Fixed manufacturing overhead is considered a product cost under variable costing.
After a bond is issued, investors may buy and sell it through the bond market.
Both job order costing and process costing track the product costs of direct materials,
direct labor, and manufacturing overhead through three inventory accounts on the
balance sheet.
Doro Fill Company fabricates automobiles. Each auto includes one wiring harness,
which is currently made in-house. Details of the harness fabrication are as follows:
A factory in Indonesia has offered to supply Doro Fill with ready-made units for a cost of
$12 each. Assume that Doro Fill’s fixed costs are unavoidable and that the company will
not be able to use the excess capacity in any profitable manner. In order to maximize
operating income, Doro Fill should not outsource.
A payroll register is a schedule that summarizes the earnings, withholdings, and net pay
for each employee.
Standard costs are developed by the cooperative effort of purchasing, production,
human resources, and accounting personnel.
Return on investment measures the profitability of an investment center but not the
efficiency in using its assets.
Use of advanced technology makes it more cost effective for managers to conduct
sensitivity analysis.
When a company invests in equity securities with 20% to 50% ownership in the
investee’s voting stock, the investor can significantly influence the investee’s decisions.
The debt to equity ratio shows the proportion of total liabilities relative to total equity.
Compound interest means that interest is calculated only on the principal amount.
When calculating the cash ratio, the numerator includes cash equivalents.
In many cases, the amount of the transfer price does not affect overall company profits.
A business, which has a calendar year accounting period, purchased an asset on March
1, 2016. The business disposed of the asset on August 31, 2017. For the calendar year
2017, depreciation should be calculated from January 1 to August 31.
Estimated residual value can be zero if the company does not expect to receive anything
when disposing of the asset.
Stated value stock is no-par stock that has been assigned an amount similar to par value.
If the merchandise inventory’s market value is greater than its cost, then it must be
adjusted for the difference.
The statement of retained earnings reports how the company’s retained earnings balance
changed from the beginning of the period to the end of the period.
When a company uses the last-in, first-out (LIFO) method, the cost of goods sold
correlates to the most recently purchased goods, and the ending inventory correlates to
the oldest goods in stock.
An equity security represents a credit relationship with another company or
governmental entity.
A product mix decision focuses on generating the maximum profit for a company but
does not consider the company’s limited production capabilities.
The units-of-production method allocates a varying amount of depreciation each year
based on an asset’s usage.
A company is uncertain whether a complex transaction should be recorded as an asset
or an expense. Under the conservatism principle, it should choose to treat it as an asset.
An overstatement of ending merchandise inventory in the current period results in an
understatement of cost of goods sold in the current period.
In a decentralized company, all the planning and controlling decisions are made by top
management.
Managerial accounting focuses on information for external decision makers.
By separating costs by behavior, fixed and variable, a service company can calculate
the contribution margin ratio by dividing the contribution margin by revenues.
When determining the date of maturity of a note, omit the date the note was issued.
The operating activities section of the statement of cash flows includes activities that
create revenue or expenses for the entity’s business.
Polynesia Company manufactures sonars for fishing boats. Its Model 70 sells for $300.
Polynesia produces and sells 5,700 of them per year. Cost data follow:
Arthur Bailey, the sales manager, wants to offer a special sale to a new customer that
outfits boats. He proposes a sale of 41 units at a special price of $148 per unit. Arthur
believes that it will not affect the company’s regular sales in the long run because it is a
one-time transaction. The sale will require the normal variable costs, both selling and
administrative costs and manufacturing costs, but will not impact the fixed costs. The
president of the company has some reservations but finally agrees to make the deal if and
only if it adds a minimum of $1,500 to operating income. Based on the president’s criteria,
Polynesia will not make the offer.
When raw materials are purchased on account, the Accounts Payable account is
credited.
In a process costing system, equivalent units must be calculated separately for materials
and conversion costs.
The owner of a bond or stock of a corporation is referred to as the investor.
The specific identification method of inventory costing is recommended when a
business deals in unique and high-priced inventory items.
Operating income alone does not indicate how efficiently a segment is using its assets.
The three types of events that affect retained earnings are dividends, revenues, and
expenses.
The payback and accounting rate of return methods are often used to perform an initial
screening of investments.
A company sold merchandise for $23,000 on account with terms of 3/15, n/30. The
company uses a perpetual inventory system. After two days, it received defective
merchandise worth $2,000. The journal entry to record the cash receipt for the sale if
the payment is received within 10 days of the invoice date would include ________.
A) a debit to Cash for $20,370, a credit to Merchandise Inventory for $630, and a credit
to Sales Revenue for $21,000
B) a debit to Cash for $20,370, a debit to Sales Discount for $630, and a credit to
Accounts Receivable for $21,000
C) a debit to Cash for $21,000, a debit to Merchandise Inventory for $2,000, and a
credit to Accounts Receivable for $23,000
D) a debit to Sales Revenue for $23,000, a credit to Accounts Receivable for $21,000,
and a credit to Sales Discounts for $2,000
A company that uses a perpetual inventory system purchased inventory on account and
later returned goods worth $500 to the vendor. Which of the following would be the
correct journal entry to record these returns?
A)
B)
C)
D)
The Polishing Department of Laminates, Inc. had 18,000 units in process on June 1 and
received 30,000 units from the Machining Department. What is the number of units to
account for by the Polishing Department for June? The company uses the FIFO costing
method.
A) 30,000 units
B) 18,000 units
C) 48,000 units
D) 12,000 units
On October 1, 2017, Hubbard, Inc. made a loan to one of its customers. The customer
signed a 9-month note for $140,000 at 14%. Calculate the total interest earned on the
note. (Round your answer to the nearest dollar.)
A) $14,700
B) $4,899
C) $1,633
D) $19,600
Roberts Produce Company has fixed costs of $14,000. The company’s contribution
margin ratio is 46%, and the ratio of selling revenue to sales is 20%. What is the
breakeven point in sales dollars? (Round your answer to the nearest dollar.)
A) $70,000
B) $30,435
C) $6,440
D) $2,800
The debt to equity ratio of four companies is given below.
Based on the debt to equity ratio, which of the following companies has the least financial
risk?
A) Lewis, Inc.
B) Jackson, Inc.
C) Jones Corp.
D) Roberts Corp.
The following information is provided by Pemberton Systems:
Which project has the highest profitability index?
A) Project A
B) Project B
C) Project C
D) Project D
Short-term investments ________.
A) are debt and equity securities that the investor expects to hold for more than a year
B) are investments in debt securities or equity securities in which the investor holds less
than 50 percent of the voting stock and that the investor plans to sell in the very near
future
C) are investments in debt and equity securities that are highly liquid and that the
investor intends to convert to cash within one year
D) are investments in debt securities that the investor intends to hold until maturity
The asset account, Office Supplies, had a beginning balance of $3,800. During the
accounting period, office supplies were purchased, on account, for $2,500. Supplies
Expense for the accounting period is $4,000. What is the ending balance of Office
Supplies?
A) $6,300
B) $2,300
C) $4,000
D) $5,300
Muses Manufacturing produces plastic toys and uses process costing. There are three
processing departments—Assembling, Finishing, and Packaging. On January 1, the
Finishing Department had 2,000 units of partially processed product in production.
During January, 31,000 units were transferred in from the Assembling Department and
29,000 units were completed and transferred out. At the end of the month, 4,000 units
of partially processed products remained in the Finishing Department. See additional
details below.
Finishing Department, ending balance at January 31
Percent completed for materials cost: 94%
Percent completed for conversion cost: 70%
What was the number of equivalent units for the month of January, with respect to
direct materials, for the Finishing Department?
A) 32,760 units
B) 33,000 units
C) 29,000 units
D) 3,760 units
When bonds are issued at face value, ________.
A) the amount of cash received depends on the amount of bond discount or premium
B) for each interest payment, the amount of Interest Expense equals the amount of cash
paid
C) for each interest payment, the amount of Interest Expense depends on the
amortization of the bond discount or premium
D) the journal entry to record the issuance of the bonds includes a debit to the Bonds
Payable account
Which of the following would not appear on a multiple-step budgeted income
statement?
A) gross profit
B) income tax expense
C) operating income
D) salaries payable
Gill Manufacturing uses a predetermined overhead allocation rate based on a
percentage of direct labor cost. At the beginning of the year, Gill estimated total
manufacturing overhead costs at $1,010,000 and total direct labor costs at $840,000. In
June, Gill completed Job 511. The details of Job 511 are shown below. (Round to 2
decimal places.)
How much was the total job cost of Job 511? (Round any percentages to two decimal
places and your final answer to the nearest dollar.)
A) $36,860
B) $52,100
C) $64,700
D) $37,100
Centium Corporation sold goods to John Dunn for $1,000 on account. Cost of goods
sold was $745. Centium uses a perpetual inventory system and special journals. The
cost of goods sold is recorded in the ________ column of the sales journal.
A) Accounts Receivable DR, Sales Revenue CR
B) Cost of Goods Sold CR, Merchandise Inventory DR
C) Cost of Goods Sold DR, Merchandise Inventory CR
D) Sales Revenue DR, Accounts Receivable CR
Which of the following actions could increase the balance in the Paid-In Capital in
Excess of Par—Common account?
A) cash dividend declared
B) stock split
C) 10% stock dividend declared
D) purchase of treasury stock
Which of the following occurs when a corporation distributes a stock dividend?
A) Total liabilities would increase.
B) Total stockholders’ equity would increase.
C) Total assets would decrease.
D) Total stockholders’ equity would be unchanged.
Which of the following describes a firewall?
A) a malicious program that enters program code or destroys data without authorization
B) when two or more people cooperate together to defraud a company
C) a technique for protecting data
D) when a company defrauds its suppliers by making false claims
Which of the following is an asset account?
A) Wages Payable
B) Notes Payable
C) Unearned Revenue
D) Accounts Receivable
The phone bill for a corporation consists of both fixed and variable costs. Refer to the
four-month data below and apply the high-low method to answer the question.
If the company uses 390 minutes in May, how much will the total bill be? (Round any
intermediate calculations to the nearest cent and your final answer to the nearest dollar.)
A) $1,842.60
B) $1,829.10
C) $3,672
D) $6,157
A company has prepared the operating budget and the cash budget and is now preparing
the budgeted balance sheet. The balance of Finished Goods Inventory can be taken from
the ________.
A) production budget and cost of goods sold budget
B) financial budget
C) cash budget
D) selling and administrative expenses budget
On April 1, 2017, Banne Services received a 7-month note for $12,000 at 12%.
Calculate the amount of interest due at maturity. (Round your answer to the nearest
dollar.)
A) $756
B) $924
C) $1,440
D) $840
An adjusting entry that debits Accounts Receivable is an example of a(n) ________.
A) deferred expense
B) accrued revenue
C) accrued expense
D) deferred revenue
Which of the following would be considered a product cost for a manufacturing
business?
A) research and development
B) property taxes on the factory
C) advertising
D) delivery costs
Under conditions of limited resources, when a company is comparing several
investments with different amounts of initial cost, the decision should be made on the
basis of the ________.
A) highest total cash inflows
B) shortest payback period
C) highest profitability index
D) highest NPV
Lafayette, Inc. was incorporated on January 1, 2014. Lafayette issued 15,000 shares of
common stock and 800 shares of preferred stock on that date. The preferred stock is
cumulative, $100 par, with an 12% dividend rate. Lafayette has not paid any dividends
yet. In 2017, Lafayette had its first profitable year, and on November 1, 2017, Lafayette
declared a total dividend of $44,000. What is the total amount that will be paid to
common stockholders?
A) $9,600
B) $38,400
C) $5,600
D) $44,000
Which of the following best describes a capital budgeting post-audit?
A) an audit of an operating unit of a company
B) an audit performed only at the end of the project’s life span
C) an analysis of an investment’s cash flows prior to committing to the initial
investment
D) a comparison of actual results of capital investments with projected results
Statewide Sales, Inc. has gross pay for March of $45,000. Which of the following is
included in the journal entry to record salaries expense?
A) credit Salaries and Wages Expense
B) debit Cash
C) debit Salaries and Wages Payable
D) debit Salaries and Wages Expense
According to the ________, acquired assets should be recorded at the amount actually
paid rather than at the estimated market value.
A) going concern assumption
B) economic entity concept
C) cost principle
D) monetary unit assumption
On April 1, 2017, Planet Services received $8,000 in advance of performing the
services from a customer for three months of service — April, May and June. What
would be the journal entry to adjust the accounts at the end of May?
A) Debit Service Revenue $2,667, and credit Unearned Revenue $2,667.
B) Debit Unearned Revenue $5,333, and credit Service Revenue $5,333.
C) Debit Unearned Revenue $8,000, and credit Service Revenue $8,000.
D) Debit Service Revenue $5,333, and credit Accounts Receivable $5,333.
Which of the following would be included in the journal entry to record the payment of
sales tax payable?
A) a debit to Sales Tax Payable
B) a credit to Sales Tax Expense
C) a debit to Sales Tax Expense
D) a credit to Sales Tax Payable
When posting entries from a purchases journal to the general ledger, ________.
A) posting references are not shown in the subsidiary ledger
B) the Accounts Payable balance in the general ledger will be less than the sum of the
individual vendor balances in the subsidiary ledger
C) the amounts in the Other Accounts DR column are posted individually to the specific
accounts
D) entries are posted on a daily basis for all the accounts
International Financial Reporting Standards ________ U.S. Generally Accepted
Accounting Principles.
A) are the same as
B) are generally less specific than
C) are based less on principle than
D) leave less room for professional judgment than
On June 30, Coral, Inc. finished Job 750 with total job costs of $4,700, and transferred
the costs to Finished Goods Inventory. On July 6, it completed the sale of the goods to a
customer for $5,000 cash. Which of the following is the correct journal entry to record
the cost of goods sold?
A) debit Finished Goods Inventory $4,700 and credit Cost of Goods Sold $4,700
B) debit Cost of Goods Sold $4,700 and credit Work-in-Process Inventory $4,700
C) debit Work-in-Process Inventory $4,700 and credit Cost of Goods Sold $4,700
D) debit Cost of Goods Sold $4,700 and credit Finished Goods Inventory $4,700
The following information relates to Newman and Foster, Inc.
Calculate the net income of Newman and Foster.
A) $22,500
B) $34,500
C) $77,500
D) $240,000
A check for which a maker’s bank account has inadequate money to pay the check is
known as ________.
A) nonsufficient funds check
B) outstanding check
C) restrictive check
D) canceled check
On April 1, Balsa, Inc. purchased office supplies for $1,500. At the end of April, they
took a count of the remaining supplies and found that there was $500 of supplies left.
Provide the adjusting entry needed at the end of April. (Ignore explanation). Assume the
office supplies were initially recorded as an asset. Assume there were no office supplies
on hand prior to the purchase on April 1.
Anderson Plumbing Fixtures reported the following income statement for the year
ended December 31, 2017.
Anderson Plumbing Fixtures
Income Statement
Year Ended December 31, 2017
Compute inventory turnover rate for the year. (Round to two decimal places.)
Compute days’ sales in inventory for the year. (Round to two decimal places.)
McFadden Clothing Store reported the following selected items at June 30, 2017 (last
year – 2016 – amounts are also given as needed):
Compute McFadden’s accounts receivable turnover ratio 2017. Show your computations.
(Round the answer to 2 decimal places. )
On January 1, 2016, a corporation acquired a truck for $100,000. Residual value was
estimated to be $20,000. The truck can be driven for 50,000 miles over the next three
years. Actual usage of the truck was recorded as 8,640 miles for the first year. Give the
journal entry to record depreciation for the first year calculated as per the
units-of-production method. (Do not round your intermediate calculations.)
The partial worksheet of Ruth Furniture is as follows:
Ruth Furniture
Worksheet
December 31, 2016
Calculate and enter the amounts for the Adjusted Trial Balance columns.
How is the contribution margin ratio calculated?
What is the difference between cash basis accounting and accrual basis accounting?
For the following situation, state whether it represents a strength or weakness in internal
control and give the reason for your answer.
Baker Auto Supply purchases merchandise inventory from A & B Company. The
accountant places the order, verifies receipt of the merchandise, and records the
transaction in the general journal.
Deborah Consultants had the following accounts and account balances after adjusting
entries. Assume all accounts have normal balances. Calculate the amount of service
revenue and prepare the adjusted trial balance for Deborah Consultants as of December
31, 2017.
Define target cost. How is target cost determined?
Data for Sherman, Inc. are as follows:
2017 2016
Net Sales $850,000 $798,000
Cost of Goods Sold 635,000 580,000
Selling and Administrative Expenses 50,000 35,000
Other Expenses 20,000 15,000
Income Tax 40,000 55,000
Prepare a horizontal analysis of the comparative income statement of Sherman, Inc.
(Round to one decimal place.) Use a multi-step income statement.
How is the use of a balanced scorecard as a performance evaluation system helpful to
companies?
The following is divisional information for Falcon Enterprises:
The target rate of return is 12% for the East Division and is 10% for the West Division.
Compute residual income for each division.
From the following details provided by Barry, Inc., prepare the cost of goods sold
budget for the year.
Direct materials per unit $65
Direct labor hours per unit 2 hours
Direct labor rate per hour $50
Manufacturing overhead cost per direct labor hour $20
Beginning inventory units 1,000
Sales price per unit $250
First Second Third Fourth
Quarter Quarter Quarter Quarter
Units expected to be sold: 15,000 18,000 21,000 24,000
Barry, Inc. expects no inventory units at the end of the second, third and fourth quarters.
Ferrell, Inc. used $213,000 of direct materials and incurred $111,000 of direct labor
costs during the year. Indirect labor amounted to $8,100, while indirect materials used
totaled $4,800. Other operating costs pertaining to the factory included utilities of
$9,300; maintenance of $13,500; repairs of $5,400; depreciation of $23,700; and
property taxes of $7,800. There was no beginning or ending finished goods inventory.
The Work-in-Process Inventory account reflected a balance of $16,500 at the beginning
of the period and $22,500 at the end of the period.
Required: Prepare a schedule of cost of goods manufactured for Ferrell, Inc. using the
format below.
Cost of Goods Manufactured
Rally Auto Supplies uses a perpetual inventory system. Journalize the following sales
transactions for this company. Explanations are not required.
Caleb Auto Parts Company uses the indirect method to prepare its statement of cash
flows. Refer to the following portion of the comparative balance sheet:
Caleb Company
Comparative Balance Sheet
December 31, 2017 and 2016
2017 2016 Increase (Decrease)
Cash $42,000 $36,000 $6,000
Accounts Receivable 62,000 70,000 (8,000)
Merchandise Inventory 106,000 50,000 56,000
PP&E, net 240,000 180,000 60,000
Total Assets $450,000 $336,000 $114,000
Additional information provided by the company includes the following:
Equipment costing $104,000 was purchased for cash.
Equipment with a net book value of $20,000 was sold for $28,000.
Depreciation expense of $24,000 was recorded during the year.
Prepare the investing activities section of the statement of cash flows.
On January 1, 2017, Ellis, Inc. purchased a patent for $200,000 cash. Although the
patent gives legal protection for 20 years, the patent is expected to be used for only 10
years. Journalize the amortization expense for 2017. Assume straight-line amortization.