Felix Skateboards Company uses the indirect method to prepare the statement of cash
flows. Refer to the following income statement:
Felix Company
Income Statement
Year Ended December 31, 2017
Additional information provided by the company includes the following:
1. Current assets, other than cash, increased by $20,000.
2. Current liabilities decreased by $1,500.
Compute the net cash provided by (used for) operating activities.
A) $26,700
B) $40,700
C) $35,600
D) $11,700
Joe, an employee of Time Travel, Inc., has gross salary for March of $5,200. The entire
amount is under the OASDI limit of $117,000, and thus subject to FICA. He is also
subject to federal income tax at a rate of 29%. His year-to-date pay has already
exceeded the $7,000 cap for FUTA and SUTA. The journal entry to record employer’s
payroll tax expense includes a credit to FICA—Medicare Taxes Payable for $150.80.
(Assume a FICA—OASDI Tax of 6.2% and FICA—Medicare Tax of 1.45%.)
Which of the following costs related to a business car would be capitalized?
A) the cost to install an engine with higher horsepower
B) the cost to change the oil
C) the cost to replace a broken windshield
D) the cost of new tires
Allen Services purchased 20 delivery vehicles by issuing a 20-year installment note
payable for $720,000. On the statement of cash flows, this transaction would be shown
in the ________.
A) investing activities section
B) non-cash investing and financing activities section
C) operating activities section
D) financing activities section
Which of the following describes a system in which suppliers deliver materials at the
time they are needed and finished units are completed when customer orders need to be
filled?
A) Supply Chain Management (SCM)
B) Just-in-Time (JIT) Management
C) Enterprise Resource Planning (ERP)
D) Total Quality Management (TQM)
The journal entry to record direct labor costs actually incurred involves a debit to the
________.
A) Work-in-Process Inventory account
B) Wages Payable account
C) Manufacturing Overhead account
D) Raw Materials Inventory account
Which of the following components of internal control consists of work performed by
internal and external auditors?
A) monitoring of controls
B) information systems
C) control procedures
D) control environment
When a business factors its accounts receivables, the business ________.
A) uses the receivables as security for a loan
B) no longer has to deal with the collection of the receivables from the customers
C) receives the the total amount of the receivables from the factor
D) receives cash, less an applicable fee, after the factor collects from the customers
Gabriel Metalworks produces a special kind of metal ingots that are unique, which
allows Gabriel to follow a cost-plus pricing strategy. Gabriel has $11,000,000 of assets
and shareholders expect approximately a 9% return on assets. Assume all products
produced are sold. Additional data are as follows:
Using the cost-plus pricing approach, what should be the sales price per unit? (Round your
answer to the nearest cent.)
A) $16.00
B) $19.33
C) $21.53
D) $2.20
SailFind, Inc. has collected the following data. (There are no beginning inventories.)
What is the operating income using variable costing if 500 units are sold?
A) $14,900
B) $43,000
C) $48,300
D) $11,100
Manufacturing Overhead is a temporary account used to ________ indirect production
costs during the accounting period.
A) allocate
B) assign
C) accumulate
D) approximate
Hamilton Lawn Services incurred $800 as a repair expense and paid for it in cash. This
transaction will ________.
A) decrease the stockholders’ equity
B) increase the assets of the business
C) increase the liabilities of the business
D) decrease the liabilities of the business
Costs that do not differ between alternatives are ________.
A) relevant to the decision
B) considered opportunity costs
C) considered irrelevant to the decision
D) important only if they represent a material dollar amount
Brannon Company manufactures ceiling fans and uses an activity-based costing system.
Each ceiling fan has 20 separate parts. The direct material cost is $70, and each ceiling
fan requires 4.00 hours of machine time to manufacture. Additional information is as
follows:
What is the cost of materials handling per ceiling fan? (Round any intermediate
calculations and your final answer to two decimal places.)
A) $1.60
B) $6.20
C) $2.30
D) $9.20
Gladiator, Inc. uses the direct method to prepare its statement of cash flows. Use the
following information reported for 2016 to compute the amount of cash paid for
merchandise inventory.
Cost of Goods Sold, $134,000
Merchandise Inventory, beginning balance, $27,000
Merchandise Inventory, ending balance, $67,000
Accounts Payable, beginning balance, $7,600
Accounts Payable, ending balance, $5,000
A) $176,600
B) $94,000
C) $174,000
D) $171,400
The predetermined overhead allocation rate is the rate used to ________.
A) assign direct material costs to jobs
B) allocate actual manufacturing overhead costs incurred during a period
C) allocate estimated manufacturing overhead costs to jobs
D) trace manufacturing and non-manufacturing costs to jobs
Venus, Inc. paid $12,000 on accounts payable. How does this transaction affect the
accounting equation of Venus?
A) assets decrease by $12,000 and equity increases by $12,000
B) assets decrease by $12,000 and liabilities decrease by $12,000
C) assets increase by $12,000 and equity decreases by $12,000
D) assets increase by $12,000 and liabilities increase by $12,000
Mars Services, Inc. pays $700,000 to acquire 35% (200,000 shares) of voting stock of
Grey Investments, Inc. on January 5, 2017. Grey Investments, Inc. declares and pays a
cash dividend of $2.4 per share on June 14, 2017. Which of the following is the correct
journal entry for the transaction on June 14, 2017?
A)
B)
C)
D)
Smash Company has 4,000 machine hours available annually to manufacture
badminton racquets. The following information is available for the two different
racquets produced by Smash:
How many units of each racquet should be manufactured for the company to maximize its
operating income?
A) 2,000 units of Pro and 1,500 units of Mid
B) 2,000 units of Pro and 500 units of Mid
C) 2,000 units of Pro and 5,000 units of Mid
D) 5,000 units of Mid and 500 units of Pro
Which of the following is a reason for a company to announce a stock split?
A) to reward investors
B) to increase total stockholders’ equity
C) to decrease the market price at which the stock is trading
D) to provide the shareholders with something of value, when the company cannot
afford a cash dividend
Daryl Corporation reports costs for the year as follows:
How much is the total product costs for the year?
A) $800,000
B) $1,825,000
C) $1,858,000
D) $1,025,000
Which of the following sections from the statement of cash flows includes borrowing
cash and paying off loans?
A) the investing activities section
B) the operating activities section
C) the financing activities section
D) the non-cash investing and financing section
Jupiter Manufacturing began business on January 1. During its first year of operation,
Jupiter worked on five industrial jobs and reported the following information at
year-end:
What was the balance in Work-in-Process Inventory at year-end?
A) $2,800
B) $2,400
C) $2,100
D) $1,100
LDR Manufacturing produces a pesticide chemical and uses process costing. There are
three processing departments—Mixing, Refining, and Packaging. On January 1, the
first department—Mixing—had no beginning inventory. During January, 56,000 fl. oz.
of chemicals were started in production. Of these, 30,000 fl. oz. were completed and
26,000 fl. oz. remained in process. In the Mixing Department, all direct materials are
added at the beginning of the production process, and conversion costs are applied
evenly through the process.
At the end of the month, LDR calculated equivalent units. The ending inventory in the
Mixing Department was 75% complete with respect to conversion costs. With respect to
direct materials, what is the number of equivalent units in the ending inventory?
A) 19,500 equivalent units
B) 30,000 equivalent units
C) 56,000 equivalent units
D) 26,000 equivalent units
Which of the following is included in the entry to record accrual of warranty expense?
A) a debit to Warranty Expense
B) a credit to Merchandise Inventory
C) a credit to Warranty Expense
D) a debit to Estimated Warranty Payable
In a purchases journal, the total of the ________ column is not posted to the general
ledger.
A) Merchandise Inventory DR
B) Other Accounts DR, Amount
C) Accounts Payable CR
D) Office Supplies DR
Medbam, Inc. has collected the following data. (There are no beginning inventories.):
What is the operating income using absorption costing? (Round any intermediate
calculations to the nearest cent, and your final answer to the nearest dollar.)
A) $44,402
B) $36,002
C) $16,002
D) $24,402
Profit center responsibility reports include ________.
A) revenues only
B) invested capital
C) both revenues and expenses
D) returns on investments
The journal entry for adjustment of underallocated manufacturing overhead includes a
________.
A) credit to Finished Goods Inventory
B) credit to Manufacturing Overhead
C) debit to Work-in-Process Inventory
D) credit to Cost of Goods Sold
A business has the following transactions:
• The business received $20,000 cash and issued common stock to stockholders.
• The business purchases $500 of office supplies on account.
• The business purchases $4,000 of furniture on account.
• The business renders services to various clients totaling $11,000 on account.
• The business pays out $3,000 for salaries expense and $5,000 for rent expense.
• The business pays $600 to supplier for the office supplies purchased earlier.
• The business collects $1,000 from one of its clients for services rendered earlier in the
month.
At the end of the month, all journal entries are posted to the ledger. Accounts Payable
will appear as which of the following?
A)
B)
C)
D)
Which of the following is required to be deducted from employees’ paychecks?
A) federal income tax
B) SUTA
C) FUTA
D) charitable contributions
Which of the following is included in the denominator of the acid-test ratio?
A) total current liabilities less accounts payable
B) total liabilities
C) total current liabilities
D) total current assets