1) Liabilities of a company are owed to
a.debtors
b.benefactors
c.creditors
d.underwriters
2) Villa Company purchased raw materials for $200,000. If this represents a $5,000
unfavorable price variance, what is the amount debited to Raw Materials Inventory in
the entry that records this acquisition?
a.$195,000
b.$200,000
c.$205,000
d.Either (a) or (b)
3) Cooney Inc. reported net income of $540,000 during 2014 and paid dividends of
$52,000 on common stock. It also has 20,000 shares of 6%, $100 par value preferred
stock outstanding. Common stockholders’ equity was $2,400,000 on January 1, 2014,
and $3,200,000 on December 31, 2014 . The company’s return on common
stockholders’ equity for 2014 is:
a.17.4%
b.15.0%
c.13.1%
d.19.3%
4) Failure to prepare an adjusting entry at the end of a period to record an accrued
revenue would cause
a.net income to be overstated
b.an understatement of assets and an understatement of revenues
c.an understatement of revenues and an understatement of liabilities
d.an understatement of revenues and an overstatement of liabilities
5) IFRS requires loans and receivables to be recorded at
a.amortized cost
b.amortized cost, adjusted for allowances for doubtful accounts
c.unamortized cost
d.unamortized cost, adjusted for allowances for doubtful accounts
6) The lessee must record a lease as an asset if the lease
a.transfers ownership of the property to the lessor
b.contains a purchase option
c.term is 75% or more of the useful life of the leased property
d.payments equal or exceed 90% of the fair value of the leased property
7) Two methods of accounting for uncollectible accounts are the
a.allowance method and the accrual method
b.allowance method and the net realizable method
c.direct write-off method and the accrual method
d.direct write-off method and the allowance method
8) During 2014, Parker Enterprises generated revenues of $90,000. The companys
expenses were as follows: cost of goods sold of $45,000, operating expenses of $18,000
and a loss on the sale of equipment of $3,000.
Yoders income from operations is
a.$18,000
b.$27,000
c.$45,000
d.$90,000
9) Agala Company applies manufacturing overhead based on direct labor hours.
Information concerning manufacturing overhead and labor for the year follows:
Actual manufacturing overhead$86,000
Estimated manufacturing overhead$84,000
Direct labor hours incurred5,800
Direct labor hours estimated6,000
Instructions
Compute (a) the predetermined overhead rate and (b) the amount of applied
manufacturing overhead.
10) A production cost report
a.is prepared for each product
b.is prepared from a job cost sheet
c.will show quantity and cost data for a production department
d.will not identify a specific department if more than one department is involved in the
production process
11) If a corporation issued $3,000,000 in bonds which pay 5% annual interest, what is
the annual net cash cost of this borrowing if the income tax rate is 30%?
a.$3,000,000
b.$45,000
c.$150,000
d.$105,000
12) The financial statements of Hainz Company appear below:
HAINZ COMPANY
Comparative Balance Sheet
December 31,
Assets 2015 2014
Cash$ 20,000$ 40,000
Short-term investments20,00060,000
Accounts receivable (net)40,00030,000
Inventory60,00070,000
Property, plant and equipment (net) 260,000 300,000
Total assets $400,000$500,000
Liabilities and stockholders’ equity
Accounts payable$ 20,000$ 30,000
Short-term notes payable40,00090,000
Bonds payable80,000160,000
Common stock150,000150,000
Retained earnings 110,000 70,000
Total liabilities and stockholders’ equity$400,000$500,000
HAINZ COMPANY
Income Statement
For the Year Ended December 31, 2015
Net sales$400,000
Cost of goods sold 250,000
Gross profit150,000
Expenses
Operating expenses$42,000
Interest expense18,000
Total expenses 60,000
Income before income taxes90,000
Income tax expense 27,000
Net income$ 63,000
Additional information:
a.Cash dividends of $23,000 were declared and paid in 2015 .
b.Weighted-average number of shares of common stock outstanding during 2015 was
30,000 shares.
c.Market value of common stock on December 31, 2015, was $21 per share.
Instructions
Using the financial statements and additional information, compute the following ratios
for Hainz Company for 2015 . Show all computations.
Computations
1>Current ratio _________.
2>Return on common stockholders’ equity _________.
3>Price-earnings ratio _________.
4>Acid-test ratio _________.
5>Accounts receivable turnover _________.
6>Times interest earned _________.
7>Profit margin _________.
8>Days in inventory _________.
9>Payout ratio _________.
10>Return on assets _________.
13) On November 30, capital balances are Ross $300,000, Ellis $250,000 and Gise
$250,000. The income ratios are 20%, 20% and 60%, respectively. Ross decides to
retire from the partnership. The partnership pays Ross $250,000 cash for her partnership
interest. After Rosss retirement, what is the balance of Gises capital account?
a.$220,000
b.$250,000
c.$280,000
d.$287,500
14) On January 1, Browne Inc. issued $5,000,000, 9% bonds for $4,685,000. The
market rate of interest for these bonds is 10%. Interest is payable annually on December
31 . Browne uses the effective-interest method of amortizing bond discount. At the end
of the first year, Greene should report unamortized bond discount of
a.$283,500
b.$296,500
c.$286,650
d.$255,650
15) Which of the following accounts has a normal credit balance?
a.Purchases
b.Sales Returns and Allowances
c.Freight-In
d.Purchase Discounts
16) The cost of debt investments includes each of the following except
a.brokerage fees
b.commissions
c.accrued interest
d.the price paid
17) John and Sam met at law school and decide to start a small law practice after
graduation. They agree to split revenues and expenses evenly. The most common form
of business organization for a business such as this would be a
a.joint venture
b.partnership
c.corporation
d.proprietorship
18) In the month of May, Kijak Company Inc. wrote checks in the amount of $84,000.
In June, checks in the amount of $114,000 were written. In May, $75,000 of these
checks were presented to the bank for payment, and $99,000 in June. What is the
amount of outstanding checks at the end of May?
a.$9,000
b.$15,000
c.$24,000
d.$30,000
19) A liabilityrevenue relationship exists with
a.prepaid expense adjusting entries
b.accrued expense adjusting entries
c.unearned revenue adjusting entries
d.accrued revenue adjusting entries
20) IFRS requires the use of
a.the term balance sheet
b.the term statement of financial position
c.neither balance sheet nor statement of financial position, but recommends use of the
term balance sheet
d.neither balance sheet nor statement of financial position, but recommends use of the
term statement of financial position
IFRS.
21) The bank statement that a depositor receives from the bank includes
a.a designation of which deposits are in transit at the end of the month
b.a designation of which checks are still outstanding at the end of the month
c.notification of amounts deducted by the bank to cover such things as the cost of a
supply of new checks ordered by the depositor
d.notification of errors made by the depositor in recording checks written during the
month in the depositor’s accounts
22) Lending money and collecting the loans are
a.operating activities
b.investing activities
c.financing activities
d.Non-cash investing and financing activities
23) Controls that enhance the accuracy and reliability of the accounting records are
a.automated controls
b.external controls
c.mechanical and electronic controls
d.physical controls
24) Indicate where the purchase of land for cash would appear, if at all, on the indirect
statement of cash flows.
a.Operating activities section
b.Investing activities section
c.Financing activities section
d.Does not represent a cash flow
25) When using a worksheet, adjusting entries are journalized
a.after the worksheet is completed and before financial statements are prepared
b.before the adjustments are entered on to the worksheet
c.after the worksheet is completed and after financial statements have been prepared
d.before the adjusted trial balance is extended to the proper financial statement columns
26) At the break-even point of 2,000 units, variable costs are $50,000, and fixed costs
are $32,000. How much is the selling price per unit?
a.$41
b.$9
c.$16.00
d.$25
27) The worksheet does not show
a.net income or loss for the period
b.revenue and expense account balances
c.the ending balance in the owner’s capital account
d.the trial balance before adjustments
28) The principal accounting record used in assigning costs to jobs is
a.a job cost sheet
b.the cost of goods manufactured schedule
c.the Manufacturing Overhead control account
d.the stores ledger cards
29) The total compensation earned by an employee is called
a.take-home pay
b.net pay
c.net earnings
d.gross earnings
30) The interest charged on a $225,000 note payable, at the rate of 8%, on a 3-month
note would be
a.$18,000
b.$9,000
c.$4,500
d.$3,000
31) The maturity value of a $50,000, 9%, 60-day note receivable dated July 3 is
a.$50,000
b.$50,750
c.$54,500
d.$59,000
32) Hunten Manufacturing assigns overhead based on machine hours. The Milling
Department logs 1,400 machine hours and Cutting Department shows 3,000 machine
hours for the period. If the overhead rate is $5 per machine hour, the entry to assign
overhead will show a
a.debit to Manufacturing Overhead for $22,000
b.credit to Work in ProcessCutting Department for $15,000
c.debit to Work in Process for $15,000
d.credit to Manufacturing Overhead for $22,000
33) Data concerning manufacturing overhead for Analina Industries are presented
below. The Mixing Department is a cost center.
An analysis of the overhead costs reveals that all variable costs are controllable by the
manager of the Mixing Department and that 50% of supervisory costs are controllable
at the department level.
The flexible budget formula and the cost and activity for the months of June and July
are as follows:
Flexible Budget Per
Direct Labor Hour Actual Costs and Activity
June July
Direct labor hours6,0007,000
Overhead costs
Variable
Indirect materials$3.50$ 20,500$ 25,100
Indirect labor6.0039,50040,700
Factory supplies 1.007,6008,200
Fixed
Depreciation$20,00015,00015,000
Supervision25,00024,00026,000
Property taxes 10,000 12,000 12,000
Total costs$118,600$127,000
Instructions
(a)Prepare the responsibility reports for the Mixing Department for each month.
(b)Comment on the manager’s performance in controlling costs during the two month
period.
34) Torm’e Company applies overhead on the basis of 130% of direct labor cost. Job
No. 190 is charged with $140,000 of direct materials costs and $208,000 of
manufacturing overhead. The total manufacturing costs for Job No. 190 is
a.$348,000
b.$618,000
c.$410,400
d.$508,000
35) Mystique Manufacturing Company has the following data:
Direct labor $96,000
Direct materials used85,000
Total manufacturing overhead65,000
Ending work in process35,000
Beginning work in process48,000
Instructions
Compute (a) total manufacturing costs and (b) cost of goods manufactured.
36) Which one of the following affects cash during a period?
a.Recording depreciation expense
b.Declaration of a cash dividend
c.Write-off of an uncollectible account receivable
d.Payment of an accounts payable
37) The following information is available for McGyver Company:
Beginning Inventory$ 100,000
Cost of Goods Sold720,000
Ending Inventory140,000
Net Sales1,350,000
Inventory turnover for the year is:
a.5.1 times
b.7.2 times
c.9.6 times
d.6.0 times
38) Which one of the following describes the total overhead variance?
a.The difference between what was actually incurred and the flexible budget amount
b.The difference between what was actually incurred and overhead applied
c.The difference between the overhead applied and the flexible budget amount
d.The difference between what was actually incurred and the total production budget
39) Fine Boat Company often requires customers to sign promissory notes for major
credit purchases. Journalize the following transactions for Fine Boat Company.
Feb.12Accepted a $25,000, 6%, 60-day note from Bob Yates for a 24-foot motorboat
built to his specifications.
April14Received notification from Bob Yates that he was unable to honor his
promissory note but that he expects to pay the amount owed in May.
May26Received a check from Bob Yates for the total amount owed.
June10Received notification by the bank that Bob Yates check was being returned
“NSF” and that Mr. Yates had declared personal bankruptcy.
40) Jim Coleman, Jr. was appointed the manager of Maris Properties, a recently formed
company that manages residential rental properties. Linda Grider is the accountant. She
prepared a chart of accounts based on an analysis of the expenditures of the company.
One of the largest expense categories is Travel and Entertainment. Mr. Coleman
believes that it is important to maintain a presence in the social life of the city. In this,
he sharply differs from his father, Jim Coleman, Sr. The elder Mr. Coleman has set up
Maris Properties in order to test his son’s management skills before allowing him to
manage the more lucrative commercial property business. Mr. Coleman, Sr. provided
the capital for Maris, and maintains close contact with the company. He allowed his
son, however, to hire his own employees.
Mr. Coleman has asked Ms. Grider to change the name of the Travel and Entertainment
account to Property Development. He hopes to deflect his father’s attention away from
the amount he has spent on travel and entertainment until he has proven that his
methods work. When Ms. Grider resisted, he reminded her that he, not his father, hired
her. He also reminded her that she had been enthusiastic about his business plans when
she was hired.
Required:
1>Who are the stakeholders in this situation?
2>Should Ms. Grider agree to the change in the Travel and Entertainment account to
Property Development? Explain.
41) At the end of an accounting period, if the fair value of the trading portfolio is less
than its cost, then the company should recognize an ______________ which is reported
on the _________________.
42) Garner Supply Company reports net income of $120,000 in 2014. The ending
inventory did not include goods valued at $7,000 that Garner had consigned to Sharifs
Gift Shop.
(1)What is the correct net income for 2014?
(2)What impact will this error have on the balance sheet at 12/31/14?
43) Selected information from the comparative financial statements of Fava Company
for the year ended December 31, appears below:
2015 2014
Accounts receivable (net)$ 180,000$200,000
Inventory140,000160,000
Total assets1,200,000800,000
Current liabilities140,000110,000
Long-term debt400,000300,000
Net credit sales1,330,000700,000
Cost of goods sold900,000530,000
Interest expense50,00025,000
Income tax expense60,00029,000
Net income150,00085,000
Instructions
Answer the following questions relating to the year ended December 31, 2015 . Show
computations.
1>Inventory turnover for 2015 is __________.
2>Times interest earned in 2015 is __________.
3>The debt to assets ratio for 2015 is __________.
4>Accounts receivable turnover for 2015 is __________.
5>Return on assets for 2015 is __________.
44) A method of amortizing bond discount or premium that allocates an equal amount
each period is the ________________ method.