Accounting Multiple Choice Test Bank

$21.00

Description

1.Regatta, Inc., has six-year bonds outstanding that pay a 8.25 percent coupon rate. Investors buying the bond today can expect to earn a yield to maturity of 6.875 percent. What should the company’s bonds be priced at today? Assume annual coupon payments. (Round to the nearest dollar.)

$923
$1,066
$1014
$972
2. A cost which remains constant per unit at various levels of activity is a:
• manufacturing cost
• mixed cost
• fixed cost
• variable cost

3. External financing needed: Jockey Company has total assets worth $4,417,665. At year-end it will have net income of $2,771,342 and pay out 60 percent as dividends. If the firm wants no external financing, what is the growth rate it can support?

• 25.1%
• 30.3%
• 32.9%
• 27.3%

4. What decision criteria should managers use in selecting projects when there is not enough capital to invest in all available positive NPV projects?

• the discounted payback
• the profitability index
• the internal rate of return
• the modified internal rate of return

5. Jayadev Athreya has started his first job. He will invest $5,000 at the end of each year for the next 45 years in a fund that will earn a return of 10 percent. How much will Jayadev have at the end of 45 years?

• $5,233,442
• $3,594,524
• $1,745,600
• $2,667,904

6. In a process cost system, product costs are summarized:
• after each unit is produced.
• when the products are sold.
• on production cost reports.
• on job cost sheets.
7. Gateway, Corp. has an inventory turnover of 5.6. What is the firm’s days’s sales in inventory?

• 61.7
• 65.2
• 57.9
• 64.3

8. Which of the following financial statements is concerned with the company at a point in time?
• balance sheet
• retained earnings statement
• income statement
• statement of cash flows

9. Your firm has an equity multiplier of 2.47. What is the debt-to-equity ratio?
• 0
• 0.60
• 1.74
• 1.47

10. Jack Robbins is saving for a new car. He needs to have $21,000 for the car in three years. How much will he have to invest today in an account paying 8 percent annually to achieve his target? (Round to nearest dollar)

•
$19,444
•
$22,680
• $16,670
• $26,454

11. TuleTime Comics is considering a new show that will generate annual cash flows of $100,000 into the infinite future. If the initial outlay for such a production is $1,500,000 and the appropriate discount rate is 6 percent for the cash flows, then what is the profitability index for the project?

• 0.11
• 1.11
• 1.90
• 0.90

12. Variance reports are:
• SEC financial reports
• external financial reports
• internal reports for management
• all of these

13. The cash conversion cycle?
• shows how long the firm keeps its inventory before selling it.
• begins when the firm invests cash to purchase the raw materials that would be used to produce the goods that the firm manufactures.
• estimates how long it takes on average for the firm to collect its outstanding accounts receivables balance.
• begins when the firm uses its cash to purchase raw materials and ends when the firm collects cash payments on its credit sales.

14. Internal reports that review the actual impact of decisions are prepared by:
• factory workers
• the controller
• management accountants
• department heads

15. Which of the following presents a summary of changes in a firm’s balance sheet from the beginning of an accounting period to the end of that accounting period?

• the statement of retained earnings
• the statement of working capital
• the statement of net worth
• the statement of cash flows

16. Next year Jenkins Traders will pay a dividend of $3.00. It expects to increase its dividend by $0.25 in each of the following three years. If their required rate of return if 14 percent, what is the present value of their dividends over the next four years?

• $11.63
• $13.50
• $12.50
• $9.72

17. Process costing is used when:
• the production process is continuous.
• costs are to be assigned to specific jobs.
• dissimilar products are involved
• production is aimed at fulfilling a specific customer order.

18. The break-even point is where:
• total variable costs equal total fixed costs.
• total sales equal total fixed costs.
• contribution margin equals total fixed costs.
• total sales equal total variable costs.

19. Horizontal analysis is also known as:
• linear analysis
• common size analysis
• vertical analysis
• trend analysis

20. The accumulation of accounting data on the basis of the individual manager who has the authority to make day-to-day decisions about activities in an area is called:
• flexible accounting
• static reporting
• master budgeting
• responsibility accounting

21. The convention of consistency refers to consistent use of accounting principles:
• among accounting periods
• within industries
• throughout the accounting period
• among firms

22. Which of the following is considered a hybrid organizational form?

sole proprietorship
partnership
corporation
limited liability partnership

23. The process of evaluating financial data that change under alternative courses of action is called:
contribution margin analysis
double entry analysis
incremental analysis
cost-benefit analysis

24. Turnbull Corp. had an EBIT of $247 million in the last fiscal year. Its depreciation and amortization expenses amounted to $84 million. The firm has 135 million shares outstanding and a share price of $12.80. A competing firm that is very similar to Turnbull has an enterprise value/EBITDA multiple of 5.40.

What is the enterprise value of Turnbull Corp.? Round to the nearest million dollars.

$1,787 million
$453.6 million
$1,315 million
$1,344 million

25. Which of the following is an advantage of corporations relative to partnerships and sole proprietorships?

reduced legal liability for investors
harder to transfer ownership
most common form of organization
lower taxes

26. Teakap, Inc. has current assets of $1,456,312 and total assets of $4,812,369 for the year ending September 30, 2006. It also has current liabilities of $1,041,012, common equity of $1,500,000 and retained earnings of $1,468,347. How much long-term debt does the firm have?

$2,303,010
$1,844,022
$803,010

$2,123,612

27. Horizontal analysis is a technique for evaluating a series of financial statement data over a period of time:

to determine the amount and/or percentage increase or decrease that has taken place.
to determine which items are in error.
that has been arranged from the lowest number to the highest number.
that has been arranged from the highest number to the lowest number.

28. M&M Proposition 1: Dynamo Corp. produces annual cash flows of $150 and is expected to exist forever. The company is currently financed with 75 percent equity and 25 percent debt. Your analysis tells you that the appropriate discount rates are 10 percent for the cash flows, and 7 percent for the debt. You currently own 10 percent of the stock.

If Dynamo wishes to change its capital structure from 75 percent equity to 60 percent equity and use the debt proceeds to pay a special dividend to shareholders, how much debt should they use?

$225
$321
$375
$600

29. An activity that has a direct cause-effect relationship with the resources consumed is a(n):

product activity
cost driver
overhead rate
cost pool

30. The group of users of accounting information charged with achieving the goals of the business is its:

investors
auditors
creditors
managers

31. The major element in budgetary control is:

the valuation of inventories
the comparison of actual results with planned objectives.
the preparation of long-term plans
the approval of the budget by the stockholders

32. The most important information needed to determine if companies can pay their current obligations is the:

relationship between short-term and long-term liabilities
net income for this year
relationship between current assets and current liabilities
projected net income for next year

33. An unrealistic budget is more likely to result when it:

has been developed by all levels of management.
is developed with performance appraisal usages in mind.
has been developed in a bottom up fashion.
has been developed in a top down fashion.

34. When a company assigns the costs of direct materials, direct labor, and both variable and fixed manufacturing overhead to products, that company is using:
absorption costing
operations costing
variable costing
product costing

35. Firms that achieve higher growth rates without seeking external financing:
have less equity and/or are able to generate high net income leading to a high ROE.
are highly leveraged
Have a low plowback ratio
None of these

36. Ajax Corp. is expecting the following cash flows – $79,000, $112,000, $164,000, $84,000, and $242,000 – over the next five years. If the company’s opportunity cost is 15 percent, what is the present value of these cash flows? (Round to the nearest dollar.)

$429,560
$477,235
$480,906
$414,322

37. Serox stock was selling for $20 two years ago. The stock sold for $25 one year ago, and it is currently selling for $28. Serox pays a $1.10 dividend per year. What was the rate of return for owning Serox in the most recent year? (Round to the nearest percent.)

16%
32%
12%
40%

38. If a company’s weighted average cost of capital is less than the required return on equity, then the firm:

has debt in its capital structure
is perceived to be safe
is financed with more than 50% debt
partnership

39. How firms estimate their cost of capital: The WACC for a firm is 13.00 percent. You know that the firm’s cost of debt capital is 10 percent and the cost of equity capital is 20% What proportion of the firm is financed with debt?

30%
70%
33%
50%

Reviews

There are no reviews yet.

Be the first to review “Accounting Multiple Choice Test Bank”

Your email address will not be published. Required fields are marked *

Accounting Multiple Choice test Bank

$29.00

Description

18. Sanderson sells a single product for $50 that has a variable cost of $30. Fixed costs
amount to $5 per unit when anticipated sales targets are met. If the company sells one
unit in excess of its break-even volume, profit will be:
A. $15.
B. $20.
C. $50.
D. an amount that cannot be derived based on the information presented.
E. an amount other than those in choices “A,” “B,” and “C”, but one that can be derived
based on the information presented.
19. At a volume of 20,000 units, Dries reported sales revenues of $1,000,000, variable
costs of $300,000, and fixed costs of $260,000. The company’s contribution margin per
unit is:
A. $22.
B. $28.
C. $35.
D. $37.
E. an amount other than those above.
20. At a volume of 20,000 units, Dries reported sales revenues of $1,000,000, variable
costs of $300,000, and fixed costs of $260,000. The company’s break-even point in units
is:
A. 7,027 (rounded).
B. 8,667 (rounded).
C. 9,286 (rounded).
D. 7,429 (rounded).
E. an amount other than those above.
21. A recent income statement of Black Corporation reported the following data:

If these data are based on the sale of 20,000 units, the contribution margin per unit would
be:
A. $40.
B. $150.
C. $290.
D. $360.
E. an amount other than those above.

22. A recent income statement of Black Corporation reported the following data:

If these data are based on the sale of 20,000 units, the break-even point would be:
A. 9,565 units (rounded).
B. 11,000 units (rounded).
C. 7,586 units (rounded).
D. 14,667 units (rounded).
E. an amount other than those above.
23. A recent income statement of Suni Corporation reported the following data:

If these data are based on the sale of 20,000 units, the break-even point would be:
A. 7,500 units.
B. 11,628 units.
C. 12,500 units.
D. 33,333 units.
E. an amount other than those above.
24. A recent income statement of Yang Corporation reported the following data:

If these data are based on the sale of 5,000 units, the break-even sales would be:
A. $2,000,000.
B. $2,206,000.
C. $2,500,000.
D. $10,000,000.
E. an amount other than those above.

25. Lawson, Inc. sells a single product for $12. Variable costs are $8 per unit and fixed
costs total $360,000 at a volume level of 60,000 units. Assuming that fixed costs do not
change, Lawson’s break-even point would be:
A. 30,000 units.
B. 45,000 units.
C. 90,000 units.
D. negative because the company loses $2 on every unit sold.
E. a positive amount other than those given above.
26. Grey, Inc. sells a single product for $20. Variable costs are $8 per unit and fixed costs
total $120,000 at a volume level of 5,000 units. Assuming that fixed costs do not change,
Green’s break-even sales would be:
A. $160,000.
B. $200,000.
C. $300,000.
D. $480,000.
E. an amount other than those above.
27. Orion recently reported sales revenues of $800,000, a total contribution margin of
$300,000, and fixed costs of $180,000. If sales volume amounted to 10,000 units, the
company’s variable cost per unit must have been:
A. $12.
B. $32.
C. $50.
D. $92.
E. an amount other than those above.
28. Strayer has a break-even point of 120,000 units. If the firm’s sole product sells for $40
and fixed costs total $480,000, the variable cost per unit must be:
A. $4.
B. $36.
C. $44.
D. an amount that cannot be derived based on the information presented.
E. an amount other than those in choices “A,” “B,” and “C”, but one that can be derived
based on the information presented.

29. Ribco Co. makes and sells only one product. The unit contribution margin is $6 and
the break-even point in unit sales is 24,000. The company’s fixed costs are:
A. $4,000.
B. $14,400.
C. $40,000.
D. $144,000.
E. an amount other than those above.
31. At a volume level of 500,000 units, Sullivan reported the following information:

The company’s contribution-margin ratio is closest to:
A. 0.33.
B. 0.40.
C. 0.60.
D. 0.67.
E. an amount other than those above.
44. A recent income statement of Dragonwood Corporation reported the following data:

If the company desired to earn a target profit of $1,270,000, it would have to sell:
A. 5,778 units.
B. 8,600 units.
C. 10,160 units.
D. 11,908 units.
E. an amount other than those above.

45. Yellow Dot, Inc. sells a single product for $10. Variable costs are $4 per unit and
fixed costs total $120,000 at a volume level of 10,000 units. What dollar sales level
would Yellow Dot have to achieve to earn a target profit of $240,000?
A. $400,000.
B. $500,000.
C. $600,000.
D. $750,000.
E. $900,000.
Narchie sells a single product for $50. Variable costs are 60% of the selling price, and the
company has fixed costs that amount to $400,000. Current sales total 16,000 units.
46. Narchie:
A. will break-even by selling 8,000 units.
B. will break-even by selling 13,333 units.
C. will break-even by selling 20,000 units.
D. will break-even by selling 1,000,000 units.
E. cannot break-even because it loses money on every unit sold.
47. Each unit that Narchie sells will:
A. increase profit by $20.
B. increase profit by $30.
C. increase profit by $50.
D. increase profit by some other amount.
E. decrease profit by $5.

48. In order to produce a target profit of $22,000, Narchie’s dollar sales must total:
A. $8,440.
B. $21,100.
C. $1,000,000.
D. $1,055,000.
E. an amount other than those above.
49. If Narchie sells 24,000 units, its safety margin will be:
A. $200,000.
B. $400,000.
C. $1,000,000.
D. $1,200,000.
E. an amount other than those above.
50. The difference between budgeted sales revenue and break-even sales revenue is the:
A. contribution margin.
B. contribution-margin ratio.
C. safety margin.
D. target net profit.
E. operating leverage.

51. Maxine’s budget for the upcoming year revealed the following figures:

If the company’s break-even sales total $750,000, Maxine’s safety margin would be:
A. $(90,000).
B. $90,000.
C. $246,000.
D. $336,000.
E. $696,000.
52. Brooklyn sells a single product to wholesalers. The company’s budget for the
upcoming year revealed anticipated unit sales of 31,600, a selling price of $20, variable
cost per unit of $8, and total fixed costs of $360,000. Brooklyn’s safety margin in units
is:
A. (13,400).
B. 0.
C. 1,600.
D. 13,600.
E. an amount other than those above.
53. Brooklyn sells a single product to wholesalers. The company’s budget for the
upcoming year revealed anticipated unit sales of 31,600, a selling price of $20, variable
cost per unit of $8, and total fixed costs of $360,000. If Brooklyn’s unit sales are 200
units less than anticipated, its breakeven point will:
A. increase by $12 per unit sold.
B. decrease by $12 per unit sold.
C. increase by $8 per unit sold.
D. decrease by $8 per unit sold.
E. not change.
54. Brooklyn sells a single product to wholesalers. The company’s budget for the
upcoming year revealed anticipated unit sales of 31,600, a selling price of $20, variable
cost per unit of $8, and total fixed costs of $360,000. If Brooklyn’s unit sales are 300
units more than anticipated, its break-even point will:
A. increase by $12 per unit sold.
B. decrease by $12 per unit sold.
C. increase by $8 per unit sold.
D. decrease by $8 per unit sold.
E. not change.

56. Danielle sells a single product at $20 per unit. The firm’s most recent income
statement revealed unit sales of 100,000, variable costs of $800,000, and fixed costs of
$400,000. If a $4 drop in selling price will boost unit sales volume by 20%, the company
will experience:
A. no change in profit because a 20% drop in sales price is balanced by a 20% increase in
volume.
B. an $80,000 drop in profit.
C. a $240,000 drop in profit.
D. a $400,000 drop in profit.
E. a change in profit other than those above.
60. O’Dale sells three products: R, S, and T. Budgeted information for the upcoming
accounting period follows.

The company’s weighted-average unit contribution margin is:
A. $3.00.
B. $3.55.
C. $4.00.
D. $19.35.
E. an amount other than those above.
Jamal & Co. makes and sells two types of shoes, Plain and Fancy. Data concerning these
products are as follows:

Sixty percent of the unit sales are Plain, and annual fixed expenses are $45,000.
62. The weighted-average unit contribution margin is:
A. $4.80.
B. $9.00.
C. $9.25.
D. $17.00.
E. an amount other than those above.

63. Assuming that the sales mix remains constant, the total number of units that Jamal
must sell to break even is:
A. 2,432.
B. 2,647.
C. 4,737.
D. 5,000.
E. an amount other than those above.
64. Assuming that the sales mix remains constant, the number of units of Plain that Jamal
must sell to break even is:
A. 2,000.
B. 3,000.
C. 3,375.
D. 5,000.
E. 5,625.
65. Assuming that the sales mix remains constant, the number of units of Fancy that
Jamal must sell to break even is:
A. 2,000.
B. 3,000.
C. 3,375.
D. 5,000.
E. 5,625.
77. The following information relates to Dazie Company:

Dazie’s operating leverage factor is closest to:
A. 0.067.
B. 0.167.
C. 0.400.
D. 2.500.
E. 6.000.

78. The following information relates to Paternus Company:

If a manager at Paternus desired to determine the percentage impact on income of a given
percentage change in sales, the manager would multiply the percentage increase/decrease
in sales revenue by:
A. 0.25.
B. 0.40.
C. 2.50.
D. 4.00.
E. 10.00.
Edmonco Company produced and sold 45,000 units of a single product last year, with the
following results:

79. Edmonco’s operating leverage factor was:
A. 4.
B. 5.
C. 6.
D. 7.
E. 8.

80. If Edmonco’s sales revenues increase 15%, what will be the percentage increase in
income before income taxes?
A. 15%.
B. 45%.
C. 60%.
D. 75%.
E. An amount other than those above.
83. A company, subject to a 40% tax rate, desires to earn $500,000 of after-tax income.
How much should the firm add to fixed costs when figuring the sales revenues necessary
to produce this income level?
A. $200,000.
B. $300,000.
C. $500,000.
D. $833,333.
E. $1,250,000.
84. Barrey, Inc. is subject to a 40% income tax rate. The following data pertain to the
period just ended when the company produced and sold 45,000 units:

How many units must Barrey sell to earn an after-tax profit of $180,000?
A. 42,000.
B. 45,000.
C. 51,000.
D. 61,000.
E. An amount other than those above.
85. Barrey, Inc. is subject to a 40% income tax rate. The following data pertain to the
period just ended when the company produced and sold 45,000 units:

How many units must Barrey sell to earn an after-tax profit of $225,000?
A. 67,250.
B. 62,250.
C. 61,000.
D. 51,000.
E. An amount other than those above

Reviews

There are no reviews yet.

Be the first to review “Accounting Multiple Choice test Bank”

Your email address will not be published. Required fields are marked *

Accounting Multiple Choice Test Bank

$32.00

Description

1. Which, if either, of the following statements is or are true?

I. The co-ownership of business property, where only minimal services are provided by the owners for their tenants, generally constitutes a partnership for federal income tax purposes.
II. As a general rule, when a person obtains an interest in partnership capital through rendition of services, compensation (ordinary) income is recognized to the extent of the fair market value of the interest received.

a. I only.
b. II only.
c. Both I and II.
d. Neither I nor II.

2. Which, if either, of the following statements is or are true?

I. On the formation of a partnership, the contribution by one partner of encumbered property to a partnership when other partners contribute only cash will not result in taxation unless the total amount of the debt relief exceeds the contributor’s basis in the contributed property.
II. The contribution of accounts receivable to a partnership results in immediate taxation to the contributor to the extent of the fair market value of the receivables on date of contribution.

I only.
b. II only.
c. Both I and II.
d. Neither I nor II.

3. Under the check-the-box regulations a corporation incorporated under the law of any state can

a. elect to be taxed as a partnership
b. elect to be taxed as a limited liability company
c. elect to be taxed as a sole proprietor if there is only one shareholder
d. not be taxed as anything other than a corporation

4. On January 2, 2013, Henry, Cabot, and Lodge formed a three-person equal partnership with Henry and Cabot each contributing $100,000 and Lodge contributing securities with a basis to him of $60,000 and a fair market value of $100,000. On February 28, 2013, the partnership sold the securities for $130,000. The amount of the gain to be allocated to Lodge is:
a. $70,000
b. $50,000
c. $30,000
d. $23,333
e. $10,000

5. Malcolm, a dealer in securities, is a 60 percent owner of the Real Partnership which on July 1, 2012, sold to him Acme Securities which it had held as an investment for three years. The basis of the securities to the Real Partnership was $40,000, and the sales price to Malcolm was $100,000. On his 2012 federal income tax return, Malcolm should report income in the amount and character of:
a. $36,000 long-term capital gain
b. $36,000 short-term capital gain
c. $36,000 ordinary income
d. $18,000 long-term capital gain
e. $18,100 ordinary income

6. Bobbie and Fran are partners in the Quick Freeze partnership, owning respectively 60 percent and 40 percent of the partnership’s capital and profits. At the beginning of the 2012, their bases in their partnership interests were $18,000 and $12,000, respectively. During the year, the partnership had the following items of income: partnership ordinary income, $30,000; long-term capital gains, $10,000; and tax-exempt income from municipal bond interest, $5,000. The partnership distributed $8,000 to Bobbie and $12,000 to Fran. Their respective bases in their partnership interests at the end of 2012 were:
a. Bobbie: $45,000; Fran: $30,000
b. Bobbie: $42,000; Fran: $28,000
c. Bobbie: $37,000; Fran: $18,000
d. Bobbie: $34,000; Fran: $16,000
e. Bobbie: $33,000; Fran: $22,000

7. Bob contributed a building with an adjusted basis to Bob of $50,000 and a fair market value of $150,000 subject to a mortgage of $120,000 in exchange for a 30 percent interest in the Alpha Partnership. Alpha will assume the mortgage on the building. What is Alpha’s basis in the building?
a. $0
b. $30,000
c. $50,000
d. $84,000

8. Which, if either, of the following statements is or are true?

I. A partnership Schedule K-1 to Form 1065 must separately state long-term capital gains and losses but not short-term capital gains and losses.
II. As a general rule, a partner’s initial basis in his or her partnership interest equals the total of the fair market value of his/her property plus money, if any, contributed by the partner to the partnership.
a. I only.
b. II only.
c. Both I and II.
d. Neither I nor II.

9. Which, if either, of the following statements is or are false?

I. Tax exempt income received by a partnership, for example, municipal bond interest, does not increase a partner’s basis in his/her partnership interest because the income is not taxable.
II. A partner who receives a current property distribution (other than cash), made pro rata to all the partners, will not have to report a gain with respect to the distribution.
a. I only.
b. II only.
c. Both I and II.
d. Neither I nor II.

10. Rex contributed land to the partnership of Rex, Tex, and Lex Partnership in exchange for a one-third interest in the Partnership. Rex’s adjusted basis in the land was $50,000 and its fair market value was $75,000. Rex’s Partnership capital account was credited with $75,000. Tex and Lex had each contributed $75,000 cash. Thus, each partner’s capital account was $75,000. What is Rex’s adjusted basis (outside basis) in his partnership interest?
a. $75,000
b. $50,000
c. $37,500
d. cannot be determined from the facts stated

11. Ten years ago, Lisa acquired a one-third interest in Dee Associates, a general partnership. In the current taxable year, when Lisa’s entire interest in the partnership was liquidated, Dee Associates’ assets consisted of cash of $20,000 and tangible property with an adjusted basis to the partnership of $46,000 and a fair market value of $40,000 on the date of distribution. Dee Associates had no liabilities. Lisa’s adjusted basis in her one-third interest in the partnership was $22,000. Lisa received cash of $20,000 in complete liquidation of her entire interest. How much loss will Lisa recognize upon receipt of the liquidating distribution?
a. 0.
b. $2,000 short-term capital loss.
c. $2,000 long-term capital loss.
d. $2,000 ordinary loss.

12. Mark, Pete and Mickey are equal partners in the 2MP Partnership, a general partnership. On January 1, 2011, Mark’s adjusted basis in his partnership interest was $15,000, Pete’s adjusted basis in his partnership interest was $10,000, and Mickey’s adjusted basis in his partnership interest was $20,000. The partnership had taxable income of $30,000 in 2011 which was allocated equally among the partners. On December 31, 2012, the partnership made a non-liquidating distribution of $25,000 cash to Pete. How much income or gain did Pete recognize as a result of the distribution?
a. 0.
b. $5,000.
c. $15,000.
d. $25,000.

13. Ellen is a 25 percent partner in EFGH Partners, a general partnership. Ellen’s adjusted basis in her partnership interest is $18,000. During the current taxable year, Ellen received a non-liquidating distribution of land from EFGH Partners that had an adjusted basis to the partnership of $23,000 and a fair market value of $45,000 on the date of distribution. What is Ellen’s basis in the land received in the non-liquidating distribution?

a. 0.
b. $18,000.
b. $23,000.
c. $45,000.

14. Gary is a one-third partner in GNG Partners. a general partnership. Gary’s adjusted basis in his partnership interest is $25,000. Gary received a distribution of real estate in a non-liquidating distribution from the partnership. The real estate had an adjusted basis to the partnership of $20,000 and a fair market value of $50,000 on the date of distribution. What is Gary’s basis in the real property received in the non-liquidating distribution?

a. 0.
b. $20,000.
c. $25,000.
d. $50,000.

15. On January 1 of the current taxable year, Sam and Barbara form an equal partnership. Sam makes a cash contribution of $60,000 and a contribution of property with an adjusted basis to him of $160,000 and a fair market value of $140,000 in exchange for his interest in the partnership. Barbara contributes property with an adjusted basis to her of $120,000 and a fair market value of $200,000in exchange for her partnership interest. Which of the following statements is accurate regarding the income tax consequences of this transaction?

a. Sam’s adjusted basis in his partnership interest is $200,000.
b. The partnership’s adjusted basis in the property contributed by Sam is $140,000.
c. Barbara recognized a gain of $80,000 with respect to her contribution of property.
d. Barbara’s adjusted basis in her partnership interest is $120,000.

16. Tina and Betty formed a partnership. Tina received a 40 percent interest in the partnership in exchange for land with an adjusted basis to her of $60,000 and a fair market value of $80,000. Betty received a 60 percent interest in the partnership in exchange for $120,000 of cash. Three years after the date of contribution, the land contributed by Tina was sold by the partnership to an unrelated third party for $90,000. How much gain was required to be allocated to Tina as a result of the sale by the partnership?

a. $4,000.
b. $12,000.
c. $24,000.
d. $30,000.

17. When inventory that was contributed to a partnership in exchange for a partnership interest is eventually sold by the partnership, how will the character of the income or loss be determined?

a. The character of any income or loss will be ordinary regardless of when the contributed property is sold by the partnership and regardless of the character of the asset in the hands of the partnership.
b. The character of any income or loss will be ordinary if the contributed property is sold by the partnership within five years after the date of contribution regardless of the character of the asset in the hands of the partnership.
c. The character of any income or loss will be based on the character of the asset in the hands of the partnership regardless of when the contributed property is sold by the partnership.
d. The character of any income or loss will be ordinary to the extent of the contributing partner’s built-in gain or loss in the property at the time of the contribution regardless of when the contributed property is sold, and any balance will based on the character of the asset in the hands of the partnership.

18. Barbara and Bill formed an equal partnership, B&B, a general partnership, on January 1, 2011. Barbara contributed $100,000 in exchange for her one-half interest. Bill contributed land worth $100,000 that had an adjusted basis to him of $30,000 in exchange for his one-half interest. Which of the following statements is accurate with respect to this transaction?

a. None of Barbara, Bill, or B&B recognized any gain or loss.
b. Bill recognized gain of $70,000 , but Barbara and B&B did not recognize any gain or loss.
c. B&B recognized gain of $70,000 , but Barbara and Bill did not recognize any gain or loss.
d. Bill and B&B each recognized $70,000 of gain, but Barbara did not recognize any gain or loss.

19. Which of the following decreases a partner’s basis in the partner’s partnership interest?

a. Additional contributions the partner makes during the year.
b. The partner’s allocable share of tax-exempt income.
c. The partner’s allocable share of partnership items of income and gain.
d. Cash distributions to the partner during the year.

20. Jim, one of two equal partners of the JJ Partnership, a general partnership, contributed business property with an adjusted basis to him of $15,000 and a fair market value of $10,000 to the JJ Partnership. Jim’s capital account was credited with $10,000. The property later was sold for $12,000. As a result of this sale, how much gain or loss must Jim report on his personal income tax return?

a. $1,000 gain.
b. $1,500 loss.
c. $2,000 gain.
d. $3,000 loss.

21. Ronald and Roy formed an equal partnership, R&R Partnership, a general partnership, on January 1, 2011. Ronald contributed $100,000 in exchange for his one-half interest in R&R partnership. Roy contributed land worth $100,000 and with an adjusted basis to Roy of $30,000 in exchange for his one-half interest in the partnership. Roy is a real estate developer, and at the time of the contribution, the land was inventory in his hands. The land is a capital asset in the hands of R&R Partnership. If R&R Partnership sells the land in 2017 to an unrelated taxpayer for $180,000,how much gain will be recognized by R&R Partnership and what will be the character of the gain?

a. $80,000, all of which gain will be ordinary income.
b. $150,000,all of which gain will be capital gain.
c. $150,000,all of which gain will be ordinary income.
d. $150,000, consisting of $80,000 capital gain and $70,000 ordinary income.

22. Glenda received a proportionate non-liquidating distribution from the EFG Partnership. The distribution consisted of $10,000 cash and property with an adjusted basis to the partnership of $34,000 and a fair market value of $42,000. Immediately before the distribution, Glenda’s adjusted basis in her partnership interest was $60,000. How much is Glenda’s basis in the noncash property distributed to her?

a. $10,000.
b. $34,000.
c. $42,000.
d. $50,000.

23. S corporation borrows $5,000 from Bank @6% interest for one year.

a. If Bill, one of several shareholders of S corporation, signs an agreement with Bank guaranteeing repayment of the loan, he may add $5,000 to the basis of his S stock.
b. If shareholder Bill signs a repayment guarantee he will be entitled to have his Schedule K-1 from S corporation list 100% of the loan interest paid as his deduction to the exclusion of the other shareholders.
c. Even if shareholder Bill signs a repayment guarantee he will not be permitted to increase his S corporation stock basis by $5,000.
d. Partnership and S corporation tax rules allowing partners/shareholders to increase the basis of partners/shareholders by the amount of partnership/corporation debt are identical.

24. Section 1014 of the Internal Revenue Code

a. requires adjustment to the basis of most items included in a decedent’s gross estate.
b. permits the exclusion from a decedent’s gross estate of real property located in a foreign country.
c. provides mortgage foreclosure relief for real property comprising part of a decedent’s gross estate.
d. will be repealed effective January 1, 2015.

25. The maximum federal estate tax charitable deduction is

a. 50% of the adjusted gross estate.
b. 100% of the fair market value of gross estate property contributed to charity.
c. 35% of the adjusted gross estate.
d. limited to the cash plus fair market value of securities included in the gross estate and contributed to charity.

26. The 2013 and 2014 annual gift tax exclusion per donee is

a. $14,000.
b. $12,000.
c. one-half of the fair market value of the gift to a maximum of $20,000.
d. not available to reduce the value of present interest gifts.

27. The decedent died on March 12, 2013. The longest first income tax year the decedent’s executor can choose for the estate will end on

a. December 31, 2013.
b. January 31,2014.
c. February 28,2014.
d. March 31,2014.

28. All of the following are separately stated items on a partner’s Schedule K-1 except

a. short term capital gain.
b. ordinary business income of the partnership.
c. dividends.
d. interest.

29. A partnership may deduct start-up expenses in the first year of operation to a maximum amount of

a. $5,000.
b. $50,000.
c. 25% of start-up expenses.
d. 5% of first year’s gross income.

30. When a partner dies

a. the tax year closes for all the partners on date of death.
b. the partnership tax year closes with respect to the deceased partner on date of death.
c. the partnership tax year closes for all partners on the last day of the tax year as it normally would.
d. the partnership may elect a fiscal tax year for all surviving partners beginning on the day after date of death.

31. A Family Partnership

a. is subject to income taxation as an entity, like a C corporation.
b. must register as such with the state’s business regulation agency, much like a limited partnership.
c. must report its annual income on Form 1065 FP and Schedule K-1/FP.
d. is subject to having its annual reported income re-allocated among family member partners by the IRS.

32. A sale of a general partnership interest

a. automatically makes the purchaser a general partner.
b. is only the sale of the selling partner’s economic interest in the partnership.
c. is automatically subject to the right-of-first-refusal granted by the Uniform Partnership Code to the other partners.
d. must first be approved by the other partners and approval may not be unreasonably withheld.

33. To become an S corporation, a corporation must:

a. have once been a C corporation.
b. elect to be treated as such.
c. have at least 100 shareholders.
d. only c and b.
e. all of the above.

34. Assume for 2013 that Don made one transfer involving his granddaughter as follows: Don opened a joint checking account with his granddaughter, with right of survivorship, for her college expenses. Don made an initial deposit of $100,000. During 2013, granddaughter wrote checks on the account to the school for tuition of $15,000 and living expenses of $20,000. What is the amount of the taxable gift for federal gift tax purposes?

a. 0.
b. $6,000.
c. $21,000.
d. $35,000.

35. Oliver gave his wife $5,250,000 worth of publicly traded stock in August 2013, outright. Oliver’s basis in the stock was $50,000. What is the amount of the taxable gift for federal gift tax purposes? (Oliver made no other gifts to anyone in 2013).

a. 0.
b. $87,000.
c. $100,000.
d. $5,087,000.

36. For 2013, what is the amount of the maximum gift tax annual exclusion per donor from the value of a gift of a future interest made to any one donee?

a. 0.
b. $14,000.
c. $28,000.
d. $5,250,000.

37. Leslie died on October 31, 2013. Prior to 2012, Leslie had never made any gifts, but in 2012 she made some transfers. Specifically, on January 10, 2012, Leslie gave her vacation beach house to her five children outright, as tenants in common. The fair market value of the vacation beach house on the date of the transfer was $50,000. The fair market value of the vacation beach house at the date of Leslie’s death was $100,000. When Leslie died on October 31, 2013, she owned a vacant lot jointly with her sister, Melissa, as joint tenants with right of survivorship. Leslie and her sister each contributed $10,000 toward the $20,000 purchase price. The basis of the property did not change subsequent to the purchase, and at Leslie’s death, the fair market value of the property was $60,000. There is $90,000 of life insurance on the life of Leslie, and her estate is named as the beneficiary. (Assume all assets have the same value on the alternate valuation date as on the date of death). What is the amount of Leslie’s gross estate for federal estate tax purposes?

a. $120,000.
b. $170,000.
c. $220,000.
d. $250,000.

38. Louise, who died in January 2013, was survived by her husband, Larry. Louise’s gross estate was equal to $6,000,000 on the date of death. When Louise died, Louise and Larry owned an undeveloped parcel of real estate in Ocala. The fair market value of the land on the date of Louise’s death was $750,000. Larry provided all of the consideration for the purchase of the land, paying $200,000 for it in 2010. Alternate valuation is not available to Louise’s estate as all assets owned by Louise will pass, either under Louise’s last will and testament or by operation of law, to Larry and hence, no estate tax will be due because of the marital deduction. What is the amount, if any, includible in Louise’s gross estate for federal estate tax purposes with respect to the land?

a. 0.
b. $200,000.
c. $375,000.
d. $750,000.

39. The trustee of a testamentary trust has distributable net income of $30,000 on December 31, 2013, the last day of the trust’s income tax year. On March 3, 2014 the trustee makes a distribution of all distributable net income on hand as of December 31, 2013 to the trust beneficiaries. The trustee

a. may elect to have the distribution treated as though made on December 31, 2013.
b. cannot elect to have the distribution treated as though made on December 31, 2013.
c. is limited to the lesser of distributable net income or trust accounting income to be deemed as distributed on December 31, 2013.
d. cannot elect to have the distribution treated as though made on the prior December 31 for the first income tax year of the trust.

40. Under Carl’s will, Carl created a testamentary trust to be funded with $700,000 worth of assets. All of the income of the trust is payable to Carl’s child, Jane, for her life, and thereafter, the remaining assets of the trust will pass to The Public Charity. Jane is serving as the trustee. In addition, the trustee has the discretion to distribute all or such portion of the principal as the trustee shall determine for Jane’s heath, support, and maintenance. Jane’s father, Carl, died during the current taxable year with a gross estate of $5,350,000. Carl’s spouse died in 1985 and no estate tax return was due at her death. Which of the following statements is accurate with respect to the federal estate tax?

a The estate tax charitable deduction is available to Carl’s estate for the assets passing to The Public Charity.
b. Jane powers with respect to the assets of the trust constitute a general power of appointment.
c. Carl’s estate is not required to file Form 706, the Federal Estate and Generation-Skipping Tax Return.
d. When Jane dies, her right to trust income for life will not cause inclusion of the assets in her gross estate.

41. At the time of his death, Nick owned the following property:

Land held by Nick and his sister Ellen, as joint tenants with right of survivorship. The fair market value of the land on the date of Nick’s death was $600,000, and the land was purchased by Nick for himself and his sister 20 years before his death for $150,000.

Land held by Nick and Amy as tenants by the entirety. The fair market value of the land on the date of Nick’s death was $800,000, and the land was purchased by Amy for Nick and Amy five years before Nick’s death for $450,000.

A one-half undivided interest in land held with Lance as tenant in common. The fair market value of the land on the date of Nick’s death was $400,000, and the land was purchased by Lance for Nick and Lance four years before Nick’s death for $300,000.

City of Dayton bonds worth $500,000 purchased by Nick five years before his death, and titled in Nick’s sole name.

What amount is includible in Nick’s gross estate assuming alternate valuation is not available to Nick’s estate?

a. $800,000.
b. $1,100,000.
c. $1,200,000.
d. $1,700,000.

42. If an election is available and is made to use alternate valuation for federal estate tax purposes, then if property X is sold within six months after the decedent’s death, property X is valued for federal estate tax purposes as of which date?

a. The date of the decedent’s death.
b. The date that is six months after the decedent’s of death.
c. The date of sale of the property.
d. The date the property is distributed to the beneficiaries.

43. Sunnie purchased 50 percent of the shares of corporation H, a calendar year S corporation, for $7,000. She also guaranteed a corporate loan of $6,000. For 2012, H had an operating loss of $22,000. What is the amount of H’s loss that Sunnie can deduct on her individual income tax return for 2012?

a. $11,000.
b. $10,000.
c. $7,000.
d. 0.

44. Which of the following trusts is eligible to be an S corporation shareholder?

a. Electing small business trust.
b. Eligible foreign trust.
c. Qualified subchapter S trust.
d. Only a and c.
e. All of the above trusts are eligible to be S corporation shareholders.

45. Which of the following count as a single S corporation shareholder?

a. A husband and wife.
b. A spouse and a spouse’s estate.
c. Members of a family with a common ancestor (who meet the six generations test).
d. All of the above.

46. A S corporation’s shareholder’s adjusted basis in the shareholder’s stock is used to determine:

a. the extent to which a distribution made by the corporation to the shareholder is taxable.
b. the amount of losses that shareholders may deduct in a given year.
c. the shareholder’s realized gain or loss upon the sale or exchange of the stock.
d. all of the above.

47. The following will result in a corporation’s loss of S status or failure to qualify except

a. issuing two types of stock, voting common stock and non-voting common stock.
b. having a partnership as a shareholder.
c. being incorporated in Canada.
d. having 101 shareholders, all unrelated to each other.

Facts for Questions 48 and 49. Mr. Grey died on January 1, 2013. Mr. Grey made no gifts during his life. Under his will, Mr. Grey devised all of his probate assets to his wife. Mr. Grey owned the following assets, probate and nonprobate, at the date of his death:

Asset 1. Home in Mr. Grey’s and Mrs. Grey’s (his surviving spouse) names as tenants by the entireties that was purchased in 2006. The home was had a fair market value of $2,000,000 both at the date of Mr. Grey’s death and six months after the Mr. Grey’s death.

Asset 2. Publicly traded stocks and bonds solely in , Mr. Grey’s name that had a fair market value of $3,000,000 on the date of Mr. Grey’s death and a fair market value of $2,000,000 six months after Mr. Grey’s death.

Asset 3. Undeveloped real estate in Mr. Grey’s name and the name of his daughter, Sue Smith, jointly with right of survivorship that Mr. Grey purchased in 2006 for $100,000. The property had a fair market value of $2,500,000 at the date of Mr. Grey’s death and a fair market value of $1,000,000 six months after the date of Mr. Grey’s death.

Asset 4. A condominium in the decedent’s name alone purchased in 2002 and used as a vacation home that had a fair market value of $500,000 on the date of Mr. Grey’s death. The condominium was sold by the personal representative of the decedent’s estate for $250,000 four months after Mr. Grey’s death.

Based on the facts for questions 48 and 49, which of the following options are available to Mr. Grey’s estate for valuation of the assets includible in the gross estate?

a. The estate may use date of death values or it may elect alternate valuation.
b. The estate must use date of death values.
c. The estate must elect alternate valuation.
d. Valuation is not required as no Federal Estate Tax Return is required to be filed.

49. Facts for Questions 48 and 49. Mr. Grey died on January 1, 2013. Mr. Grey made no gifts during his life. Under his will, Mr. Grey devised all of his probate assets to his wife. Mr. Grey owned the following assets, probate and nonprobate, at the date of his death:

Asset 1. Home in Mr. Grey’s and Mrs. Grey’s (his surviving spouse) names as tenants by the entireties that was purchased in 2006. The home was had a fair market value of $2,000,000 both at the date of Mr. Grey’s death and six months after the Mr. Grey’s death.

Asset 2. Publicly traded stocks and bonds solely in , Mr. Grey’s name that had a fair market value of $3,000,000 on the date of Mr. Grey’s death and a fair market value of $2,000,000 six months after Mr. Grey’s death.

Asset 3. Undeveloped real estate in Mr. Grey’s name and the name of his daughter, Sue Smith, jointly with right of survivorship that Mr. Grey purchased in 2006 for $100,000. The property had a fair market value of $2,500,000 at the date of Mr. Grey’s death and a fair market value of $1,000,000 six months after the date of Mr. Grey’s death.

Asset 4. A condominium in the decedent’s name alone purchased in 2002 and used as a vacation home that had a fair market value of $500,000 on the date of Mr. Grey’s death. The condominium was sold by the personal representative of the decedent’s estate for $250,000 four months after Mr. Grey’s death.
Based upon the facts presented in the fact pattern for questions 48 and 49, what is the amount of Mr. Grey’s gross estate for federal estate tax purposes?

a. 0.
b. $2,500,000.
c. $3,500,000.
d. $4,250,000.
e. $7,000,000.

50. An S corporation may lose its S status because:

a. it issues a second class of stock.
b. it has accumulated E&P and excess passive investment income for three consecutive years.
c. the number of shareholders exceeds 100.
d. all of the above.

Reviews

There are no reviews yet.

Be the first to review “Accounting Multiple Choice Test Bank”

Your email address will not be published. Required fields are marked *

Accounting Multiple Choice Test Bank

$52.00

Description

18. Sanderson sells a single product for $50 that has a variable cost of $30. Fixed costsamount to $5 per unit when anticipated sales targets are met. If the company sells oneunit in excess of its break-even volume, profit will be:
A. $15.
B. $20.
C. $50.
D. an amount that cannot be derived based on the information presented.
E. an amount other than those in choices “A,” “B,” and “C”, but one that can be derivedbased on the information presented.
19. At a volume of 20,000 units, Dries reported sales revenues of $1,000,000, variablecosts of $300,000, and fixed costs of $260,000. The company’s contribution margin perunit is:
A. $22.
B. $28.
C. $35.
D. $37.
E. an amount other than those above.
20. At a volume of 20,000 units, Dries reported sales revenues of $1,000,000, variable
costs of $300,000, and fixed costs of $260,000. The company’s break-even point in units
is:
A. 7,027 (rounded).
B. 8,667 (rounded).
C. 9,286 (rounded).
D. 7,429 (rounded).
E. an amount other than those above.
21. A recent income statement of Black Corporation reported the following data:

If these data are based on the sale of 20,000 units, the contribution margin per unit would
be:
A. $40.
B. $150.
C. $290.
D. $360.
E. an amount other than those above.

22. A recent income statement of Black Corporation reported the following data:

If these data are based on the sale of 20,000 units, the break-even point would be:
A. 9,565 units (rounded).
B. 11,000 units (rounded).
C. 7,586 units (rounded).
D. 14,667 units (rounded).
E. an amount other than those above.
23. A recent income statement of Suni Corporation reported the following data:

If these data are based on the sale of 20,000 units, the break-even point would be:
A. 7,500 units.
B. 11,628 units.
C. 12,500 units.
D. 33,333 units.
E. an amount other than those above.
24. A recent income statement of Yang Corporation reported the following data:

If these data are based on the sale of 5,000 units, the break-even sales would be:
A. $2,000,000.
B. $2,206,000.
C. $2,500,000.
D. $10,000,000.
E. an amount other than those above.

25. Lawson, Inc. sells a single product for $12. Variable costs are $8 per unit and fixed
costs total $360,000 at a volume level of 60,000 units. Assuming that fixed costs do not
change, Lawson’s break-even point would be:
A. 30,000 units.
B. 45,000 units.
C. 90,000 units.
D. negative because the company loses $2 on every unit sold.
E. a positive amount other than those given above.
26. Grey, Inc. sells a single product for $20. Variable costs are $8 per unit and fixed costs
total $120,000 at a volume level of 5,000 units. Assuming that fixed costs do not change,
Green’s break-even sales would be:
A. $160,000.
B. $200,000.
C. $300,000.
D. $480,000.
E. an amount other than those above.
27. Orion recently reported sales revenues of $800,000, a total contribution margin of
$300,000, and fixed costs of $180,000. If sales volume amounted to 10,000 units, the
company’s variable cost per unit must have been:
A. $12.
B. $32.
C. $50.
D. $92.
E. an amount other than those above.
28. Strayer has a break-even point of 120,000 units. If the firm’s sole product sells for $40
and fixed costs total $480,000, the variable cost per unit must be:
A. $4.
B. $36.
C. $44.
D. an amount that cannot be derived based on the information presented.
E. an amount other than those in choices “A,” “B,” and “C”, but one that can be derived
based on the information presented.

29. Ribco Co. makes and sells only one product. The unit contribution margin is $6 and
the break-even point in unit sales is 24,000. The company’s fixed costs are:
A. $4,000.
B. $14,400.
C. $40,000.
D. $144,000.
E. an amount other than those above.
31. At a volume level of 500,000 units, Sullivan reported the following information:

The company’s contribution-margin ratio is closest to:
A. 0.33.
B. 0.40.
C. 0.60.
D. 0.67.
E. an amount other than those above.
44. A recent income statement of Dragonwood Corporation reported the following data:

If the company desired to earn a target profit of $1,270,000, it would have to sell:
A. 5,778 units.
B. 8,600 units.
C. 10,160 units.
D. 11,908 units.
E. an amount other than those above.

45. Yellow Dot, Inc. sells a single product for $10. Variable costs are $4 per unit and
fixed costs total $120,000 at a volume level of 10,000 units. What dollar sales level
would Yellow Dot have to achieve to earn a target profit of $240,000?
A. $400,000.
B. $500,000.
C. $600,000.
D. $750,000.
E. $900,000.
Narchie sells a single product for $50. Variable costs are 60% of the selling price, and the
company has fixed costs that amount to $400,000. Current sales total 16,000 units.
46. Narchie:
A. will break-even by selling 8,000 units.
B. will break-even by selling 13,333 units.
C. will break-even by selling 20,000 units.
D. will break-even by selling 1,000,000 units.
E. cannot break-even because it loses money on every unit sold.
47. Each unit that Narchie sells will:
A. increase profit by $20.
B. increase profit by $30.
C. increase profit by $50.
D. increase profit by some other amount.
E. decrease profit by $5.

48. In order to produce a target profit of $22,000, Narchie’s dollar sales must total:
A. $8,440.
B. $21,100.
C. $1,000,000.
D. $1,055,000.
E. an amount other than those above.
49. If Narchie sells 24,000 units, its safety margin will be:
A. $200,000.
B. $400,000.
C. $1,000,000.
D. $1,200,000.
E. an amount other than those above.
50. The difference between budgeted sales revenue and break-even sales revenue is the:
A. contribution margin.
B. contribution-margin ratio.
C. safety margin.
D. target net profit.
E. operating leverage.

51. Maxine’s budget for the upcoming year revealed the following figures:

If the company’s break-even sales total $750,000, Maxine’s safety margin would be:
A. $(90,000).
B. $90,000.
C. $246,000.
D. $336,000.
E. $696,000.
52. Brooklyn sells a single product to wholesalers. The company’s budget for the
upcoming year revealed anticipated unit sales of 31,600, a selling price of $20, variable
cost per unit of $8, and total fixed costs of $360,000. Brooklyn’s safety margin in units
is:
A. (13,400).
B. 0.
C. 1,600.
D. 13,600.
E. an amount other than those above.
53. Brooklyn sells a single product to wholesalers. The company’s budget for the
upcoming year revealed anticipated unit sales of 31,600, a selling price of $20, variable
cost per unit of $8, and total fixed costs of $360,000. If Brooklyn’s unit sales are 200
units less than anticipated, its breakeven point will:
A. increase by $12 per unit sold.
B. decrease by $12 per unit sold.
C. increase by $8 per unit sold.
D. decrease by $8 per unit sold.
E. not change.
54. Brooklyn sells a single product to wholesalers. The company’s budget for the
upcoming year revealed anticipated unit sales of 31,600, a selling price of $20, variable
cost per unit of $8, and total fixed costs of $360,000. If Brooklyn’s unit sales are 300
units more than anticipated, its break-even point will:
A. increase by $12 per unit sold.
B. decrease by $12 per unit sold.
C. increase by $8 per unit sold.
D. decrease by $8 per unit sold.
E. not change.

56. Danielle sells a single product at $20 per unit. The firm’s most recent income
statement revealed unit sales of 100,000, variable costs of $800,000, and fixed costs of
$400,000. If a $4 drop in selling price will boost unit sales volume by 20%, the company
will experience:
A. no change in profit because a 20% drop in sales price is balanced by a 20% increase in
volume.
B. an $80,000 drop in profit.
C. a $240,000 drop in profit.
D. a $400,000 drop in profit.
E. a change in profit other than those above.
60. O’Dale sells three products: R, S, and T. Budgeted information for the upcoming
accounting period follows.

The company’s weighted-average unit contribution margin is:
A. $3.00.
B. $3.55.
C. $4.00.
D. $19.35.
E. an amount other than those above.
Jamal & Co. makes and sells two types of shoes, Plain and Fancy. Data concerning these
products are as follows:

Sixty percent of the unit sales are Plain, and annual fixed expenses are $45,000.
62. The weighted-average unit contribution margin is:
A. $4.80.
B. $9.00.
C. $9.25.
D. $17.00.
E. an amount other than those above.

63. Assuming that the sales mix remains constant, the total number of units that Jamal
must sell to break even is:
A. 2,432.
B. 2,647.
C. 4,737.
D. 5,000.
E. an amount other than those above.
64. Assuming that the sales mix remains constant, the number of units of Plain that Jamal
must sell to break even is:
A. 2,000.
B. 3,000.
C. 3,375.
D. 5,000.
E. 5,625.
65. Assuming that the sales mix remains constant, the number of units of Fancy that
Jamal must sell to break even is:
A. 2,000.
B. 3,000.
C. 3,375.
D. 5,000.
E. 5,625.
77. The following information relates to Dazie Company:

Dazie’s operating leverage factor is closest to:
A. 0.067.
B. 0.167.
C. 0.400.
D. 2.500.
E. 6.000.

78. The following information relates to Paternus Company:

If a manager at Paternus desired to determine the percentage impact on income of a given
percentage change in sales, the manager would multiply the percentage increase/decrease
in sales revenue by:
A. 0.25.
B. 0.40.
C. 2.50.
D. 4.00.
E. 10.00.
Edmonco Company produced and sold 45,000 units of a single product last year, with the
following results:

79. Edmonco’s operating leverage factor was:
A. 4.
B. 5.
C. 6.
D. 7.
E. 8.

80. If Edmonco’s sales revenues increase 15%, what will be the percentage increase in
income before income taxes?
A. 15%.
B. 45%.
C. 60%.
D. 75%.
E. An amount other than those above.
83. A company, subject to a 40% tax rate, desires to earn $500,000 of after-tax income.
How much should the firm add to fixed costs when figuring the sales revenues necessary
to produce this income level?
A. $200,000.
B. $300,000.
C. $500,000.
D. $833,333.
E. $1,250,000.
84. Barrey, Inc. is subject to a 40% income tax rate. The following data pertain to the
period just ended when the company produced and sold 45,000 units:

How many units must Barrey sell to earn an after-tax profit of $180,000?
A. 42,000.
B. 45,000.
C. 51,000.
D. 61,000.
E. An amount other than those above.
85. Barrey, Inc. is subject to a 40% income tax rate. The following data pertain to the
period just ended when the company produced and sold 45,000 units:

How many units must Barrey sell to earn an after-tax profit of $225,000?
A. 67,250.
B. 62,250.
C. 61,000.
D. 51,000.
E. An amount other than those above

Reviews

There are no reviews yet.

Be the first to review “Accounting Multiple Choice Test Bank”

Your email address will not be published. Required fields are marked *