KPC-EXAM-2

1. On April 25, Gregg Repair Service extended an offer of $115,000 for land that had been priced for sale at $140,000. On May 3, Gregg Repair Service accepted the seller’s counteroffer of $127,000. On June 20, the land was assessed at a value of $88,000 for property tax purposes. On August 4, Gregg Repair Service was offered $150,000 for the land by a national retail chain. At what value should the land be recorded in Gregg Repair Service’s records?

2. Land, originally purchased for $20,000, is sold for $75,000 in cash. What is the effect of the sale on the accounting equation.

3. A debit may signify a(n)

4. In which of the following types of accounts are increases recorded by debits?

5. Prior to the adjusting process, accrued revenue has

6. Austin, Inc. made a Prepaid Rent payment of $2,800 on January 1st. The company’s
monthly rent is $700. The amount of Prepaid Rent that would appear on the January 31
balance sheet after adjustment is:

7. Which of the following pairs of accounts could not appear in the same adjusting
entry?

8. Which of the following account groups are all considered nominal accounts?

9. If the physical count of the inventory revealed $72,000 of merchandise on hand and the inventory records reported $73,200, what would be the necessary adjusting entry to record inventory shortage?

10. If title to merchandise purchases passes to the buyer when the goods are delivered to the buyer, the terms are

11. Addison, Inc. uses a perpetual inventory system. The following is information about one inventory item for the month of September:

• Sep.1   Inventory 20 units at $20.
• Sep.4   Sold 10 units
• Sep.10  Purchased 30 units at $25
• Sep.17  Sold 20 units
• Sep.30 Purchased 10 units at $30

If Addison uses FIFO, the cost of the ending merchandise inventory on September 30 is

12. Merchandise inventory at the end of the year is overstated. Which of the following statements correctly states the effect of the error?

13. For the year ended December 31, 2011 Depot Max’s cost of merchandise sold was $54,350. Inventory at the beginning of the year was $6,540. Ending inventory was $7,250. Depot Max’s number of days sales in inventory is closest to

14. A $135 petty cash fund has cash of $44 and receipts of $93. The journal entry to replenish the account would include a

15. Harris Company had checks outstanding totaling $15,400 on its May bank reconciliation. In June, Harris Company issued checks totaling $64,900. The June bank statement shows that $37,600 in checks cleared the bank in June. A check from one of Harris Company’s customers in the amount of $300 was also returned marked “NSF.” The amount of outstanding checks on Harris Company’s June bank reconciliation should be

16. Under the allowance method of accounting for uncollectible receivables, writing off an uncollectible account.

17. A 60-day, 10% note for $9,000, dated April 15, is received from a customer on
account. The face value of the note is

18. A machine with a cost of $75,000 has an estimated residual value of $5,000 and an estimated life of 4 years or 18,000 hours. What is the amount of depreciation for the second full year, using the double declining-balance method?

19. The Bacon Company acquired new machinery with a price of $15,200 by trading in similar old machinery and paying $12,700. The old machinery originally cost $9,000 and had accumulated depreciation of $5,000. In recording this transaction, Bacon Company should record

20. Which intangible assets are amortized over their useful life?

21. Power Company sells merchandise with a one year warranty. In 2012, sales consisted of 1,600 units. It is estimated that warranty repairs will average $10 per unit sold, and 30% of the repairs will be made in 2012 and 70% in 2013. In the 2012 income statement, Power should show warranty expense of

22. Treasury stock which was purchased for $3,000 is sold for $3,500. As a result of  these two transactions combined

23. The Dayton Corporation began the current year with a retained earnings balance of $25,000. During the year, the company corrected an error made in the prior year, which was a failure to record.     depreciation expense of $3,000 on equipment. Also, during the current year, the company earned net income of $12,000 and declared cash dividends of $5,000. Compute the year end retained earnings balance.

24. If the market rate of interest is 8%, the price of 6% bonds paying interest semiannually with a face value of $100,000 will be

25. If the market rate of interest is 8%, the price of 6% bonds paying interest semiannually with a face value of $100,000 will be

26. When callable bonds are redeemed below carrying value

27. The equity method of accounting for investments

28. The account Unrealized Gain (Loss) on Available-For-Sale Securities should be included in the

29. A building with a book value of $ 46,000 is sold for $51,000 cash Using the indirect method, this transaction should be shown on the statement of cash flows as follows:

30. Accounts receivable from sales to customers amounted to $40,000 and $32,000 at the beginning and end of the year, respectively. Income reported on the income statement for the year was $110,000. Exclusive of the effect of other adjustments, the cash flows from operating activities to be reported on the statement of cash flows is

31. The cost of merchandise sold during the year was $50,000. Merchandise inventories were $12,500 and $10,500 at the beginning and end of the year, respectively. Accounts payable were $6,000 and $5,000 at the beginning and end of the year, respectively. Using the direct method of reporting cash flows from operating activities, cash payments for merchandise total

32. The current period statement of cash flows includes the flowing:
Cash balance at the beginning of the period         $310,000
Cash provided by operating activities                       185,000
Cash used in investing activities                                  43,000
Cash used in financing activities                                  97,000
The cash balance at the end of the period is :

33. An analysis in which all the components of an income statement are expressed as a percentage of net sales is called

34. The independent auditor’s report does which of the following?

35. A product cost is:

36. The Thomlin Company forecasts that total overhead for the current year will be $15,000,000 and that total machine hours will be 200,000 hours. Year to date, the actual overhead is $15,500,000 and the actual machine hours are 220,000 hours. If the Thomlin Company uses a predetermined overhead rate based on machine hours for applying overhead, what is that overhead rate?

37. The recording of the application of factory overhead costs to jobs would include a
credit to:

38. Which of the following statements is true regarding fixed and variable costs?

39. If sales are $525,000, variable costs are 56% of sales, and operating income is $50,000, what is the contribution margin ratio?

40. The following data relate to direct labor costs for the current period:

Standard costs 36,000 hours at $22.50
Actual costs 35,000 hours at $23.00

What is the direct labor time variance?