1) Control is the process of monitoring operating results and comparing actual results
with the expected results.
2) For short-run production planning, information in the absorption costing format is
more useful to management than is information in the variable costing format.
3) The statement of cash flows shows the effects on cash of a company’s operating,
investing, and financing activities.
4) In a just-in-time (JIT) environment, process problems are more visible than they are
in a traditional environment.
5) Companies with large amounts of fixed costs will generally have a high operating
leverage.
6) An adjusting entry would adjust revenue so it is reported when earned and not when
cash is received.
7) All bank memos reported on the bank reconciliation require entries in the company’s
accounts.
8) When a note is received from a customer on account, it is recorded by debiting Notes
Receivable and crediting Accounts Receivable.
9) When there are material differences between the results of using the straight-line
method and using the effective interest method of amortization, the effective interest
method should be used.
10) Using the indirect method, if land costing $85,000 was sold for $145,000, the
amount reported in the financing activities section of the statement of cash flows would
be $85,000.
11) During the closing process, some balance sheet accounts are closed and end the
period with a zero balance.
12) An example of good internal controls over cash payments is the taking of all cash
discounts offered.
13) Comparing dividends per share to earnings per share indicates the extent to which
the corporation is retaining its earnings for use in operations.
14) The lower-of-cost-or-market method of determining the value of ending inventory
can be applied on an item by item, by major classification of inventory, or by the total
inventory.
15) The carrying amount of the bonds is defined as the face value of the bonds plus any
unamortized discount or less any unamortized premium.
16) The cost of computer equipment does not include the consultant’s fee to supervise
installation of the equipment.
17) The Kaumajet Factory produces two products – table lamps and desk lamps. It has
two separate departments – finishing and production. The overhead budget for the
finishing department is $550,000, using 500,000 direct labor hours. The overhead
budget for the production department is $400,000 using 80,000 direct labor hours.
If the budget estimates that a table lamp will require 2 hours of finishing and 1 hours of
production, how much factory overhead will be allocated to each unit of table lamp
using the multiple production department factory overhead rate method with an
allocation base of direct labor hours?
A.$6.33
B.$4.91
C.$5.00
D.$7.20
18) During a bank reconciliation process,
A.Outstanding checks and deposits in transit are added to the bank statement balance
B.Outstanding checks are subtracted and deposits in transit are added to the bank
statement balance
C.Outstanding checks and deposits in transit are subtracted from the bank statement
balance
D.Outstanding checks are added and deposits in transit are subtracted from the bank
statement balance
19) Ruby Company produces a chair that requires 5 yds. of material per unit. The
standard price of one yard of material is $7.50. During the month, 8,400 chairs were
manufactured, using 43,700 yards at a cost of $7.30 per yard. Determine the (a) price
variance, (b) quantity variance, and (c) cost variance.
20) Cleary Company had total Sales of $550,000; Sales Discounts of $10,000; Sales
Returns of $40,000 and Cost of Merchandise Sold of $200,000 during 2010. The total
asset balance at the beginning of the year was $175,000 and at the end of the year was
$167,000. Calculate the ratio of net sales to total assets (Round answer to 2 decimal
points).
A.1.75
B.2.92
C..34
D..57
21) The process of developing budget estimates by requiring all levels of management
to estimate sales, production, and other operating data as though operations were being
initiated for the first time is referred to as:
A.flexible budgeting
B.continuous budgeting
C.zero-based budgeting
D.master budgeting
22) Each year there is a ceiling for the amount that is subject to all of the following
except
A.social security tax
B.federal income tax
C.federal unemployment tax
D.state unemployment tax
23) Which of the following is not a prime cost?
A.Supervisors wages
B.Direct labor wages
C.Machine operator wages
D.Assembly line wages
24) The following is a list of various costs of producing sweatshirts. Classify each cost
as either a variable, fixed, or mixed cost for units produced and sold.
(a) Leather used to make a handbag.
(b) Warehouse rent of $8,000 per month plus $.50 per square foot of storage used.
(c) Thread.
(d) Electricity costs of $.038 per kilowatt-hour.
(e) Janitorial costs of $4,000 per month.
(f) Advertising costs of $12,000 per month.
(g) Accounting salaries.
(h) Color dyes for producing different colors of sweatshirts.
(i) Salary of the production supervisor.
(j) Straight-line depreciation on sewing machines.
(k) Patterns for different designs. Patterns typically last many years before being
replaced.
(l) Hourly wages of sewing machine operators.
(m) Property taxes on factory, building, and equipment.
(n) Cotton and polyester cloth.
(o) Maintenance costs with sewing machine company. The cost is $2,000 per year plus
$.001 for each machine hour of use.
25) When referring to a note receivable or promissory note
A.the maker is the party to whom the money is due
B.the note is not considered a formal credit instrument
C.the note cannot be factored to another party
D.the note may be used to settle an accounts receivable
26) Cash dividends paid on capital stock would be reported in the statement of cash
flows in
A.the cash flows from financing activities section
B.the cash flows from investing activities section
C.a separate schedule
D.the cash flows from operating activities section
27) Costs that are used in generating revenues during the current period, but are not
involved in the manufacturing process are often referred to as:
A.period costs
B.conversion costs
C.factory overhead costs
D.product costs
28) The best measure of managerial efficiency in the use of investments in assets is:
A.rate of return on stockholders’ equity
B.investment turnover
C.income from operations
D.inventory turnover
29) Most employers are required to withhold from employees which of the following
employment taxes?
A.FICA tax
B.FICA tax, state and federal unemployment compensation tax
C.only state unemployment compensation tax
D.only federal unemployment compensation tax
30) On April 2nd, Granger Sales decides to establish a $125.00 Petty Cash Account to
relieve the burden on Accounting.
(a) Journalize this event.
(b) On April 10th, the petty cash fund has receipts for mail and postage of $43.50,
contributions and donations of $29.50, meals and entertainment of $38.25 and $13.55 in
cash. Journalize the replenishment of the fund.
(c) On April 11th, Granger Sales decides to increase petty cash to $200.00. Journalize
this event.
31) On the first day of the current fiscal year, $1,500,000 of 10-year, 8% bonds, with
interest payable semiannually, were sold for $1,225,000. Present entries to record the
following transactions for the current fiscal year:
(a) Issuance of the bonds.
(b) First semiannual interest payment.
(c) Amortization of bond discount for the year, using the straight-line method of
amortization.
32) During times of rising prices, which of the following is not an accurate statement?
A.Average costing will yield results that are between those of FIFO and LIFO
B.LIFO will result in a higher cost of goods sold than FIFO
C.FIFO will result in a higher net income than LIFO
D.LIFO will result in higher income taxes than FIFO
33) The Excelsior Company has three salespersons. Average sales price per unit sold,
average variable manufacturing costs per unit, and number of units sold for each
salesperson is shown below.
Commissions are according to the following schedule:
Prepare a contribution by salesperson report.
34) Indicate whether each of the following activities would be reported on the statement
of cash flows as an operating activity, an investing activity, a financing activity, or not
at all.
(a) Cash paid for building
(b) Cash paid to suppliers
(c) Cash paid for dividends
(d) Cash received from customers
(e) Cash received from issuing capital stock
(f) Cash received from the sale of a building
(g) Borrowed cash from a bank
35) When merchandise is returned under the perpetual inventory system, the buyer
would credit
A.Merchandise Inventory
B.Purchases Returns and Allowances
C.Accounts Payable
D.Accounts Receivable
36) On June 1, 2014, Aaron Company purchased equipment at a cost of $120,000 that
has a depreciable cost of $90,000 and an estimated useful life of 3 years and 30,000
hours.
Using straight line depreciation, calculate depreciation expense for the first year.
A.$17,500
B.$30,000
C.$12,500
D.$40,000
37) Costs that remain constant in total dollar amount as the level of activity changes are
called:
A.fixed costs
B.mixed costs
C.product costs
D.variable costs
38) The income summary account is also called
A.the imprest account
B.the clearing account
C.the adjustments account
D.the helpful account
39) Bonds Payable has a balance of $1,000,000 and Discount on Bonds Payable has a
balance of $15,500. If the issuing corporation redeems the bonds at 98.5, what is the
amount of gain or loss on redemption?
A.$500 loss
B.$15,500 loss
C.$15,500 gain
D.$500 gain
40) Sifton Electronics Corporation manufactures and assembles electronic motor drives
for video cameras. The company assembles the motor drives for several accounts. The
process consists of a just-in-time cell for each customer. The following information
relates only to one customer’s just-in-time cell for the coming year. Projected labor and
overhead, $7,370,000; materials costs, $28 per unit. Planned production included 4,000
hours to produce 27,500 motor drives. Actual production for August was 1,600 units,
and motor drives shipped amounted to 1,380 units.
From the foregoing information, determine the manufacturing cost per unit.
A.$240.00
B.$268.00
C.$296.00
D.$1,870.50
41) Which of the following statements is correct?
A.Costs of controlling quality include prevention and appraisal costs
B.Costs of failing to control quality include internal and external failure costs
C.A and B are both correct
D.A and B are both incorrect
42) Anthony Company sold Madison Company merchandise on account FOB shipping
point, 2/10, net 30, for $10,000. Anthonyprepaid the $300 shipping charge. Which of
the following entries does Anthony make to record this sale?
A.Accounts Receivable-Madison, debit $10,000; Sales, credit $10,000
B.Accounts Receivable-Madison, debit $10,000; Sales, credit $10,000, and
Accounts Receivable-Madison, debit $300; Cash, credit $300
C.Accounts Receivable-Madison, debit $10,300; Sales, credit $10,300
D.Accounts Receivable-Madison, debit $10,000; Sales, credit $10,000, and
Freight Out, debit $300; Cash, credit$300
43) Equipment acquired at a cost of $126,000 has a book value of $42,000. Journalize
the disposal of the equipment under the following independent assumptions.
a. The equipment had no market value and was discarded.
b. The equipment is sold for $54,000.
c. The equipment is sold for $24,000.
d. The equipment is traded-in for a similar asset. The list price of the new equipment is
$63,000. The buyer gave no cash in the exchange. The transaction lacks commercial
substance.
Journal
44) Job order costing and process costing are
A.pricing systems
B.cost accounting systems
C.cost flow systems
D.inventory tracking systems
45) A series of equal cash flows at fixed intervals is termed a(n):
A.present value index
B.price-level index
C.net cash flow
D.annuity
46) Target costing is arrived at by
A.taking the selling price and subtracting desired profit
B.taking the selling price and adding desired profit
C.taking the selling price and subtracting the budget standard cost
D.taking the budget standard cost and reducing it by 10%
47) A company is contemplating investing in a new piece of manufacturing machinery.
The amount to be invested is $170,000. The present value of the future cash flows is
$185,000. The companys desired rate of return used in the present value calculations
was 10%. Which of the following statements is true?
A.The project should not be accepted because the net present value is negative.
B.The internal rate of return on the project is less than 10%.
C.The internal rate of return on the project is more than 10%.
D.The internal rate of return on the project is equal to 10%.
48) Depreciation on factory equipment would be reported in the statement of cash flows
prepared by the indirect method in
A.the cash flows from financing activities section
B.the cash flows from investing activities section
C.a separate schedule
D.the cash flows from operating activities section
49) The cost of merchandise sold during the year was $50,000. Merchandise inventories
were $12,500 and $10,500 at the beginning and end of the year, respectively. Accounts
payable were $6,000 and $5,000 at the beginning and end of the year, respectively.
Using the direct method of reporting cash flows from operating activities, cash
payments for merchandise total
A.$49,000
B.$47,000
C.$51,000
D.$53,000
50) Differentiate between financial and managerial accounting, addressing such issues
as what reports are generated, when, and for whom.
51) The following data is given for the Taylor Company:
Overhead is applied on standard labor hours.
Compute the direct material price and quantity variances for Taylor Company.
52) Why is the sales budget usually prepared first?
53) The Scharf Company is a retailer located in a state without sales tax. The following
data was given to you to complete the transactions for the days sales to be recorded. All
cash drawers start with $100 in change.
Record the Journal Entries for EACH cash register to determine the cashiers accuracy.
54) The Bottling Department of Mountain Springs Water Company had 5,000 liters in
beginning work in process inventory (20% complete). During the period, 58,000 liters
were completed. The ending work in process inventory was 3,000 liters (90%
complete). What are the equivalent units for conversion costs under the FIFO method?
