1) Differential analysis can aid management in making decisions on a variety of
alternatives, including whether to discontinue an unprofitable segment and whether to
replace fixed assets.
2) Fixed assets are reported at their book value on the balance sheet.
3) To determine cash payments for operating expenses for the cash flow statement using
the direct method, depreciation expense is added to net income.
4) Liabilities that are due and payable beyond one year or paid out of noncurrent assets
are termed long-term liabilities.
5) Ratios and various other analytical measures are not a substitute for sound judgment,
nor do they provide definitive guides for action.
6) When evaluating a proposal by use of the net present value method, if the present
value is less than the amount to be invested, the rate of return on the proposal is more
than the rate used in the analysis.
7) By using the rate of return on investment as a divisional performance measure,
divisional managers will always be motivated to invest in proposals that will increase
the overall rate of return for the company.
8) If 20,000 shares are authorized, 15,000 shares are issued, and 500 shares are
reacquired, the number of outstanding shares is 19,500.
9) The product cost concept includes all manufacturing costs in the cost amount to
which the markup is added to determine product price.
10) For efficiency of operations and better control over cash, a company should
maintain only one bank account.
11) Flexible budgeting builds the effect of changes in level of activity into the budget
system.
12) A voucher is the notification accompanying the check issued to a creditor that
indicates the specific invoice being paid.
13) The bank reconciles its statement to the depositor’s records.
14) When merchandise that was sold is returned, the seller decreases accounts payable.
15) The basic financial statements do not include the:
A.income statement
B.tax return
C.balance sheet
D.statement of cash flows
16) Sometimes a(n) _____ is offered to buyers as a means of encouraging them to pay
before the end of the credit period.
A.accounts receivable
B.credit card
C.sales discount
D.cash sale
17) Job order costing and process costing are:
A.pricing systems
B.cost accounting systems
C.cost flow systems
D.inventory tracking systems
18) Below is budgeted production and sales information for Cooper Cans, Inc. for the
month of March:
The unit selling price for aluminum cans is $0.10 and for tin cans is $0.15.
Refer to the information provided for Cooper Cans Inc. Budgeted sales for the month
are:
A.$63,000
B.$62,750
C.$63,250
D.$66,450
19) To measure depreciation, all of the following must be known except:
A.market value of asset
B.residual value of asset
C.cost of asset
D.estimated life of asset
20) Below is budgeted production and sales information for Cooper Cans, Inc. for the
month of March:
The unit selling price for aluminum cans is $0.10 and for tin cans is $0.15.
Refer to the information provided for Cooper Cans Inc. Budgeted production for
aluminum cans during the month is:
A.476,000 units
B.484,000 units
C.480,000 units
D.504,000 units
21) The framework that has become widely accepted as the standard by which
companies design, analyze, and evaluate internal controls is the:
A.Internal Control – Integrated Framework by the Committee of Sponsoring
Organizations
B.Internal Control – Integrated Framework by the Congress of Special Offerings
C.Internal Control Localized Structure by the Committee of Sponsoring Organizations
D.Internal Control Localized Structure by the Congress of Special Offerings
22) Office salaries, depreciation of office equipment, and office supplies are examples
of what type of expense?
A.Selling expense
B.Miscellaneous expense
C.Administrative expense
D.Other expense
23) If a business had a capacity of $10,000,000 of sales, actual sales were $6,000,000,
break-even sales was $4,500,000, fixed costs amounted to $1,800,000, and variable
costs amounted to 60% of sales, what is the margin of safety expressed as a percentage
of sales?
A.25%
B.18%
C.33.3%
D.15%
24) In job order cost accounting system used by a service business, which of the
following items would normally not be included as part of overhead?
A.Materials
B.Direct labor
C.Rent
D.Supplies
25) Which of the following would be subtracted from gross profit to determine
operating income?
A.Operating expenses
B.Other expenses
C.Income taxes
D.All of these
26) Given the following costs and activity observations for Pike Companys utilities, use
the high-low method to calculate Pike Companys variable utilities costs per machine
hour.
A.$0.10
B.$0.19
C.$0.21
D.$0.27
27) The Harold Company forecasts that total overhead for the current year will be
$12,000,000 and total machine hours will be 200,000 hours. However, the actual
overhead is $4,000,000 and the actual machine hours are 100,000 hours. If the company
uses a predetermined overhead rate based on machine hours for applying overhead, the
overhead will be:
A.overapplied by $2,000,000
B.underapplied by $2,000,000
C.overapplied by $4,000,000
D.underapplied by $4,000,000
28) For EFG Co., the transaction “cash sales to customers at a profit” would:
A.increase total assets
B.decrease total assets
C.have no effect on total assets
D.decrease stockholders equity
29) The balance in the office supplies account on June 1 was $5,200, supplies
purchased during June were $2,500, and the supplies on hand at June 30 were $1,500.
The amount to be used for the appropriate adjusting entry is:
A.$6,700
B.$2,500
C.$9,200
D.$6,200
30) Benjamin Corporation began its operations on September 1 of the current year.
Budgeted sales for the first three months of business are $250,000, $300,000, and
$420,000, respectively, for September, October, and November. The company expects
to sell 20% of its merchandise for cash. Of sales on account, 70% are expected to be
collected in the month of the sale, 25% in the month following the sale, and the
remainder in the following month.
Refer to the information provided for Benjamin Corporation. The cash collections from
accounts receivable in October are:
A.$270,000
B.$272,500
C.$210,000
D.$218,000
31) Production estimates for July are as follows:
For each unit produced 3 hours of direct labor is required. The labor rate per hour is
$12. The number of direct labor hours required for July production is:
A.24,000
B.21,600
C.22,800
D.25,950
32) If merchandise inventory is being valued at cost and the price level is steadily
rising, the method of costing that will yield the highest net income is:
A.average cost
B.LIFO
C.FIFO
D.All methods will generate the same net income
33) Which of the following is considered an asset until consumed?
A.Accounts payable
B.Prepaid expense
C.Accounts receivable
D.Stockholders’ equity
34) Under the indirect method for preparing the statement of cash flows, decreases in
current assets are _____ net income in the cash flows from operating activities section.
A.subtracted from
B.added to
C.not used in calculating
D.cannot tell from the information given
35) A fixed asset with a cost of $30,000 and accumulated depreciation of $25,000 is
sold for $3,500. What is the amount of gain or loss on disposal of the fixed asset?
A.$2,500 loss
B.$1,500 loss
C.$2,500 gain
D.$1,500 gain
36) A summary of changes in the earnings retained by the corporation for a specific
period of time is known as a(n):
A.income statement
B.balance sheet
C.statement of cash flows
D.retained earnings statement
37) Since merchandise inventory is normally sold within a year, how is it reported on
the balance sheet?
A.As a revenue
B.As the cost of merchandise sold
C.It does not appear on the Balance Sheet
D.As a current asset
38) Rush Corporation borrowed $25,000 from the bank. Which of the following
accurately shows the effects of the transaction?
A.Increase cash $25,000 and decrease notes payable $25,000
B.Increase cash $25,000 and increase notes payable $25,000
C.Decrease cash $25,000 and decrease notes payable $25,000
D.Decrease cash $25,000 and increase notes payable $25,000
39) A company acquired a truck for $79,000 at the beginning of the fiscal year. It has a
useful life of 5 years and a residual value of $9,000. The company uses the straight-line
method of depreciation. After owning the truck for two years, the company sold it for
$34,000. (a) Determine depreciation expense for each of the first two years, and (b)
determine the gain or loss resulting from the sale.
40) Most employers are required to withhold from employees for:
A.both federal and state unemployment compensation
B.only federal unemployment compensation tax
C.only federal income tax
D.only state unemployment compensation tax
41) Prior to the last weekly payroll period of the calendar year, the cumulative earnings
of employees A and B are $106,150 and $91,000, respectively. Their earnings for the
last completed payroll period of the year are $850 each. Social security tax rate is 6%
on maximum of $106,800. All earnings are subject to Medicare tax of 1.5%. Assuming
that the payroll will be paid on December 29, what will be the employer’s total FICA
tax for this payroll period on the two salary amounts of $850 each?
A.$127.50
B.$115.50
C.$76.50
D.$63.75
42) Production and sales estimates for June are as follows:
The number of units expected to be manufactured in June is:
A.10,000
B.12,000
C.13,000
D.12,500
43) Accompanying the bank statement was a debit memorandum for bank service
charges. What adjustment is required in the depositor’s accounts?
A.Increase Miscellaneous Expense; decrease Cash
B.Increase Cash; increase Other Income
C.Increase Cash; increase Accounts Payable
D.Decrease Accounts Payable; decrease Cash
44) Which of the following is an example of direct materials cost for an automobile
manufacturer?
A.Cost of oil lubricants for factory machinery
B.Cost of wages of assembly worker
C.Varnish for coating
D.Cost of interior upholstery
45) Income from operations for Division B is $150,000, total service department
charges are $400,000, and operating expenses are $2,266,000. What are the revenues
for Division B?
A.$2,416,000
B.$2,016,000
C.$2,666,000
D.$2,816,000
46) XYZ Co. paid $1,000 in dividends to stockholders. How does this transaction affect
the accounts of XYZ?
A.Cash will decrease by $1,000 and retained earnings will decrease by $1,000
B.Cash will decrease by $1,000 and expenses will increase $1,000
C.Cash will decrease by $1,000 and revenues will decrease $1,000
D.Net income will decrease by $1,000
47) A company with working capital of $500,000 and a current ratio of 2.25 pays a
$100,000 short-term liability. The amount of working capital immediately after
payment is:
A.$600,000
B.$400,000
C.$500,000
D.$100,000
48) Which of the following is an example of a factory overhead cost?
A.Repair and maintenance cost on the administrative building
B.Factory heating and lighting cost
C.Insurance premiums on salespersons’ automobiles
D.President’s salary
49) Which of the following statements is true?
A.The revenue activities of a service business involve providing services to customers
B.The revenue activities of a merchandising business involve the building of a product
C.The revenue activities of a service business involve the building of a product
D.The revenue activities of a merchandising business involve providing services to
customers
50) Which of the following would probably not be found in the accounting system of a
service provider?
A.Cost ledger
B.Finished goods ledger
C.Cost of services account
D.Job cost sheets
51) A check drawn by a depositor for $915 in payment of a liability was recorded in the
depositors book as $195. What adjustment is required in the depositor’s accounts?
A.Decrease Accounts Payable; decrease Cash
B.Increase Cash; decrease Accounts Receivable
C.Increase Cash; increase Accounts Payable
D.Increase Accounts Receivable; decrease Cash
52) Which of the following is a reason to undergo a reverse stock split?
A.To reduce the stocks market price per share
B.To increase total stockholders’ equity
C.To reduce total stockholders’ equity
D.To increase the market value of the stock per share
53) Gross profit is determined by subtracting the cost of merchandise sold from what?
A.The cost of merchandise purchased
B.Fees earned
C.Accounts receivable
D.Net sales