Facility level costs vary with the number of units or batches produced.
Answer:
An increase in the price of the U.S. dollar against other currencies puts U.S. companies
in a stronger competitive position internationally.
Answer:
A markup percentage equals total costs divided by desired profit.
Answer:
The amount of federal income tax withheld is based on the employee’s annual earnings
rate plus the number of withholding allowances claimed by the employee.
Answer:
As the level of output activity increases, the variable cost per unit remains constant.
Answer:
A unique feature of process costing systems is the use of a single Goods in Process
Inventory control account.
Answer:
The reasoning behind the retail inventory method is that if an accurate estimate of the
cost-to-retail ratio is made, it can be multiplied by the ending inventory at retail to
estimate ending inventory at cost.
Answer:
The following journal entry would be made to record the use of direct materials in the
reporting period covered by the information:
Answer:
Prime costs consist of direct labor and factory overhead.
Answer:
FastForward paid $6,000 in dividends. This amount should be included as an expense
on the income statement.
Answer:
Sellers generally prefer to receive notes receivable rather than accounts receivable
when the credit period is long and the receivable is for a large amount.
Answer:
A company can change its inventory costing method without mentioning this change in
its financial statements since it is a decision made by internal management.
Answer:
Generally, it does not matter how cost allocations are designed and explained, because
most employees do not care whether the allocations appear to be fair or not.
Answer:
Whether prices are rising or falling, FIFO always will yield the highest gross profit and
net income.
Answer:
The accrual basis of accounting is a system of accounting in which the adjustments are
needed to assign revenues to periods in which they are earned and to match expenses
with revenues.
Answer:
The higher the debt ratio, the higher risk of a company not being able to meet its
obligations.
Answer:
All costs of the processes in a process costing system ultimately pass through the Cost
of Goods Sold account.
Answer:
Profit margin can also be called return on sales.
Answer:
Return on total assets can be separated into the profit margin ratio and total asset
turnover.
Answer:
The equity method with consolidation is used in accounting for long-term investments
in equity securities with controlling influence.
Answer:
There are two basic types of cost accounting systems: job order costing and periodic
costing.
Answer:
Larger, more complex organizations usually require a longer time to prepare their
budgets than smaller organizations because of the considerable effort to coordinate the
different units within the business.
Answer:
Efficiency refers to how productive a company is in using its assets and is usually
measured relative to how much revenue is generated from a certain level of assets.
Answer:
Reference: 16_02
Refer to the following table of cost information:
If the predetermined overhead allocation rates were based on direct labor costs, the
rates for the Pushing and Shoving Departments were 50% and 150%, respectively.
Answer:
A manufacturing company that uses a cost accounting system normally has only two
inventory accounts: Finished Goods Inventory and Goods in Process Inventory.
Answer:
Accounting information systems collect and process data from transactions and events,
organize them in useful forms and communicate results to decision makers.
Answer:
As prepaid expenses are used up, the costs of these assets become expenses.
Answer:
The return on common stockholders equity measures a company’s success in reaching
the goal of earning net income for its owners.
Answer:
Amortization is the process of allocating the cost of natural resources to periods when
they are consumed.
Answer:
If two projects have the same risks, the same payback periods, and the same initial
investments, they are equally attractive.
Answer:
The International Accounting Standards Board (IASB) has the authority to impose its
standards on companies around the world.
Answer:
Receivables can be used to obtain cash by either selling them or using them as security
for a loan.
Answer:
When time ticket information is entered into the accounting system, the journal entry is
a debit to Factory Payroll and a credit to Goods in Process Inventory.
Answer:
A company has the choice of either selling 1,000 defective units as scrap or rebuilding
them. The company could sell the defective units as they are for $4.00 per unit.
Alternatively, it could rebuild them with incremental costs of $1.00 per unit for
materials, $2.00 per unit for labor, and $1.50 per unit for overhead, and then sell the
rebuilt units for $8.00 each. What should the company do?
A. Sell the units as scrap.
B. Rebuild the units.
C. It does not matter because both alternatives have the same result.
D. Neither sell nor rebuild because both alternatives produce a loss. Instead, the
company should store the units permanently.
E. Throw the units away.
Answer:
On January 1, 2013, Jacob issues $600,000 of 11%, 15-year bonds at a price of 102½.
The straight-line method is used to amortize any bond premium or discount. What is
the total interest expense for the life of these bonds?
A. $975,000
B. $964,000
C. $936,000
D. $772,000
E. $990,000
Answer:
A company had the following items and amounts in its unadjusted trial balance as of
December 31 of the current year:
Prepare the adjusting entry to estimate bad debts under each of the following separate
situations.
a. Bad debts are estimated to be 2.5% of credit sales.
b. An aging analysis estimates that 8% of the outstanding accounts receivable will be
uncollectible.
Answer:
On December 31, the balance in the Prepaid Insurance account was $4,500, which is
the remaining balance of a 12-month policy purchased on October 31 in the current
year. How much did this policy originally cost?
A. $5,400
B. $3,750
C. $4,909
D. $4,500
E. $6,000
Answer:
Which of the following would not be considered a product cost?
A. Direct labor costs.
B. Factory supervisors salary.
C. Factory line workers salary.
D. Cost accountants salary.
E. Manufacturing overhead costs.
Answer:
The accrual basis of accounting:
A. Is generally accepted for external reporting since it is more useful for most business
decisions.
B. Is flawed because it gives complete information about cash flows.
C. Recognizes revenues when received in cash.
D. Recognizes expenses when paid in cash.
E. Eliminates the need for adjusting entries at the end of each period.
Answer:
A company’s Southwest segment had revenues of $12 million, operating income of $2
million, and average total assets of $3 million. The Southwest segment return on assets
is:
A. 42.85%
B. 41.67%
C. 25.00%
D. 16.67%
E. 66.67%
Answer:
Reference: 21_01
Five Rings, Inc, has collected the following data on one of its products:
The entry to record the material variances would include a:
A. Credit to Goods in Process for $133,750.
B. Debit to Direct Material Price Variance for $13,750.
C. Credit to Direct Material Quantity Variance for $13,750.
D. Debit to Goods in Process for $120,000.
E. Debit to Raw Materials for $120,000.
Answer:
Technological advancement
A. Has replaced accounting.
B. Has not changed the work that accountants do.
C. Has freed accounting professionals to concentrate more on the analysis and
interpretation of information.
D. In accounting has replaced the need for decision makers.
E. In accounting is only available to large corporations.
Answer:
Indicate the order in which the following budgets would be completed (1 = first and so
on)
______ (A) Merchandise purchases budget
______ (B) Capital expenditures budget
______ (C) Selling expense budget
______ (D) Budgeted balance sheet
______ (E) Cash budget
Answer:
Curvilinear costs always increase:
A. With decreases in volume.
B. In constant proportion to changes in production levels.
C. When management performs break-even analysis.
D. When volume increases but not at a constant rate.
E. On a per unit basis when volume of activity goes down.
Answer:
Which of the following is true regarding the effective interest amortization method?
A. Allocates bond interest expense using a changing interest rate.
B. Allocates bond interest expense using a constant interest rate.
C. Allocates a decreasing amount of interest over the life of a discounted bond.
D. Allocates bond interest expense using the current market rate for each period.
E. Is not allowed by the FASB.
Answer:
A corporation had 20,000 shares of $10 par value common stock outstanding on
January 10. Later that day the board of directors declared a 30% stock dividend when
the market value of each share was $40. The entry to record this dividend is:
A.
B.
C.
D.
E. No entry is made until the stock is issued
Answer:
Which of the following pair of journal entries correctly records the current months
activity where the company had $21,030 in total factory labor costs that were paid in
cash with $16,200 of this total for direct labor?
A. Factory Payroll 21,030
Cash
21,030
Wage Expense 16,200
Factory Overhead 4,830
Factory Payroll
21,030
B. Factory Payroll 21,030
Cash
21,030
Goods in Process Inventory 16,200
Wage Expense 4,830
Factory Payroll
21,030
C. Cash 21,030
Factory Payroll
21,030
Goods in Process Inventory 16,200
Factory Overhead 4,830
Factory Payroll
21,030
D. Factory Payroll 21,030
Cash
21,030
Goods in Process Inventory 16,200
Factory Overhead 4,830
Factory Payroll
21,030
E. Cash 21,030
Factory Payroll
21,030
Factory Payroll 21,030
Goods in Process Inventory
21,030
Answer:
Paz Inc. manufactures a product that contains a small motor. The company has always
purchased this motor from a supplier for $55 each. Paz recently upgraded its own
manufacturing capabilities and now has enough excess capacity (including trained
workers) to begin manufacturing the motor instead of buying it. The company prepared
the following per unit cost projections of making the motor, assuming that overhead is
allocated to the part at the normal predetermined overhead rate of 150% of direct labor
cost.
The required volume of output to produce the motors will not require any incremental
fixed overhead. Incremental variable overhead cost is $21 per motor. What is the effect
on income if Paz decides to make the motors?
A. Income will decrease by $2 per unit.
B. Income will increase by $2 per unit.
C. Income will increase by $11 per unit.
D. Income will decrease by $11 per unit.
E. Income will increase by $19 per unit.
Answer:
The cost object of the plantwide overhead rate method is:
A. The unit of product.
B. The production departments of the company.
C. The production activities of the company.
D. Manufacturing cost pools.
E. the time period.
Answer:
The price of one currency stated in terms of another currency is referred to as the:
A. Historical exchange rate
B. Foreign exchange rate
C. Consolidated exchange rate
D. General exchange rate
E. Multinational exchange rate
Answer:
The ledger that contains the financial statement accounts of a company is the:
A. General ledger
B. General journal
C. Special ledger
D. Special journal
E. Column balance ledger
Answer:
Which financial statements are prepared for a period of time?
A. Income statement, statement of retained earnings, balance sheet and statement of
cash flows.
B. Balance sheet.
C. Income statement, statement of retained earnings, and statement of cash flows.
D. Income statement and balance sheet.
E. Statement of retained earnings and statement of cash flows.
Answer:
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.
Answer:
The statement of changes in stockholders’ equity:
A. Is part of the statement of retained earnings.
B. Shows only the ending balances in stockholders’ equity.
C. Describes changes in contributed capital and retained earnings subcategories
D. Does not include changes in treasury stock.
E. Is reported by very few companies.
Answer:
A company had a return on common stockholders’ equity of 22%. Net income equaled
$600,000 and average common stockholders’ equity equaled $2,500,000. Compute the
amount of the preferred dividends declared.
A. $50,000
B. $550,000
C. $132,000
D. $10,763,636
E. $10,000
Answer:
Information storage:
A. Eliminates the need for professional judgment.
B. Keeps data in a form accessible to information processors.
C. Provides the basic information processed by an accounting system.
D. Captures information from source documents.
E. Is always in electronic format.
Answer:
Which of the following characteristics does not usually apply to process manufacturing
systems?
A. Each unit of product is separately identifiable.
B. Partially completed products are transferred between processes.
C. Different managers are responsible for different processes.
D. The output of all processes except the final process is an input to the next process.
E. In a multistep process, there will be multiple Goods in Process accounts.
Answer:
J.C. Penny had net sales of $28,496 million, cost of goods sold of $19,092 million, and
net income of $997 million. Its gross margin ratio equals:
A. 3.5%
B. 5.2%
C. 33%
D. 67%
E. 149.3%
Answer:
On August 31, 2013, Victory Corporation’s common stock is priced at $30 per share
before any stock dividend or split, and the stockholders’ equity section of its balance
sheet appears as follows. Assume that the company declares and immediately
distributes a 15% stock dividend.
What is the total amount in the Paid-In Capital in Excess of Par account immediately
after the stock dividend?
A. $537,000
B. $195,000
C. $366,000
D. $100,000
E. $231,100
Answer:
A company purchased $1,800 of merchandise on December 5. On December 7, it
returned $200 worth of merchandise. On December 8, it paid the balance in full, taking
a 2% discount. The amount of the cash paid on December 8 is:
A. $200
B. $1,564
C. $1,568
D. $1,600
E. $1,800
Answer:
Long-term investments in held-to-maturity debt securities are accounted for using the:
A. Market value method with market adjustment to income.
B. Market value method with market adjustment to equity.
C. Cost method with amortization.
D. Cost method without amortization.
E. Equity method.
Answer:
The internal document that is prepared to notify the appropriate persons that ordered
goods have been received and describes the quantities and condition of the goods is the
A. Purchase requisition
B. Purchase order
C. Invoice
D. Receiving report
E. Invoice approval
Answer:
The adjusted trial balance contains information pertaining to:
A. Asset accounts only.
B. Balance sheet accounts only.
C. Income statement accounts only.
D. All general ledger accounts.
E. Revenue accounts only.
Answer:
Product A has a sales price of $10 per unit. Based on a 10,000-unit production level, the
variable costs are $6 per unit and the fixed costs are $3 per unit. Using a flexible budget
for 12,500 units, what is the budgeted operating income from Product A?
A. $12,500
B. $25,000
C. $20,000
D. $30,000
E. $35,000
Answer:
An individual is planning to set-up an education fund for her children. She plans to
invest $10,000 annually at the end of each year. She expects to withdraw money from
the fund at the end of 10 years and expects to earn an annual return of 8%. What will be
the total value of the fund at the end of 10 years?
A. $ 46,320
B. $ 67,107
C. $100,000
D. $144,870
E. $215,890
Answer:
Sam has a loan that requires a single payment of $4,000 at the end of three years. The
loan’s interest rate is 6%, compounded semiannually. How much did Sam borrow?
A. $3,358.40
B. $4,000.00
C. $3,660.40
D. $4,776.40
E. $3,350.00
Answer:
Reference: 22_07
Assume Rock Bottom Golf is divided into four departments that operate as profit
centers and that the data below is from the most recent fiscal year.
Given the information above, list Rock Bottom Golfs departments in order of highest
departmental contribution to overhead to lowest departmental contribution to overhead.
A. Golf Balls, Golf Apparel, Golf Bags, Golf Clubs.
B. Golf Apparel, Golf Balls, Golf Bags, Golf Clubs.
C. Golf Clubs, Golf Bags, Golf Balls, Golf Apparel.
D. Golf Clubs, Golf Bags, Golf Apparel, Golf Balls.
E. Golf Balls, Golf Apparel, Golf Clubs, Golf Bags.
Answer:
Keisha has $3,500 now and plans on investing it in a fund that will pay her 12% interest
compounded quarterly. How much will Keisha have accumulated after two years?
A. $4,433.80
B. $4,340.00
C. $4,390.40
D. $3,920.00
E. $3,500.00
Answer:
What is a voucher system?
Answer:
What is the maturity date of a six-month note receivable dated February 5?
Answer:
Describe the posting process for special journals.
Answer:
The following trial balance was prepared from the general ledger of Hal’s Auto Repair.
Since the trial balance did not balance, you decided to examine the accounting records.
You found that the following errors had been made:
1) A purchase of supplies on account for $245 was posted as a debit to Supplies and as a
debit
to Accounts Payable.
2) An investment of $500 cash by the owner was debited to Common Stock and
credited to
Cash.
3) In computing the balance of the Accounts Receivable account, a debit of $600 was
omitted
from the computation.
4) One debit of $300 to the Dividends account was posted as a credit.
5) Office equipment purchased for $800 was posted to the Repair Equipment account.
6) One entire entry was not posted to the general ledger. The transaction involved the
receipt
of $125 cash at the time repair services were performed.
Prepare a corrected trial balance for the Hal’s Auto Repair as of October 31.
Answer:
Explain the basic differences between estimating the amount of uncollectible accounts
using the percent of sales method and the accounts receivable method.
Answer:
Answer:
A company’s income before interest expense and income taxes was $395,000 in 2013
and $427,000 in 2014. Its fixed interest expense was $125,000 for both years. Calculate
the company’s times interest earned ratio and comment on its level of risk.
Answer:
Assume a company sells a given product for $33.28 per unit. How many units must the
company sell to break-even if variable selling costs are $1.40 per unit, variable
production costs are $23.56 per unit, and total fixed costs are $2,080,000?
Answer:
Explain how the amounts in the subsidiary ledgers are tested for accuracy.
Answer:
On January 1, 2013, a company issued 10-year, 10% bonds payable with a par value of
$500,000 and received $442,647 in cash proceeds. The market rate of interest at the
date of issuance was 12%. The bonds pay interest semiannually on July 1 and January
1. The issuer uses the straight-line method for amortization. Prepare the issuer’s general
journal entry to record the first semiannual interest payment on July 1, 2013.
Answer:
Regardless of what inventory method or system is used, cost of goods available for sale
must be allocated between ___________________ and ___________________.
Answer:
_____________________ is a general term that refers to any shares issued to obtain
owner financing in a corporation.
Answer:
From the adjusted trial balance for Worker Products, prepare the necessary closing
entries.
Answer:
A company has assets of $500,000 and equity of $350,000. What is the amount of
liabilities?
Answer:
Ace Company purchased a machine valued at $320,000 on August 1. The equipment
has an estimated useful life of five years or 5 million units. The equipment is estimated
to have a salvage value of $8,200. Assuming the straight-line method of depreciation,
what is the amount of depreciation expense that needs to be recorded at the end of the
first year?
A $64,000
B. $76,800
C. $62,360
D. $25,983
E. $106,667
Answer:
The FASB requires a reconciliation of net income to net cash provided or used by
operating activities when the ______________ method is used.
Answer:
At the end of the accounting period, immaterial variances are closed to
_____________________.
Answer:
A corporation had the following stock outstanding when the company’s board of
directors declared a $95,000 cash dividend during the current year:
Allocate the cash dividend between the preferred and common stockholders assuming
the preferred stock is cumulative and nonparticipating and dividends are one year in
arrears.
Answer:
Based on the following income statement and balance sheet for Rashid Corporation,
determine the cash flows from operating activities using the indirect method.
Answer:
