Which of the following statements is true of the just-in-time costing system?
A) It increases the need for suppliers to deliver raw materials on time.
B) It records summary journal entries before the units are purchased.
C) It results in increased inventory storage costs.
D) It increases the risk of the inventory becoming obsolete or unsalable.
Get in Shape, a healthy living magazine, collected $528,000 in subscription revenue on
May 31. Each subscriber will receive an issue of the magazine in each of the next 12
months, beginning with the June issue. The company uses the accrual method of
accounting. What is the balance in the Unearned Revenue account as of December 31?
A) $220,000
B) $308,000
C) $528,000
D) $396,000
A business renders services to a customer for $26,000 on account. Which of the
following accounts is debited?
A) Cash
B) Accounts Receivable
C) Service Revenue
D) Accounts Payable
Ariel Tax Planning Service has the following plant assets: Communications equipment:
Cost, $8,640 with useful life of 8 years; Furniture: Cost, $18,000 with useful life of 12
years; and Computer: Cost, $13,440 with useful life of 4 years. Assume the residual
value of all the assets is zero and the straight-line method is used.
Ariel’s monthly depreciation journal entry will include a ________.
A) debit to Depreciation Expense of $5,940
B) credit to Depreciation Expense of $5,940
C) debit to Accumulated Depreciation of $495
D) credit to Accumulated Depreciation of $495
When performing vertical analysis of an income statement, the base amount is
________.
A) total expenses
B) net sales
C) sales revenue
D) gross profit
A business collects cash from a customer for services that were preformed one month
earlier. Which of the following accounts is credited?
A) Cash
B) Accounts Receivable
C) Service Revenue
D) Accounts Payable
Which of the following accounts is debited when employees take paid vacation?
A) Vacation Benefits Expense
B) Vacation Benefits Payable
C) Salaries Expense
D) No entry is needed.
The entry to write off an account receivable under the allowance method will
________.
A) reduce net income
B) have no effect on net income
C) increase total assets
D) increase net income
PM Manufacturing produces a chemical pesticide 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, 40,000 fl. oz.
of chemicals were started in production. Of these, 34,000 fl. oz. were completed, and
6,000 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. The weighted-average method is used.
At the end of the month, PM calculated equivalent units in the Mixing Department as
shown below:
* Percent complete for direct materials costs: 100%
Percent complete of completion for conversion costs: 60%
During January, the Mixing Department incurred $49,000 in direct materials costs and
$213,000 in conversion costs. How much was the cost per equivalent unit for materials and
for conversion costs?
(Use the weighted average method and round your answer to the nearest cent.)
A) $8.17 per EP for direct materials and $5.33 per EUP for conversion costs
B) $1.23 for materials and $6.26 for conversion
C) $1.44 for materials and $6.26 for conversion
D) $1.23 for materials and $5.66 for conversion
Bass Accounting Services expects its accountants to work a total of 24,000 direct labor
hours per year. The company’s estimated total indirect costs are $336,000. The company
uses direct labor hours as the allocation base for indirect costs. What is the indirect cost
allocation rate?
A) $14 per hour
B) $28 per hour
C) $140 per hour
D) $16.80 per hour
What do cost variances measure?
A) the difference between the cost the company pays and the cost its competitors pay
B) the change in costs over time
C) how well the business keeps unit costs of material and labor inputs within standards
D) the volume discounts companies receive when ordering direct materials in large
quantities
Which of the following is a capital budgeting method used to screen potential
investments?
A) return on assets
B) acid test ratio
C) accounting rate of return
D) debt-to-equity ratio
Paradiso Company manufactures dolls that are sold to various distributors. The
company produces at full capacity for six months each year to meet peak demand; the
manufacturing facility operates at 80% of capacity for the other six months of the year.
The company has provided the following data for the year:
Paradiso receives an offer to produce 6,000 dolls for a special event. This is a one-time
opportunity during a period when the company has excess capacity. What is the minimum
sales price the company should accept for the order?
A) $15
B) $40
C) $20
D) $25
Which of the following is described as a system where customers send their checks
directly to a post office box that belongs to a bank?
A) an encryption system
B) an imprest system
C) a lock-box system
D) a firewall system
Just-in-time costing systems use a combined account for Raw Materials Inventory and
Work-in-Process Inventory known as the ________.
A) Raw Materials Inventory account
B) Work-in-Process Inventory account
C) Raw and In-Process Inventory account
D) Process account
Which of the following sequences states the order in which accounts are listed on a trial
balance?
A) Equity → Assets → Liabilities
B) Liabilities → Assets → Equity
C) Assets → Equity → Liabilities
D) Assets → Liabilities → Equity
Investors and creditors cannot evaluate a company by examining only one year’s data.
Washington Enterprises had net income for 2016 of $103,000. Washington had 39,000
shares of common stock outstanding at the beginning of the year and 43,000 shares of
common stock outstanding at the end of the year. There were 6,000 shares of preferred
stock outstanding all year. During 2016, Washington declared and paid preferred
dividends of $29,000. What is Washington’s earnings per share? (Round the answer to
two decimal places.)
A) $2.51
B) $2.40
C) $1.80
D) $1.72
A truck costs $303,000 and is expected to be driven 115,000 miles during its five-year
life. Residual value is expected to be zero. If the truck is driven 29,000 miles during the
first year, how much depreciation should the business record under the
units-of-production method? (Round any intermediate calculations to two decimal
places, and your final answer to the nearest dollar.)
A) $97,750
B) $25,423
C) $76,270
D) $47,520
________ represent the right to receive cash in the future from customers for goods
sold or for services performed.
A) Accounts Receivable
B) Accounts Payable
C) Equity
D) Expenses
The static budget, at the beginning of the month, for Onyx Dcor Company, follows:
Static budget:
Sales volume: 1,000 units; Sales price: $70.00 per unit
Variable costs: $32.00 per unit; Fixed costs: $37,900 per month
Operating income: $100
Actual results, at the end of the month, follows:
Actual results:
Sales volume: 970 units; Sales price: $74.00 per unit
Variable costs: $35.00 per unit; Fixed costs: $34,400 per month
Operating income: $3,430
Calculate the flexible budget variance for sales revenue.
A) $4,470 U
B) $4,470 F
C) $3,880 U
D) $3,880 F
Intangible assets ________.
A) always have a definite life
B) that are purchased are recorded at cost
C) are always expensed through amortization
D) with definite lives are tested annually for impairment
Which of the following is the correct formula for calculating gross profit percentage?
A) Net profit / Net sales revenue
B) Gross profit / Net sales revenue
C) Net sales revenue / Net profit
D) Net sales revenue / Gross profit
A business makes a cash payment of $12,000 to a creditor. Which of the following
accounts is credited?
A) Cash
B) Accounts Payable
C) Bank
D) Accounts Receivable
When is a trial balance usually prepared?
A) after each entry is journalized
B) before the financial statements are prepared
C) after the financial statements are prepared
D) at the beginning of an accounting period
At the beginning of the year, Tea Tree Manufacturing had the following account
balances:
Work-in-Process Inventory
Finished Goods Inventory
Manufacturing Overhead
Cost of Goods Sold
Sales Revenue
The following additional details are provided for the year:
The unadjusted balance in the Manufacturing Overhead account is a ________.
A) credit of $295,000
B) credit of $6,800
C) debit of $6,800
D) debit of $301,800
Which of the following will result in an unfavorable direct materials efficiency
variance?
A) when the actual cost per unit of direct materials exceeds the standard cost of direct
materials
B) when the actual cost per unit of direct materials is less than the standard cost per unit
of direct materials
C) when the actual quantity of direct materials used per unit exceeds the standard
quantity of direct materials allowed per unit
D) when the actual quantity of direct materials used per unit is less than the standard
quantity of direct materials allowed per unit
In process costing, which of the following is recorded by debiting the Manufacturing
Overhead account?
A) transfer of units from one process to the next
B) direct labor costs incurred
C) depreciation on factory machinery
D) office electricity charges
On November 1, 2017, Lotz, Inc. sold merchandise for $10,000, FOB destination, with
payment terms of 3/10, n/40. Customer returns on this sale amounted to $5,000. The
company received payment for the balance on November 10, 2017. The cost of goods
sold was $3,600. Calculate the amount of gross profit from these transactions.
A) $6,400
B) $1,300
C) $1,400
D) $4,900
Under which of the following inventory costing methods is the ending inventory based
on the costs of the most recent purchases?
A) specific identification
B) weighted-average
C) last-in, first-out
D) first-in, first-out
Hisham was a professional classical guitar player until a motorcycle accident left him
disabled. After long months of therapy, he hired an experienced luthier and started a
small shop to make and sell Spanish guitars. The guitars sell for $900, and the fixed
monthly operating costs are as follows:
Hisham’s accountant told him about contribution margin ratios, and Hisham understood
clearly that for every dollar of sales, $0.65 went to cover his fixed costs, and anything
above that point was profit.
Hisham wishes to earn $4,000 of operating profit each month. Calculate the number of
guitars Hisham will need to sell to achieve the target profit. (Round your answer up to the
nearest whole guitar.)
A) 3 guitars
B) 12 guitars
C) 4 guitars
D) 13 guitars
Which of the following is an example of a direct materials cost standard?
A) $40 per direct labor hour
B) 50 square feet per unit
C) $0.95 per square foot
D) 6 direct labor hours per unit