1) Average inventory is computed by adding the inventory at the beginning of the
period to the inventory at the end of the period and dividing by two.
2) A check for $342 was erroneously charged by the bank as $4 In order for the bank
reconciliation to balance, you must add $90 to the bank statement balance.
3) Product costs are not expensed until the product is sold.
4) A 10% stock dividend will increase the number of shares outstanding but the book
value per share will decrease.
5) If the ability to sell and the amount of production facilities devoted to each of two
products is equal, it is profitable to increase the sales of that product with the highest
contribution margin.
6) A company is considering purchasing a machine for $21,000. The machine will
generate income from operations of $2,000; annual cash flows from the machine will be
$3,500. The payback period for the new machine is 6 years.
7) The cost of materials entering directly into the manufacturing process is classified as
factory overhead cost.
8) For a period during which the quantity of product manufactured equals the quantity
sold, income from operations reported under absorption costing will equal the income
from operations reported under variable costing.
9) When accounts do not appear on the unadjusted trial balance but are needed to post
adjustments, they are simply added to the account title column.
10) A company should only use nonfinancial performance measures when financial
measures cannot be calculated.
11) Payroll taxes are based on the employee’s net pay.
12) A law firm would use a job order cost system to accumulate all of the costs
associated with a particular client engagement, such as lawyer time, copying charges,
filing fees, and overhead.
13) An operating lease is accounted for as if the lessee has purchased the asset.
14) The adjusting entry to adjust supplies was omitted at the end of the year. This would
effect the income statement by having
A.expenses understated and therefore net income overstated
B.revenues understated and therefore net income understated
C.expenses understated and therefore net income understated
D.expenses overstated and therefore net income understated
15) Yakking Co. manufactures mobile cellular equipment and develops a price for the
product by using the variable cost concept. Yakking incurs variable costs of $1,900,000
in the production of 100,000 units while fixed costs total $50,000. The company
employs $4,725,000 of assets and wishes to earn a profit equal to a 10% rate of return
on assets.
Round your markup percentage to one decimal place, and other intermediate
calculations and final answer to two decimal places.
16) Department E had 4,000 units in Work in Process that were 40% completed at the
beginning of the period at a cost of $12,500. Of the $12,500, $8,000 was for material
and $4,500 was for conversion costs. 14,000 units of direct materials were added during
the period at a cost of $28,700. 15,000 units were completed during the period, and
3,000 units were 75% completed at the end of the period. All materials are added at the
beginning of the process. Direct labor was $32,450 and factory overhead was $18,710.
If the average cost method is used the conversion cost per unit (to the nearest cent)
would be:
A.$3.71
B.$2.84
C.$2.97
D.$3.23
17) The excess of divisional income from operations over a minimum amount of
divisional income from operations is termed:
A.profit margin
B.residual income
C.rate of return on investment
D.gross profit
18) Which of the following accounts is a stockholders equity account?
A.Cash
B.Accounts Payable
C.Prepaid Insurance
D.Dividends
19) Adjusting entries are
A.the same as correcting entries
B.needed to bring accounts up to date and match revenue and expense
C.optional under generally accepted accounting principles
D.rarely needed in large companies
20) All of the following occur with a double-entry accounting system except
A.The accounting equation remains in balance
B.The sum of all debits is always equal to the sum of all credits in each journal entry
C.Each business transaction will have only two entries
D.Every transaction affects at least two accounts
21) The cost of materials transferred into the Bottling Department of Mountain Springs
Water Company is $32,400, with $26,000 from the Purifying Department, plus
additional $6,400 from the materials storeroom. The conversion cost for the period in
the Bottling Department is $8,750 ($3,750 factory applied and $5,000 direct labor.) The
total costs transferred to finished goods for the period was $31,980. The Bottling
Department had a beginning inventory of $1,860.
22) The following data is given for the Harry Company:
Overhead is applied on standard labor hours.
The direct labor rate variance is:
A.6,000U
B.6,000F
C.33,000F
D.33,000U
23) Hummingbird Company uses the product cost concept of applying the cost-plus
approach to product pricing. The costs and expenses of producing 25,000 units of
Product K are as follows:
Hummingbird desires a profit equal to a 5% rate of return on invested assets of
$642,500.
(a) Determine the amount of desired profit from the production and sale of Product K.
(b) Determine the total manufacturing costs and the cost amount per unit for the
production and sale of 25,000 units of Product K.
(c) Determine the markup percentage for Product K.
(d) Determine the selling price of Product K.
Round your markup percentage to one decimal place, and other intermediate
calculations and final answer to two decimal places.
24) Indirect labor and indirect materials are classified as:
A.factory overhead and product costs
B.factory overhead and period costs
C.operating costs and period costs
D.operating costs and product costs
25) Harold Corporation just started business in January 2012. They had no beginning
inventories. During 2012 they manufactured 12,000 units of product, and sold 10,000
units. The selling price of each unit was $20. Variable manufacturing costs were $4 per
unit, and variable selling and administrative costs were $2 per unit. Fixed
manufacturing costs were $24,000 and fixed selling and administrative costs were
$6,000.
What would be the Harold Corporations net income for 2012 using absorption costing?
A.$114,000
B.$110,000
C.$4,000
D.$106,000
26) Condelezza Co. manufactures two products, A and B, in two production
departments, Assembly and Finishing. Condelezza Co. expects to produce 10,000 units
of Product A and 20,000 units of Product B in the coming year. Budgeted factory
overhead costs for the coming year are:
The machine hours expected to be used in the coming year are as follows:
(c) Which method is better (plantwide or department)? Why?
27) A $300,000 bond was redeemed at 98 when the carrying value of the bond was
$296,000. The entry to record the redemption would include a
A.loss on bond redemption of $4,000
B.gain on bond redemption of $4,000
C.gain on bond redemption of $2,000
D.loss on bond redemption of $2,000
28) For Company A and Company B:
29) On March 1, a company collects revenue in advance for the next twelve months and
credits a liability account. The adjusting entry at year end on the work sheet would
A.increase a liability account
B.decrease an asset account
C.decrease a revenue account
D.decrease a liability account
30) Equipment was acquired at the beginning of the year at a cost of $75,000. The
equipment was depreciated using the straight-line method based upon an estimated
useful life of 6 years and an estimated residual value of $7,500.
a) What was the depreciation expense for the first year?
b) Assuming the equipment was sold at the end of the second year for $59,000,
determine the gain or loss on sale of the equipment.
c) Journalize the entry to record the sale.
31) The process of recording a transaction in the journal is called
A.recording
B.journalizing
C.posting
D.summarizing
32) During a period of falling prices, which of the following inventory methods
generally results in the lowest balance sheet amount for inventory.
A.average method
B.LIFO method
C.FIFO method
D.can not tell without more information
33) After all of the account balances have been extended to the Balance Sheet columns
of the work sheet, the totals of the debit and credit columns are $38,755 and $32,735,
respectively. What is the amount of net income or net loss for the period?
A.$6,020 net income
B.$38,755 net loss
C.$6,020 net loss
D.$32,735 net income
34) Which of the following conditions would cause the break-even point to increase?
A.Total fixed costs increase
B.Unit selling price increases
C.Unit variable cost decreases
D.Total fixed costs decrease
35) Materials used by Square Yard Products Inc. in producing Division 3’s product are
currently purchased from outside suppliers at a cost of $5 per unit. However, the same
materials are available from Division 6. Division 6 has unused capacity and can
produce the materials needed by Division 3 at a variable cost of $3 per unit. A transfer
price of $3.20 per unit is established, and 40,000 units of material are transferred, with
no reduction in Division 6’s current sales.
How much would Square Yard Products total income from operations increase?
A.$32,000
B.$112,000
C.$80,000
D.$150,000
36) Operating expenses other than depreciation for the year were $400,000. Prepaid
expenses increased by $17,000 and accrued expenses decreased by $30,000 during the
year. Cash payments for operating expenses to be reported on the cash flow statement
using the direct method would be
A.$353,000
B.$413,000
C.$447,000
D.$383,000
37) The tendency of the rate earned on stockholders’ equity to vary disproportionately
from the rate earned on total assets is sometimes referred to as
A.leverage
B.solvency
C.yield
D.quick assets
38) A minimum cash balance required by a bank is called
A.cash in bank
B.cash equivalent
C.compensating balance
D.EFT
39) Merchandise is ordered on December 1; the merchandise is shipped by the seller
and the invoice is prepared, dated, and mailed by the seller on December 3; the
merchandise is received by the buyer on December 8; the entry is made in the buyer’s
accounts on December 10. The credit period begins with what date?
A.December 1
B.December 3
C.December 8
D.December 10
40) Which of the following is used to analyze the efficiency and effectiveness of
inventory management?
A.inventory turnover only
B.number of days sales in inventory only
C.both inventory turnover and number of days sales in inventory
D.neither inventory turnover or number of days sales in inventory
41) At the end of April, Cavy Company had completed Job 766 and 765. According to
the individual job cost sheets the information is as follows:
Job 765 produced 152 units, and Job 766 consisted of 250 units.
Assuming that the predetermined overhead rate is applied by using machine hours at a
rate of $200 per hour, determine the (a) balance on the job cost sheets for each job, and
(b) the cost per unit at the end of April.
42) Unearned rent, representing rent for the next six months’ occupancy, would be
reported on the landlord’s balance sheet as a(n)
A.asset
B.liability
C.equity
D.revenue
43) Which of the following would appear as a prior-period adjustment?
A.loss resulting from the sale of fixed assets
B.difference between the actual and estimated uncollectible accounts receivable
C.error in the computation of depreciation expense in the preceding year
D.loss from the restructuring of assets
44) On January 12th, JumpStart Co. purchased $870 in office supplies.
(a) Journalize this transaction as if JumpStart paid cash.
(b) (1) Journalize this transaction as if JumpStart placed it on account.
(b) (2) On January 18th, JumpStart pays the amount due. Journalize this event.
45) Which of the following is not a reason for a direct materials quantity variance?
A.Malfunctioning equipment
B.Purchasing of inferior raw materials
C.Increased material cost per unit
D.Spoilage of materials
46) In which section of the financial statements would Paid-In Capital from Sale of
Treasury Stock be reported?
A.other expense on income statement
B.intangible asset on balance sheet
C.stockholders’ equity on balance sheet
D.other income on income statement
47) Current liabilities are
A.due, but not receivable for more than one year
B.due, but not payable for more than one year
C.due and receivable within one year
D.due and payable within one year
48) Scooby Company has applied $567,988 of overhead into production on Jobs in the
Work in Process account. Actual overhead at the end of the year is $575,000. What is
the adjustment for over or underapplied overhead?
A.$7012 Overapplied, increase Cost of Goods Sold
B.$7012 Underapplied, increase Cost of Goods Sold
C.$7012 Overapplied, decrease Cost of Goods Sold
D.$7012 Underapplied, decrease Cost of Goods Sold
49) Details of invoices for purchases of merchandise are as follows:
Returns and
Merchandise Freight Terms Allowances
(a) $2,800 $45 FOB shipping point, 1/10, n/30 $200
(b) 7,600 — FOB destination, n/30 800
(c) 1,400 55 FOB shipping point, 2/10, n/30 600
(d) 500 — FOB destination, 1/10, n/30
Determine the amount to be paid in full settlement of each of the invoices, assuming
that credit for returns and allowances was received prior to payment and that all
invoices were paid within the discount period.
50) Using the allowance method of accounting for uncollectible receivables, the entry
to reinstate a specific receivable previously written off would include a
A.credit to Bad Debt Expense
B.credit to Accounts Receivable
C.debit to Allowance for Doubtful Accounts
D.debit to Accounts Receivable
51) All of the following should be considered in a make or buy decision except
A.cost savings
B.quality issues with the supplier
C.future growth in the plant and other production opportunities
D.whether the supplier will make a profit that would no longer belong to the business
52) An asset was purchased for $120,000 on January 1, 2010 and originally estimated to
have a useful life of 10 years with a residual value of $10,000. At the beginning of
2012, it was determined that the remaining useful life of the asset was only 4 years with
a residual value of $2,000. Calculate the 2012 depreciation expense using the revised
amounts and straight line method.
A.$25,000
B.$11,000
C.$24,000
D.$24,500
53) The cost per equivalent units of direct materials and conversion in the Bottling
Department of Mountain Springs Water Company is $.45 and $.12, respectively. The
equivalent units to be assigned costs are as follows.
The beginning work in process inventory had a cost of $2,200. Determine the cost of
completed and transferred out production, and the ending work in process inventory.
54) Williams Company acquired machinery on July 1, 2009, at a cost of $130,000. The
estimated useful life of the machinery was 10 years and the estimated residual value
was $10,000. Williams uses the double-declining-balance method of depreciation. On
October 1, 2012, Williams sold the equipment for $75,000.
1) Record the journal entry for the depreciation on this machinery for 2012.
2) Record the journal entry for the sale of the machinery.
55) Peaches, Inc. reported the following data in its December 31, 2011 annual report:
Required:
(1) What is the companys cash burn per month?
(2) What is the companys ratio of cash to monthly cash expenses?
56) Journalize the following transactions for Riley Corporation:
57) The Stamping Department accepted Job 051507A on May 15th to make 1,000
funnels.
To complete the job they requisitioned 1,100 sheets at $1.20 per sheet and 1,150
grommets at $0.15 per set.
The cost driver that the Stamping Department uses is drop-forge strokes which are
counted on a machine mounted counter. $2.25 is applied as overhead for each
drop-forge stroke. Additionally $375.00 of overhead is applied to each job due to setup
and teardown.
Direct labor is applied at $22.50 per hour for the machine operator and $11.10 for the
machine loader. The job required 6 1/2 hours of labor by the team.
When the job was complete Job 051507A was transferred to Semi-finished Goods
Inventory (SFGI). When the job was transferred, 20 sheets were returned unused to raw
material inventory, 75 grommet sets were returned, and there were 1,115 strokes on the
counter.
Journalize all events depicted as of May 15th.
58) The end-of-period spreadsheet (work sheet) for the current year for Jamal Company
shows Balance Sheet columns with a debit total of $614,210 and a credit total of
$630,430. This is before the amount for net income or net loss has been included. In
preparing the income statement from work sheet, what is the amount of net income or
net loss?