1) The seller records the sales tax as part of the sales amount.
2) If 800 shares of $40 par common stock are sold for $43,000, the $43,000 would be
reported in the cash flows from financing activities section of the statement of cash
flows.
3) When production departments differ significantly in their manufacturing process, it is
recommended that the single plantwide factory overhead rate be used for allocating
factory overhead.
4) As we compare a merchandise business to a service business, the financial statement
that changes the most is the Balance Sheet.
5) If the products of a manufacturing process are produced to customer specifications, a
process cost system is more appropriate than a job order cost system.
6) Medicare taxes are paid by both the employee and the employer.
7) A transaction that is recorded in the journal is called a journal entry.
8) Care must be taken involving capital investment decisions, since normally a
long-term commitment of funds is involved and operations could be affected for many
years.
9) If the standard to produce a given amount of product is 600 direct labor hours at $15
and the actual was 600 hours at $17, the rate variance was $1,200 unfavorable.
10) All financial statements are identified by the name of the business, the title of the
statement, and the date or period of time.
11) If income from operations for a division is $30,000, sales are $263,750, and
invested assets are $187,500, the investment turnover is 1.3.
12) The document that serves as the basis for recording direct labor on a job cost sheet
is the time ticket.
13) If a fire destroys the merchandise inventory, the gross profit method can be used to
estimate the cost of merchandise destroyed.
14) When merchandise is sold for $600 plus 6% sales tax, the Sales account should be
credited for $636.
15) The number of shares of outstanding stock is equal to the number of shares
authorized minus the number of shares issued.
16) For a period during which the quantity of product manufactured was less than the
quantity sold, income from operations reported under absorption costing will be larger
than income from operations reported under variable costing.
17) The usual presentation of the retained earnings statement is (1) beginning retained
earnings, (2) net income or loss, (3) dividends (4) ending retained earnings.
18) Only callable bonds can be purchased by the issuing corporation before maturity.
19) A staff department or unit is one directly involved in the basic objective of the
organization.
20) Activity cost pools are cost accumulations associated with a given activity.
21) On April 30, a business estimates depreciation on equipment used during the first
year of operations to be $2,900. (a) Journalize the adjusting entry required as of April
30. (b) If the adjusting entry in (a) were omitted, which items would be erroneously
stated on (1) the income statement for the year and (2) the balance sheet as of April 30?
22) Principal components of a master budget include which of the following?
A.Production budget
B.Sales budget
C.Capital expenditures budget
D.All of the above
23) If fixed costs are $300,000, the unit selling price is $31, and the unit variable costs
are $22, what is the break-even sales (units) if fixed costs are reduced by $30,000?
A.30,000 units
B.8,710 units
C.12,273 units
D.20,000 units
24) Kramer Company started its production operations on August 1. During August, the
printing department completed 17,600 units. There were 4,400 units in ending inventory
which were 80% complete with respect to materials and 10% complete with respect to
conversion costs. During August, the department accumulated materials costs of
$45,408 and conversion costs of $76,670.
Required:
a. Calculate the cost of the goods transferred out.
b. What is the value of the ending inventory?
Round intermediate computation to nearest cent.
25) Data for an adjusting entry described as “accrued wages, $2,020” would result in
A.a debit to Wages Expense and a credit to Wages Payable
B.a debit to Wages Payable and a credit to Wages Expense
C.a debit to Accounts Receivable and a credit Wages Expense
D.a debit to Dividends and a credit to Wages Payable
26) When the perpetual inventory system is used, the inventory sold is shown on the
income statement as
A.cost of merchandise sold
B.purchases
C.purchases returns and allowances
D.net purchases
27) What ratio indicates the percentage of each sales dollar that is available to cover
fixed costs and to provide a profit?
A.Margin of safety ratio
B.Contribution margin ratio
C.Costs and expenses ratio
D.Profit ratio
28) Using the variable cost concept determine the mark-up per unit for 30,000 units
using the following data: Variable cost per unit $15.00, total fixed costs $90,000 and
desired profit $150,000.
A.$10
B.$15
C.$8
D.$23
29) Most employers are levied a tax on payrolls for
A.sales tax
B.medical insurance premiums
C.federal unemployment compensation tax
D.union dues
30) Mocha Company manufactures a single product by a continuous process, involving
three production departments. The records indicate that direct materials, direct labor,
and applied factory overhead for Department 1 were $100,000, $125,000, and
$150,000, respectively. The records further indicate that direct materials, direct labor,
and applied factory overhead for Department 2 were $55,000, $65,000, and $80,000,
respectively. In addition, work in process at the beginning of the period for Department
1 totaled $75,000, and work in process at the end of the period totaled $60,000.
The journal entry to record the flow of costs into Department 2 during the period for
direct labor is:
A.Work in Process–Department 265,000
Wages Payable65,000
B.Wages Payable65,000
Work in Process–Department 265,000
C.Work in Process–Department 2125,000
Wages Payable125,000
D.Work in Process–Department 2185,000
31) An aging of a company’s accounts receivable indicates the estimate of uncollectible
receivables totals $7,900. If Allowance for Doubtful Accounts has a $700 credit
balance, the adjustment to record the bad debt expense for the period will require a
A.debit to Bad Debt Expense for $8,600
B.debit to Bad Debt Expense for $7,900
C.debit to Bad Debt Expense for $7,200
D.credit to Allowance for Doubtful Accounts for $700
32) 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 production costs transferred to Finished
Goods during August.
A.$369,840
B.$408,480
C.$428,800
D.$473,600
33) Record the following selected transactions for April in a two-column journal,
identifying each entry by letter:
(a) Received $18,000 from Katie Long in exchange for stock.
(b) Purchased equipment for $27,000, paying $10,000 in cash and giving a note payable
for the remainder.
(c) Paid $2,300 for rent for April.
(d) Purchased $1,500 of supplies on account.
(e) Recorded $9,800 of fees earned on account.
(f) Received $7,500 in cash for fees earned.
(g) Paid $1,200 to creditors on account.
(h) Paid wages of $3,425.
(i) Received $7,900 from customers on account.
(j) Recorded the payment of a $1,875 dividend.
34) For the year ending December 31, 2010, Nathan Clinical Supplies Co. mistakenly
omitted adjusting entries for (1) $8,900 of unearned revenue that was earned, (2) earned
revenue that was not billed of $10,200, and (3) accrued wages of $7,000. Indicate the
combined effect of the errors on (a) revenues, (b) expenses, and (c) net income for
2010.
35) Which of the following would not be found in a Schedule of Noncash Investing and
Financing Activities, reported at the end of a Statement of Cash Flows?
A.equipment acquired in exchange for a note payable
B.bonds payable exchanged for capital stock
C.purchase of treasury stock
D.capital stock issued to acquire fixed assets
36) An investor purchased 500 shares of common stock, $25 par, for $21,750.
Subsequently, 100 shares were sold for $49.50 per share. What is the amount of gain or
loss on the sale?
A.$12,750 gain
B.$600 gain
C.$600 loss
D.$9,250 loss
37) Which of the following items appear on the corporate income statement before
income from continuing operations?
A.cumulative effect of a change in accounting principle
B.income tax expense
C.extraordinary gain
D.loss on discontinued operations
38) The following transactions took place for the XYZ Corporation;
a. November 12th – Declared a total cash dividend of $45,000 for stockholders of
record November 20th payable on December 1st. Record the journal entry, if necessary,
for the following events;
Nov. 12 –
Nov. 20 –
Dec. 1 –
b. Briefly describe the significance of November 20th.
39) On December 31 it was estimated that goodwill of $65,000 was impaired. In
addition, a patent with an estimated useful economic life of 10 years was acquired for
$60,000 on July 1.
40) Beginning inventory, purchases and sales data for hammers are as follows:
Assuming the business maintains a perpetual inventory system, complete the inventory
cards and calculate the cost of merchandise sold and ending inventory under the
following assumptions:
a. First-in, first-out
b. Last-in, first-out
41) A cash payment is recorded on the cash account as a
A.neither a debit or a credit
B.credit
C.debit
D.both a debit and a credit
42) Which of the following is characteristic of a just-in-time (JIT) production layout?
A.Decentralized maintenance
B.Small production batches
C.Organization around processes
D.Both A and B
43) Which of the following budgets allow for adjustments in activity levels?
A.Static Budget
B.Continuous Budget
C.Zero-Based Budget
D.Flexible Budget
44) Deferred expenses have
A.not yet been recorded as expenses or paid
B.been recorded as expenses and paid
C.been incurred and paid
D.not yet been recorded as expenses
45) What is the term used to describe expenses that are incurred for the benefit of a
specific department?
A.Indirect expenses
B.Margin expenses
C.Departmental expenses
D.Direct expenses
46) One of the accounting concepts upon which deferrals and accruals are based is
A.matching
B.cost
C.price-level adjustment
D.conservatism
47) On the basis of the details of the common stock account presented below, calculate
the total amount to be recorded in financing section of the statement of cash flows.
Indicate whether the amount results in an increase or decrease in cash.
48) A copy machine acquired on March 1, 2011 with a cost of $705 has an estimated
useful life of 4 years. Assuming that it will have a residual value of $125, determine the
depreciation for the first year by the double-declining-balance method.
49) Describe the features of a voucher system and list typical supporting documents for
a voucher.
50) According to a summary of the payroll of Sinclair Company, $505,000 was subject
to the 6.0% social security tax and $545,000 was subject to the 1.5% Medicare tax.
Also, $10,000 was subject to state and federal unemployment taxes.
Required:
51) A machine costing $57,000 with a 6-year life and $54,000 depreciable cost was
purchased January 1, 2015. Compute the yearly depreciation expense using straight-line
depreciation.
52) A quality control activity analysis indicated the following four activity costs of a
hotel.
Sales are $750,000 for the year. Prepare a cost of quality report.
53) The materials used by the Holly Company Division A are currently purchased from
outside supplier. Division B is able to supply Division A with 20,000 units at a variable
cost of $42 per unit. The normal price that Division B normally sells its units is $53 per
unit. What is the range of transfer prices that the two division managers should
negotiate?
54) Discuss the similarities and differences between accounts receivables, notes
receivables and other receivables.
55) On July 1, 2010, Howard Co. acquired patents rights for $40,000. The patent has a
useful life of 8 years and a legal life of 15 years. Journalize the adjusting entry on
December 31, 2010 to recognize the amortization.
Journal