1) During periods of decreasing costs the use of the LIFO method of costing inventory
will result in a lower amount of net income than would result from the use of the FIFO
method.
2) A large retained earnings account means that there is cash available to pay dividends.
3) The job order costing system is not used by service organizations.
4) On the variable costing income statement, variable costs are deducted from
contribution margin to yield manufacturing margin.
5) The basic difference between manufacturing and merchandising companies is the
completion level of the products they purchase for resale to customers.
6) If the property tax rates are increased, this change in fixed costs will result in a
decrease in the break-even point.
7) Cash flows from investing activities, as part of the statement of cash flows, include
receipts from the sale of land.
8) Use of a plantwide factory overhead rate does not distort product costs when there
are differences in the factory overhead rates across different production departments.
9) All lead time are considered as value-added lead time.
10) When a major corporation develops its own trademark and over time it becomes
very valuable, the trademark may not be shown on their balance sheet due to lack of a
material cost.
11) Federal unemployment compensation taxes that are collected by the federal
government are not paid directly to the unemployed but are allocated among the states
for use in state programs.
12) The direct labor time variance measures the efficiency of the direct labor force.
13) An example of a nonfinancial measure is the number of customer complaints.
14) If the budgeted factory overhead cost is $460,000, the budgeted direct labor hours is
80,000, and the actual direct labor hours is 6,700 for the month, the factory overhead
rate for the month is $68.65 (if the allocation is based on direct labor hours).
15) Depending on the account title, the right side of the account is referred to as the
debit side.
16) When a note is written to settle an open account, no entry is necessary.
17) If income from operations for a division is $6,000, invested assets are $25,000, and
sales are $30,000, the investment turnover is 5.
18) Using the variable cost concept determine the selling price for 30,000 units using
the following data: Variable cost per unit $15.00, total fixed costs $90,000 and desired
profit $150,000.
A.$10
B.$15
C.$8
D.$23
19) Taking a physical count of inventory
A.is not necessary when a periodic inventory system is used
B.should be done near year-end
C.has no internal control relevance
D.is not necessary when a perpetual inventory system is used
20) An asset was purchased for $58,000 and originally estimated to have a useful life of
10 years with a residual value of $3,000. After two years of straight line depreciation, it
was determined that the remaining useful life of the asset was only 2 years with a
residual value of $2,000.
a) Determine the amount of the annual depreciation for the first two years.
b) Determine the book value at the end of the 2nd year.
c) Determine the depreciation expense for each of the remaining years after revision.
21) A widely used activity base for developing factory overhead rates in highly
automated settings is:
A.direct labor hours
B.direct labor dollars
C.direct materials
D.machine hours
22) Harold Corporation just started business in January 2012. They had no beginning
inventories. During 2012 they manufactured 12,000 units of product, and sold 10,000
units. The selling price of each unit was $20. Variable manufacturing costs were $4 per
unit, and variable selling and administrative costs were $2 per unit. Fixed
manufacturing costs were $24,000 and fixed selling and administrative costs were
$6,000.
What would be the difference in Harold Corporations Net income for 2012 if they used
variable costing instead of absorption costing?
A.No difference
B.$2,000 greater
C.$4,000 less
D.$6,000 less
23) Next years sales forecast shows that 20,000 units of Product A and 22,000 units of
Product B are going to be sold for prices of $10 and $12 per unit, respectively. The
desired ending inventory of Product A is 20% higher than its beginning inventory of
2,000 units. The beginning inventory of Product B is 2,500 units. The desired ending
inventory of B is 3,000 units.
Budgeted purchases of Product A for the year would be:
A.22,400 units
B.20,400 units
C.20,000 units
D.12,200 units
24) Which of the following statements is not true about liabilities?
A.Liabilities are debts owed to outsiders
B.Account titles of liabilities often include the term payable.
C.Receiving cash before a service is performed creates a liability
D.Liabilities do not include wages owed to employees of the company
25) Under variable costing, which of the following costs would be included in finished
goods inventory?
A.advertising costs
B.salary of vice-president of finance
C.wages of carpenters in a furniture factory
D.straight-line depreciation on factory equipment
26) Pinacle Corp. budgeted $350,000 of overhead cost for 2012. Actual overhead costs
for the year were $325,000. Pinacle’s plantwide allocation base, machine hours, was
budgeted at 50,000 hours. Actual machine hours were 40,000. A total of 100,000 units
was budgeted to be produced and 98,000 units were actually produced. Pinacle’s
plantwide factory overhead rate for 2012 is:
A.$8.13 per machine hour
B.$7.00 per machine hour
C.$6.50 per machine hour
D.$8.75 per machine hour
27) Which of the following costs is a mixed cost?
A.Salary of a factory supervisor
B.Electricity costs of $3 per kilowatt-hour
C.Rental costs of $10,000 per month plus $.30 per machine hour of use
D.Straight-line depreciation on factory equipment
28) The comparative balance sheet of Colson Company, for 2011 and the preceding
year ended December 31, 2010 appears below in condensed form:
The income statement for the current year is as follows:
Additional data for the current year are as follows:
(a) Fully depreciated equipment costing $39,000 was scrapped, no salvage, and
equipment was purchased for $157,000.
(b) Bonds payable for $100,000 were retired by payment at their face amount.
(c) 5,000 shares of common stock were issued at $15 for cash.
(d) Cash dividends declared were paid $28,000.
(e) All sales are on account.
Prepare a statement of cash flows, using the direct method of reporting cash flows from
operating activities.
29) Merchandise with a sales price of $6,000 is sold on account with term 2/10, n/30.
The journal entry to record the sale would include a
A.debit to Cash for $6,000
B.Debit to Sales Discounts for $120
C.Credit to Sales for $6,000
D.Debit to Accounts Receivable for $5,880
30) The market interest rate related to a bond is also called the
A.stated interest rate
B.effective interest rate
C.contract interest rate
D.straight-line rate
31) On December 31, Strike Company has decided to sell one of its batting cages. The
initial cost of the equipment was $310,000 with an accumulated depreciation of
$260,000. Depreciation has been taken up to the end of the year. The company found a
company that is willing to buy the equipment for $20,000. What is the amount of the
gain or loss on this transaction?
A.Gain of $20,000
B.Loss of $30,000
C.No gain or loss
D.Cannot be determined
32) Management accountants usually provide for a minimum cash balance in their cash
budgets for which of the following reasons:
A.stockholders demand a minimum cash balance
B.to comply with U.S. GAAP
C.it provides a safety buffer for variations in estimates
D.to have funds available for major capital expenditures
33) The following data were taken from Harrison Companys balance sheet:
Dec. 31, 2012 Dec. 31, 2011
Total liabilities $150,000 $105,000
Total stockholders equity 75,000 60,000
a. Compute the ratio of liabilities to stockholders equity.
b. Has the creditors risk increased or decreased from December 31, 2011, to December
31, 2012?
34) The unequal totals of the debit and credit columns of the Adjusted Trial Balance
columns on a work sheet
A.indicates the amount of net income or loss
B.indicates there is an error on the work sheet
C.is not unusual when preparing the work sheet
D.is the net difference between revenue, expenses, and dividends
35) Prepare entries to record the following:
(a) Issued 1,000 shares of $10 par common stock at $56 for cash.
(b) Issued 1,400 shares of common stock in exchange for equipment with a fair market
price of $21,000.
(c) Purchased 100 shares of treasury stock at $25.
(d) Sold 100 shares of treasury stock at $30.
36) In recording the cost of merchandise sold for cash, based on data available from
perpetual inventory records, the journal entry is
A.debit Cost of Merchandise Sold; credit Sales
B.debit Cost of Merchandise Sold; credit Merchandise Inventory
C.debit Merchandise Inventory; credit Cost of Merchandise Sold
D.debit Accounts Receivable; credit Merchandise Inventory
37) As of January 1 of the current year, the Grackle Company had accounts receivables
of $50,000. The sales for January, February, and March were as follows: $120,000,
$140,000 and $150,000. 20% of each months sales are for cash. Of the remaining 80%
(the credit sales), 60% are collected in the month of sale, with remaining 40% collected
in the following month. What is the total cash collected (both from accounts receivable
and for cash sales) in the month of February?
A.$129,600
B.$62,400
C.$133,600
D.$91,200
38) Contribution margin is:
A.the excess of sales revenue over variable cost
B.another term for volume in the “cost-volume-profit” analysis
C.profit
D.the same as sales revenue
39) Blackwelder Factory produces two similar products – small lamps and desk lamps.
The total plant overhead budget is $640,000 with 400,000 estimated direct labor hours.
It is further estimated that small lamp production will require 275,000 direct labor hours
and desk lamp production will need 125,000 direct labor hours.
Using the single plantwide factory overhead rate with an allocation base of direct labor
hours, how much factory overhead will be allocated to the small lamp production if the
actual direct hours for the period is 285,000?
A.$275,000
B.$285,000
C.$440,000
D.$456,000
40) The manufacturing cost of Mocha Industries for three months of the year are
provided below:
Using the high-low method, determine the (a) variable cost per unit, and (b) the total
fixed costs.
41) What is the term applied to the excess of net revenue from sales over the cost of
merchandise sold?
A.gross profit
B.income from operations
C.net income
D.gross sales
42) Which of the following represents an inflow of cash and therefore would be
reported on the statement of cash flows?
A.retirement of bond payable
B.acquisition of treasury stock
C.declaration of stock dividends
D.issuance of long-term debt
43) The Merchant Company issued 10-year bonds on January 1, 2011. The 15% bonds
have a face value of $100,000 and pay interest every January 1 and July 1. The bonds
were sold for $117,205 based on the market interest rate of 12%. Merchant uses the
effective-interest method to amortize bond discounts and premiums. On July 1, 2011,
Merchant should record interest expense (round to the nearest dollar) of
A.$7,032
B.$7,500
C.$8,790
D.$14,065
44) If Department H had 600 units, 60% completed, in process at the beginning of the
period, 8,000 units were completed during the period, and 500 units were 30%
completed at the end of the period, what was the number of equivalent units of
production for the period for conversion if the first-in, first-out method is used to cost
inventories? Assume the completion percentage applies to both direct materials and
conversion cost.
A.7,790
B.8,390
C.8,600
D.8,000
45) Based upon the following data taken from the records of Bruce Inc., prepare a
contribution margin analysis report for the year ended December 31, 2012.
46) Describe a master budget and the sequence in which the individual budgets within
the master budget are prepared.
47) On August 30th JumpStart pays numerous bills which include:
Payment to the landlord for August rent – $2,300
Payment to the Gas & Electric Company for Augusts bill – $525
Payment of employee wages for the last half of August – $1,750
Payment of shopping centers parking lot cleaning fee – $275
Journalize these payments as one compound journal entry.
48) Allen Company used $71,000 of direct materials and incurred $37,000 of direct
labor costs during 2011. Indirect labor amounted to $2,700 while indirect materials used
totaled $1,600. Other operating costs pertaining to the factory included utilities of
$3,100; maintenance of $4,500; supplies of $1,800; depreciation of $7,900; and
property taxes of $2,600. There was no beginning or ending finished goods inventory,
but work in process inventory began the year with a $5,500 balance and ended the year
with a $7,500 balance.
Prepare a statement of cost of goods manufactured.
49) List/describe the four closing entries in the order that they should occur.
50) On March 1, Upton Companys packaging department had Work in Process
inventory of
8,820 units, which had been transferred in from the finishing department. These units
had accumulated costs of $315,000 in previous departments and $16,000 for conversion
costs in the packaging department.
51) A summary of cash flows for Lopez Wedding Planning for the year ended
December 31, 2011 is shown below.
Prepare a statement of cash flows for Lopez Wedding Planning for the year ended
December 31, 2011.
52) The net present value has been computed for Proposals P and Q. Relevant data are
as follows:
Determine the present value index for each proposal. Round your answers to two
decimal places. Proposal P: $296,500 = 1.21
$245,000
Proposal Q: $425,000 = 0.92