Cost plus methods determine the normal selling price by estimating a cost amount per
unit and adding a markup.
Answer:
Variable costs as a percentage of sales are equal to 100% minus the contribution margin
ratio.
Answer:
The total net pay for a period is determined from the payroll register.
Answer:
If direct materials cost per unit increases, the break-even point will decrease.
Answer:
To determine cash payments for operating expenses for the cash flow statement using
the direct method, a decrease in prepaid expenses is added to operating expenses other
than depreciation.
Answer:
Freight in is the amount paid by the company to deliver merchandise sold to a customer.
Answer:
When a note is written to settle an open account, no entry is necessary.
Answer:
Detailed supplemental schedules based on department responsibility are often prepared
for major items in the operating expenses budget.
Answer:
While setting standards, the managers should never allow for spoilage or machine
breakdowns in their calculations.
Answer:
Since the controllable variance measures the efficiency of using variable overhead
resources, if budgeted variable overhead exceeds actual results, the variance is
favorable.
Answer:
Depending on the account title, the right side of the account is referred to as the credit
side.
Answer:
Operating expenses incurred for the entire business as a unit that are not subject to the
control of individual department managers are called indirect expenses.
Answer:
In order to choose the proper activity base for a cost, managerial accountants must be
familiar with the operations of the entity.
Answer:
Nonmanufacturing costs are generally classified into two categories: selling and
administrative.
Answer:
Financial reporting systems that are guided by the principle of exceptions concept focus
attention on variances from standard costs.
Answer:
If a business issued bonds payable in exchange for land, the transaction would be
reported in a separate schedule on the statement of cash flows.
Answer:
The interest on a 6%, 60-day note for $5,000 is $300.
Answer:
Budgetary slack can be avoided if lower and mid-level managers are requested to
support all of their spending requirements with specific operational plans.
Answer:
Supervisor salaries and indirect factory wages would normally appear in the direct labor
cost budget.
Answer:
If the costs for direct materials, direct labor, and factory overhead were $277,300,
$52,600, and $61,000, respectively, for 14,000 equivalent units of production, the total
conversion cost was $390,900.
Answer:
The cost of replacing an engine in a truck is an example of ordinary maintenance.
Answer:
The point in operations at which revenues and expired costs are exactly equal is called
the break-even point.
Answer:
Bonds of major corporations are traded on bond exchanges.
Answer:
If the volume of sales is $7,000,000 and sales at the break-even point amount to
$4,800,000, the margin of safety is 45.8%.
Answer:
An adjusting entry to accrue an incurred expense will affect total liabilities.
Answer:
For a month’s transactions for a typical medium-sized business, the accounts payable
account is likely to have only credit entries.
Answer:
If the amount of a bond premium on an issued 11%, 4-year, $100,000 bond is $12,928,
the annual interest expense is $5,500.
Answer:
The trial balance prepared after all the closing entries have been posted is called a
pre-closing trial balance.
Answer:
Methods that ignore present value in capital investment analysis include the cash
payback method.
Answer:
Sales of office supplies for cash, at cost, to a neighboring business as an
accommodation, are recorded in the revenue journal.
Answer:
A credit to the cash account will increase the account.
Answer:
The statement of members’ equity is used for equity reporting of a partnership.
Answer:
The sales budget is derived from the production budget.
Answer:
The average rate of return method of capital investment analysis gives consideration to
the present value of future cash flows.
Answer:
Inventory errors, if not discovered, will self-correct in two years.
Answer:
An employee’s take home pay is equal to gross pay less all voluntary deductions.
Answer:
A corporation has 10,000 shares of $100 par value stock outstanding. If the corporation
issues a 5-for-1 stock split,the number of shares outstanding after the split willbe40,000.
Answer:
The budgeted direct materials purchases is normally computed as the sum of (1) the
materials for production and (2) the desired ending inventory.
Answer:
The underlying principle of allocating operating expenses to departments is to assign to
each department an amount of expense proportional to the revenues of that department.
Answer:
The total manufacturing cost variance consists of:
A.Direct materials price variance, direct labor cost variance, and fixed factory overhead
volume variance
B.Direct materials cost variance, direct labor rate variance, and factory overhead cost
variance
C.Direct materials cost variance, direct labor cost variance, variable factory overhead
controllable variance
D.Direct materials cost variance, direct labor cost variance, factory overhead cost
variance
Answer:
Mr. Potts issued a 90-day, 7% note for $200,000, dated February 3rd to Valley Co. on
account. (Assume a 360-day year when calculating interest.)
a. Determine the due date of the note.
b. Determine the interest.
c. Determine the maturity value of the note.
d. Journalize the entry to record the issuance of the note by Potts on Feb. 3.
e. Journalize the entry to record the receipt of payment of the note at maturity by Valley
Co.
Answer:
The following are steps to the accounting cycle. Of the following, which step should be
done first?
A.Closing entries are journalized and posted to the ledger.
B.Transactions are posted to the ledger.
C.Adjusting entries are journalized and posted to the ledger.
D.Financial statements are prepared.
Answer:
When a transposition error is made on the trial balance, the difference between the debit
and credit totals on the trial balance will be
A.zero
B.twice the amount of the transposition
C.one-half the amount of the transposition
D.divisible by 9
Answer:
If sales are $820,000, variable costs are 45% of sales, and operating income is
$260,000, what is the contribution margin ratio?
A.45%
B.55%
C.62%
D.32%
Answer:
The debit side of an account
A.depends on whether the account is an asset, liability or owner’s equity
B.can be either side of the account depending on how the accountant set up the system
C.is the right side of the account
D.is the left side of the account
Answer:
Currently, the unit selling price is $50, the variable cost, $34, and the total fixed costs,
$108,000. A proposal is being evaluated to increase the selling price to $54.
Answer:
Hamlin Corporation had $220,000 in invested assets, sales of $242,000, income from
operations amounting to $70,400, and a desired minimum rate of return of 3%. The rate
of return on investment for Hamlin is:
A.7%
B.32%
C.3%
D.29%
Answer:
A company reports the following:
Determine the (a) inventory turnover, and (b) number of days’ sales in inventory. Round
your answer to one decimal place.
Answer:
Those most responsible for the major policy decisions of a corporation are the
A.management.
B.board of directors.
C.employees.
D.stockholders.
Answer:
If the expected sales volume for the current period is 7,000 units, the desired ending
inventory is 400 units, and the beginning inventory is 300 units, the number of units set
forth in the production budget, representing total production for the current period, is:
A.6,900
B.7,000
C.7,200
D.7,100
Answer:
Zeke Company is a manufacturing company that has worked on several production jobs
during the 1st quarter of the year. Below is a list of all the jobs for the quarter:
Job 356, 357, 358 & 359 were completed. Jobs 356 & 357 were sold at a profit of $500
on each job.
What is the ending balance of Work in Process for Zeke Company as of the end of the
1st quarter?
A.$0
B.$456
C.$3,208
D.$2,752
Answer:
Which of the following entries records the collection of cash from cash customers?
A.Fees Earned, debit; Cash, credit
B.Fees Earned, debit; Accounts Receivable, credit
C.Cash, debit; Fees Earned, credit
D.Accounts Receivable, debit; Fees Earned, credit
Answer:
A corporation uses the indirect method for preparing the Statement of Cash Flows. A
fixed asset has been sold for $25,000 representing a gain of $4,500. The value in the
operating activities section regarding this event would be:
A.$25,000
B.($4,500)
C.$29,500
D.$4,500
Answer:
Rosalba Manufacturing Company had the following account balance for 2012:
Collections on account were $625,000 in 2012.
Cost of goods sold was 68% of sales.
Direct materials purchased amounted to $90,000.
Factory overhead was 300% of the cost of direct labor.
Compute:
a) sales revenue (all sales were on account)
b) cost of goods sold
c) cost of goods manufactured
d) direct labor incurred
e) direct materials used
f) factory overhead incurred
Answer:
Production and sales estimates for April are as follows:
The budgeted total sales for April is:
A.$200,000
B.$230,000
C.$270,000
D.$250,000
Answer:
Supplies are recorded as assets when purchased. Therefore, the credit to supplies in the
adjusting entry is for the amount of supplies
A.still on hand
B.purchased
C.used
D.required for the next accounting period
Answer:
The following budget data are available for Happy Company:
If factory overhead is to be applied based on direct labor dollars, the predetermined
overhead rate is
A.199%
B.196%
C.$14.92
D.$15.65
Answer:
There are four transactions that affect Owner’s equity.
(a) What are the two types of transactions that increase Owner’s equity?
(b) What are the two types of transactions that decrease Owner’s equity?
Answer:
Some items are omitted from each of the following condensed divisional income
statements of Demi Inc.
Answer:
During a period of consistently rising prices, the method of inventory that will result in
reporting the greatest cost of merchandise sold is
A.FIFO
B.LIFO
C.average cost
D.weighted average
Answer:
Rusty Co. sells two products, X and Y. Last year Rusty sold 5,000 units of X’s and
35,000 units of Y’s. Related data are:
What was Rusty Co.’s weighted average unit variable cost?
A.$52.50
B.$70.00
C.$120.00
D.$50.00
Answer:
The condensed income statement for a business for the past year is as follows:
Management is considering the discontinuance of the manufacture and sale of Product
T at the beginning of the current year. The discontinuance would have no effect on the
total fixed costs and expenses or on the sales of Product U. What is the amount of
change in net income for the current year that will result from the discontinuance of
Product T?
A.$120,000 increase
B.$250,000 increase
C.$25,000 decrease
D.$120,000 decrease
Answer:
On August 1, Batson Company issued a 60-day note with a face amount of $140,000 to
Jergens Company for merchandise inventory. (Assume a 360-day year is used for
interest calculations.)
Answer:
Falcon Co. produces a single product. Its normal selling price is $30.00 per unit. The
variable costs are $19.00 per unit. Fixed costs are $25,000 for a normal production run
of 5,000 units per month. Falcon received a request for a special order that would not
interfere with normal sales. The order was for 1,500 units and a special price of $20.00
per unit. Falcon Co. has the capacity to handle the special order and, for this order, a
variable selling cost of $1.00 per unit would be eliminated.
Should the special order be accepted?
A.Cannot determine from the data given
B.Yes
C.No
D.There would be no difference in accepting or rejecting the special order
Answer:
Which of the following is not an element of internal controls?
A.to protect assets from misuse
B.ensure the accuracy of business information
C.ensure that laws and regulations are followed
D.ensure that company policies are in place to maximize profits
Answer:
Classify the following items as: (1) prepaid expense, (2) unearned revenue, (3) accrued
expense, or (4) accrued revenue.
a) Fees received but not yet earned.
b) Fees earned but not yet received.
c) Paid premium on a one-year insurance policy.
d) Property tax accrual
Answer:
Which of the following budgets allow for adjustments in activity levels?
A.Static Budget
B.Continuous Budget
C.Zero-Based Budget
D.Flexible Budget
Answer:
The following are all product costs except:
A.Direct materials
B.Sales and administrative expenses
C.Direct labor
D.Factory overhead
Answer:
Finch Company began its operations on March 31 of the current year. Finch Co. has the
following projected costs:
(1) 3/4 of the manufacturing costs are paid for in the month they are incurred. 1/4 is
paid in the following month.
(2) Insurance expense is $1,000 a month, however, the insurance is paid four times
yearly in the first month of the quarter, i.e. January, April, July, and October.
(3) Property tax is paid once a year in November.
The cash payments for Finch Company in the month of April are:
A.$122,600
B.$120,600
C.$123,100
D.$121,100
Answer:
On the basis of the following data, what is the estimated cost of the merchandise
inventory on May 31 using the retail method?
A.$250,000
B.$360,000
C.$172,500
D.$187,500
Answer:
The objectives of internal control are to
A.control the internal organization of the accounting department personnel and
equipment
B.provide reasonable assurance that operations are managed to achieve goals, financial
reports are accurate, and laws and regulations are complied with
C.prevent fraud, and promote the social interest of the company
D.provide control over “internal-use only” reports and employee internal conduct
Answer:
Isaac Co. sells merchandise on credit to Sonar Co in the amount of $5,700. The invoice
is dated on April 1 with terms of 1/15, net 45. What is the amount of the discount and
up to what date must the invoice be paid in order for the buyer to take advantage of the
discount?
A.$114, April 15
B.$114, April 16
C.$57, April 15
D.$57, April 16
Answer:
Based on the following data, calculate the estimated cost of the merchandise inventory
on March 31 using the retail method.
Answer:
The Dickinson Company reported net income of $155,000 for the current year.
Depreciation recorded on buildings and equipment amounted to $65,000 for the year. In
addition, a building with an original cost of $250,000 and accumulated depreciation of
$190,000 on the date of the sale, was sold for $75,000. Balances of the current asset and
current liability accounts at the beginning and end of the year are as follows:
Instructions
Prepare the cash flows from the operating activities section of the statement of cash
flows using the indirect method.
Answer:
An 8-year project is estimated to cost $400,000 and have no residual value. If the
straight-line depreciation method is used and the average rate of return is 5%, determine
the estimated annual net income.
Answer:
Selected data taken from the accounting records of Laser Inc. for the current year ended
December 31, are as follows:
During the current year, the cost of merchandise sold was $448,500, and the operating
expenses other than depreciation were $78,000. The direct method is used for
presenting the cash flows from operating activities on the statement of cash flows.
Determine the amount reported on the statement of cash flows for:
(1) Cash payments for merchandise; and
(2) Cash payments for operating expenses.
Answer:
Define (1) debt securities and (2) equity securities. Include their similarities and
differences in your discussion.
Answer:
Define nonfinancial performance measures. What are they used for and what are some
common examples?
Answer:
Mobile Sales has five sales employees which receive weekly paychecks. Each earns
$11.50 per hour and each has worked 40 hours in the pay period. Each employee pays
12% of gross in Federal Income Tax, 3% in State Income Tax, 6% of gross in Social
Security Tax, 1.5% of gross in Medicare Tax, and 1/2% in State Disability Insurance.
Journalize the recognition the pay period ending January 19th which will be paid to the
employees January 26th. (Keep in mind that none of the employees is subject to a
ceiling amount for social security.)
Answer:
Comment on the validity of the following statements. “As an asset loses its ability to
provide services, cash needs to be set aside to replace it. Depreciation accomplishes this
goal.”
Answer:
Skyline, Inc. purchased a portfolio of trading securities during 2012. The cost and fair
value of this portfolio on December 31, 2012, was as follows:
Provide the journal entry to record the adjustment of the trading security portfolio to
fair value on December 31, 2012.
Where will the information from the journal entry be reported on the financial
statements?
Answer:
Materials used by the Layton Company Division 1 are currently purchased from outside
supplier at $58 per unit. Division 2 is able to supply Division 1 with 22,000 units at a
variable cost of $46 per unit. The two divisions have recently negotiated a transfer price
of $50 per unit for the 20,000 units.
By how much will each division’s income increase as a result of this transfer?
Answer:
Match each item with its definition.
Answer:
Emerson and Dakota formed a partnership dividing income as follows:
1) Annual salary allowance to Emerson of $58,000
2) Interest of 8% on each partner’s capital balance on January 1
3) Any remaining net income divided equally.
Emerson and Dakota had $25,000 and $140,000 respectively in their January 1 capital
balances. New income for the year was $220,000.
How much net income should be distributed to Dakota?
Answer:
A $400,000 capital investment proposal has an estimated life of four years and no
residual value. The estimated net cash flows are as follows:
The minimum desired rate of return for net present value analysis is 12%. The present
value of $1 at compound interest of 12% for 1, 2, 3, and 4 years is .893, .797, .712,
and .636, respectively. Determine the net present value.
Answer:
The bookkeeper for Brockton Industries prepared the following journal entries and
posted the entries to the general ledger as indicated in the T accounts presented. Assume
that the dollar amounts and the descriptions of the entries are correct.
Journal entries:
Required: If you assume that all journal entries have been recorded correctly, use the
above information to:
(1) Identify the postings to the general ledger that were made incorrectly.
(2) Describe how the each incorrect posting should have been made.
Answer:
On the first day of the fiscal year, a company issues a $800,000, 6%, 5 year bond that
pays semi-annual interest of $24,000 ($800,000 x 6% x 1/2), receiving cash of
$690,960. Journalize the entry to record the first interest payment and the amortization
of the related bond discount using the straight-line method.
Answer:
If a company records inventory purchases at standard cost and also records purchase
price variances, prepare the journal entry for a purchase of widgets that were bought at
$7.45 per unit and have a standard cost of $7.15. The total amount owed to the vendor
for this purchase is $33,525.
Answer:
On September 1, 2012, Parsons Company purchased $84,000, 10 year, 7% government
bonds at 100 plus accrued interest. The semi-annual interest payment dates are June 30
and December 31. Interest calculations are done by the month.
Answer:
Aquatic Corp.’s standard material requirement to produce a single of Model 2000 is 15
pounds of material x $110.00 per pound.
Last month, Aquatic purchased 170,000 pounds of material at a total cost of
$17,850,000. They used 162,000 pounds to produce 10,000 units of Model 2000.
Calculate the material price variance and material quantity variance, and indicate
whether each variance is favorable or unfavorable.
Calculate the material price variance and material quantity variance, and indicate
whether each variance is favorable or unfavorable.
Answer:
Each of the events below may have an effect on the statement of cash flows. Designate
how the event should be reported within the statement of cash flows using the codes
provided below. Codes may be used more than once, or not at all.
Codes
Events
Answer:
A machine costing $57,000 with a 6-year life and $54,000 depreciable cost was
purchased January 1, 2015. Compute the yearly depreciation expense using straight-line
depreciation.
Answer: