1) The direct labor and overhead costs of providing services to clients are accumulated
in a work-in-process account.
2) Once journal entries are posted to accounts, each account will show a new balance
after each entry.
3) Changes in the quantity of finished goods inventory, caused by differences in the
levels of sales and production, directly affects the amount of income from operations
reported under absorption costing.
4) Under the direct method of reporting cash flows from operations, the major source of
cash is cash received from customers.
5) Debiting the cash account will increase the account.
6) Since there are few rules to restrict how an organization chooses to arrange its own
internal data for decision making, managerial accounting provides ample opportunity
for creativity and change.
7) A capital expenditures budget is prepared before the operating budgets.
8) If the principal products of a manufacturing process are identical, a process cost
system is more appropriate than a job order cost system.
9) Service organizations can use activity-based costing to allocate selling and
administrative costs to services provided.
10) Standards are performance goals used to evaluate and control operations.
11) The relevant range is useful for analyzing cost behavior for management
decision-making purposes.
12) A compensating balance occurs when a bank may require a company to maintain a
maximum cash balance.
13) Retailers record all credit card sales as credit sales.
14) Non-financial measures are often lined to the inputs or outputs of an activity or
process.
15) If the ability to sell and the amount of production facilities devoted to each of two
products is equal, it is profitable to increase the sales of that product with the lowest
contribution margin.
16) The cost of replacing an engine in a truck is an example of ordinary maintenance.
17) Department S had no work in process at the beginning of the period. 12,000 units of
direct materials were added during the period at a cost of $84,000, 9,000 units were
completed during the period, and 3,000 units were 30% completed as to labor and
overhead at the end of the period. All materials are added at the beginning of the
process. Direct labor was $49,500 and factory overhead was $9,900.
The total cost of units completed during the period were:
A.$117,000
B.$143,400
C.$121,000
D.$127,450
18) The method of analyzing capital investment proposals that divides the estimated
average annual income by the average investment is:
A.cash payback method
B.net present value method
C.internal rate of return method
D.average rate of return method
19) A cost that has characteristics of both a variable cost and a fixed cost is called a:
A.variable/fixed cost
B.mixed cost
C.discretionary cost
D.sunk cost
20) The inventory at June 1 and costs charged to Work in Process – Department 60
during June are as follows:
During June, 32,000 units were placed into production and 31,200 units were
completed, including those in inventory on June On June 30, the inventory of work in
process consisted of 4,600 units which were 85% completed. Inventories are costed by
the first-in, first-out method and all materials are added at the beginning of the process.
Determine the following, presenting your computations (Prepare your computations
using unit cost data to four decimal places, i.e. $4.4444, to minimize rounding
differences):
(a) equivalent units of production for conversion cost
(b) conversion cost per equivalent unit
(c) total and unit cost of finished goods started in prior period and completed in the
current period
(d) total and unit cost of finished goods started and completed in the current period
(e) total cost of work in process inventory at June 30
21) What term is used to describe the process of developing the organizations objectives
and translating those into courses of action?
A.Supervising
B.Planning
C.Improving
D.Decision making
22) Which of the following accounts has a normal debit balance?
A.Accounts Payable
B.Sales Returns and Allowances
C.Sales
D.Interest Revenue
23) If variable cost of goods sold totaled $80,000 for the year (16,000 units at $5.00
each) and the planned variable cost of goods sold totaled $86,250 (15,000 units at $5.75
each), the effect of the unit cost factor on the change in variable cost of goods sold is:
A.$12,000 increase
B.$5,750 decrease
C.$12,000 decrease
D.$5,750 increase
24) Basic inventory data for April 30 are presented below for a business that employs
the lower of cost or market basis of inventory valuation.
25) The following information has been condensed from the December 31 balance
sheets of Hanson Co.:
(a) Determine the ratio of fixed assets to long-term liabilities for 2012 and 2011.
(b) Determine the ratio of liabilities to stockholders’ equity for 2012 and 2011.
(c) Comment on the year-to-year changes for both ratios.
Round your answers to two decimal place.
26) Mocha Company manufactures a single product by a continuous process, involving
three production departments. The records indicate that direct materials, direct labor,
and applied factory overhead for Department 1 were $100,000, $125,000, and
$150,000, respectively. The records further indicate that direct materials, direct labor,
and applied factory overhead for Department 2 were $55,000, $65,000, and $80,000,
respectively. In addition, work in process at the beginning of the period for Department
1 totaled $75,000, and work in process at the end of the period totaled $60,000.
The journal entry to record the flow of costs into Department 1 during the period for
direct labor is:
A.Work in Process–Department 165,000
Wages Payable65,000
B.Wages Payable125,000
Work in Process–Department 1125,000
C.Work in Process–Department 1125,000
Wages Payable125,000
D.Wages Payable65,000
Work in Process–Department 165,000
27) The entry to adjust for the cost of supplies used during the accounting period is
A.debit Supplies Expense; credit Supplies
B.debit Retained Earnings; credit Supplies
C.debit Accounts Payable; credit Supplies
D.debit Supplies; credit Retained Earnings
28) Which of the following is a present value method of analyzing capital investment
proposals?
A.Average rate of return
B.Cash payback method
C.Accounting rate of return
D.Net present value
29) Safari Co. sells two products, Orks and Zins. Last year Safari sold 21,000 units of
Orks and 14,000 units of Zins. Related data are:
Calculate the following:
a. Safari Co.s sales mix
b. Safari Co.s weighted average unit selling price
c. Safari Cos weighted average unit contribution margin
d. Safari Cos break-even point assuming that last years fixed costs were $160,000.
30) The Atlantic Company sells a product with a break-even point of 3,000 sales units.
The variable cost is $60 per unit, and fixed costs are $270,000. Determine the (a) unit
sales price, and (b) break-even points in sales units if the company desires a target profit
of $36,000.
31) Prepare the journal entries for the following transactions for Batson Co.
(a) Batson Co. purchased 1,200 shares of the total of 100,000 outstanding shares of
Michael Corp. stock for $20.75 per share plus a $70 commission.
(b) Michaels total earnings for the period are $84,000.
(c) Michael paid a total of $40,000 in cash dividends to shareholders of record.
32) The employee earnings record would contain which column that the payroll register
would probably not contain?
A.deductions
B.payment
C.earnings
D.cumulative earnings
33) On January 1 of the current year, Townsend Co. commenced operations. It operated
its plant at 100% of capacity during January. The following data summarized the results
for January:
34) If the contribution margin ratio for France Company is 45%, sales were $425,000.
and fixed costs were $100,000, what was the income from operations?
A.$233,750
B.$91,250
C.$191,250
D.$133,750
35) Which of the following manufacturing costs is an indirect cost of producing a
product?
A.Oil lubricants used for factory machinery
B.Commissions for sales personnel
C.Hourly wages of an assembly worker
D.Memory chips for a microcomputer manufacturer
36) Which of the following would most likely use a job order costing system?
A.A paper mill
B.A swimming pool installer
C.A company that manufactures chlorine for swimming pools
D.An oil refinery
37) A retailer purchases merchandise with a catalog list price of $30,000. The retailer
receives a 15% trade discount and credit terms of 2/10, n/30. How much cash will be
needed to pay this invoice within the discount period?
A.$30,000
B.$24,900
C.$29,400
D.$24,990
38) Interest revenue on bonds is reported
A.as an addition to the Investment in Bonds account
B.as part of Comprehensive Income but not as part of Net Income.
C.as part of other income
D.as part of operating income
39) With the aid of computer software, managers can vary assumptions regarding
selling prices, costs, and volume and can immediately see the effects of each change on
the break-even point and profit. This is called:
A.”What if” or sensitivity analysis
B.vary the data analysis
C.computer aided analysis
D.data gathering
40) The recording of the application of factory overhead costs to jobs would include a
credit to:
A.Factory Overhead
B.Wages Payable
C.Work in Process
D.Cost of Goods Sold
41) If a company mistakenly counts more items during a physical inventory than
actually exist, how will the error affect their bottom line?
A.No change to net income
B.Net income will be overstated
C.Net income will be understated
D.Only gross profit will be affected
42) A business pays bi-weekly salaries of $20,000 every other Friday for a ten-day
period ending on that day. The last pay day of December is Friday, December 27.
Assuming the next pay period begins on Monday, December 30 and the proper
adjusting entry is journalized at the end of the fiscal period (December 31). The entry
for the payment of the payroll on Friday, January 10 includes a:
A.debit to Salary Expense of $16,000
B.debit to Salary Expense of $4,000
C.credit to Salary Payable of $16,000
D.credit to Salary Payable of $4,000
43) The Bottlebrush Company has income from operations of $60,000, invested assets
of $345,000, and sales of $786,000. Use the DuPont formula to calculate the rate of
return on investment, and show (a) the profit margin, (b) the investment turnover, and
(c) rate of return on investment. Round profit margin percentage to two decimal places
and investment turnover to three decimal places.
44) Assuming a 360-day year, the interest charged by the bank, at the rate of 9%, on a
90-day, discounted note payable of $100,000 is
A.$9,000
B.$2,250
C.$750
D.$1,000
45) Which of the following describes the behavior of the variable cost per unit?
A.Varies in increasing proportion with changes in the activity level
B.Varies in decreasing proportion with changes in the activity level
C.Remains constant with changes in the activity level
D.Varies in direct proportion with the activity level
46) The Turtle Company has total estimated factory overhead for the year of
$1,200,000, divided into four activities: Fabrication, $600,000; Assembly, $240,000;
Setup, $200,000; and Materials Handling $160,000. Turtle manufactures two products:
Boogie Boards and Surf Boards. The activity-base usage quantities for each product by
each activity are as follows:
Each product is budgeted for 10,000 units of production for the year. Determine (a) the
activity rates for each activity and (b) the factory overhead cost per unit for each
product using activity-based costing.
47) Inventory controls start when the merchandise is shelved in the store area.
48) At the end of April, the first month of the year, the usual adjusting entry transferring
rent earned to a revenue account from the unearned rent account was omitted. Indicate
which items will be incorrectly stated, because of the error, on (a) the income statement
for April and (b) the balance sheet as of April 30. Also indicate whether the items in
error will be overstated or understated.
49) Marshall Supplies is a janitorial supply store. Marshall Supplies uses perpetual
inventory. Use a General Journal to journalize the following four transactions during the
month of July:
(a) On July 4th, Marshall purchases inventory for sale from Tidy Wholesalers for
$8,500.00 with terms 1/10, n/30.
(b) On July 5th, Marshall pays Express Transfer $45 for freight-in on the July 4th order.
(c) On July 12th, Marshall buys an additional $11,985 in inventory from Tidy
Wholesalers with terms 1/10, n/30.
(d) On July 22nd, Marshall pays Tidy Wholesalers the balance due.
50) Clanton Company engaged in the following transactions during 2011. Record each
in the general journal below:
1) On January 3, 2011, Clanton purchased a copyright from Dalton Company with a
cost of $250,000 with a remaining useful life of 25 years.
2) On January 10, 2011, Clanton purchased a trademark from Felton Company with a
cost of $700,000.
3) On July 1, 2011, Clanton purchased a patent from Garrison Company at a cost of
$80,000. The remaining legal life of the patent is 15 years and the expected useful life is
11 years.
4) On July 2, 2011, Clanton paid $30,000 in legal fees to defend the patent protection
purchased on July 1, 2011.
5) Recorded the appropriate amortization for the intangible assets for 2011.
6) Clanton Company includes an asset in its ledger recorded when Clanton purchased a
computer service business at a price in excess of the fair value of the assets of the
company in the amount of $400,000. At December 31, 2011, $100,000 of this asset has
become impaired.
51) Schedule of Activity Costs
From the above schedule, calculate the external failure costs.
52) Protonix Corp has a payroll of $8,000 for a five-day workweek. Its employees are
paid each Friday for the five-day workweek. The adjusting entry on December 31, 2015
assuming the year ends on Thursday would be:
53) If working papers are not considered part of the formal accounting records, then
why are they used?
54) Tucha Manufacturing Co. operates in a just-in-time (JIT) manufacturing
environment. The company had scheduled production of 95,000 units during February
in its Y12 cell. Actual February production totaled 88,200 units. Tucha had budgeted
conversion costs for February totaling $800,000 and budgeted production hours totaling
2,000.
Compute Tucha’s budgeted cell conversion cost per unit for Cell Y12.
55) Travis Company purchased merchandise on account from a supplier for $5,700,
terms 2/10, net 30. Travis returned $1,100 of the merchandise and received full credit.
Travis Company paid for the merchandise within the discount period.
Under a perpetual inventory system, record all of the journal entries required for the
above transactions.
56) Durrand Corporations accumulated depreciation increased by $12,000, while
patents decreased by $2,200 between consecutive balance sheet dates. There were no
purchases or sales of depreciable or intangible assets during the year. In addition, the
income statement showed a gain of $4,300 from sale of land. Reconcile a net income of
$65,000 to net cash flow from operating activities.
57) On April 15, Compton Co. paid $2,800 to upgrade a delivery truck and $125 for an
oil change. Journalize the entries for the upgrade to delivery truck and oil change
expenditures.
58) Beachside Realty rents condominiums and furnishings. Its adjusted trial balance at
December 31, 2011, is as follows:
Prepare the closing entry required to transfer the income or loss at the end of the period.