Question 8: The contract interest rate for bonds: A. must equal the effective interest rate. B. is greater than the effective interest rate when bonds are issued at a premium. C. has no relation to the cash flow associated with a particular bond. D. will fluctuate over the life of a bond. E. None of these. Question 9: Frick Corporation issued $100,000 of 7%, 15-year bonds on June 1, 2014 (dated April 1 2014) at 101 plus accrued interest, which is paid on April 1 and October 1. The proper entry to record issuance of the bonds includes a debit to Cash for: a. $100,000. b. $101,000. c. $101,167. d. $102,167. e. None of these. Question 10: Which of the following statements about treasury stock is true? a. Excess of the sales price over cost should be credited to retained earnings. b. Gains are not recorded on treasury stock transactions but losses are. c. Losses on treasury stock transactions are recorded in income. d. Reacquiring treasury stock causes stockholders equity to decrease. e. None of these. Question 11: Frick Company has 100,000 shares of common stock outstanding. On April 15, the board declared a $.30 dividend to be paid to stockholders of record on May 4. The dividend was distributed on May 15. The proper journal entry for Frick Company on May 15 does not include: a. a credit to Dividends Payable for $30,000. b. a debit to Dividends for $30,000. c. a credit to Cash for $30,000. d. Both A and B, above. e. None of these. Acct221 Page 4 of 8 Question 12: In an effort to concentrate its resources in more profitable areas, Frick Corporation recently sold its family pizza restaurant segment. The disposal constitutes: a. an extraodinary item. b. a discontinued operation which should be treated as a prior period adjustment. c. a discontinued operation which should be disclosed net-of-tax effects. d. a portion of income from continuing operations. e. None of these. Question 13: Frick Corporation has 100,000, 5%, $100 par preferred shares outstanding. The stock is callable at 102, but was originally issued at 99. The current dividend has been fully paid. Total stockholders' equity is $20,000,000. The residual common equity is: a. $20,000,000 b. $10,100,000 c. $10,000,000 d. $9,800,000 e. None of these. Question 14: Frick Company's balance sheet included cash ($4,000,000), accounts receivable ($16,000,000), inventories ($10,000,000), prepaid expenses ($2,000,000), accounts payable ($9,000,000), and accrued expenses ($7,000,000). These are the only current items. a. The quick ratio is 2:1. b. The quick ratio is 1.25:1. c. The current ratio is 1.875:1. d. Both A and C. e. None of these. Question 15: Selected information for 2014 is: cost of goods sold, $5,400,000; average inventory, $1,800,000; net sales, $7,200,000; average receivables, $960,000; and net income, $720,000. Assuming a 360-day year, what was the inventory turnover ratio for 2014? a. 333 b. 3 c. 7.5 d. 20 e.

1. Question
8:
The contract interest rate for bonds:
A.
must equal the effective interest rate.
B.
is greater than the effective interest rate when bonds are issued
at a premium.
C.
has no relation to the cash flow associated with a particular
bond.
D.
will fluctuate over the life of a bond.
E.
None of these.
Question
9:
Frick Corporation issued $100,000 of 7%, 15-year bonds on
June 1, 2014 (dated April 1 2014) at 101 plus accrued interest,
which is paid on April 1 and October 1.
The proper entry to record issuance of the bonds includes a
debit to Cash for:
a.

2. $100,000.
b.
$101,000.
c.
$101,167.
d.
$102,167.
e.
None of these.
Question
10:
Which of the following statements about treasury stock is true?
a.
Excess of the sales price over cost should be credited to
retained earnings.
b.
Gains are not recorded on treasury stock transactions but losses
are.
c.
Losses on treasury stock transactions are recorded in income.
d.
Reacquiring treasury stock causes stockholders equity to
decrease.
e.
None of these.

3. Question
11:
Frick Company has 100,000 shares of common stock
outstanding. On April 15, the board declared a $.30 dividend to
be paid to stockholders of record on May 4.
The dividend was distributed on May 15.
The proper journal entry for Frick Company on May 15 does not
include:
a.
a credit to Dividends Payable for $30,000.
b.
a debit to Dividends for $30,000.
c.
a credit to Cash for $30,000.
d.
Both A and B, above.
e.
None of these.
Acct221
Page 4 of 8
Question
12:
In an effort to concentrate its resources in more profitable
areas, Frick Corporation recently sold its family pizza

4. restaurant segment.
The disposal constitutes:
a.
an extraodinary item.
b.
a discontinued operation which should be treated as a prior
period adjustment.
c.
a discontinued operation which should be disclosed net-of-tax
effects.
d.
a portion of income from continuing operations.
e.
None of these.
Question
13:
Frick Corporation has 100,000, 5%, $100 par preferred shares
outstanding.
The stock is callable at 102, but was originally issued at 99.
The current dividend has been fully paid.
Total stockholders' equity is $20,000,000.
The residual common equity is:
a.

5. $20,000,000
b.
$10,100,000
c.
$10,000,000
d.
$9,800,000
e.
None of these.
Question
14:
Frick Company's balance sheet included cash ($4,000,000),
accounts receivable ($16,000,000), inventories ($10,000,000),
prepaid expenses ($2,000,000), accounts payable ($9,000,000),
and accrued expenses ($7,000,000).
These are the only current items.
a.
The quick ratio is 2:1.
b.
The quick ratio is 1.25:1.
c.
The current ratio is 1.875:1.
d.
Both A and C.

6. e.
None of these.
Question
15:
Selected information for 2014 is: cost of goods sold,
$5,400,000; average inventory, $1,800,000; net sales,
$7,200,000; average receivables, $960,000; and net income,
$720,000.
Assuming a 360-day year, what was the inventory turnover ratio
for 2014?
a.
333
b.
3
c.
7.5
d.
20
e.
None of these.
Acct221
Page 5 of 8
Question
16:

7. On the schedule of cost of goods manufactured:
a.
beginning work-in-process plus direct materials used equals
manufacturing costs.
b.
cost of goods manufactured is the same thing as total
manufacturing costs.
c.
work-in-process will necessarily increase if total manufacturing
costs increase.
d.
factory overhead plus beginning work-in-process equals
manufacturing costs.
e.
None of these.
Question
17:
Which costing method seems ideally suited to the production of
homogenous products in continuous throughput?
a.
Activity-based costing.
b.
Job order costing.
c.
Process costing.

8. d.
Absorption costing.
e.
None of these.
Question
18:
Frick Company uses a job order cost system and applies
overhead based on estimated rates.
The overhead application rate is based on total estimated
overhead costs of $200,000 and direct labor hours of 50,000.
For job 836, direct labor hours were 800.
a.
Factory Overhead should be debited for $3,200.
b.
Factory Overhead should be credited for $3,200.
c.
Overhead Expense should be debited for $3,200.
d.
Overhead Expense should be credited for $3,200.
e.
None of these.
Question
19:
For job 1838, there were 1,000 direct labor hours, and actual

9. overhead was $500 for depreciation and $1,400 for indirect
labor.
Overhead is applied at $2 per direct labor hour.
Which account should be debited for $1,900?
a.
Work in Process.
b.
Cost of Goods Sold.
c.
Factory Overhead.
d.
Cost of Goods Manufactured.
e.
None of these.
Acct221
Page 6 of 8
Question
20:
Frick Company had no beginning inventory and adds all
materials at the very beginning of its only process.
Assume 100,000 units were started, and 80% complete at

10. month's end.
Total costs were $24,000 for material and $16,000 for
conversion.
a.
The cost per equivalent unit of conversion is $0.16.
b.
The cost per equivalent unit of conversion is $0.20.
c.
The cost per equivalent unit of conversion is $0.36.
d.
The cost per equivalent unit of conversion is $0.40.
e.
None of these.
Question
21:
Frick Company had no beginning inventory and adds all
materials at the very beginning of its only process.
Assume 10,000 units were started, and 5,000 units completed.
Ending work in process is 60% complete.
The cost per equivalent unit of conversion is:
a.
$1.00 if total conversion cost is $3,000.
b.

11. $1.00 if total conversion cost is $5,000.
c.
$1.00 if total conversion cost is $8,000.
d.
$1.00 if total conversion cost is $10,000.
e.
None of these.
Question
22:
Frick Company makes units that each requires 2 pounds of
material at $3 per pound.
500 and 700 units will be built in May and June, respectively.
Frick keeps material on hand at 20% of the next month's
production needs.
How much is the material cost for May's output?
a.
$2,400
b.
$3,000
c.
$3,240
d.
$4,200

12. e.
None of these.
Question
23:
Anticipated unit sales are January, 5,000; February, 4,000; and
March 8,000.
Finished goods are consistently maintained at 80% of the
following month's sales.
If units cost $10 each to produce, how much is February's total
cost of production?
a.
$0
b.
$40,000
c.
$72,000
d.
$80,000
e.
None of these.
Acct221
Page 7 of 8
Question
24:

13. Total production of 1,000 units of finished goods required 3,900
actual hours at $12 per hour.
The standard is 4 hours per unit of finished goods, at a standard
rate of $11 per hour.
Which of the following statements is true?
a.
The labor rate variance is $3,900 favorable.
b.
The labor rate variance is $4,000 unfavorable.
c.
The labor efficiency variance is $1,100 favorable.
d.
The labor efficiency variance is $1,100 unfavorable.
e.
None of these.
Question
25:
If beginning work in process was 600 units, 1,400 additional
units were put into production, and ending work in process was
500 units, how many units were completed?
a.
500
b.
900

14. c.
1,400
d.
2,000
e.
None of these.
Question
26:
Frick Company had no beginning inventory and adds all
materials at the very beginning of its only process.
Assume 10,000 units were started, and 5,000 units completed.
Ending work in process is 60% complete.
The cost per equivalent unit of material is:
a.
$1.00 if total material cost is $3,000.
b.
$1.00 if total material cost is $5,000.
c.
$1.00 if total material cost is $8,000.
d.
$1.00 if total material cost is $10,000.
e.
None of these.

15. Question
27:
Assume that actual overhead consisted of $30,000 for indirect
labor, $20,000 for indirect material, and $10,000 for
depreciation of factory equipment.
Based on the preset rates, $65,000 of overhead was applied to
work in process.
a.
Overhead is underapplied.
b.
This is viewed as an unfavorable situation.
c.
There will be a $5,000 debit balance in Factory Overhead.
d.
All of the above.
e.
None of these