1) The following costs and inventory data were taken from the accounts of Garfunkle
Company for 2014:
January 1, 2014December 31, 2014
Inventories:
Raw materials$ 9,000$ 6,000
Work in process16,00014,000
Finished goods15,00010,000
Costs incurred:
Raw materials purchases$94,000
Direct labor40,000
Factory rent8,400
Factory utilities10,600
Indirect materials4,300
Indirect labor9,700
Operating expenses17,000
Instructions
a.Prepare a schedule showing the amount of direct materials used in production during
the year.
b.Compute the amount of manufacturing overhead incurred during the year.
c.Prepare a schedule of Cost of Goods Manufactured for Garfunkle Company for the
year ended December 31, 2014 in good form.
d.Prepare the Cost of Goods Sold section of the Income Statement for Garfunkle
Company for the year ended December 31, 2014 in good form.
2) Standards based on the optimum level of performance under perfect operating
conditions are
a.attainable standards
b.ideal standards
c.normal standards
d.practical standards
3) Process costing is used when
a.the production process is continuous
b.production is aimed at filling a specific customer order
c.dissimilar products are involved
d.costs are to be assigned to specific jobs
4) Which one of the following managerial accounting approaches attempts to allocate
manufacturing overhead in a more meaningful fashion?
a.Balanced scorecard
b.Just-in-time inventory
c.Activity-based costing
d.Total-quality management
5) For companies that use a perpetual inventory system, all of the following are
purposes for taking a physical inventory except
a.to check the accuracy of the records
b.to determine the amount of wasted raw materials
c.to determine losses due to employee theft
d.to determine ownership of the goods
6) Select the correct statement concerning the cost-volume-profit graph at right:
a.The point identified by “B” is the break-even point
b.Line F is the variable cost line
c.At point B, profits equal total costs
d.Line E is the total cost line
7) Conrad Company’s Assembly Department has materials cost at $5 per unit and
conversion cost at $8 per unit. There are 20,000 units in ending work in process, all of
which are 70% complete as to conversion costs. How much are total costs to be
assigned to inventory?
a.$112,000
b.$212,000
c.$182,800
d.$260,000
8) An income ratio based on capital balances might be appropriate when
a.service is a primary consideration
b.some, but not all, partners plan to work in the business
c.funds invested in the partnership are considered the critical factor
d.little net income is expected
9) A budget
a.is a substitute for management
b.is an aid to management
c.can operate or enforce itself
d.is the responsibility of the accounting department
10) Live Wire Hot Rod Shop follows the revenue recognition principle. Live Wire
services a car on July 31 . The customer picks up the vehicle on August 1 and mails the
payment to Live Wire on August 5 . Live Wire receives the check in the mail on August
6 . When should Live Wire show that the revenue was recognized?
a.July 31
b.August 1
c.August 5
d.August 6
11) Which one of the following columns in a cash receipts journal is not posted in total
to an account in the general ledger?
a.Cash column
b.Sales Discounts column
c.Accounts Receivable column
d.Other Accounts column
12) Bad Debt Expense is reported on the income statement as
a.part of cost of goods sold
b.reducing gross profit
c.an operating expense
d.a contra-revenue account
13) Sullivan Bike Company received a $450 check from a customer for the balance due.
The transaction was erroneously recorded as a debit to Cash $540 and a credit to
Service Revenue $540. The correcting entry is:
a.debit Accounts Receivable, $450; credit Cash, $450
b.debit Service Revenue, $540; credit Accounts Receivable, $90; credit Cash, $450
c.debit Service Revenue, $540; credit Cash $90; credit Accounts Receivable, $450
d. debit Cash, $90; debit Service Revenue, $450; credit Accounts Receivable, $540
14) A department adds raw materials to a process at the beginning of the process and
incurs conversion costs uniformly throughout the process. For the month of January,
there were no units in the beginning work in process inventory; 90,000 units were
started into production in January; and there were 20,000 units that were 40% complete
in the ending work in process inventory at the end of January. What were the equivalent
units of production for materials for the month of January?
a.98,000 equivalent units
b.82,000 equivalent units
c.90,000 equivalent units
d.70,000 equivalent units
15) The following amounts were taken from the financial statements of Leaf Company:
2014 2013
Total assets$800,000$880,000
Net sales720,000650,000
Gross profit352,000320,000
Net income126,000117,000
Weighted average number of common shares outstanding90,00090,000
Market price of common stock$35$39
The return on assets ratio for 2014 is
a.15.8%
b.15%
c.14.3%
d.14.5%
16) In the Garnet Company, the beginning and ending balances in Land were $198,000
and $240,000 respectively. During the year, land costing $50,000 was sold for $50,000
cash, and land costing $92,000 was purchased for cash. The entries in the reconciling
columns of the worksheet will include a:
a.credit to Land $50,000 and a debit to Sale of Land $50,000 under investing activities
b.debit to Land $92,000 and a credit to Purchase of Land $92,000 under financing
activities
c.net debit to Land $42,000 and a credit to Purchase of Land $42,000 under investing
activities
d.credit to Land $50,000 and a debit to Sale of Land $50,000 under financing activities
17) Each of the following would be reported under operating activities except cash
receipts
a.from sales of goods
b.from sales of investments
c.of interest on loans
d.of dividends from investments
18) Which one of the following is not a justification for adjusting entries?
a.Adjusting entries are necessary to ensure that the revenue recognition principle is
followed
b.Adjusting entries are necessary to ensure that the expense recognition principle is
followed
c.Adjusting entries are necessary to enable financial statements to be in conformity with
GAAP
d.Adjusting entries are necessary to bring the general ledger accounts in line with the
budget
19) In order to be considered extraordinary, an item must be:
a.infrequent and unusual
b.unusual and uninsured
c.uninsured and infrequent
d.infrequent and uninsured
20) During 2014, Harvey Industries reported cash provided by operations of $670,000,
cash used in investing of $1,039,000, and cash used in financing of $145,000. In
addition, cash spent for fixed assets during the period was $404,000. No dividends were
paid. Based on this information, what was Harvey’s free cash flow?
a.($369,000)
b. $1,450,000
c. $266,000
d.($918,000)
21) The two methods of accounting for uncollectible accounts are (a) percentage of
sales and (b) percentage of receivables.
22) Incremental analysis would be appropriate for
a.acceptance of an order at a special price
b.a retain or replace equipment decision
c.a sell or process further decision
d.all of these answer choices are correct
23) Two classifications appearing in the paid-in capital section of the balance sheet are
a.preferred stock and common stock
b.paid-in capital and retained earnings
c.capital stock and additional paid-in capital
d.capital stock and treasury stock
24) Gloria Company had no beginning work in process. During the period, 12,000 units
were completed, and there were 1,200 units of ending work in process. How many units
were started into production?
a.13,200
b.12,000
c.10,800
d.1,200
25) Before distributing any remaining cash to partners in a partnership liquidation, it is
necessary to do each of the following except
a.sell noncash assets for cash
b.recognize a gain or loss on realization
c.allocate the gain or loss to the partners based on their capital balances
d.pay partnership liabilities in cash
26) The ending inventory of Whitlow Company, which uses a periodic inventory
system, was understated $14,000 on December 31, 2014, and overstated $6,000 on
December 31, 2015 . Because of these errors, 2015 net income was
a.overstated $20,000
b.understated $8,000
c.overstated $6,000
d.understated $20,000
27) Each of the following is added to net income in computing net cash provided by
operating activities except
a.amortization expense
b.an increase in accrued expenses payable
c.a gain on sale of equipment
d.a decrease in inventory
28) If beginning work in process is 4,000 units, ending work in process is 2,000 units,
and the units accounted for equals 11,000 units, what must units started into production
be?
a.15,000
b.13,000
c.7,000
d.9,000
29) The following totals for the month of April were taken from the payroll register of
Asplend Company.
Salaries and wages$72,000
FICA taxes withheld5,508
Income taxes withheld15,000
Medical insurance deductions2,700
Federal unemployment taxes192
State unemployment taxes1,296
The entry to record the accrual of federal unemployment taxes would include a
a.credit to Federal Unemployment Taxes Payable for $192
b.debit to Federal Unemployment Taxes Expense for $192
c.credit to Payroll Tax Expense for $192
d.debit to Federal Unemployment Taxes Payable for $192
30) The Tool Division of Cerrani Company reported the following data for the current
year.
Sales revenue$4,000,000
Variable costs2,600,000
Controllable fixed costs800,000
Average operating assets6,000,000
Top management is unhappy with the investment center’s return on investment (ROI). It
asks the manager of the Tool Division to submit plans to improve ROI in the next year.
The manager believes it is feasible to consider the following independent courses of
action.
1>Increase sales revenue by $420,000 with no change in the contribution margin
percentage.
2>Reduce variable costs by $150,000.
3>Reduce average operating assets by 4%
Instructions
(a)Compute the return on investment (ROI) for the current year.
(b)Using the ROI formula, compute the ROI under each of the proposed courses of
action. (Round to one decimal.)
31) The double-entry system requires that each transaction must be recorded
a.in at least two different accounts
b.in two sets of books
c.in a journal and in a ledger
d.first as a revenue and then as an expense
32) Which of the following companies would be least likely to use a worksheet to
facilitate the adjustment process?
a.Large company with numerous accounts
b.Small company with numerous accounts
c.All companies, since worksheets are required under generally accepted accounting
principles
d.Small company with few accounts
33) The partner in a limited partnership that has unlimited liability is referred to as the
a.lead partner
b.head partner
c.general partner
d.unlimited partner
34) The December 31, 2013 balance sheet of Jensen Company showed Equipment of
$76,000 and Accumulated Depreciation of $18,000. On January 1, 2014, the company
decided that the equipment has a remaining useful life of 6 years with a $4,000 salvage
value.
Instructions
Compute the (a) depreciable cost of the equipment and (b) revised annual depreciation.
35) 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
FIFO is
a.$738
b.$792
c.$1,740
d.$1,794
36) The Income Summary account is an important account that is used
a.during interim periods
b.in preparing adjusting entries
c.annually in preparing closing entries
d.annually in preparing correcting entries
37) Assume the following sales data for a company:
2014$945,000
2013877,500
2012675,000
If 2012 is the base year, what is the percentage increase in sales from 2012 to 2013?
a.76.9%
b.30%
c.40%
d.71.4%
38) Oscar Corporation uses a process cost accounting system. Given the following data,
compute the number of units transferred out during the current period.
Beginning Work in Process10,000 units (1/2 complete)
Ending Work in Process12,500 units (1/3 complete)
Started into Production75,000 units
a.85,000
b.72,500
c.62,500
d.75,000
39) Place each of the items listed below in the appropriate subdivision of the
stockholders’ equity section of a balance sheet.
Common stock, $10 stated value
Retained earnings
8% Preferred stock, $100 par value
Paid-in capital in excess of par
Paid-in capital in excess of stated value
Treasury stockcommon
Paid-in capital from treasury stock
Stockholders’ equity
Paid-in capital
Capital stock
Additional paid-in capital
Total additional paid-in capital
Total paid-in capital
Retained earnings
Total paid-in capital and retained earnings
Total stockholders’ equity
40) Pincher Company purchased 50 Issac Company 12%, 10-year, $1,000 bonds on
January 1, 2014, for $50,000. The bonds pay interest semiannually. On January 1, 2015,
after receipt of interest, Pincher Company sold 30 of the bonds for $28,300.
Instructions
Prepare the journal entries to record the transactions described above.
41) The budget components for Park Company for the quarter ended June 30 appear
below. Park sells trash cans for $12 each. Budgeted sales and production for the next
three months are:
SalesProduction
April 20,000 units26,000 units
May 50,000 units46,000 units
June 30,000 units29,000 units
Park desires to have trash cans on hand at the end of each month equal to 20 percent of
the following months budgeted sales in units. On March 31, Park had 4,000 completed
units on hand. Five pounds of plastic are required for each trash can. At the end of each
month, Park desires to have 10 percent of the following months production material
needs on hand. At March 31, Park had 13,000 pounds of plastic on hand. The materials
used in production cost $0.60 per pound. Each trash can produced requires 0.10 hours
of direct labor.
Instructions
Determine how much the materials purchases budget will be for the month ending April
30 .
42) For each item given, identify the budget in which it will appear. If an item will
appear on more than one budget, then indicate as many budgets as are relevant.
Budget Code:
DMDirect Materials Budget
DLDirect Labor Budget
PProduction Budget
SSales Budget
CCash Budget
BBSBudgeted Balance Sheet
BISBudgeted Income Statement
SASelling and Administrative Expense Budget
MOHManufacturing Overhead Budget
1>Ending cash balance
2>Total selling and administrative expenses
3>Total sales (in dollars)
4>Interest expense
5>Ending raw materials inventory (in dollars)
6>Ending finished goods inventory (in dollars)
43) You are purchasing a car for $20,000, and you obtain financing as follows: $2,000
down payment, 12% interest, semiannual payments over 5 years.
Instructions
Compute the payment you will make every 6 months.
44) Presented below is a list of costs and expenses incurred in the factory by Off-Road
Corporation, a manufacturer of recreational vehicles.
____1>Property taxes on the factory land
____2>Nails and glue used in production
____3>Cabinet maker’s wages
____4>Factory supervisors salaries
____5>Metal used in manufacturing
____6>Depreciation on factory machines
____7>Factory utilities
____8>Carpeting for the recreational vehicles
____9>Property taxes on the factory building
____10>Insurance on factory equipment
Instructions
Classify the above items into the following categories:
DM Direct Materials
DL Direct Labor
MO Manufacturing Overhead
45) Ton Janner, a 26-year-old entrepreneur, started Bells & Whistles (B&W), Inc., a
firm that specializes in top-of-the-line add-ons for computer systems. The firm has a
capital structure of approximately 60% debt. This was necessitated by the rapid growth
of B&W, and Mr. Janner’s lack of personal funds to sustain the growth. The 60% debt
amount is quite high for firms in this field, and in fact slightly exceeds the debt
covenants negotiated with the bank. B&W recently received notice that the bank
considers the company’s debt to be excessive, and that some accelerated repayment
schedule will be adopted. The notice came at a particularly bad time. B&W is in the
midst of a major upgrade of its own computer system. The hardware was to have been
purchased outright, financed by the seller, Karl miner, longtime friend of Mr. Janner.
Mr. Miner really needs Mr. Janners business. Both believe in the long-term strength of
B&W. He therefore suggests to Mr. Janner that the equipment be purchased by means
of a short-term lease. Mr. Janner could renew the lease annually.
Required:
1>Is Mr. Miners suggestion ethical? Explain.
2>If Mr. Janner accepts the suggestion, is he behaving ethically? Explain.