1) In order to choose the proper activity base for a cost, managerial accountants must be
familiar with the operations of the entity.
2) An employee’s take home pay is equal to gross pay less all voluntary deductions.
3) Differential analysis can aid management in making decisions on a variety of
alternatives, including whether to discontinue an unprofitable segment and whether to
replace usable plant assets.
4) It is beneficial for divisions in a company to negotiate a transfer price when the
supplying division has unused capacity in its plant.
5) An intangible asset is one that has a physical existence.
6) In a process costing system, a separate work in process inventory account is
maintained for each customers job.
7) If the unit selling price is $40, the volume of sales is $3,000,000, sales at the
break-even point amount to $2,500,000, and the maximum possible sales are
$3,300,000, the margin of safety is 14,500 units.
8) The normal balance of an expense account is a credit.
9) Prepaid expenses are an example of an expense.
10) If employees accept a wage contract that increases the unit contribution margin, the
break-even point will decrease.
11) The classified Balance Sheet will subsection the assets section as follows
A.Current Assets and Other Assets
B.Current Assets and Property, Plant, and Equipment
C.Current Assets and Short-Term Assets
D.Other Assets and Property, Plant and Equipment
12) Allowance for Doubtful Accounts has a debit balance of $600 at the end of the year
(before adjustment), and an analysis of accounts in the customers ledger indicates
uncollectible receivables of $13,000. Which of the following entries records the proper
adjusting entry for bad debt expense?
A.debit Bad Debt Expense, $600; credit Allowance for Doubtful Accounts, $600
B.debit Bad Debt Expense, $12,400; credit Allowance for Doubtful Accounts, $12,400
C.debit Allowance for Doubtful Accounts, $600; credit Bad Debt Expense, $600
D.debit Bad Debt Expense, $13,600; credit Allowance for Doubtful Accounts, $13,600
13) Which of the following expenses incurred by a department store is an indirect
expense?
A.Insurance on merchandise inventory
B.Sales salaries
C.Depreciation on store equipment
D.Salary of vice-president of finance
14) At the end of July, the first month of the current fiscal year, the factory overhead
account had a debit balance. Which of the following describes the nature of this balance
and how it would be reported on the interim balance sheet?
A.Overapplied, deferred credit
B.Underapplied, deferred debit
C.Underapplied, deferred credit
D.Overapplied, deferred debit
15) When management seeks to achieve personal departmental objectives that may
work to the detriment of the entire company, the manager is experiencing:
A.budgetary slack
B.padding
C.goal conflict
D.cushions
16) The following account balances appear on the balance sheet of Osgood Industries:
Common Stock (300,000 shares authorized, $100 par): $10,000,000
Paid-in Capital in Excess of Par Common Stock: $2,000,000;
Retained earnings: $45,000,000.
The board of directors declared a 2% stock dividend when the market price of the stock
was $135 a share. Osgood reported no income or loss for the current year.
Required:
(1) Journalize the entries to record
a. the declaration of the dividend, capitalizing an amount equal to market value; and
b. the issuance of the stock certificates.
(2) Determine the following amounts before the stock dividend was declared:
a. Total paid-in capital;
b. Total retained earnings; and
c. Total stockholders equity.
(3) Determine the following amounts after the stock dividend was declared and closing
entries were recorded at the end of the year:
a. Total paid-in capital;
b. Total retained earnings; and
c. Total stockholders equity.
17) A difference in quantity of materials used on two comparable jobs may be caused
by:
A.inadequately trained employees
B.poor quality materials
C.employee carelessness
D.all of the above
18) Match each of the following terms with the best definition given.
1>Variable manufacturing costs plus variable selling and administrative costs are
included in cost per unit. A. Engineering Change Order
2>Changing tooling when preparing for a new product. B. Total cost concept
3>Includes manufacturing cost plus selling and administrative expenses. C. Setup
4>A document that initiates a product or process change. D. Normal selling price
5>Target selling price to be achieved in the long term. E. Variable cost concept
19) Which of the following accounts are debited to record increase in balances?
A.assets and liabilities
B.drawing and liabilities
C.expenses and liabilities
D.assets and expenses
20) Temporary investments
A.are reported as current assets
B.include cash equivalents
C.do not include equity securities
D.all of the above
21) Widgeon Co. manufactures three products: Bales; Tales; and Wales. The selling
prices are: $55; $78; and $32, respectively. The variable costs for each product are: $20;
$50; and $15, respectively. Each product must go through the same processing in a
machine that is limited to 2,000 hours per month. Bales take 5 hours to process, Tales
take 7 hours, and Wales take 1 hour.
Assuming that Widgeon Co. can sell all of the products they can make, what is the
maximum contribution margin they can earn per month?
A.$49,000
B.$70,000
C.$56,000
D.$34,000
22) The profit margin for Atlantic Division is 28% and the investment turnover is 2.8.
What is the rate of return on investment for Atlantic Division?
A.20%
B.28%
C.14%
D.78.4%
23) The total manufacturing cost variance is
A.the difference between actual costs and standard costs for units produced.
B.the flexible budget variance plus the time variance
C.the difference between planned costs and standard costs for units produced
D.none of the above.
24) ABC Corporation has three service departments with the following costs and
activity base:
ABC has three operating divisions, Micro, Macro and Super. Their revenue, cost and
activity information are as follows:
How much service department cost will be allocated to the Micro Division?
A.$200,000
B.$145,000
C.$60,000
D.$345,000
25) Income from operations for Division Z is $250,000, total service department
charges are $400,000 and operating expenses are $2,266,000. What are the revenues for
Division Z?
A.$650,000
B.$2,516,000
C.$2,916,000
D.$2,666,000
26) Closing entries
A.need not be journalized if adjusting entries are prepared
B.need not be posted if the financial statements are prepared from the work sheet
C.are not needed if adjusting entries are prepared
D.must be journalized and posted
27) The four steps necessary to determine the cost of goods completed and the ending
inventory valuation in a process cost system are:
The correct ordering of the steps is:
A.2, 4, 3, 1
B.4, 2, 3, 1
C.2, 3, 4, 1
D.2, 3, 1, 4
28) A disadvantage of static budgets is that they:
A.are dependent on previous year’s actual results
B.cannot be used by service companies
C.do not show possible changes in underlying activity levels
D.show the expected results of a responsibility center for several levels of activity
29) A business received an offer from an exporter for 10,000 units of product at $17.50
per unit. The acceptance of the offer will not affect normal production or domestic sales
prices. The following data is available:
What is the differential revenue from the acceptance of the offer?
A.$200,000
B.$175,000
C.$130,000
D.$140,000
30) The total assets and total liabilities of Pauls Pools, a proprietorship, at the beginning
and at the end of the current fiscal year are as follows:
(a) Determine the amount of net income earned during the year. The owner did not
invest any additional assets in the business during the year and made no withdrawals.
(b) Determine the amount of net income during the year. The assets and liabilities at the
beginning and at the end of the year are unchanged from the amounts presented above.
However, the owner withdrew $53,000 in cash during the year (no additional
investments).
(c) Determine the amount of net income earned during the year. The assets and
liabilities at the beginning and at the end of the year are unchanged from the amounts
presented above. However, the owner invested an additional $35,000 in cash in the
business in June of the current fiscal year (no withdrawals).
(d) Determine the amount of net income earned during the year. The assets and
liabilities at the beginning and at the end of the year are unchanged from the amounts
presented above. However, the owner invested an additional $12,000 in cash in August
of the current fiscal year and made twelve monthly cash withdrawals of $1,500 each
during the year.
31) Ruben Company purchased $100,000 of Evans Company bonds at 100. Ruben later
sold the bonds at $104,500 plus $500 in accrued interest. The journal entry to record the
sale of the bonds would be:
A.Debit: Cash $105,000; Credit: Investment in Bonds $104,500 and Interest Revenue
$500
B.Debit: Cash $105,000; Credit: Investment in Bonds $100,000 and Gain on Sale of
Investments $5,000
C.Debit: Cash $104,500 and Interest Receivable $500; Credit: Investment in Bonds
$100,000, Gain on Sale of Investments $4,500 and Interest Revenue $500
D.Debit: Cash $105,000; Credit: Investment in Bonds $100,000; Gain on Sale of
Investments $4,500 and Interest Revenue $500
32) Tippi Company produces lamps that require 2.25 standard hours per unit at an
hourly rate of $15.00 per hour. If 7,700 units required 17,550 hours at an hourly rate of
$15.20 per hour, what is the direct labor (a) rate variance, (b) time variance, and (c) cost
variance?
33) The proper journal entry to record the receipt of inventory purchased on account in
a perpetual inventory system would be:
A.Jan 1 Merchandise Inventory 1,500
Accounts Payable 1,500
B.Jan 1 Office Supplies 1,500
Accounts Payable 1,500
C.Jan 1 Purchases 1,500
Accounts Payable 1,500
D.Jan 1 Purchases 1,500
34) In general, consolidated financial statements should be prepared
A.when a corporation owns more than 20% and less than 40% of the common stock of
another company
B.when a corporation owns more than 50% of the common stock of another company
C.only when a corporation owns 100% of the common stock of another company
D.whenever the market value of the stock investment is significantly lower than its cost
35) 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
36) Which of the following would appear as an extraordinary item on the income
statement?
A.loss resulting from the sale of fixed assets
B.gain resulting from the disposal of a segment of the business
C.loss from land condemned for public use
D.liquidating dividend
37) Indicate the section (operating activities, investing activities, financing activities, or
none) in which each of the following would be reported on the statement of cash flows
prepared by the indirect method:
(a) Gain on sale of fixed assets
(b) Net income
(c) Retirement of long-term debt
(d) Sale of capital stock
(e) Distribution of stock dividends
(f) Payment of cash dividends
(g) Purchase of fixed assets
(h) Sale of fixed assets
(i) Receipt of interest revenue
(j) Payment of interest expense
38) The following data is given for the Harry Company:
Overhead is applied on standard labor hours.
The direct labor time variance is:
A.6,000F
B.6,000U
C.33,000U
D.33,000F
39) If fixed costs are $400,000 and the unit contribution margin is $20, what amount of
units must be sold in order to have a zero profit?
A.25,000 units
B.10,000 units
C.400,000 units
D.20,000 units
40) The Sneed Corporation issues 10,000 shares of $50 par value preferred stock for
cash at $75 per share. The entry to record the transaction will consist of a debit to Cash
for $750,000 and a credit or credits to
A.Preferred Stock for $750,000
B.Preferred stock for $500,000 and Paid-in Capital in Excess of Par ValuePreferred
Stock for $250,000
C.Preferred Stock for $500,000 and Retained Earnings for $250,000
D.Paid-in Capital from Preferred Stock for $750,000
41) Wonder purchased one-half of Darwins interest in the Todd and Darwins
partnership for $50,000. Prior to the investment, land was revalued to a market value of
$175,000 from a book value of $100,000. Todd and Darwin share net income equally.
Darwin had a capital balance of $40,000 prior to these transactions.
Required:
a. Provide the journal entry for the revaluation of land.
b. Provide the journal entry to admit Wonder.
42) The journal entry a company uses to record the payment of an interest-bearing note
is
A.debit Cash; credit Notes Payable
B.debit Accounts Payable; credit Cash
C.debit Notes Payable and Interest Expense; credit Cash
D.debit Notes Payable and Interest Receivable; credit Cash
43) Construct a chart of accounts, assigning account numbers and arranging the
accounts in balance sheet and income statement order (1 for assets, and so on). Each
account number is three digits. Contra accounts should designated with a decimal of the
account (100.1 for contra of account 100). Assets and liabilities should be in order of
liquidity, expenses should be in alphabetical order.
44) The following data is given for the Taylor Company:
Overhead is applied on standard labor hours.
Compute the direct labor rate and time variances for Taylor Company.
45) On May 1, 2012, Chase Inc. purchases $60,000 of 10-year, Manus Corporation 8%
bonds dated March 1, 2012 at 100 plus accrued interest. What entry would Chase record
when receiving its semiannual interest on March 1, 2013?
46) On the basis of the following data for Larson Co. for the year ending December 31,
2011 and the preceding year ended December 31, 2010, prepare a statement of cash
flows. Use the indirect method of reporting cash flows from operating activities. In
addition to the balance sheet data, assume that:
Equipment costing $125,000 was purchased for cash.
Equipment costing $85,000 with accumulated depreciation of $65,000 was sold for
$15,000.
The stock was issued for cash.
The only entries in the retained earnings account were net income of $51,000 and cash
dividends declared of $13,000.
47) An investment of $185,575 is expected to generate returns of $65,000 per year for
each of the next four years. What is the investments internal rate of return?
Below is a table for the present value of $1 at compound interest.
Below is a table for the present value of an annuity of $1 at compound interest.
48) Discuss the process of posting from a revenue journal to the subsidiary ledger and
to the general ledger.
49) A company reports the following income statement and balance sheet information
for the current year:
Determine the rate earned on total assets. Round your answer to one decimal place.
50) The following accounts were taken from the Adjusted Trial Balance columns of the
work sheet for April 30, 2010 for Finnegan Co.:
Prepare an income statement.
51) On May 1, 10,000 shares of $10 par common stock were issued at $30, and on May
7, 5,000 shares of $50 par preferred stock were issued at $111. Journalize the entries for
May 1 and May 7.
52) Describe the flow of materials in a process cost accounting system.