1) A cost object indicates how costs are related or identified.
2) Unearned Revenues account is an example of a liability.
3) Form W-2 is called the Wage and Tax Statement.
4) Even when a trial balance is in balance, there may be errors in the individual
accounts.
5) The lower of cost or market is a method of inventory valuation.
6) An adjusting entry would adjust revenue so it is reported when earned and not when
cash is received.
7) During the first year of operations, employees earned vacation pay of $35,000. The
vacations will be taken during the second year. The vacation pay expense should be
recorded in the second year as the vacations are taken by the employees.
8) Using the Internet to perform business transactions is called e-commerce.
9) If a company uses the periodic inventory system to cost its inventory, the gross profit
method is a method that can be used to check on theft when the actual inventory is
taken by the company.
10) If the articles of partnership provide for annual salary allowances of $36,000 and
$18,000 to X and Y respectively and net income is $30,000, X’s share of net income is
$20,000.
11) “Market,” as used in the phrase “lower of cost or market” for valuing inventory,
refers to the price at which the inventory is being offered for sale by its owner.
12) On October 1, Ramos Co. signed a $90,000, 60-day discounted note at the bank.
The discount rate was 6%, and the note was paid on November 30. (Assume a 360-day
year is used for interest calculations.)
13) The standard costs and actual costs for factory overhead for the manufacture of
2,500 units of actual production are as follows:
The amount of the total factory overhead cost variance is:
A.$2,000 favorable
B.$5,000 unfavorable
C.$2,500 unfavorable
D.$0
14) A corporation issues for cash $2,000,000 of 8%, 15-year bonds, interest payable
annually, at a time when the market rate of interest is 7%. The straight-line method is
adopted for the amortization of bond discount or premium. Which of the following
statements is true?
A.The carrying amount increases from its amount at issuance date to $2,000,000 at
maturity
B.The carrying amount decreases from its amount at issuance date to $2,000,000 at
maturity
C.The amount of annual interest paid to bondholders increases over the 15-year life of
the bonds
D.The amount of annual interest expense decreases as the bonds approach maturity
15) The journal entry a company uses to record partially funded pension rights for its
salaried employees, at the end of the year is
A.debit Salary Expense; credit Cash
B.debit Pension Expense; credit Unfunded Pension Liability
C.debit Pension Expense; credit Unfunded Pension Liability and Cash
D.debit Pension Expense; credit Cash
16) For the year ending December 31, Orion, Inc. mistakenly omitted adjusting entries
for $1,500 of supplies that were used, (2) unearned revenue of $4,200 that was earned,
and (3) insurance of $5,000 that expired. For the year ending December 31, what is the
effect of these errors on revenues, expenses, and net income?
A.Revenues are overstated by $4,200
B.Net income is overstated by $2,300
C.Expenses are overstated by $6,500
D.Expenses are understated by $3,500
17) Which of the following entries records the investment of cash by Ron York, owner
of a proprietorship?
A.debit Ron York, Capital; credit Accounts Receivable
B.debit Cash; credit Ron York, Capital
C.debit Ron York, Drawing; credit Cash
D.debit Cash; credit Ron York, Drawing
18) The following are selected transactions related to purchases on account and cash
payments completed during April of the current year.
(a) Record the transactions, using the accompanying journals.
(b) Total and rule the purchases and cash payments journals as of April 30.
(c) Indicate the method of posting the individual items and the totals of the purchases
and cash payments journals in the following manner:
(1) For individual items and totals to be posted to the subsidiary ledger or not to be
posted, insert a check mark in the Posting Reference column or below the totals.
(2) For individual items and totals to be posted to the general ledger, insert the letter
“G” (as a substitute for specific account numbers) in the Posting Reference column or
below the totals.
19) 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 C’s income from operations increase?
A.$0
B.$75,000
C.$12,500
D.$50,000
20) Which of the following should be reported net of the related income tax effect on
the income statement?
A.sale of an inventory item at a loss
B.loss due to sale of fixed assets
C.loss due to a discontinued operations of the business
D.sale of a temporary investment at a loss
21) Which of the following is true about a T-Account?
A.Left hand side of the T-Account is called a debit
B.Left hand side of the T-Accounts is called a credit
C.Right hand side of the T-Account is called a debit
D.None are true
22) The following procedures were recently implemented at the Pampered Pets, Inc. For
each procedure, indicate whether the internal control over cash represents (1) a strength
or (2) a weakness. If it is a weakness, please explain why.
(a) At the end of the day, cash register clerks are required to use their own funds to
make up any cash shortages in their registers.
(b) At the end of the day, an accounting clerk compares the duplicate copy of the daily
cash deposit slip with the deposit receipt obtained from the bank.
(c) After necessary approvals have been obtained for the payment of a voucher, the
treasurer signs and mails the check. The treasurer then stamps the voucher and
supporting documentation as paid and returns the voucher and supporting
documentation to the accounts payable clerk for filing.
(d) Along with the petty cash expense receipts for postage, office supplies, etc., several
post-dated employee checks are in the petty cash fund.
23) The journal entry a company records for the issuance of bonds when the contract
rate is less than the market rate would be
A.debit Bonds Payable, credit Cash
B.debit Cash and Discount on Bonds Payable, credit Bonds Payable
C.debit Cash, credit Premium on Bonds Payable and Bonds Payable
D.debit Cash, credit Bonds Payable
24) Standard and actual costs for direct labor for the manufacture of 1,000 units of
product were as follows:
Determine the (a) time variance, (b) rate variance, and (c) total direct labor cost
variance.
25) The management of Wyoming Corporation is considering the purchase of a new
machine costing $375,000. The company’s desired rate of return is 6%. The present
value factor for an annuity of $1 at interest of 6% for 5 years is 4.212. In addition to the
foregoing information, use the following data in determining the acceptability in this
situation:
The net present value for this investment is:
A.Negative $118,145
B.Positive $118,145
C.Positive $19,875
D.Negative $19,875
26) A trial balance is prepared to
A.prove that there were no errors made in recording transactions into the journal
B.prove that no errors were made in posting to the ledger
C.prove that each account balance is correct
D.summarize the account balances to help prepare financial statements
27) Morgan Company has the following segment revenues for fiscal 2011 and 2010.
Prepare a vertical analysis of the segment data.
28) A $100 petty cash fund contains $91 in petty cash receipts, and $4.75 in currency
and coins. The journal entry to record the replenishment of the fund would include a
A.credit to Petty Cash for $95.75
B.credit to Cash for $90
C.debit to Cash Short and Over for $4.25
D.credit to Cash Short and Over for $4.25
29) If a company mistakenly counts more items during a physical inventory than
actually exist, how will the error affect their bottom line?
A.No change to net income
B.Net income will be overstated
C.Net income will be understated
D.Only gross profit will be affected
30) The total on the “Cash Receipts” report at January 31 should equal
A.the total revenue earned for the month of January
B.the total of the purchases journal on January 31
C.the total of the Cash Debit column of the cash receipts journal
D.the balance in Accounts Receivable at January 31
31) Division X of O’Blarney Company has sales of $300,000, cost of goods sold of
$120,000, operating expenses of $58,000, and invested assets of $150,000.
What is the profit margin for Division X?
A.81.3%
B.20.2%
C.40.7%
D.60%
32) Widgeon Co. manufactures three products: Bales; Tales; and Wales. The selling
prices are: $55; $78; and $32, respectively. The variable costs for each product are: $20;
$50; and $15, respectively. Each product must go through the same processing in a
machine that is limited to 2,000 hours per month. Bales take 5 hours to process, Tales
take 7 hours, and Wales take 1 hour.
Which product has the highest contribution margin per machine hour?
A.Bales
B.Tales
C.Wales
D.Bales and Tales have the same
33) The condensed income statement for a business for the past year is as follows:
Management is considering the discontinuance of the manufacture and sale of Product
T at the beginning of the current year. The discontinuance would have no effect on the
total fixed costs and expenses or on the sales of Product U. What is the amount of
change in net income for the current year that will result from the discontinuance of
Product T?
A.$120,000 increase
B.$250,000 increase
C.$25,000 decrease
D.$120,000 decrease
34) On the first day of the current fiscal year, $1,500,000 of 10-year, 8% bonds, with
interest payable semiannually, were sold for $1,225,000. Present entries to record the
following transactions for the current fiscal year:
(a) Issuance of the bonds.
(b) First semiannual interest payment.
(c) Amortization of bond discount for the year, using the straight-line method of
amortization.
35) Below is a table for the present value of $1 at compound interest.
Below is a table for the present value of an annuity of $1 at compound interest.
Using the tables above, what would be the present value of $15,000 (rounded to the
nearest dollar) to be received at the end of each of the next two years, assuming an
earnings rate of 6%?
A.$27,495
B.$26,040
C.$30,000
D.$25,350
36) On the first day of the fiscal year, Lisbon Co. issued $1,000,000 of 10-year, 7%
bonds for $1,050,000, with interest payable semiannually. Orange Inc. purchased the
bonds on the issue date for the issue price. If the company uses the straight-line method
for amortizing the premium, the journal entry to record the first semiannual interest
payment by Lisbon Co. would include a debit to:
A.Interest Payable for $30,000
B.Interest Expense for $32,500
C.Cash for $70,000
D.Premium on Bonds Payable for $5,500
37) Harold Corporation just started business in January 2012. They had no beginning
inventories. During 2012 they manufactured 12,000 units of product, and sold 10,000
units. The selling price of each unit was $20. Variable manufacturing costs were $4 per
unit, and variable selling and administrative costs were $2 per unit. Fixed
manufacturing costs were $24,000 and fixed selling and administrative costs were
$6,000.
What would be the difference in Harold Corporations Net income for 2012 if they used
variable costing instead of absorption costing?
A.No difference
B.$2,000 greater
C.$4,000 less
D.$6,000 less
38) The Corbit Corp. sold merchandise $10,000 for cash. The cost of the merchandise
sold was $7,590. The journal entry(s) to record this transaction would be
A.Cash 10,000
Merchandise Inventory 10,000
Cost of Merchandise Sold 7,590
Sales 7,590
B.Cash 10,000
Sales 10,000
Cost of Merchandise Sold 7,590
Merchandise Inventory 7,590
C.Cash 10,000
Sales 10,000
Cost of Merchandise Sold 10,000
Merchandise Inventory 10,000
D.Cash 7,590
Sales 7,590Cost of Merchandise Sold 7,590Merchandise Inventory 7,590
39) Which of the following is not a characteristic of accrual basis of accounting?
A.Revenues and expenses are reported in the period in which cash is received or paid
B.Revenues are reported on the income statement in the period in which they are earned
C.Accrual basis of accounting supports the matching concept
D.Expenses are reported in the same period as the revenues to which they relate
40) Discuss the use of job order costing for professional services businesses. What are
the similarities and differences between service and manufacturing business job order
costing?
41) 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.
42) Aquatic Corp.s standard material requirement to produce a single of Model 2000 is
15 pounds of material @ $110.00 per pound.
Last month, Aquatic purchased 170,000 pounds of material at a total cost of
$17,850,000. They used 162,000 pounds to produce 10,000 units of Model 2000.
Required:
Calculate the material price variance and material quantity variance, and indicate
whether each variance is favorable or unfavorable.
43) On April 1, 2015, ValueTime, Inc. had a market price per common share of $24. For
the previous year ValueTime paid a dividend of $1.50 per share. Compute the dividend
yield for ValueTime, Inc.
44) On October 17th Nikle Company purchased a building and a plot of land for
$750,000. The building was valued at $500,000 while the land carried a value of
$250,000. Nikle paid $300,000 down in cash and signed a notes payable for the
balance. In the space below write the journal entry.
45) Fortune Corporations comparative balance sheet for current assets and liabilities
was as follows:
Adjust 2012 net income of $65,000 for changes in operating assets and liabilities to
arrive at cash flows from operating activities using the indirect method.
46) Johnson Corporation provided revenue disclosures for 2009 by its major product
segments in the notes to its financial statements as follows:
Prepare a vertical analysis.