Principles of Accounting 1
Final Exam (120 minutes)
Name: (please print)_____________________________
50 Multiple choice questions at 6.25 points each for total points available of 312.50.
However, the maximum grade is 300. Select the BEST answer. You are permitted to use
a simple four-function calculator. This is a closed book, closed note, and closed neighbor
exam. You are NOT permitted to have scratch paper. Turn in the exam and scantron
with your name, instructor name, and exam version letter noted on both. You will be
required to show a picture ID upon turning in your exam and scantron.
Indicate your answer on a SCANTRON using pencil. Do not mark your
SCANTRON until you have selected your FINAL answer. Erasures confuse the
SCANTRON. All adverse consequences of erasures and mismarks are your
1. In the following journal entry, revenue is being recognized:
at the same time cash is collected
before the cash is collected
after the cash is collected
no revenue is being recognized
2. Up-State Corporation ordered materials from Down-State Manufacturing on
October 1, 2008. Down-State shipped the materials by rail on October 5 and the
railroad notified Up-State on October 12 that the goods had arrived. Up-State
picked up the materials on October 13. The terms of the sale are FOB shipping
point. On what date should Up-State consider this a purchase?
3. Company X produces and sells 3 products: X1, X2, and X3. The company
recently developed a new advertising campaign for X3. The costs incurred to
develop this ad would be considered:
4. An unfavorable sale price variance reflects
A) Fewer units sold than budgeted.
B) A lower actual selling price than budgeted.
C) An increase in the cost of products causing a decrease in income for the
D) A decrease in the amount of cash received from customers.
5. A cash sale would impact the:
income statement only
balance sheet and income statement only
balance sheet and statement of cash flows only
balance sheet, income statement, and statement of cash flows
6. Limited liability means:
A) A company is only liable for an amount that is established by a pre-set limit.
B) Creditors are limited to just the cash available in the company at the time of
C) Creditors of a company can only claim the assets of the firm and not the
assets of the owners of the firm.
D) Creditors of a firm can claim all the assets of a company and all of the
owners’ personal assets.
7. In times of declining prices, ______ generally result(s) in the ______ cost of
LIFO and FIFO, same
Use the following to answer questions 8 and 9:
ThinkStyles, Inc. applies manufacturing overhead on the basis of the number of
indirect labor hours required. The following information is available:
Indirect Labor Hours
Manufacturing Overhead Costs
predetermined manufacturing overhead rate per indirect labor hour is:
9. The amount of over/underapplied manufacturing overhead is:
10. On April 30, Crossover Company had a general ledger cash balance of
$216,854. At the end of April, the bank statement had a balance of $249,322.
Deposits in transit amounted to $26,500 and there was a service charge of $180.
Outstanding checks totaled $59,148. What is the reconciled/adjusted amount of
None of the above.
11. The journal entry to record wages earned by assembly line workers would
credit to Indirect Labor
debit to Finished Goods Inventory
debit to Work In Process Inventory
credit to Cost of Goods Manufactured
12. On September 1, 2009, Olpe Corporation paid $2,400 in advance for a one year
insurance policy that covers the period September 1, 2009 through August 31,
2010. What amount of insurance expense should Olpe report for the year ended
December 31, 2009?
13. The Pacioli Manufacturing Company has kept track of the number of units they
have produced each month and the cost to produce those units for the past six
Number of Units
Cost of Units Produced
Using the high/low method, what is the estimated total cost if 14,000 units are
produced in January?
14. Which of the following would be part of the entry to record a sales return?
A) credit to sales returns and allowances
B) debit to accounts receivable
C) debit to sales returns and allowances
D) debit to cash
15. Hasbrouck Corporation used $63,500 of direct materials, $46,000 of direct
labor, and applied $94,500 of manufacturing overhead during October. Cost of
goods sold for October was $218,200. Hasbrouck’s beginning and ending
work-in-process and finished goods inventories were as follows:
What was Hasbrouck’s cost of goods manufactured for October?
None of the above.
16. Halting, Inc. gathered the following direct labor cost information for the month
Actual direct labor hours
Standard direct labor hours allowed
for actual production
Actual direct labor rate per hour
Standard direct labor rate per hour
The direct labor price variance is:
17. On December 31, 2009, Voyager Products, Inc. received a $20,000 deposit from
a customer for a special order of merchandise to be manufactured and shipped
in January 2010. Voyager Products, Inc. made the following journal entry on
December 31, 2009:
The financial statements dated December 31, 2009 would be:
in error, understating liabilities and overstating assets
in error, overstating net income and understating liabilities
in error, understating net income and understating stockholders’ equity
18. Allowance for Uncollectible Accounts had a beginning and ending balance of
$3,500 and $4,600, respectively. If uncollectible accounts expense was $9,500
for the period, the total dollar amount of accounts written off during the period
19. Kozicek Corporation reported credit sales of $200,000, accounts receivable of
$110,000 at the beginning of the year and accounts receivable of $150,000 at the
end of the year. Cash receipts/collections from customers during the year were:
20. A cost that does not change in total as the activity changes is a:
A) Fixed cost
B) Variable cost
C) Mixed cost
D) None of the above
Use the following information for questions 21 and 22.
Hepler Enterprises began the year with $188,200 of finished goods inventory. During the
year the company manufactured goods costing $712,000. At the end of the year,
$207,500 of finished goods remained in inventory. Actual manufacturing overhead was
$141,500 and applied manufacturing overhead totaled $143,900.
21. Prior to any adjustment for overhead application, cost of goods sold was:
22. Assuming the overapplied or underapplied manufacturing overhead was
considered small and, therefore, closed out to Cost of Goods Sold, the cost of
goods sold reported on the income statement for the period was:
23. The Manhattan Company sells its one and only product for $89.00 per unit.
Variable costs per unit amount to $63.50 and total fixed costs are $3,697,500. If
Manhattan increases its selling price to $95, how will this affect the breakeven
point in units?
The breakeven point will increase 27,619 units.
The breakeven point will decrease 106,078 units.
The breakeven point will increase 41,300 units.
The breakeven point will decrease 27,619 units.
24. Bonita Enterprises purchased $42,000 of merchandise on account, terms 2/10,
n/30. Assuming Bonita uses the net price method to account for purchase
discounts, and it pays for the merchandise on the 30th day after the purchase,
the journal entry to record the payment would include a:
credit to Cash for $41,160
credit to Inventory for $42,000
debit to Accounts Payable for $42,000
debit to Purchase Discounts Lost for $840
25. A company’s accounts payable was $600,000 at the beginning of the year and
$632,000 at the end of the year. Cost of goods sold for the year was $637,000.
Inventory at the beginning of the year was $420,000 and at the end of the year
$455,000. How much cash did the company pay to its suppliers during the
None of the above
26. If a company’s selling price per unit increases, what is the impact on its
contribution margin and breakeven point?
27. The bookkeeper who records cash receipts also deposits daily cash receipts at
the bank on his way home from work. This is a violation of which of the
following characteristics of good internal control:
A) requiring proper authorization
B) separating incompatible duties
C) physically controlling assets and documents
D) maintaining adequate documents and records
28. For 2008, Parker Inc. reported total liabilities of $720,000, current assets of
$235,000, and total shareholders’ equity of $1,250,000. What are Parker Inc.’s
29. The Torbel Company ordered $80,000 of inventory from Borton Industries and
was given terms of 3/15 n/45. Which of the following describes how soon the
payment must be made in order to receive a discount and the amount of the
Payment Made Within
Between 3 and 15Days
Between 2 and 15
Within 15 Days
Amount of Discount
30. The following journal entry affected the accounting equation by:
increasing assets and increasing liabilities
decreasing assets and increasing owners equity
increasing liabilities and decreasing owners equity
increasing assets and increasing owners equity
31. Moreland Corp. purchased a building for $35 million that will house its new
manufacturing plant. This is part of Moreland’s
All of the above
Use the following to answer questions 32 and 33:
Carrington Company has a perpetual inventory system and uses the LIFO method of
inventory costing. Carrington reported the following events during the month of March:
Number of Units
32. The cost of goods sold for the March 21st sale is:
33. The ending inventory on March 31st is:
34. Triple Tee Company sells their only product for $22.00. Variable costs per unit
are $14.80, while total fixed costs amount to $550,000. The company wants to
earn a before-tax profit of $400,000. The total unit sales needed to achieve the
desired before-tax profit is:
35. Distance Solutions’ president receives a bonus equal to 8% of income before tax
and bonus. If the tax rate is 30%, what is Distance Solutions’ net income for
the year assuming income before tax and bonus was $1,300,000?
36. Pratt Company currently produces and sells 12,000 units of its product each
month at a sales price of $15 each. Another firm has offered to buy an
additional 1,000 units at $10 per unit. Pratt’s total cost per unit is as follows:
Fixed costs per unit are based on production of 12,000 units per month. Pratt
Company currently has the capacity to produce 15,000 units per month. By how
much would profit change if Pratt accepts this offer?
37. If a product has a cost of $600 and a selling price of $1,800, what is the
product’s markup percentage?
38. Grover Company’s economic order quantity is 2,800 units. Demand for the
year is 108,000 units. There are three days between the time an order is placed
and the day it is received. Grover operates 360 days per year. What is the daily
39. WyKan Corporation sells three types of speaker systems, the Model A, the
Model B and the Model C. The profit report for these speaker systems for the
most recent period is shown below by product line. The facility sustaining costs
are fixed and allocated as shown below between each of the three product lines.
Facility Sustaining Cost
Net Income (Loss)
Wykan’s president insists on discontinuing Model C. He obviously has not taken
acct 2101! What will be the company’s net income (loss) after eliminating Model
40. Palisades Corporation purchased equipment by signing a long-term note
payable. What was the effect of this transaction?
A) increased assets and increased liabilities
B) increased assets and increased owners equity
C) increased assets and decreased owners equity
D) increased owners equity and decreased liabilities
41. The most likely explanation for the following journal entry would be:
performed a service and immediately received the cash
performed a service and billed the customer
performed a service for a customer who had paid for the service ahead of time
recorded the receipt of cash from a customer for services previously
Use the following information for questions 42 and 43.
Hepburn Corporation’s sales price is $30 per unit. Unit sales information is presented
Management estimates that 5% of credit sales are uncollectible, 30 % are collected in the
month of sale, and 65% in the following month. The March 31 ending inventory is 5,500
units, and Hepburn wants to have 10% of the next month’s sales in ending inventory.
42. What are Hepburn Corporation’s expected sales revenue and cash receipts for
43. How many units should Hepburn produce during April?
44. Net income is found on which of the following two financial statements?
Balance Sheet and Income Statement
Statement of Shareholders Equity and Balance Sheet
Statement of Cash Flows and Balance Sheet
Income Statement and Statement of Shareholders Equity
45. What is a perpetual inventory system?
A) A system that keeps a continuous record of the cost of inventory on hand and
the cost of inventory sold.
B) A system that determines the inventory at the end of each accounting period
by physically counting it.
C) A system that records cash on hand.
D) None of the above.
46. Memory Time Picture Frame Co. manufactures picture frames and incurs many
different types of costs. The cost of the glass for the picture frames, assuming it
is significant to the overall cost, would be a:
direct material cost
direct labor cost
manufacturing overhead cost
selling and administrative cost
47. Lyco Company is a service firm. The company showed the following activities
for the current month:
Provided services for a client who will pay $82,000 next month.
Provided services for a client and received $30,000 cash.
Received a $10,000 advance payment for services to be provided next
Used $7,000 of office supplies to provide services.
Employees were owed $25,000 for work performed in the current month.
What is the accrual basis income for the current month?
48. Fostoria Corporation began the current period with $21,975 of direct materials,
purchased $97,950 of direct materials and $8,230 of indirect materials during
the period and ended the period with $30,205 of direct materials. The total
amount of direct materials put into production during the current period was:
49. J & C Electronics, Inc. gathered the following direct materials cost information
for the month of July:
Standard Quantity Allowed for production
Quantity used in production
Actual price per gallon purchased
Standard price per gallon
The direct materials usage variance is:
50. Anthony Company sold merchandise on account to a customer at a price of
$5,000. The merchandise had cost Anthony $4,200. The terms of the sales
were 3/10, n/30. If the customer paid within the discount period, by how much
did this transaction increase Anthony’s net income?