1) Sebastiani Inc. declared a $80,000 cash dividend. It currently has 3,000 shares of 7%,
$100 par value cumulative preferred stock outstanding. It is one year in arrears on its
preferred stock. How much cash will Sebastiani distribute to the common stockholders?
a.$38,000
b.$42,000
c.$59,000
d.None of these answer choices are correct
2) A manufacturing company reports cost of goods manufactured as a(n)
a.current asset on the balance sheet
b.administrative expense on the income statement
c.component in the calculation of cost of goods sold on the income statement
d.component of the raw materials inventory on the balance sheet
3) Sargent Corporation bought equipment on January 1, 2014 . The equipment cost
$360,000 and had an expected salvage value of $60,000. The life of the equipment was
estimated to be 6 years. The depreciation expense using the straight-line method of
depreciation is
a.$70,000
b.$72,000
c.$50,000
d.None of these answer choices are correct
4) Which of the following would not be classified as a short-term investment?
a.Short-term commercial paper
b.Idle cash in a bank checking account
c.Marketable stock securities
d.Marketable debt securities
5) Toolworks has a standard of 1.5 pounds of materials per unit, at $6 per pound. In
producing 2,000 units, Toolworks used 3,100 pounds of materials at a total cost of
$17,980. Toolworks materials price variance is
a.$200 U
b.$420 F
c.$600 F
d.$620 F
6) A static budget is appropriate for
a.variable overhead costs
b.direct materials costs
c.fixed overhead costs
d.none of these answer choices are correct
7) When a job is completed and all costs have been accumulated on a job cost sheet, the
journal entry that should be made is
a.Finished Goods Inventory
Direct Materials
Direct Labor
Manufacturing Overhead
b.Work In Process Inventory
Direct Materials
Direct Labor
Manufacturing Overhead
c.Raw Materials Inventory
Work In Process Inventory
d.Finished Goods Inventory
Work In Process Inventory
8) It is not true that current assets are assets that a company expects to
a.realize in cash within one year
b.sell within one year
c.use up within one year
d.acquire within one year
9) On January 15, 2014, Craig Company received a two-month, 9%, $9,000 note from
William Pentel for the settlement of his open account. The entry by Craig Company on
March 15, 2014 if Pentel dishonors the note and collection is expected is:
a.Accounts ReceivableW. Pentel9,000
Notes Receivable9,000
b.Accounts ReceivableW. Pentel9,135
Notes Receivable9,000
Interest Revenue135
c.Accounts ReceivableW. Pentel8,865
Interest Lost135
Notes Receivable9,000
d.Bad Debts Expense9,135
Notes Receivable9,135
10) Equipment was purchased for $144,000 and it is estimated to have a $14,000
salvage value at the end of its estimated 8-year life. The equipment is estimated to
generate cash inflows of $24,000 each year and will be depreciated by using the
straight-line method. The payback period on this investment is:
a.3.8 years
b.5.4 years
c.6 years
d.8 years
11) Related buying activities include
a.ordering, receiving, paying
b.ordering, selling, paying
c.ordering, shipping, billing
d.selling, shipping, paying
12) Match the items below by entering the appropriate code letter in the space provided.
A.Current liabilityF.Federal income taxes
B.Notes payableG.FICA taxes
C.Wage and Tax StatementH.Federal unemployment taxes
D.Current ratioI.Post-retirement benefits
E.Contingent liabilityJ.Pension plan
1>Levied against employees’ wages without limit.
2>An obligation in the form of a written promissory note.
3>An agreement whereby an employer provides benefits to employees after they retire.
4>A payroll tax expense levied only against the employer based on employees’ wages.
5>A measure of a companys liquidity.
6>A debt than can reasonably be expected to be paid from current assets.
7>A form showing gross earnings, FICA taxes withheld, and income taxes withheld.
8>Levied against employees’ wages with a maximum limit.
9>Payments by employers to retired employees.
10>A potential liability that may become an actual liability in the future.
13) Kelsey Manufacturing Inc. has three divisions which are operated as profit centers.
Actual operating data for the divisions listed alphabetically are as follows.
Operating Data Women’s ShoesMen’s ShoesChildren’s Shoes
Contribution margin$210,000(3)$200,000
Controllable fixed costs 100,000(4) (5)
Controllable margin (1)$ 90,000 96,000
Sales revenue 600,000 480,000 (6)
Variable costs (2) 330,000 260,000
Instructions
(a)Compute the missing amounts. Show computations.
(b)Prepare a responsibility report for the Women’s Shoe Division assuming (1) the data
are for the month ended June 30, 2014, and (2) all data equal budget except variable
costs which are $15,000 over budget.
14) As current technology changes manufacturing processes, it is likely that direct
a.labor will increase
b.labor will decrease
c.materials will increase
d.materials will decrease
15) Martin Company uses a job order cost system in each of its two manufacturing
departments. Manufacturing overhead is applied to jobs on the basis of direct labor cost
in Department X and machine hours in Department Y. In establishing the predetermined
overhead rates for 2014, the following estimates were made for the year:
Department
X Y
Manufacturing overhead$2,100,000$1,500,000
Direct labor cost1,500,0001,200,000
Direct labor hours100,000100,000
Machine hours200,000400,000
During January, the job cost sheet showed the following costs and production data:
Department
X Y
Direct materials used$190,000$130,000
Direct labor cost105,000120,000
Manufacturing overhead incurred145,000112,000
Direct labor hours8,0008,400
Machine hours16,00030,000
Instructions
(a)Compute the predetermined overhead rate for each department.
(b)Compute the total manufacturing cost assigned to jobs in January in each
department.
(c)Compute the balance in the Manufacturing Overhead account at the end of January
and indicate whether overhead is over- or underapplied.
16) Red Company produces 1,000 units of a necessary component with the following
costs:
Direct Materials$34,000
Direct Labor15,000
Variable Overhead8,000
Fixed Overhead10,000
Red’s Company could avoid $6,000 in fixed overhead costs if it acquires the
components externally. If cost minimization is the major consideration and the
company would prefer to buy the components, what is the maximum external price that
Red Company would accept to acquire the 1,000 units externally?
a.$57,000
b.$61,000
c.$59,000
d.$63,000
17) On March 1, Mena Company borrows $150,000 from High Country Bank by
signing a 6-month, 8%, interest-bearing note.
Instructions
Prepare the necessary entries below associated with the note payable on the books of
Mena Company.
(a)Prepare the entry on March 1 when the note was issued.
(b)Prepare any adjusting entries necessary on June 30 in order to prepare the
semi-annual financial statements. Assume no other interest accrual entries have been
made.
(c)Prepare the adjusting entry at August 31 to accrue interest.
(d)Prepare the entry to record payment of the note at maturity.
18) Capital stock to which the charter has assigned a value per share is called
a.par value stock
b.no-par value stock
c.stated value stock
d.assigned value stock
19) Match the items below by entering the appropriate code letter in the space provided.
A.Aging of receivablesF.Percentage of receivables basis
B.Direct write-off methodG.Factoring
C.Promissory noteH.Dishonored note
D.Trade receivablesI.Average collection period
E.Percentage of sales basisJ.Credit card sales
20) Richmond’s Wholesale uses a sales journal. An entry in this journal represents a
a.debit to Cash; credit to Sales Revenue
b.debit to Accounts Receivable; credit to Sales Revenue
c.debit to Sales Discounts; credit to Cash
d.debit to Accounts Payable; credit to Sales Returns and Allowances
21) Sansford Company has the following equivalent units for July: materials 20,000 and
conversion costs 18,000. Production cost data are:
MaterialsConversion
Work in process, July 1$ 3,200$ 1,500
Costs added in July30,00021,000
The unit production costs for July are:
MaterialsConversion Costs
a.$1.50$1.25
b.1.661.17
c.1.501.17
d.1.661.25
22) Messler Industries is evaluating its Mountain division, an investment center. The
division has a $99,000 controllable margin and $600,000 of sales. How much will
Messlers average operating assets be when its return on investment is 10%?
a.$891,000
b.$990,000
c.$600,000
d.$501,000
23) The maturity value of a $70,000, 8%, 3-month note receivable is
a.$70,467
b.$70,560
c.$71,400
d.$75,600
24) Under IFRS, liabilities
a.must be legally enforceable by a contract
b.must be legally enforceable by law
c.may be legally enforceable by a contract or law but need not be
d.are defined differently than under GAAP
25) Nirvana Corporation issued a one-year, 9%, $400,000 note on April 30, 2014 .
Interest expense for the year ended December 31, 2014 was
a.$21,000
b.$24,000
c.$27,000
d.$36,000
26) A bond with a face value of $200,000 and a quoted price of 102 has a selling price
of
a.$240,225
b.$204,025
c.$200,225
d.$204,250
27) Dina Corp. had 500,000 shares of common stock outstanding throughout the year.
Dina reported net income of $2,400,000 and declared preferred stock dividends of
$400,000 during the year. Dina should present earnings per share of:
a.$0.80
b.$4.00
c.$4.80
d.$6.00
28) When a note receivable is dishonored,
a.interest revenue is never recorded
b.bad debts expense is recorded
c.the maturity value of the note is written off
d.Accounts Receivable is debited if eventual collection is expected
29) The fraud triangle applies to
a.U.S companies but not international companies
b.international companies but not U.S. companies
c.U.S. and Canadian companies but not other international companies
d.U.S and international companies
30) The carrying value of bonds will equal the market price
a.at the close of every trading day
b.at the end of the fiscal period
c.on the date of issuance
d.every six months on the date interest is paid
31) Mortan Manufacturing decided to analyze certain costs for June of the current year.
Units started into production equaled 28,000 and ending work in process equaled 4,000.
With no beginning work in process inventory, how much is the conversion cost per unit
if ending work in process was 25% complete and total conversion costs equaled
$125,000?
a.$4.31
b.$4.46
c.$5.00
d.$2.50
32) Which one of the following transactions is recorded with the same entry in a
perpetual and a periodic inventory system?
a.Cash received on account with a discount
b.Payment of freight costs on a purchase
c.Return of merchandise sold
d.Sale of merchandise on credit
33) In a job order cost system, a credit to Manufacturing Overhead will be accompanied
by a debit to
a.Cost of Goods Manufactured
b.Finished Goods Inventory
c.Work in Process Inventory
d.Raw Materials Inventory
34) An important feature of a job order cost system is that each job
a.must be similar to previous jobs completed
b.has its own distinguishing characteristics
c.must be completed before a new job is accepted
d.consists of one unit of output
35) As prepaid expenses expire with the passage of time, the correct adjusting entry will
be a
a.debit to an asset account and a credit to an expense account
b.debit to an expense account and a credit to an asset account
c.debit to an asset account and a credit to an asset account
d.debit to an expense account and a credit to an expense account
36) A purchased patent has a legal life of 20 years. It should be
a.expensed in the year of acquisition
b.amortized over 20 years regardless of its useful life
c.amortized over its useful life if less than 20 years
d.not amortized
37) The following monthly data are available for Kyle, Inc. which produces only one
product: Selling price per unit, $42; Unit variable expenses, $14; Total fixed expenses,
$84,000; Actual sales for the month of June, 4,500 units. How much is the margin of
safety for the company for June?
a.$28,000
b.$42,000
c.$63,000
d.$1,000
38) When customers make purchases with a national credit card, the retailer
is not involved in the collection process
is responsible for maintaining customer accounts
c.absorbs any losses from uncollectible accounts
d.receives cash equal to the full price of the merchandise sold from the credit card
company
39) If actual manufacturing overhead was greater than the amount of manufacturing
overhead applied to jobs, the Manufacturing Overhead account will have a
___________ balance and overhead is said to be ______________.
40) Using the following operating data for Complex Corporation, prepare a schedule
showing a vertical analysis for 2014 .
2014 2013
Net sales$360,000$320,000
Cost of goods sold210,000180,000
Operating expenses112,000100,000
Net income38,00040,000
41) Farley Corporation purchased land adjacent to its plant to improve access for trucks
making deliveries. Expenditures incurred in purchasing the land were as follows:
purchase price, $70,000; brokers fees, $6,000; title search and other fees, $5,000;
demolition of an old building on the property, $5,700; grading, $1,200; digging
foundation for the road, $3,000; laying and paving driveway, $25,000; lighting $7,500;
signs, $1,500. List the items and amounts that should be included in the Land account.
42) The corporate head office has requested that the regional manager maintain an
inventory in dollars equal to 25% of the next quarter’s sales. Quarterly purchases
average 55% of quarterly sales. Budgeted ending inventory on December 31, 2014 is
$132,000. Quarterly salaries are $15,000 plus 5% of sales. All salaries are classified as
sales salaries. Other quarterly expenses are estimated to be as follows:
Rent expense$19,000
Depreciation on office equipment$8,000
Utilities expense$2,700
Miscellaneous expenses2% of sales
The income statement for the first quarter of 2014 was as follows:
Income Statement
For the Quarter Ended March 31, 2014
Sales revenue$480,000
Cost of goods sold 264,000
Gross profit216,000
Operating expenses
Sales salaries$39,000
Rent expense19,000
Depreciation8,000
Utilities2,700
Miscellaneous 9,600
Total operating expenses 78,300
Net income$137,700
Instructions
Prepare a budgeted quarterly income statement in tabular form for the first quarter of
2015 . (Show computations.)
43) On June 1, 2014, Secretly Canadian Company prepared a balance sheet that shows
the following:
Assets (no cash)$100,000
Liabilities45,000
Owner’s Equity55,000
Shortly thereafter, all of the assets were sold for cash. How would the balance sheet
appear immediately after the sale of the assets for cash for each of the following cases?
Cash Received for Balances Immediately After Sale
the Assets Assets Liabilities =Owner’s Equity
Cash A$110,000$________$________$________
Cash B100,000________________________
Cash C90,000________________________
44) Mike Mergenthaler asks, Since stock dividends don’t change anything, why declare
them?” What is your answer to Mike?
45) The beginning cash balance is $18,000. Sales are forecasted at $800,000 of which
80% will be on credit. 70% of credit sales are expected to be collected in the year of
sale. Cash expenditures for the year are forecasted at $500,000. Accounts receivable
from previous accounting periods totaling $14,000 will be collected in the current year.
The company is required to make a $20,000 loan payment and an annual interest
payment on the last day of the year. The loan balance as of the beginning of the year is
$120,000, and the annual interest rate is 10%.
Instructions
How much will be reported as ‘cash’ on the budgeted balance sheet?
46) A cost that has both variable and fixed elements is referred to as a
_________________ cost.