1) The cost of production report reports the cost of the goods sold.
2) Unusual items affecting the current periods income statement consist of changes in
accounting principles and discontinued operations.
3) A sale of $750 on account, subject to a sales tax of 6%, would be recorded as an
account receivable of $750.
4) A bond is usually divided into a number of individual bonds of $500 each.
5) At the end of the fiscal year, the variances from standard are usually transferred to
the finished goods account.
6) Expenses are assets that are used up during the process of earning revenue.
7) Service businesses provide services for income, while a merchandising business sells
merchandise.
8) Under absorption costing, the cost of finished goods includes direct materials, direct
labor, and all factory overhead.
9) A responsibility center in which the department manager has responsibility for and
authority over costs, revenues, and assets invested in the department is termed a cost
center.
10) A bond is simply a form of an interest bearing note.
11) A company pays $360 for a yearly trade magazine on August 1. The adjusting entry
on December 31 is debit Unearned Subscription Revenue, $150 and credit Subscription
Revenue, $150.
12) Two divisions of Central Company (Divisions X and Y) have the same profit
margins. Division X’s investment turnover is larger than that of Division Y (1.2 to 1.0).
Income from operations for Division X is $55,000, and income from operations for
Division Y is $43,000. Division X has a higher return on investment than Division Y
by:
A.using income from operations as a performance measure
B.comparing the profit margins
C.applying a negotiated price measure
D.using its assets more efficiently in generating sales
13) 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
14) A manager is responsible for costs only in a(n):
A.profit center
B.investment center
C.volume center
D.cost center
15) 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
16) The numerator of the rate earned on total assets ratio is equal to
A.net income
B.net income plus tax expense
C.net income plus interest expense
D.net income minus preferred dividends
17) Journalize the entries to record the following selected transactions of Oliver Co.:
(a) Purchased $100,000 of Kruse Co. 8% bonds at par value plus accrued interest of
$2,000.
(b) Received first semiannual interest payment.
(c) Sold the bonds at 97 plus accrued interest of $1,500.
18) When several alternative investment proposals of the same amount are being
considered, the one with the largest net present value is the most desirable. If the
alternative proposals involve different amounts of investment, it is useful to prepare a
relative ranking of the proposals by using a(n):
A.average rate of return
B.consumer price index
C.present value index
D.price-level index
19) The primary purpose of a stock split is to
A.increase paid-in capital
B.reduce the market price of the stock per share
C.increase the market price of the stock per share
D.increase retained earnings
20) The Winston Company estimates that the factory overhead for the following year
will be $1,250,000. The company has decided that the basis for applying factory
overhead should be machine hours, which is estimated to be 50,000 hours. The total
machine hours for the year was 54,300. The actual factory overhead for the year was
$1,375,000. Determine the over or under applied amount for the year.
A.$17,500 overapplied
B.$17,500 underapplied
C.$118,250 overapplied
D.$118,250 underapplied
21) If the market rate of interest is greater than the contractual rate of interest, bonds
will sell
A.at a premium
B.at face value
C.at a discount
D.only after the stated rate of interest is increased
22) Which of the accounting steps in the accounting process below would be completed
last?
A.preparing the adjusted trial balance
B.posting
C.preparing the financial statements
D.journalizing
23) What do just-in-time (JIT) manufacturers demand from their vendors?
A.High quality materials
B.Low cost materials
C.On-time deliveries
D.All of the above
24) The balance in the prepaid rent account before adjustment at the end of the year is
$32,000, which represents four months’ rent paid on December 1. The adjusting entry
required on December 31 is
A.debit Rent Expense, $8,000; credit Prepaid Rent, $8,000
B.debit Prepaid Rent, $24,000; credit Rent Expense, $8,000
C.debit Rent Expense, $24,000; credit Prepaid Rent, $8,000
D.debit Prepaid Rent, $8,000; credit Rent Expense, $8,000
25) What are the total proceeds from the February 1, 2015 sale?
A.$52,400
B.$51,500
C.$50,000
D.$52,000
26) What term is commonly used to describe the concept whereby the cost of
manufactured products is composed of direct materials cost, direct labor cost, and
variable factory overhead cost?
A.Absorption costing
B.Differential costing
C.Standard costing
D.Variable costing
27) Period costs include:
A.current assets on the balance sheet
B.current liabilities on the balance sheet
C.operating costs that are shown on the income statement when products are sold
D.operating costs that are shown on the income statement in the period in which they
are incurred
28) Given the following data:
Dec. 31,2014 Dec. 31,2013
Total liabilities $128,250 $120,000
Total stockholders equity 95,000 80,000
a. Compute the ratio of liabilities to stockholders equity for each year.
b. Has the creditors risk increased or decreased from December 31, 2013, to December
31, 2014?
29) If one company owns more than 50% of the common stock of another company
A.a partnership exists
B.a parentsubsidiary relationship exists
C.the company whose stock is owned must be liquidated
D.the cost method should be used to account for the investment
30) When comparing a retail business to a service business, the financial statement that
changes the least is the
A.Balance Sheet
B.Income Statement
C.Statement of Owner’s Equity
D.Statement of Cash Flow
31) What information is generally included in the Management Discussion and Analysis
(MD&A) section of a corporate annual report?
32) The formula to compute direct material quantity variance is to calculate the
difference between
A.actual costs – standard costs
B.standard costs – actual costs
C.(actual quantity * standard price) – standard costs
D.actual costs – (standard price * standard costs)
33) The source of the data for debiting Work-in-Process for direct materials is the:
A.purchase order
B.purchase requisition
C.materials requisition
D.receiving report
34) The price at which a stock can be sold depends upon a number of factors. Which
statement below is not one of those factors?
A.the financial condition, earnings record, and dividend record of the corporation
B.investor expectations of the corporation’s earning power
C.how high the par value is
D.general business and economic conditions and prospects
35) The Bitterns Company produces their product at a total cost of $89 per unit. Of this
amount $14 per unit is selling and administrative costs. The total variable cost is $58
per unit. The desired profit is $25 per unit. Determine the mark up percentage on (a)
total cost, (b) product cost and (c) variable cost concepts.
36) Which statement below is not a reason for a corporation to buy back its own stock.
A.resale to employees
B.bonus to employees
C.for supporting the market price of the stock
D.to increase the shares outstanding
37) The balance in Premium on Bonds Payable
A.should be reported on the balance sheet as a deduction from the related bonds
payable
B.should be allocated to the remaining periods for the life of the bonds by the
straight-line method, if the results obtained by that method materially differ from the
results that would be obtained by the interest method
C.would be added to the related bonds payable on the balance sheet
D.should be reported in the paid-in capital section of the balance sheet
38) The income statement should be prepared
A.before the retained earnings statement and balance sheet
B.after the retained earnings statement and before the balance sheet
C.after the retained earnings statement and balance sheet
D.after the balance sheet and before the retained earnings statement
39) In calculating cash flows from operating activities using the indirect method, a gain
on the sale of equipment is
A.added to net income
B.deducted from net income
C.ignored because it does not affect cash
D.reported supplementally as a non-cash investing and financing activity
40) At the end of the period, Carson Company had the following balances in selected
accounts:
Required:
a. Assuming the factory overhead balance is relatively small, prepare the journal entry
to close the Factory Overhead account if the balance in the account is a debit balance.
What does a debit balance mean?
b. Assuming the factory overhead balance is relatively small, prepare the journal entry
to close the Factory Overhead account if the balance in the account is a credit balance.
What does a credit balance mean?
41) Compute conversion costs given the following data: Direct Materials, $347,500;
Direct Labor, $186,300; Factory Overhead, $187,900; and Selling Expenses, $45,290.
A.$533,800
B.$187,900
C.$721,700
D.$374,200
42) Which of the following would be considered an Other Comprehensive Income
item?
A.net income
B.extraordinary loss related to flood
C.gain on disposal of discontinued operations
D.unrealized loss on available-for-sale securities
43) When a company sells machinery at a price equal to its book value, this transaction
would be recorded with an entry that would include the following:
A.debit Cash and Accumulated Depreciation; credit Machinery
B.debit Machinery; credit Cash and Accumulated Depreciation
C.debit Cash and Machinery; credit Accumulated Depreciation
D.debit Cash and Depreciation Expense; credit Accumulated Depreciation
44) If bonds payable are not callable, the issuing corporation
A.can exchange it for common stock
B.can repurchase them in the open market
C.must get special permission from the SEC to repurchase them
D.is more likely to repurchase them if the interest rates increase
45) Discontinuing a product or segment is a huge decision that must be carefully
analyzed. Which of the following would be a valid reason not to discontinue an
operation?
A.The losses are minimal
B.The variable costs are less than revenues
C.The variable costs are more than revenues
D.The allocated fixed costs are more than revenues
46) When does an account become uncollectible?
A.when accounts receivable is converted into notes receivable
B.when discount is availed on notes receivable
C.there is no general rule for when an account becomes uncollectible
D.at the end of the fiscal year
47) The Thomlin Company forecasts that total overhead for the current year will be
$15,000,000 and that total machine hours will be 300,000 hours. Year to date, the actual
overhead is $16,000,000 and the actual machine hours are 330,000 hours. If the
Thomlin Company uses a predetermined overhead rate based on machine hours for
applying overhead, what is that overhead rate?
A.$48 per machine hour
B.$53 per machine hour
C.$45 per machine hour
D.$50 per machine hour
48) A project is estimated to cost $273,840 and provide annual cash flows of $60,000
for seven years. Determine the internal rate of return for this project, using the
following table.
49) A copy machine acquired on March 1, 2011 with a cost of $1,410 has an estimated
useful life of 3 years. Assuming that it will have a residual value of $150, determine the
depreciation for the first and second year by the straight-line method.
50) Green Valley Bank sent Comstock Industries their end of month bank statement for
July. The end of month balance by the bank is $11,237.00. The statement shows that a
deposit for $4,250.00 is in transit at the end of the statement period. The statement also
revealed that checks for $87.00, $105.00, and $95.00 are outstanding. Green Valley
collected a 90 day, 12% interest $4,000.00 note receivable charging $20.00 for the
service. No interest has been accrued on the note. The bank charges a monthly account
fee of $35.00. The end of month balance per company books is $11,135.00.
Complete a bank/account reconciliation and write any necessary journal entries for the
reconciliation.
51) On June 1, the cash account balance was $96,750. During June, cash receipts
totaled $305,000 and the June 30 balance was $75,880. Determine the cash payments
made during June.
52) The cost of direct materials transferred into the Bottling Department of the
Mountain Springs Water Company is $28,072. The conversion cost for the period in the
Bottling Department is $10,275. The total equivalent units for direct materials and
conversion are 63,800 and 68,500 respectively. Determine the direct materials and
conversion cost per equivalent unit.
Round answers to nearest cent.
53) Technics Inc., a manufacturing company, utilizes job order costing. Each division
establishes its own estimates regarding overhead which are as follows:
Required:
If Division A allocates overhead on the basis of machine hours, and Division B
allocates overhead as a percentage of direct labor costs, what would the predetermined
overhead rate be for each division?
54) The Cavy Company estimates that the factory overhead for the following year will
be $1,470,000. The company has decided that the basis for applying factory overhead
should be machine hours, which is estimated to be 40,000 hours. The machine hours for
the month of April for all of the jobs was 4,780. Prepare the journal entry to apply
factory overhead.
55) List three different security measures taken by stores to safeguard inventory.