1) A job order cost system would most likely be used by a(n):
a.cement manufacturer
b.paint manufacturer
c.automobile manufacturer
d.specialty printing company
2) On the costs of goods manufactured schedule, the item raw materials inventory
(ending) appears as a(n)
a.addition to raw materials purchases
b.addition to raw materials available for use
c.subtraction from raw materials available for use
d.subtraction from raw materials purchases
3) The direct labor quantity standard is sometimes called the direct labor
a.volume standard
b.effectiveness standard
c.efficiency standard
d.quality standard
4) (a)Identify the three activities that pertain to a petty cash fund, and indicate an
internal control principle that is applicable to each activity. (b) When are journal entries
required in the operation of a petty cash fund?
5) Hart Company issued $600,000 of 8%, 5-year bonds at 105, with interest paid
annually. Assuming straight-line amortization, what is the carrying value of the bonds
after one year?
a.$630,000
b.$627,000
c.$624,000
d.$633,000
6) In the Connor Company, materials are entered at the beginning of the process. If
there is no beginning work in process, but there is an ending work in process inventory,
the number of equivalent units as to materials costs will be
a.the same as the units started
b.the same as the units completed
c.less than the units started
d.less than the units completed
7) Lansington Company earned net income of $350,000 last year. This year it wants to
earn net income of $450,000. The company’s fixed costs are expected to be $300,000,
and variable costs are expected to be 70% of sales.
Instructions
(a)Determine the required sales to meet the target net income of $450,000 using the
mathematical equation.
(b)Using a CVP income statement format, prove your answer.
8) The net amount expected to be received in cash from receivables is termed the
a.cash realizable value
b.cash-good value
c.gross cash value
d.cash-equivalent value
9) Materials requisitions are:
a.not used in process costing
b.generally used more frequently in process costing than job order costing
c.generally used less frequently in process costing than job order costing
d.used more frequently by latter stage production departments
10) Netta Shutters has the following inventory information.
Nov.1Inventory30 units @$8.00
8Purchase120 units @$8.30
17Purchase60 units @$8.40
25Purchase90 units @$8.80
A physical count of merchandise inventory on November 30 reveals that there are 90
units on hand. Assume a periodic inventory system is used. Assuming that the specific
identification method is used and that ending inventory consists of 20 units from each
of the three purchases and 30 units from the November 1 inventory, cost of goods sold
is
a.$1,740
b.$1,772
c.$1,782
d.$1,794
11) The SEC and FASB are two organizations that are primarily responsible for
establishing generally accepted accounting principles. It is true that
a.they are both governmental agencies
b.the SEC is a private organization of accountants
c.the SEC often mandates guidelines when no accounting principles exist
d.the SEC and FASB rarely cooperate in developing accounting standards
12) The usual sequence of steps in the recording process is to analyze each transaction,
enter the transaction in the
a.journal, and transfer the information to the ledger accounts
b.ledger, and transfer the information to the journal
c.book of accounts, and transfer the information to the journal
d.book of original entry, and transfer the information to the journal
13) A prior period adjustment that corrects income of a prior period requires that an
entry be made to
a.an income statement account
b.a current year revenue or expense account
c.the retained earnings account
d.an asset account
14) The specific identification method
a.cannot be used under GAAP
b.cannot be used under IFRS
c.must be used under IFRS if the inventory items can be specifically identified
d.must be used under IFRS if it would result in the lowest net income
15) A higher discount rate produces
a.a smaller present value
b.a higher present value
c.the same present value
d.a greater length of time
16) When current liabilities are presented under IFRS, they are generally shown
a.alphabetically
b.in order of magnitude
c.in order of the dates they become due
d.in order of liquidity
17) Use the following table,
Present Value of an Annuity of 1
Period 8% 9% 10%
1.926.917.909
21.7831.7591.736
32.5772.5312.487
A company has a minimum required rate of return of 8% and is considering investing in
a project that costs $175,000 and is expected to generate cash inflows of $70,000 at the
end of each year for three years. The net present value of this project is
a.$5,390
b.$35,000
c.$2,170
d.$180,390
18) The standard form of a journal entry has the
a.debit account entered first and indented
b.credit account entered first and indented
c.debit account entered first at the extreme left margin
d.credit account entered first at the extreme left margin
19) Assuming the cost of direct materials used is $1,170,000, compute the total
manufacturing costs using the information below.
Raw materials inventory, January 1$ 35,000
Raw materials inventory, December 3150,000
Work in process, January 118,000
Work in process, December 3127,000
Finished goods, January 148,000
Finished goods, December 3160,000
Raw materials purchases1,100,000
Direct labor700,000
Factory utilities225,000
Indirect labor105,000
Factory depreciation500,000
Operating expenses630,000
a.$2,500,000
b.$2,700,000
c.$2,300,000
d.$3,330,000
20) If Whisper Wings Airlines cuts its domestic fares by 30%,
a.its fixed costs will decrease
b.profit will increase by 30%
c.a profit can only be earned by decreasing the number of flights
d.a profit can be earned either by increasing the number of passengers or by decreasing
variable costs
21) The following information is available for Spencer Company at December 31,
2014:
1>Inventory balanceBeginning of YearEnd of Year
Finished Goods$12,000$14,000
Work in Process6,50015,000
Raw Materials10,3006,500
2>Debit postings to Work in Process Inventory during the year were:
Direct materials$92,000
Direct labor54,000
Manufacturing overhead applied81,000
3>Sales totaled $317,000 for the year.
Instructions
(a)Prepare a condensed cost of goods manufactured schedule.
(b)Prepare an income statement for the year through gross profit.
22) Stock dividends and stock splits have the following effects on retained earnings:
Stock SplitsStock Dividends
a.IncreaseNo change
b.No changeDecrease
c.DecreaseDecrease
d.No changeNo change
23) In computing depreciation, salvage value is
a.the fair value of a plant asset on the date of acquisition
b.subtracted from accumulated depreciation to determine the plant asset’s depreciable
cost
c.an estimate of a plant asset’s value at the end of its useful life
d.ignored in all the depreciation methods
24) Belle Corporation retires its bonds at 105 on January 1, following the payment of
semi-annual interest. The face value of the bonds is $600,000. The carrying value of the
bonds at the redemption date is $621,500. The entry to record the redemption will
include a
a.credit of $21,500 to Loss on Bond Redemption
b.debit of $30,000 to Premium on Bonds Payable
c.credit of $8,500 to Gain on Bond Redemption
d.debit of $21,500 to Premium on Bonds Payable
25) Match the basic step in the recording process described by each of the following
statements.
A.Analyze each transaction
B.Enter each transaction in a journal
C.Transfer journal information to ledger accounts
____ 1>This step is called posting.
____ 2>Business documents are examined to determine the effects of transactions on
the accounts.
____ 3>This step is called journalizing.
26) A petty cash fund:
a.results in expense accounts being charged when cash is disbursed
b.should be replenished when the fund is low and at the end of the period
c.results in expense accounts being charged when the fund is replenished
d.Both (b) and (c) above
27) The income statement for the year 2014 of Fugazi Co. contains the following
information:
Revenues$70,000
Expenses:
Salaries and Wages Expense$45,000
Rent Expense12,000
Advertising Expense10,000
Supplies Expense6,000
Utilities Expense2,500
Insurance Expense 2,000
Total expenses 77,500
Net income (loss)$ (7,500)
The entry to close the expense accounts includes a
a.debit to Income Summary for $7,500
b.credit to Income Summary for $7,500
c.debit to Income Summary for $77,500
d.debit to Utilities Expense for $2,500
28) For the Assembly Department, unit materials cost is $7 and unit conversion cost is
$12. If there are 10,000 units in ending work in process 75% complete as to conversion
costs, the costs to be assigned to the inventory are
a.$190,000
b.$160,000
c.$142,500
d.$172,500
29) A factor which distinguishes the corporate form of organization from a sole
proprietorship or partnership is that a
a.corporation is organized for the purpose of making a profit
b.corporation is subject to more federal and state government regulations
c.corporation is an accounting economic entity
d.corporations temporary accounts are closed at the end of the accounting period
30) The use of reversing entries
a.is a required step in the accounting cycle
b.changes the amounts reported in the financial statements
c.simplifies the recording of subsequent transactions
d.is required for all adjusting entries
31) 1>Name at least three factors that influence the market value of stock.
2>Corporations acquire treasury stock for a variety of purposes. Name three reasons
why treasury stock may be acquired by a corporation.
32) Clare Company had total operating expenses of $185,000 in 2014, which included
Depreciation Expense of $36,000. Also, during 2014, prepaid expenses increased by
$8,000 and accrued expenses decreased by $7,600.
Instructions
Calculate the amount of cash payments for operating expenses in 2014 using the direct
method.
33) Prepare a 2014 income statement for Shanta Corporation based on the following
information:
Cost of goods sold$490,000
Operating expenses100,000
Other expenses and losses30,000
Sales revenue700,000
Tax rate30%
34) In October, Fink Inc. reports 42,000 actual direct labor hours, and it incurs
$196,000 of manufacturing overhead costs. Standard hours allowed for the work done
is 40,000 hours. Finks predetermined overhead rate is $5.00 per direct labor hour. In
addition, the flexible manufacturing overhead budget shows that budgeted costs are
$3.80 variable per direct labor hour and $60,000 fixed.
Instructions
Compute the manufacturing overhead controllable variance.
35) Prepare journal entries to record the following transactions entered into by Valente
Company:
2014
June1Received a $10,000, 12%, 1-year note from Andrea Foley as full payment on her
account.
Nov.1Sold merchandise on account to Patton, Inc. for $12,000, terms 2/10, n/30.
Nov.5Patton, Inc. returned merchandise worth $500.
Nov.9Received payment in full from Patton, Inc.
Dec.31Accrued interest on Foley’s note.
2015
June1Andrea Foley honored her promissory note by sending the face amount plus
interest. No interest has been accrued in 2015 .
36) Winsor Company uses the perpetual inventory system and the LIFO method. The
following information is available for the month of May:
May1Beginning inventory20 units @ $5
10Purchase20 units @ $8
15Sales15 units
18Purchase10 units @ $9
21Sales15 units
30Purchase10 units @ $10
Instructions
Prepare a schedule to show cost of goods sold and the value of the ending inventory for
the month of May.