Depreciation Equip.$20,000
Depreciation Expense18,000
Salaries and Wages Expense15,000
Service Revenue40,000
Unearned Service Revenue8,000
37) Gray Company uses the periodic inventory system to account for inventories.
Information related to Gray Company’s inventory at October 31 is given below:
October1Beginning inventory400units @ $9.80 =$ 3,920
8Purchase800units @ $10.40 =8,320
16Purchase600units @ $10.80 =6,480
24Purchase 200units @ $11.80 = 2,360
Total units and cost2,000units$21,080
Instructions
1>Show computations to value the ending inventory using the FIFO cost assumption if
550 units remain on hand at October 31 .
2>Show computations to value the ending inventory using the weighted-average cost
method if 550 units remain on hand at October 31 .
3>Show computations to value the ending inventory using the LIFO cost assumption if
550 units remain on hand at October 31 .
38) Harve Reardon, the CEO of Mythic Products, is a successful entrepreneur but a
poor student of accounting. He asks you to explain to him, in a memo, the bases of
comparison for ratio analysis.