1) A company invests $10,000 at 7% compounded annually. At the end of the second
year, the company should have $11,400 in the fund.
2) Budgets are long term financial plans that generally cover more than a one-year
period.
3) If ending variances account balances are material, they should always be closed
directly to Cost of Goods Sold.
4) A company should report its portfolio of trading securities at its fair value.
5) Adjusting entries are usually entered in the work sheet before they are entered in the
general journal.
6) Basic bank services such as bank accounts, bank deposits, and checking contribute to
the control of cash.
7) A time ticket is a source document used by an employee to record the total number of
hours worked and serves as a source document for entries to record labor costs.
8) A job order costing system would be appropriate for a manufacturer of automobile
tires.
9) Partnership accounting is the same as accounting for:
A.A sole proprietorship.
B.A corporation.
C.A sole proprietorship, except that separate capital and withdrawal accounts are kept
for each partner.
D.An S corporation.
E.A corporation, except that retained earnings is used to keep track of partners’
withdrawals.
10) Achieving an increased return on common stock by paying dividends on preferred
stock at a rate that is less than the rate of return earned with the assets invested from the
preferred stock issuance is called:
A.Financial leverage.
B.Discount on stock.
C.Premium on stock.
D.Preemptive right.
E.Capital gain.
11) The amount by which the overhead applied to jobs during a period exceeds the
overhead incurred during the period is known as:
A.Adjusted overhead.
B.Estimated overhead.
C.Predetermined overhead.
D.Underapplied overhead.
E.Overapplied overhead.
12) Foreign exchange rates fluctuate due to changes in all but which of the following?
A.Political conditions.
B.Economic conditions.
C.Supply and demand for currencies.
D.Expectations of future events.
E.Whether the companies prepare financial statements under U.S. GAAP or IFRS.
13) Which of the following must be prepared before the direct labor budget?
A.Budgeted income statement.
B.Merchandise purchases budget.
C.Capital expenditures budget.
D.Selling expense budget.
E.Production budget.
14) A company has net income of $250,000, net sales of $2,000,000, and average total
assets of $1,500,000. Its return on total assets equals:
A.12.5%.
B.13.3%.
C.16.7%.
D.75.0%.
E.600.0%.
15) Janitor Supply produces an industrial cleaning powder that requires 40 grams of
material at $0.10 per gram and .25 direct labor hours at $12.00 per hour. Overhead is
assigned at the rate of $18 per direct labor hour. What is the total standard cost for one
unit of product that would appear on a standard cost card?
A.$7.00.
B.$8.50.
C.$11.50.
D.$7.50.
E.$25.00.
16) In order to be reported, liabilities must:
A.Be certain.
B.Sometimes be estimated.
C.Be for a specific amount.
D.Always have a definite date for payment.
E.Involve an outflow of cash.
17) Departmental contribution to overhead is calculated as the amount of sales of the
department less:
A.Controllable costs.
B.Product and period costs.
C.Direct expenses.
D.Direct and indirect costs.
E.Joint costs.
18) Dazzle, Inc. produces beads for jewelry making use. The following information
summarizes production operations for June. The journal entry to record June production
activities for goods transferred from production to finished goods is:
A.Debit Finished Goods Inventory $432,000; credit Work in Process Inventory
$432,000.
B.Debit Work in Process Inventory $444,000; credit Finished Goods Inventory
$444,000.
C.Debit Work in Process Inventory $432,000; credit Finished Goods Inventory
$432,000.
D.Debit Finished Goods Inventory $444,000; credit Work in Process Inventory
$444,000.
E.Debit Work in Process Inventory $432,000; credit Cash $432,000.
19) Juarez Builders incurred $285,000 of labor costs for construction jobs completed
during the month of August, of which $212,000 was direct and $73,000 was indirect
supervisory costs. The correct journal entry to record the $73,000 indirect labor for the
month is:
A.Debit Supervisor Wage Expense; credit Factory Wages Payable.
B.Debit Factory Overhead; credit Factory Wages Payable.
C.Debit Supervisor Wage Expense; credit Factory Overhead.
D.Debit Factory Wages Payable; credit Factory Overhead.
E.Debit Factory Wage Expense; credit Cash.
20) During June, Vixen Fur Company sells $850,000 in merchandise that has a one year
warranty. Experience shows that warranty expenses average about 3% of the selling
price. Customers returned $14,000 of merchandise for warranty replacement during the
month. The entry to record the estimated warranty provision at the end of the month is:
A.Debit Warranty Expense $11,500; credit Estimated Warranty Liability $11,500.
B.Debit Warranty Expense $14,000; credit Estimated Warranty Liability $14,000.
C.Debit Warranty Expense $25,500; credit Estimated Warranty Liability $25,500.
D.Debit Estimated Warranty Liability $14,000; credit Warranty Expense $14,000.
E.Debit Estimated Warranty Liability $11,500; credit Warranty Expense $11,500.
21) A bonus may be paid in all of the following situations except:
A.By a new partner when the current value of a partnership is greater than the recorded
amounts of equity.
B.By a withdrawing partner to remaining partners if the recorded value of the equity is
overstated.
C.To a new partner with exceptional talents.
D.By remaining partners to a withdrawing partner if the recorded equity is understated.
E.By an existing partner to him or herself when in need of personal cash flow.
22) Desjardin Landscaping’s income statement reports net income of $75,300, which
includes deductions for interest expense of $11,500 and income taxes of $34,900. Its
times interest earned is:
A.10.6 times
B.7.5 times
C.4.0 times
D.6.5 times
E.0.15 times
23) Stormer Corporation has provided the following data from its activity-based costing
accounting system:
Distribution of resource consumption across Activity Cost Pools:
The “Other” activity cost pool consists of the costs of idle capacity and
organization-sustaining costs that are not assigned to products.
Required:
a. Determine the total amount of indirect factory wages and factory equipment
depreciation costs that would be allocated to the Product Processing activity cost pool.
Show your work!
b. Determine the total amount of indirect factory wages and factory equipment
depreciation costs that would NOT be assigned to products. Show your work!
24) Explain where each of the following items should appear in the financial statements
of a corporation:
(1) The accounting department discovered that an entry was made last year to Insurance
Expense instead of to Prepaid Insurance. The after-tax effect of the charge to Insurance
Expense was $5,000.
(2) The company grants five of its employees the option to purchase 100 shares of its $5
par value common stock at its current market price of $20 per share anytime with the
next five years. None of the employees exercised the options in the current year.
26) Partner net income divided by average partner equity equals
______________________.
27) Describe how materials flow through a job order costing system, and identify the
key documents in the system.
28) On June 1, a company established a $75 petty cash fund. On June 27, the petty cash
fund contains $5.25 in cash and the following paid petty cash receipts: postage, $19.50;
office supplies, $36.25; and miscellaneous expense $14.00. Give the general journal
entry to reimburse the fund on June 27.
29) At December 31 of the current year, a company reported the following:
Total sales for the current year: $980,000 includes $160,000 in cash sales
Accounts receivable balance at Dec. 31, end of current year: $160,000
Allowance for Doubtful Accounts balance at January 1, beginning of current year:
$7,300
Bad debts written off during the current year: $5,800.
Prepare the necessary adjusting entries to record bad debts expense assuming this
company’s bad debts are estimated to equal 1.5% of credit sales:
30) Lock Production Co. applies factory overhead to production on the basis of direct
labor costs. Assume that at the beginning of the current year the company estimated that
direct material costs would be $178,800, direct labor costs would be $154,000, and
factory overhead costs would be $231,000.
(1) If the $28,000 cost of Lock’s Work in Process inventory included $5,200 of direct
labor cost, what amount of direct materials cost was included?
(2) If $8,100 of the company’s $34,300 finished goods inventory was direct materials
cost, determine the direct labor cost and factory overhead cost of the finished goods
inventory.
31) What is one advantage and one disadvantage of using the accounting rate of return
to evaluate investment alternatives?