________ is a costing system that starts with output that has been completed and then
assigns manufacturing costs to units sold and to inventories.
A) Job costing
B) Batch costing
C) Backflush costing
D) Process costing
Maize Corporation pays $532,000 for 100,000 shares to acquire 45% common stock of
Teal Investments, Inc. on January 5, 2017. Maize Corporation sells 20,000 shares for
$40,000 on January 6, 2017. Which of the following is the correct journal entry for the
transaction on January 6, 2017? (Round any intermediate calculations to two decimal
places, and your final answer to the nearest dollar.)
A)
B)
C)
D)
Dakota, Inc. purchased raw materials worth $8,000 on account. The journal entry to
record the purchase of raw materials on account is ________.
A) debit Cash, $8,000; credit Raw Materials Inventory, $8,000
B) debit Accounts Payable, $8,000; credit Raw Materials Inventory, $8,000
C) debit Raw Materials Inventory, $8,000; credit Accounts Payable, $8,000
D) debit Raw Materials Inventory, $8,000; credit Cash, $8,000
The ________ is a measure of a company’s ability to pay its current liabilities from cash
and cash equivalents.
A) cash conversion cycle
B) cash ratio
C) gross profit
D) debt equity ratio
Lorna Smith decided to start her own CPA practice as a professional corporation, Smith
CPA PC. Her corporation purchased an office building for $35,000 that her real estate
agent said was worth $50,000 in the current market. The corporation recorded the
building as a $50,000 asset because Lorna believes that is the real value of the building.
Which of the following concepts or principles of accounting is being violated?
A) cost principle
B) economic entity assumption
C) monetary unit assumption
D) going concern assumption
Star Homes Corporation just recorded a transaction in its books. If this transaction
increased the total liabilities by $12,000, then ________.
A) assets must increase, or equity must decrease by $12,000
B) either assets or equity must decrease by $12,000
C) both assets and equity must each decrease by $6,000
D) assets must decrease by $12,000
Which of the following is an example of internal failure costs?
A) costs incurred for the evaluation of the quality of suppliers’ processes
B) costs incurred in the inspection at various stages of production
C) cost incurred for the reworking of substandard products
D) cost incurred as warranty expenses
The following information is needed to reconcile the cash balance for Baker’s Dry
Cleaning, Inc.
• A deposit of $5,700 is in transit.
• Outstanding checks total $1,300.
• The book balance is $6,400 at February 28, 2017.
• The bookkeeper recorded a $1,500 check as $17,300 in payment of the current
month’s rent.
• The bank balance at February 28, 2017 was $16,930.
• A deposit of $300 was credited by the bank for $3,000.
• A customer’s check for $3,500 was returned for nonsufficient funds.
• The bank service charge is $70.
What was the adjusted book balance?
A) $18,700
B) $17,000
C) $18,630
D) $18,770
Cash disbursement journals also are known as ________.
A) sales journals
B) purchases journals
C) cash receipts journals
D) cash payments journals
Oceanside Marine Company manufactures special metallic materials and decorative
fittings for luxury yachts that require highly skilled labor. Oceanside uses standard costs
to prepare its flexible budget. For the first quarter of the year, direct materials and direct
labor standards for one of their popular products were as follows:
Direct materials: 2 pound per unit; $12 per pound
Direct labor: 2 hours per unit; $16 per hour
Oceanside produced 3,000 units during the quarter. At the end of the quarter, an
examination of the direct materials records showed that the company used 6,500 pounds
of direct materials and actual total materials costs were $99,600.
What is the direct materials cost variance? (Round any intermediate calculations to the
nearest cent, and your final answer to the nearest dollar.)
A) $9,960 Unfavorable
B) $9,960 Favorable
C) $21,580 Unfavorable
D) $21,580 Favorable
A cash payments journal is a special journal that ________.
A) differs from the cash disbursements journal
B) eliminates the need to perform a bank reconciliation
C) is used to record cash payments by check and currency
D) is used to record the net of cash payments and cash receipts by check and currency
Glendale Brands Company uses standard costs for its manufacturing division. Standards
specify 0.1 direct labor hours per unit of product. At the beginning of the year, the static
budget for variable overhead costs included the following data:
At the end of the year, actual data were as follows:
What is the variable overhead efficiency variance? (Round any intermediate calculations to
the nearest cent, and your final answer to the nearest dollar.)
A) $1,866 F
B) $1,866 U
C) $2,534 F
D) $2,534 U
Emerald Marine Stores Company manufactures special metallic materials and
decorative fittings for luxury yachts that require highly skilled labor. Emerald uses
standard costs to prepare its flexible budget. For the first quarter of the year, direct
materials and direct labor standards for one of their popular products were as follows:
Direct materials: 4 pounds per unit; $6 per pound
Direct labor: 2 hours per unit; $17 per hour
During the first quarter, Emerald produced 4,000 units of this product. Actual direct
materials and direct labor costs were $65,000 and $329,000, respectively.
For the purpose of preparing the flexible budget, calculate the total standard direct
materials cost at a production volume of 4,000 units.
A) $96,000
B) $65,000
C) $16,000
D) $24,000
The dollar amount that provides for covering fixed costs and then provides for
operating income is called ________.
A) variable cost
B) total cost
C) contribution margin
D) margin of safety
A corporation reported the following equity section on its current balance sheet. The
common stock is currently selling for $15.00 per share.
Which of the following would be included in the entry to record the distribution of a 15%
stock dividend?
A) Common Stock—$6 Par Value would be credited for $51,300.
B) Stock Dividends would be debited for $95,400.
C) Paid-In Capital in Excess of Par—Common is debited for $95,400.
D) Stock Dividends would be credited for $51,300.
A high rate of employee turnover indicates that ________.
A) employees of the organization leave their jobs frequently
B) pay packages of employees are at par with that of the industry
C) the employee retention ratio is also high
D) employees also participate in the decision making process
Sunlight Company has assets and equity that amount to $200,000 and $90,000,
respectively. Liabilities total ________.
A) $90,000
B) $110,000
C) $200,000
D) $290,000
A deposit receipt is ________.
A) retained by the customer as proof of a deposit transaction
B) the same as a signature card
C) used by the bank as an alternative to a remittance advice
D) given by the customer to the bank as a proof of deposit
The financial statements for Lexington Service Company include the following items:
Compute the current ratio for 2016. (Round answer to two decimal places.)
A) 1.19
B) 0.84
C) 3.95
D) 6.66
Cambridge Roller Skates has three product lines—D, E, and F. The following
information is available:
The company is deciding whether to drop product line F because it has an operating loss.
Assume that $21,000 of total fixed costs could be eliminated by dropping F. What effect
would this decision have on operating income?
A) Operating income will increase by $25,000.
B) Operating income will increase by $3,000.
C) Operating income will decrease by $25,000.
D) Operating income will decrease by $3,000.
A favorable sales volume variance in sales revenue suggests a(n) ________.
A) increase in actual sales price per unit as compared to budgeted sales price
B) increase in number of actual units sold when compared to the expected number of
units sold
C) increase in actual variable cost per unit as compared to expected variable cost per
unit
D) decrease in actual fixed costs
Milliken, Inc. provides the following information:
Calculate the sales volume variance.
A) 25,000 F
B) 25,000 U
C) $85,000 U
D) $110,000 F
Based on the following, what is the total direct materials variance?
A) $150 U
B) $300 F
C) $150 F
D) $300 U
Which of the following statements is true of absorption and variable costing methods?
A) Both costing methods consider selling and administrative costs to be period costs.
B) Variable costing considers variable selling and administrative costs to be product
costs.
C) Absorption costing considers fixed manufacturing overhead to be period costs.
D) Both costing methods consider fixed manufacturing overhead to be product costs.
Which of the following requires a formal journal entry?
A) selection of a new CEO
B) stock dividend distribution
C) stock split
D) date of record
Which of the following appears on a statement of cash flows prepared using the direct
method?
A) adjustments to net income
B) cash payments for salaries
C) adjustments for gains and losses on sale of property
D) increase/decrease in current assets
The accounts receivable turnover ratio measures ________.
A) a company’s ability to pay its current liabilities with its current assets
B) how many days it takes, on average, to collect receivables
C) how many days it takes, on average, to sell the inventory
D) the number of times a company collects the average accounts receivable balance in a
year
An Enterprise Resource Planning system (ERP) ________.
A) is a cost management system in which a company produces products just in time to
satisfy needs
B) requires the implementation of Total Quality Management
C) integrates all worldwide functions, departments, and data of a company into a single
system
D) cannot be implemented in service companies
Which of the following would be considered a period cost for a manufacturing
company?
A) indirect materials
B) factory utilities
C) direct labor
D) sales salaries
The income statement presents a summary of an entity’s revenues and expenses for a
period of time. Which of the following statements is true of an income statement?
A) There is net income when total expenses are greater than total revenues.
B) There is a net loss when total expenses are less than total revenue.
C) There is a net loss when total expenses are greater than total liabilities.
D) There is net income when total revenues are greater than total expenses.
The Accumulated Depreciation account is ________.
A) a record of the sum of all the depreciation expense recorded
B) the price quoted to the buyer of a used asset
C) an expense account
D) the expense account used to expense the cost of an asset
What type of account is Prepaid Rent, and what is its normal balance?
A) It is an expense account and has a debit balance.
B) It is a liability account and has a credit balance.
C) It is a revenue account and has a credit balance.
D) It is an asset account and has a debit balance.