1) Companies promoting continuous improvement strive to achieve practical standards
rather than ideal standards.
2) In process costing, indirect materials are always classified as factory overhead, even
if they are linked with a specific production process or department.
3) The sequence of the budgets within the master budget are dictated by GAAP.
4) A master budget refers to a company’s sales budget that includes all of its segments
or departments.
5) A company made an error in recording the 2014 purchase of computer equipment as
an expense. This was discovered in 2015. The item should be reported as a prior period
adjustment on the 2015 income statement.
6) The return on total assets ratio is a profitability measure.
7) Manufacturing costs incurred for jobs completed during an accounting period can
bypass the inventory accounts on the balance sheet and be recorded directly in expense
accounts.
8) Job order production systems would be appropriate for companies that produce
compact disks or disposable cameras.
9) A.$473 unfavorable.
B.$473 favorable.
C.$1,530 favorable.
D.$1,530 unfavorable.
E.$1,057 favorable.
10) A company purchased an equipment system for $325,000 on January 2. The
company expects the equipment to last for eight years or 81,250 hours of operation,
with no estimated salvage value. During the first year, the equipment was in operation
for 8,000 hours, while in the second year, the equipment was in operation for 8,700
hours. Compute the depreciation expense relating to the equipment for Year 1 and Year
2 using the following depreciation methods:
a. Straight-line.
b. Double-declining-balance.
c. Units-of-production.
11) The anticipated costs incurred under normal conditions to produce a specific
product or to perform a specific service are:
A.Variable costs.
B.Fixed costs.
C.Standard costs.
D.Product costs.
E.Period costs.
12) The document that the purchasing department prepares and sends to the vendor to
place an order is called the
A.Purchase requisition.
B.Purchase order.
C.Invoice.
D.Receiving report.
E.Invoice approval.
13) A partnership in which all partners have mutual agency and unlimited liability is
called:
A.Limited partnership.
B.Limited liability partnership.
C.General partnership.
D.S corporation.
E.Limited liability company.
14) Bagrov Corporation had a net decrease in cash of $10,000 for the current year. Net
cash used in investing activities was $52,000 and net cash used in financing activities
was $38,000. What amount of cash was provided (used) in operating activities?
A.$100,000 provided.
B.($100,000) used.
C.$80,000 provided.
D.($80,000) used.
E.($10,000) used.
15) Which one of the following is representative of typical cash flows from operating
activities?
A.Proceeds from collecting the principal amounts of loans.
B.Repayment of principals on loans.
C.Proceeds from the issuance of bonds and notes payable.
D.Payments by a merchandiser to acquire equity securities of other companies.
E.Receipts of cash sales.
16) The break-even time (BET) method is a variation of the:
A.Payback method.
B.Internal rate of return method.
C.Accounting rate of return method.
D.Net present value method.
E.Present value method.
17) Copy Center pays an average wage of $12 per hour to employees for printing and
copying jobs, and allocates $18 of overhead for each employee hour worked. Materials
are assigned to each job according to actual cost. Jobs are marked up 20% above cost to
determine the selling price. If Job M-47 used $350 of materials and took 20 hours of
labor to complete, what is the selling price that should be assigned to the job?
A.$852
B.$1,140
C.$456
D.$720
E.$708
18) Wiggins Company has 1,000 shares of $10 par preferred stock. It also has 25,000
shares of common stock outstanding, and its total stockholders’ equity equals $500,000.
The book value per common share is:
A.$16.00.
B.$19.60.
C.$19.96.
D.$20.00.
E.$10.00.
19) Boiano Corp. operates a retail store and has two service departments and two
operating departments, Hardware and Automotive. During the current year, the
departments had the following direct expenses and occupied the following amount of
floor space.
The advertising department developed and aired 150 spots. Of these spots, 60 spots
were for Hardware and 90 spots were for Automotive. The store sold $1,500,000 of
merchandise during the year; $675,000 in Hardware and $825,000 in Automotive.
Indirect expenses include rent, utilities, and insurance expense. Total indirect expenses
of $220,000 are allocated to all departments. Prepare a departmental expense allocation
spreadsheet for Boiano. The spreadsheet should assign (1) direct expenses to each of the
four departments, (2) allocate the indirect expenses to each department on the basis of
floor space occupied, (3) the advertising department’s expenses to the two operating
departments on the basis of ad spots placed promoting each department’s products, (4)
the administrative department’s expenses based on the amount of sales. Complete the
departmental expense allocation spreadsheet below. Provide supporting computations
for the expense allocations below the spreadsheet.
20) On March 12, Klein Company sold merchandise in the amount of $7,800 to Babson
Company, with credit terms of 2/10, n/30. The cost of the items sold is $4,500. Klein
uses the perpetual inventory system. Babson pays the invoice on March 17, and takes
the appropriate discount. The journal entry that Klein makes on March 17 is:
21) On January 1, a company purchased machinery for $75,000 that had a 6-year useful
life and a salvage value of $6,000. After three years of straight-line depreciation, the
company paid $8,500 cash at the beginning of the year to improve the efficiency of the
machinery. The productivity of the machinery was improved without increasing its
remaining useful life or changing its salvage value. Straight-line depreciation is used
throughout the machinery’s life.
1) Prepare the journal entry to record the $8,500 expenditure.
2) Prepare the journal entry to record depreciation expense for the fourth year.
22) ____________ is a method of analysis used to evaluate individual financial
statement items or groups of items in terms of a specific base amount.
23) A _________________ cost does not change in total in proportion to changes in the
volume of activity within the relevant range.
24) The following unadjusted and adjusted trial balances are from the current year’s
accounting system for Excelsior.
Present the six adjusting entries in general journal form that explain the changes in the
account balances from the unadjusted to the adjusted trial balance.
25) The Redtail Partnership agrees to dissolve. The cash balance after selling all assets
and paying all liabilities is $60,000. The final capital account balances are: Paulson,
$35,000; Gray, $29,000; and Chang, ($4,000). Chang is unable to pay the capital
deficiency. Prepare the journal entries to record the transactions required to dissolve this
partnership.
26) If partners agree on how to share income, but say nothing about losses, then losses
are shared ___________________.