1) Manufacturers use labor, plant, and equipment to convert direct materials into
finished products.
2) Purchasing supplies on account increases liabilities and decreases equity.
3) Make or buy options often arise when a manufacturer has excess productive capacity
in the form of unused equipment, space, and labor.
4) Retained earnings represents past net incomes less past dividends, therefore any
balance in this account would be listed on the income statement.
5) If $475,000 of bonds payable are sold at 101, $475,000 would be reported in the cash
flows from financing activities section of the statement of cash flows.
6) A group of related accounts that make up a complete unit is called a trial balance.
7) Financial statements should be prepared before the closing entries are journalized
and posted.
8) In the absorption costing income statement, deduction of the cost of goods sold from
sales yields gross profit.
9) The inventory accounts generally maintained by a manufacturing firm are only
finished goods and materials.
10) In a just-in-time (JIT) system, there are more transactions to record than there are in
a traditional system.
11) In a just-in-time (JIT) system, indirect labor is traced directly to product cells.
12) Discontinuing a segment or product may not be the best choice when the segment is
contributing to fixed expenses.
13) The account Unrealized Gain (Loss) on Available-For-Sale Securities should be
included in the
A.Income statement as Other Revenue (Expenses)
B.Balance sheet as an adjustment to the asset account
C.Balance sheet as an adjustment to Stockholders’ Equity
D.Statement of Retained Earnings
14) If fixed costs are $250,000, the unit selling price is $125, and the unit variable costs
are $73, what is the break-even sales (units)?
A.3,425 units
B.2,381 units
C.2,000 units
D.4,808 units
15) If the expected sales volume for the current period is 7,000 units, the desired ending
inventory is 400 units, and the beginning inventory is 300 units, the number of units set
forth in the production budget, representing total production for the current period, is:
A.6,900
B.7,000
C.7,200
D.7,100
16) Ramone Company had $600,000 in Net Sales for the year 2010. The total assets at
the beginning of the year were $240,000 and total assets at the end of the year were
$280,000. The ratio of net sales to total assets is (round answer to 2 decimal places):
A.2.31
B.1.15
C..43
D..87
17) A form prepared periodically for each processing department summarizing (1) the
units for which the department is accountable and the units to be assigned costs and (2)
the costs charged to the department and the allocation of these costs is termed a:
A.factory overhead production report
B.manufacturing cost report
C.process cost report
D.cost of production report
18) The point where the profit line intersects the horizontal axis on the profit-volume
chart represents:
A.the maximum possible operating loss
B.the maximum possible operating income
C.the total fixed costs
D.the break-even point
19) In a common size income statement, the 100% figure is:
A.net cost of goods sold
B.net income
C.gross profit
D.net sales
20) If the market rate of interest is 10%, a $10,000, 12%, 10-year bond that pays
interest semiannually would sell at an amount
A.less than face value
B.equal to the face value
C.greater than face value
D.that cannot be determined
21) Which of the following would be most likely to use process costing?
A.A custom furniture manufacturer
B.An auto body repair shop
C.A law firm
D.A lawn fertilizer manufacturer
22) Shubelik Company is changing to an activity-based costing method. They have
determined that they will use three cost pools. They are setups, inspections, and
assembly. Which of the following would be used as the activity base for assembly?
A.number of direct labor hours
B.number of setups
C.number of inspections
D.number of units to be produced
23) Which of the following is not a general-purpose financial statement?
A.balance sheet
B.income statement
C.retained earnings statement
D.cash budget
24) The controlling account for the cost ledger is:
A.Finished Goods
B.Materials
C.Work in Process
D.Cost of Goods Sold
25) A series of budgets for varying rates of activity is termed a(n):
A.flexible budget
B.variable budget
C.master budget
D.activity budget
26) The amount of the promissory note plus the interest earned on the due date is called
the
A.interest value
B.maturity value
C.face value
D.issuance value
27) Gale Company owns 87% of the outstanding stock of Leonardo Company.
Leonardo Company is referred to as the
A.parent
B.minority interest
C.affiliate
D.subsidiary
28) Reedy Company reports the following information for 2012:
Factory overhead is 75% of the cost of direct labor. Work in process inventory on
December 31, 2012, is:
A.$16,250
B.$8,500
C.$18,750
D.$13,500
29) Which of the following is not an advantage of issuing bonds instead of common
stock?
A.Tax savings result
B.Income to common shareholders may increase
C.Earnings per share on common stock may be lower
D.Stockholder control is not affected
30) Cades Company has the following information for March:
Determine the March (a) manufacturing margin, (b) contribution margin, and (c)
income from operations for Cades Company.
31) The purpose of an audit is to
A.determine whether or not a company is a good investment
B.render an opinion on the fairness of the statements
C.determine whether or not a company complies with corporate social responsibility
D.determine whether or not a company is a good credit risk
32) Which of the following should be deducted from net income in calculating net cash
flow from operating activities using the indirect method?
A.a decrease in inventory
B.a decrease in accounts payable
C.preferred dividends declared and paid
D.a decrease in accounts receivable
33) Miriah Inc. has 10,000 shares of 5%, $100 par value, cumulative preferred stock
and 50,000 shares of $1 par value common stock outstanding at December 31, 2014.
What is the annual dividend on the preferred stock?
A.$50 per share
B.$50,000 in total
C.$10,000 in total
D.$0.50 per share
34) The following items were taken from the financial statements of Stanton, Inc., over
a three-year period:
Compute the following for each of the above time periods.
Round percentage to one decimal place.
35) For each of the following, identify whether it would be disclosed as an operating
(O), financing (F), or investing (I) activity on the statement of cash flows under the
indirect method.
a. Receipt of dividends
b. Payment of dividends
c. Purchase of equipment
d. Net income
e. Issuance of the companys common stock
f. Amortization expense
36) At the end of the current year, Accounts Receivable has a balance of $550,000;
Allowance for Doubtful Accounts has a credit balance of $5,500; and net sales for the
year total $2,500,000. An analysis of receivables estimates uncollectible receivables as
$25,000.
Determine (a) the amount of the adjusting entry for bad debt expense; (b) the adjusted
balances of Accounts Receivable, Allowance of Doubtful Accounts; and Bad Debt
Expense; and (c) the net realizable value of accounts receivable.
37) Eagle Co. manufactures bentwood chairs and tables. Wood for both products is
steam-bent in the same process, but different types of wood are used for each product.
Thus, materials cost is identified separately to each product. One production cycle uses
20 board feet. Labor cost is identified to the process as a whole, as is overhead cost.
Data for the month of July follow:
(a) Compute July’s predetermined rate for the steam-bending process.
(b) Compute July’s direct material costs for chairs and tables.
(c) Compute conversion costs to be applied to chairs and tables in July.
(d) Journalize the following entries:
(1) Assignment of direct materials to chairs and tables.
(2) Application of conversion costs to chairs and tables.
(3) The transfer of completed chairs and tables to the Finishing Department. All of
July’s production was completed in July.
(a) Steam-bending conversion cost per hour = $390,000/5,200 hrs.
= $75 per hour
(b) Direct material cost per unit: Chairs Tables
($3.60/ft. 20 ft. per cycle)
38) What is the type of account and normal balance of Allowance for Doubtful
Accounts?
A.Contra asset, credit
B.Asset, debit
C.Asset, credit
D.Contra asset, debit
39) The inventory system employing accounting records that continuously disclose the
amount of inventory is called
A.retail
B.periodic
C.physical
D.perpetual
41) Standard costs are divided into which of the following components?
A.Variance Standard and Quantity Standard
B.Materials Standard and Labor Standard
C.Quality Standard and Quantity Standard
D.Price Standard and Quantity Standard
42) Albright Company purchased as a long-term investment $500,000 of Benton
Corporation 10-year, 9% bonds. Present entries to record the following selected
transactions:
43) Generally, the revenue account for a merchandising business is entitled
A.Sales
B.Fees Earned
C.Gross Sales
D.Gross Profit
44) When Bayou Corporation was formed on January 1, 20xx, the corporate charter
provided for 100,000 share of $10 par value common stock. The following transaction
was among those engaged in by the corporation during its first month of operation: The
corporation issued 9,000 shares of stock at a price of $23 per share.
The entry to record the above transaction would include a
A.debit to Cash for $90,000
B.credit to Common Stock for $207,000
C.credit to Paid in Capital in Excess of Par for $117,000
D.debit to Common Stock for $90,000
45) Financial Statement data for the years ended December 31 for Parker Corporation is
as follows:
2012 2011
Net Sales $2,595,600 $2,409,498
Fixed Assets:
Beginning of the year $ 901,070 $820,000
End of the year 829,330 901,070
a) Determine the Fixed Asset Turnover for 2012 and 2011.
b) Does the change in Fixed Asset Turnover from 2011 to 2012 indicate a favorable or
unfavorable trend.?
46) A business paid $7,000 to a creditor in payment of an amount owed. The effect of
the transaction on the accounting equation was to
A.increase one asset, decrease another asset
B.decrease an asset, decrease a liability
C.increase an asset, increase a liability
D.increase an asset, increase stockholders equity
47) Which of the following is characteristic of the traditional cost system?
A.Many work in process account transactions
B.Reliance on financial performance measures
C.Many process control points
D.All of the above
48) Under a periodic inventory system
A.accounting records continuously disclose the amount ofinventory
B.a separate account for each type of merchandise is maintained in a subsidiary ledger
C.a physical inventory is taken at the end of the period
D.merchandise inventory is debited when goods are returned to vendors
49) Ending inventory is made up of the oldest purchases when a company uses
A.first-in, first-out
B.last-in, first-out
C.average cost
D.retail method
50) Management will use both variable and absorption costing in all of the following
activities except:
A.controlling costs
B.product pricing
C.production planning
D.controlling inventory levels
51) The profit margin is the:
A.ratio of income from operations to sales
B.ratio of income from operations to invested assets
C.ratio of assets to liabilities
D.ratio of sales to invested assets
52) Under a periodic inventory system, closing entries will include
A.Dr. Sales, Purchases Returns and Allowances, Purchases Discounts
B.Cr. Purchases, Sales Discounts, Sales Returns and Allowances
C.Adjust Merchandise Inventory account to match physical inventory
D.All are correct
53) Blane Company has the following data:
What will operating income be if units sold double to 100,000 units?
54) An 8-year project is estimated to cost $400,000 and have no residual value. If the
straight-line depreciation method is used and the average rate of return is 5%, determine
the estimated annual net income.
Estimated Average Annual Income = ___ $X = 5%
Average Investment ($400,000 + $0)/2
$X = .05($200,000)
55) Stephanie Roe utilizes the direct write-off method of accounting for uncollectible
receivables. On September 15th she is notified by the attorneys for Jacob Marley that
Jacob Marley is bankrupt and no cash is expected in the liquidation of Jacob Marley.
Write off the $675 of accounts receivable due Jacob Marley.
56) McMann Company has condensed income statements as follows:
REQUIRED:
Prepare a horizontal analysis of McMann Companys income statements. Comment on
the trends, both favorable and unfavorable.
57) Below is the unadjusted trial balance for Dawson Designs at December 31, 2011 –
the end of its first year in business.
(1) Identify the errors in the following trial balance. All accounts have normal balances.
(2) Prepare a corrected trial balance.
58) Pepito Company purchased 40% of the outstanding stock of Reyes Company on
January 1, 2012. Reyes reported net income of $75,000 and declared dividends of
$15,000 during 2012. How much would Pepito adjust their investment in Reyes
Company under the equity method?
59) Aquatic Corp.s standard material requirement to produce a single of Model 2000 is
15 pounds of material @ $110.00 per pound.
Last month, Aquatic purchased 170,000 pounds of material at a total cost of
$17,850,000. They used 162,000 pounds to produce 10,000 units of Model 2000.
Required:
Calculate the material price variance and material quantity variance, and indicate
whether each variance is favorable or unfavorable.