1) A manufacturing process requires small amounts of glue. The glue used in the
production process is classified as a(n)
a.period cost
b.indirect material
c.direct material
d.miscellaneous expense
2) Which one of the following should be equal to the balance of the Work In Process
Inventory account at the end of the period?
a.The total of the amounts transferred from raw materials for the current period
b.The sum of the costs shown on the job cost sheets of unfinished jobs
c.The total of manufacturing overhead applied to work in process for the period
d.The total manufacturing costs for the period
3) When a company retires bonds before maturity, the gain or loss on redemption is the
difference between the cash paid and the
a.carrying value of the bonds
b.face value of the bonds
c.original selling price of the bonds
d.maturity value of the bonds
4) A measure that describes the cash remaining from operations after adjustment for
capital expenditures and dividends is
a.adjusted cash from operations
b.cash provided by operations
c.free cash flow
d.net cash provided by operating activities
5) Listed below are seven errors or problems which might occur in the processing of
cash transactions. Also shown is a list of internal control principles. Evaluate each
possible error and cite a principle that is listed that would reduce the probability of the
error occurring. If none of the principles given will correct the problem, write “None.”
If you think more than one principle is appropriate, list all principles that apply.
Possible Errors or Problems
1>An employee steals the cash collected from a customer for an account receivable and
conceals this theft by issuing a credit memorandum indicating that the customer
returned the merchandise.
2>A small fire destroys 3 days of cash receipts.
3>The official designated to sign checks is able to steal blank checks and issue them
without fear of detection.
4>A salesclerk in serving customers often rings up a sale for less than the actual amount
and then keeps the additional cash collected from the customer.
5>Three cashiers use one cash register drawer and the cash in the drawer is often short
of the balance kept on hand.
6>Each cashier counts his own register drawer each day and verbally reports the results
to the supervisor.
7>Cashiers with over 5 years experience are not bonded.
Internal Control Principles
a.Establishment of responsibility
b.Segregation of duties
c.Physical controls
d.Documentation procedures
e.Independent internal verification
f.Human resource controls
6) Which of the following would be the least controllable fixed cost?
a.Property taxes
b.Rent
c.Research and development
d.Management training programs
7) Retained earnings
a.is unique to the corporate form of business
b.is an optional account in the partnership form of business
c.reflects cash paid in by stockholders to date
d.is closed at the end of the year
8) Dividends in arrears on cumulative preferred stock
a.are shown in stockholders equity of the balance sheet
b.must be paid before common stockholders can receive a dividend
c.should be recorded as a current liability until they are paid
d.enable the preferred stockholders to share equally in corporate earnings with the
common stockholders
9) The four subdivisions for plant assets are
a.land, land improvements, buildings, and equipment
b.intangibles, land, buildings, and equipment
c.furnishings and fixtures, land, buildings, and equipment
d.property, plant, equipment, and land
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. Ending inventory under
LIFO is
a.$738
b.$792
c.$1,740
d.$1,794
11) A partner’s share of net income is recognized in the accounts through
a.adjusting entries
b.closing entries
c.correcting entries
d.accrual entries
12) Jared Manufacturing is planning to sell 1,200 boxes of ceramic tile, with production
estimated at 1,120 boxes during May. Each box of tile requires 44 pounds of clay mix
and a quarter hour of direct labor. Clay mix costs $0.50 per pound and employees of the
company are paid $15.00 per hour. Manufacturing overhead is applied at a rate of 110%
of direct labor costs. Jacob has 5,200 pounds of clay mix in beginning inventory and
wants to have 6,000 pounds in ending inventory.
What is the total amount to be budgeted for direct labor for the month?
a.$4,500
b.$16,800
c.$4,200
d.$18,000
13) A company uses 20,000 pounds of materials for which it paid $5.00 a pound. The
materials price variance was $15,000 unfavorable. What is the standard price per
pound?
a.$0.75
b.$5.75
c.$5.00
d.$4.25
14) In the month of April, a department had 500 units in the beginning work in process
inventory that were 60% complete. These units had $40,000 of materials costs and
$30,000 of conversion costs. Materials are added at the beginning of the process and
conversion costs are added uniformly throughout the process. During April, 10,000
units were completed and transferred to the finished goods inventory and there were
2,000 units that were 25% complete in the ending work in process inventory on April
30. During April, manufacturing costs charged to the department were: Materials
$1,040,000; Conversion costs $1,020,000.
The cost assigned to the units transferred to finished goods during April was
a.$1,900,000
b.$1,910,000
c.$1,980,000
d.$1,890,000
15) A typical organization chart showing delegation of authority would show
a.stockholders delegating to the board of directors
b.the board of directors delegating to stockholders
c.the chief executive officer delegating to the board of directors
d.the controller delegating to the chief executive officer
16) Customarily, a trial balance is prepared
a.at the end of each day
b.after each journal entry is posted
c.at the end of an accounting period
d.only at the inception of the business
17) A review of the June 30 bank statement and other data of Jordan Company reveals
the following:
1>Balance per bank statement on June 30$1,950
2>Balance per books on June 30$460
3>NSF Check from R. Angel in payment of account$420
4>Collection of $2,000, 6-month, 5% note with a $25 collection fee. No interest
had been accrued2,025
5> Deposits in transit at June 303,550
6>Outstanding checks at June 304,120
7>A check written by Jordan to OShea for salary on June 10 was
recorded at $540 but correctly cleared the bank at $450.
8>A check drawn on the account of Riverside Company for $775 was mistakenly
charged against Jordan’s account by the bank.
Instructions: Prepare the June 30 (a) bank reconciliation (omit heading) and (b) related
journal entries.
1>BANK RECONCILIATION:
AmountAmount
Balance per bank statement$Balance per books$
Adjusted balance per bank$Adjusted balance per books$
2>ENTRIES:
Account TitlesDebitCredit
18) Rhode Company does not ring up sales taxes separately on the cash register. Total
receipts for October amounted to $81,900. If the sales tax rate is 5%, what amount must
be remitted to the state for October’s sales taxes?
a.$3,900
b.$4,095
c.$195
d.It cannot be determined
19) The procedure of transferring journal entries to the ledger accounts is called
a.journalizing
b.analyzing
c.reporting
d.posting
20) Chula Manufacturing Company developed the following data:
Beginning work in process inventory $ 70,000
Direct materials used470,000
Actual overhead550,000
Overhead applied530,000
Cost of goods manufactured1,270,000
Ending work in process50,000
How much are total manufacturing costs for the period?
a.$1,250,000
b.$1,290,000
c.$1,000,000
d.$1,020,000
21) Angies Blooms purchased a delivery van for $40,000. The company was given a
$4,000 cash discount by the dealer, and paid $2,000 sales tax. Annual insurance on the
van is $1,000. As a result of the purchase, by how much will Angies Blooms increase its
van account?
a.$40,000
b.$36,000
c.$39,000
d.$38,000
22) Overhead application is recorded with a
a.credit to Work in Process Inventory
b.credit to Manufacturing Overhead
c.debit to Manufacturing Overhead
d.credit to job cost sheets
23) The existence of under- or overapplied overhead at the end of the year:
a.requires an adjustment to Cost of Goods Sold
b.indicates that an error has been made
c.requires a retroactive adjustment to the cost of all jobs completed
d.is written off as a bad estimate expense
24) In a production cost report, which one of the following sections is not shown under
Costs?
a.Unit costs
b.Costs to be accounted for
c.Costs during the period
d.Units accounted for
25) Accountants refer to an economic event as a
a.purchase
b.sale
c.transaction
d.change in ownership
26) An investment is readily marketable if it is management’s intent to sell the
investment.
27) Employees who handle cash should be ______________ in order to protect against
misappropriation of assets by dishonest employees.
28) A major difference between the annual budget and long-range planning is the
____________________ over which the data pertain.
29) On January 1, 2014, Bottle Rockets Corp. purchased a general liability insurance
policy for $9,000 to provide coverage for the calendar year.
1>If the company recorded the policy as an asset when purchased, what is the monthly
adjusting journal entry that should be recorded at January 31, 2014?
2>If the company expensed the cost of the policy on January 1, 2014, what is the
monthly adjusting entry that should be recorded at January 31, 2014?
30) Handel Company uses the allowance method for estimating uncollectible accounts.
Prepare journal entries to record the following transactions:
January5Sold merchandise to Terry Richman for $2,000, terms n/15.
April15Received $600 from Terry Richman on account.
August21Wrote off as uncollectible the balance of the Terry Richman account when she
declared bankruptcy.
October5Unexpectedly received a check for $300 from Terry Richman. It is not felt any
more will be received from Richman
31) The adjusted trial balance of Hanson Hawk Company at September 30, 2014
includes the following accounts: Owner’s Capital $27,700; Owner’s Drawings $9,750;
Service Revenue $46,800; Insurance Expense $1,950; Salaries Expense $18,000; Rent
Expense $3,000; Supplies Expense $650; and Depreciation Expense $1,100. Prepare an
owners equity statement for the year.
32) The two major differences between the master budgets of a merchandiser and a
manufacturer are that the merchandiser will have a ______________________ budget
and will not have __________________ budgets.
33) A company desires to replace its current plant equipment with new equipment that
costs $10,000,000. One possibility would be for the company to issue $10,000,000 of
bonds and use the proceeds to purchase the equipment. Another possibility is to acquire
the use of the equipment by signing a long-term capital lease with a leasing company.
Describe and compare the financial statement effects of these two alternatives.