Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
1) The assignment of the three manufacturing cost elements to Work in Process in a
process cost system is the same as in a job order cost system.
2) The par value of stock issued for noncash assets is never a factor in determining the
cost of the assets received.
3) Each payment on a mortgage note payable consists of interest on the original balance
of the loan and a reduction of the loan principal.
4) Process cost accounting focuses on the process involved in mass-producing products
that are very similar in nature.
5) The petty cash fund eliminates the need for a bank checking account.
6) The budget itself and the administration of the budget are the responsibility of the
accounting department.
7) Goods out on consignment should be included in the inventory of the consignor.
8) A 3-for-1 common stock split will increase total stockholders' equity but reduce the
par or stated value per share of common stock.
9) In a voucher system, vouchers are prepared in the accounts receivable department.
10) In a responsibility accounting reporting system, as one moves up each level of
responsibility in an organization, the responsibility reports become more summarized
and show less detailed information.
11) There are no units in process at the beginning of the period, 1,500 units in process at
the end of the period that are 40% complete, and 15,000 units transferred out during the
period. Based on this information, there were 14,400 equivalent units of production
during the period.
12) The total cost of a finished product does not generally contain equal amounts of
materials, labor, and overhead costs.
13) An opportunity cost is the potential benefit obtained by using resources in an
alternative course of action.
14) A change in the estimated salvage value of a plant asset requires a restatement of
prior years' depreciation.
15) Direct materials and direct labor are the only product costs.
16) Financial statements can be prepared from the information provided by an adjusted
trial balance.
17) Personnel who handle cash receipts should have the option of taking a vacation or
not.
18) Finished Goods Inventory is charged for the cost of jobs completed during a period.
19) Corporations purchase investments in debt or stock securities generally for one of
two reasons.
20) Discount on bonds is an additional cost of borrowing and should be recorded as
interest expense over the life of the bonds.
21) An increase in the level of activity will have the following effects on unit costs for
variable and fixed costs:
Unit Variable CostUnit Fixed Cost
a.IncreasesDecreases
b.Remains constantRemains constant
c.DecreasesRemains constant
d.Remains constantDecreases
22) Use the following information to calculate for the year ended December 31, 2014
(a) net income, (b) ending owners equity, and (c) total assets.
Supplies$ 3,000Revenues$25,000
Operating expenses12,000Cash15,000
Accounts payable9,000Drawings1,000
Accounts receivable3,000Notes payable1,000
Beginning Capital5,000Equipment6,000
23) Match the items below by entering the appropriate code letter in the space provided.
A.Gain on disposalF.Asset turnover
B.Loss on disposalG.Goodwill
C.TrademarkH.Amortization
D.DepletionI.Intangible asset
E.Useful lifeJ.Research and development costs
1>Process of allocating the cost of an intangible asset to expense over its useful life.
2>Is only recorded when an exchange has commercial substance.
3>Examples are franchises and licenses.
4>The allocation of the cost of a natural resource to expense over its useful life.
5>Can be identified only with a business as a whole.
6>A symbol that identifies a particular enterprise or product.
7>When book value of asset is greater than the proceeds received from its sale.
8>Must be expensed when incurred.
9>Indicates how efficiently a company is able to generate sales with its assets.
10>An estimate of the expected productive life of an asset.
24) Variances from standards are
a.expressed in total dollars
b.expressed on a per-unit basis
c.expressed on a percentage basis
d.All of these answer choices are correct
25) Of the following companies, which one would not likely employ the specific
identification method for inventory costing?
a.Music store specializing in organ sales
b.Farm implement dealership
c.Antique shop
d.Hardware store
26) Match the items below by entering the appropriate code letter in the space provided.
A.Plant assetsF.Units-of-activity method
B.DepreciationG.Double-declining-balance method
C.Book valueH.MACRS
D.Salvage valueI.Revenue expenditure
E.Straight-line methodJ.Capital expenditure
1>Small expenditures which primarily benefit the current period.
2>Cost less accumulated depreciation.
3>An accelerated depreciation method used for financial statement purposes.
4>Tangible resources that are used in operations and are not intended for resale.
5>Equal amount of depreciation each period.
6>Expected cash value of the asset at the end of its useful life.
7>Allocation of the cost of a plant asset to expense over its useful life.
8>Material expenditures which increase an asset's operating efficiency, productive
capacity, or useful life.
9>An accelerated depreciation method used for tax purposes.
10>Useful life is expressed in terms of units of production or expected use.
27) The basis for dividing partnership net income or net loss is referred to as any of the
following except the
a.income ratio
b.income and loss ratio
c.profit and loss ratio
d.income sharing ratio
28) When production costs are debited to Work in Process Inventory, accounts that may
be credited are:
a.Accounts Payable, Factory Wages Payable, and Accumulated Depreciation
b.Raw Materials Inventory, Factory Labor, and Manufacturing Overhead
c.Raw Materials Inventory, Factory Labor, and Finished Goods Inventory
d.Manufacturing Overhead, Factory Labor, and Cost of Goods Sold
29) When a seller grants credit for returned goods, the account that is credited is
a.Sales Revenue
b.Sales Returns and Allowances
c.Inventory
d.Accounts Receivable
30) Dividends in arrears on cumulative preferred stock
a.are considered to be a non-current liability
b.are considered to be a current liability
c.only occur when preferred dividends have been declared
d.should be disclosed in the notes to the financial statements
31) An accounting convention is best described as
a.an absolute truth
b.an accounting custom
c.an optional rule
d.something that cannot be changed
32) Instructions: Given the information provided below, prepare (1) a bank
reconciliation in proper format and (2) the necessary journal entries for the month of
April for Hanlon Mowers.
1>Balance per Bank on April 30$20,601
2>Balance per Books on April 30$19,262
3>Total outstanding checks at April 30$2,180
4>Debit memoranda:
a.NSF check from Watts Co.$475
b.Printing company checks$45
c.Payment to bank of $1,200 note owed bank by Hanlon Mowers plus $100 interest.
5>Credit memorandum: Collection of note receivable for $1,600 plus $240 interest less
$50 collection fee
6>Errors:
a.A check written this month to PharmCo. for office supplies cleared the bank at the
correct amount of $420, but was recorded by Hanlon at $240.
b.The bank charged a $270 check of Atrin Company against Hanlon's account this
month.
7>Deposit in transit on April 30$361
1> Bank Reconciliation
2> Journal Entries (Note: Assume no interest has been accrued on the notes.)
33) If accounts receivable have increased during the period,
a.revenues on an accrual basis are less than revenues on a cash basis
b.revenues on an accrual basis are greater than revenues on a cash basis
c.revenues on an accrual basis are the same as revenues on a cash basis
d.expenses on an accrual basis are greater than expenses on a cash basis
34) Washington Bottom Company reports the following for the month of June.
UnitsUnit CostTotal Cost
June 1 Inventory300$5$1,500
12 Purchase45062,700
23 Purchase75086,000
30 Inventory180
Instructions
(a)Compute the cost of the ending inventory and the cost of goods sold under (1) FIFO
and (2) LIFO.
(b)Compute the cost of the ending inventory and the cost of goods sold using the
average-cost method.
35) For a manufacturing company, which of the following is an example of a period
cost rather than a product cost?
a.Depreciation on factory equipment
b.Wages of salespersons
c.Wages of machine operators
d.Insurance on factory equipment
36) The stockholders equity section of Fauberg Marigny Corporation at December 31 is
as follows.
FAUBERG MARIGNY CORPORATION
Balance Sheet (partial)
Paid-in capital
Preferred stock, cumulative, 10,000 shares authorized,
5,000 shares issued and outstanding$ 300,000
Common Stock, no par, 750,000 shares authorized, 300,000 shares issued 1,500,000
Total paid-in capital1,800,000
Retained earnings 2,050,000
Total paid-in capital and retained earnings3,850,000
Less: Treasury stock (5,000 common shares) 64,000
Total stockholders' equity$3,786,000
Instructions
From a review of the stockholders equity section, answer the following questions.
(a)How many shares of common stock are outstanding?
(b)Assuming there is a stated value, what is the stated value of the common stock?
(c)What is the par value of the preferred stock?
(d)If the annual dividend on preferred stock is $18,000, what is the dividend rate on
preferred stock?
(e)If dividends of $36,000 were in arrears on preferred stock, what would be the
balance in Retained Earnings?
37) How have many companies significantly lowered inventory levels and costs?
a.They use activity-based costing
b.They utilize a balanced scorecard system
c.They have a just-in-time method
d.They focus on a total quality management system
38) A company purchases 15,000 pounds of materials. The materials price variance is
$6,000 favorable. What is the difference between the standard and actual price paid for
the materials?
a.$1.00
b.$.04
c.$2.50
d.$.40
39) The paid absence that is most commonly accrued is
a.voting leave
b.vacation time
c.maternity leave
d.disability leave
40) The following credit sales are budgeted by McNauley Industries:
January$204,000
February300,000
March420,000
April360,000
The company's past experience indicates that 70% of the accounts receivable are
collected in the month of sale, 20% in the month following the sale, and 8% in the
second month following the sale. The anticipated cash inflow for the month of April is
a.$370,320
b.$336,000
c.$360,000
d.$352,800
41) CVP analysis does not consider
a.level of activity
b.fixed cost per unit
c.variable cost per unit
d.sales mix
42) Controllable costs for responsibility accounting purposes are those costs that are
directly influenced by
a.a given manager within a given period of time
b.a change in activity
c.production volume
d.sales volume
43) Given the following data for Good man Company, compute (A) total manufacturing
costs and (B) costs of goods manufactured:
Direct materials used$345,000Beginning work in process$30,000
Direct labor305,000Ending work in process60,000
Manufacturing overhead450,000Beginning finished goods75,000
Operating expenses525,000Ending finished goods45,000
(A) (B)
a.$1,100,000$1,070,000
b.$1,130,000$1,070,000
c.$1,130,000$1,070,000
d.$1,070,000$1,130,000
44) Financial information that is capable of making a difference in a decision is
a.faithfully representative
b.relevant
c.convergent
d.generally accepted
45) Which one of the following would not be classified as manufacturing overhead?
a.Indirect labor
b.Direct materials
c.Insurance on factory building
d.Indirect materials
46) At December 31, 2014, Delta Inc. has these data on its security investments:
Security Cost Fair Value 12/31/14
Trading $ 140,000 $190,000
Available-for-sale 137,000 122,000
If the available-for-sale securities are held as long-term investments, which of the
following will be recorded to adjust the securities to fair value?
a. Securities 35,000
Unrealized GainIncome 35,000
b.Unrealized LossIncome 15,000
Securities 35,000
Unrealized GainIncome 50,000
c.Fair Value AdjustmentTrading 50,000
Unrealized GainIncome 50,000
Unrealized Gain or LossEquity 15,000
Fair Value AdjustmentAvailable-for-Sale 15,000
d.Unrealized GainIncome 50,000
Fair Value AdjustmentTrading 50,000
Fair Value AdjustmentAvailable-for-Sale 15,000
Unrealized Gain or LossEquity 15,000
47) Under IFRS, contingent liabilities are
a.recorded in the financial statements
b.disclosed if certain criteria are met
c.always disclosed in the financial statements
d.accounted for in the same way as under GAAP
48) Entries in a sales journal
a.are made from sales invoices
b.will indicate the invoice number in the reference column of the sales journal
c.will occupy two lines of the sales journal
d.indicate either a cash debit or accounts receivable debit
49) Harrington, Inc. determines that 54,000 pounds of direct materials are needed for
production in July. There are 3,200 pounds of direct materials on hand at July 1 and the
desired ending inventory is 2,800 pounds. If the cost per unit of direct materials is
$3.20, what is the budgeted total cost of direct materials purchases?
a.$162,560
b.$172,800
c.$174,080
d.$171,520
50) Product costs are also called
a.direct costs
b.overhead costs
c.inventoriable costs
d.capitalizable costs
51) On January 1, 2014, Meeks Corporation issued $5,000,000, 10-year, 4% bonds at
102 . Interest is payable semiannually on January 1 and July 1 . The journal entry to
record this transaction on January 1, 2014 is
a.Cash5,000,000
Bonds Payable5,000,000
b.Cash5,100,000
Bonds Payable5,100,000
c.Premium on Bonds Payable100,000
Cash5,000,000
Bonds Payable5,100,000
d.Cash5,100,000
Bonds Payable5,000,000
Premium on Bonds Payable100,000
52) In Alona Company, net income is $285,000. If accounts receivable increased
$140,000 and accounts payable decreased $40,000, net cash provided by operating
activities using the indirect method is:
a.$105,000
b.$185,000
c.$385,000
d.$465,000
53) Short-term investments are
a.(1) readily marketable and (2) intended to be converted into cash after the current year
or operating cycle, whichever is shorter
b.(1) readily marketable and (2) intended to be converted into cash within the current
year or operating cycle, whichever is longer
c.(1) readily marketable and (2) intended to be converted into cash after the current year
or operating cycle, whichever is longer
d.(1) readily marketable and (2) intended to be converted into cash within the current
year or operating cycle, whichever is shorter
54) A mortgage note payable with a fixed interest rate requires the borrower to make
installment payments over the term of the loan. Each installment payment includes
interest on the unpaid balance of the loan and a payment on the principal. With each
installment payment, indicate the effect on the portion allocated to interest expense and
the portion allocated to principal.
Portion AllocatedPortion Allocated
to Interest Expenseto Payment of Principal
a.IncreasesIncreases
b.IncreasesDecreases
c.DecreasesDecreases
d.DecreasesIncreases
55) Dinosaur Junior Corporation purchased a one-year insurance policy in January 2014
for $75,000. The insurance policy is in effect from May 2014 through April 2015 . If the
company neglects to make the proper year-end adjustment for the expired insurance
net income and assets will be understated by $50,000
net income and assets will be overstated by $50,000
net income and assets will be understated by $25,000
net income and assets will be overstated by $25,000
56) The process of determining the present value is referred to as _________________
the future amount.
57) The cost of a patent should be amortized over its ____________ life or its
____________ life, whichever is shorter.
58) An important purpose of management accounting is to provide
_____________________ for decision making.
59) At the end of an accounting period, all revenue and expense accounts are closed to a
temporary account called ______________.
60) Using the code letters below, indicate how each of the items listed would be
handled in preparing a bank reconciliation. Enter the appropriate code letter in the space
to the left of each item.
Code
AAdd to cash balance per books
BDeduct from cash balance per books
CAdd to cash balance per bank
DDeduct from cash balance per bank
EDoes not affect the bank reconciliation
Items:
1>Outstanding checks.
2>Bank service charge.
3>Check for $420 correctly written and paid by the bank but incorrectly entered in the
cash payments journal for $240.
4>Deposit in transit.
5>Bank returns deposited check marked NSF.
6>Bank collects notes receivable and interest for depositor.
7>Bank debit memorandum for check printing fees.
8>Petty cash custodian has $91 in paid petty cash vouchers that have not been
reimbursed.
9>Bank charged a check against the company which should have been charged to
another company.
10>A check for $246 was correctly paid by the bank but was incorrectly entered in the
cash payments journal for $264.
61) Expenses that relate to such activities as personnel management, accounting, and
office security generally should appear in a multiple-step income statement in the
selling expenses section
cost of goods sold section
c.administrative expenses section
d.nonoperating section
