Which of the following is true when computing cost per equivalent unit in a FIFO
process costing system?
A. Prior period costs are combined with costs incurred in the current period and then
divided by the equivalent units of production.
B. Costs incurred in the current period are divided by the equivalent units of
production.
C. Total cost to account for is divided by the equivalent units of production.
D. Equivalent units of production are divided by costs incurred in the current period.
E. Equivalent units of production are divided by cost to account for.
Answer:
Which department is often responsible for the direct materials price variance?
A. The accounting department.
B. The production department.
C. The purchasing department.
D. The finance department.
E. The budgeting department.
Answer:
Given the following information, determine the cost of goods sold at December 31
using the LIFO periodic inventory method:
December 2: 5 units were purchased at $7 per unit.
December 9: 10 units were purchased at $9.40 per unit.
December 11: 12 units were sold at $35 per unit.
December 15: 20 units were purchased at $10.15 per unit.
December 22: 18 units were sold at $35 per unit.
A. $284.70
B. $332.10
C. $281.25
D. $290.70
E. $297.00
Answer:
A deposit in transit on last period’s bank reconciliation is shown as a deposit on the
bank statement this period. As a result, in preparing this period’s reconciliation, the
amount of this deposit should be:
A. Added to the book balance of cash.
B. Deducted from the book balance of cash.
C. Added to the bank balance of cash.
D. Deducted from the bank balance of cash.
E. Not included as a reconciling item.
Answer:
Scott Corporation is considering the purchase of new equipment costing $30,000. The
projected annual after-tax net income from the equipment is $1,200, after deducting
$10,000 for depreciation. The revenue is to be received at the end of each year. The
machine has a useful life of three years and a $4,000 salvage value. Scott requires a
12% return on its investments. The factors for the present value of $1 for different
periods follow:
What is the net present value of the machine and what is the maximum Scott would
have been willing to pay for it?
A. $(251.52) but Scott would not pay any amount to acquire the machine because the
NPV is negative.
B. $(251.52) and Scott would be willing to pay $29,748.48 for the machine.
C. $(251.52) but the price Scott would pay cannot be determined.
D. $900 and Scott would be willing to pay $30,900 to acquire the machine
E. $900 but Scott would not be willing to acquire the machine.
Answer:
Based on the information provided below, complete the following worksheet to be used
to prepare the statement of cash flows:
(a) Net income for the year was $30,000.
(b) Dividends of $10,000 were declared and paid.
(c) Stylish’s only noncash expense was depreciation, which totaled $50,000.
(d) The company purchased plant assets for $70,000.
(e) Notes payable in the amount of $40,000 were issued during the year for cash.
(f) Merchandise inventory increased $30,000.
(g) Accounts payable decreased $10,000,
Answer:
On November 15, 2013, Betty Corporation accepted a note receivable in place of an
outstanding accounts receivable in the amount of $138,460. The note is due in 90 days
and has an interest rate of 5%. What would be the amount required for the December
31, 2013, adjusting journal entry?
A. $35,913.06
B. $34,615.00
C. $10,384.50
D. $1,298.06
E. $2,596.13
Answer:
Actual fixed overhead for Kapok Company during March was $92,780. The flexible
budget for fixed overhead this period is $89,000 based on a production level of 5,000
units. If the company actually produced 4,200 units what is the fixed overhead volume
variance for March?
A. $3,780 favorable
B. $18,020 unfavorable
C. $14,240 unfavorable
D. $3,780 unfavorable
E. $14,240 favorable
Answer:
Given Advanced Companys data, and the knowledge that the product is sold for $50 per
unit and operating expenses are $200,000, compute the net income under absorption
costing.
A. $55,000
B. $67,500
C. $80,500
D. $122,500
E. $205,000
Answer:
After posting is completed, there may be an error if:
A. The sum of the customer account balances does not equal the total in the sales
journal.
B. The sum of the accounts receivable ledger does not equal the balance in the Sales
account.
C. The sum of the customer account balances does not equal the Accounts Receivable
controlling account balance.
D. The balance in the sales journal does not equal the Accounts Receivable account
balance.
E. The sum of the accounts receivable ledger does not equal the balance in the sales
journal.
Answer:
On September 1, 2010, Drill Far Company purchased a tract of land for $2,300,000.
The land is estimated to have a salvage value or $50,000, a useful life of four years, and
contain an estimated 4,234,000 tons of iron ore. The company also purchased
equipment to use in the extraction process that cost $220,450. The company plans to
abandon the equipment when the ore is completely mined. During 2010, the company
extracted and sold 1.25 million tons of ore. What is the depletion expense recorded for
2010?
A. $575,000
B. $679,027
C. $664,265
D. $562,500
E. $600,000
Answer:
Why is it a matter of good internal control to deposit all cash receipts daily and make
all payments for goods and services by check?
A. When no paper documents are required, there is increased convenience and lower
cost
B. These actions control the access to cash and create an independent record of all cash
activities.
C. These procedures result in a more extensive testing of a company’s records.
D. The Sarbanes-Oxley Act requires these steps be taken by each publicly traded
company.
E. These procedures allow management to determine if projected cash receipts and
disbursements came in over or under budgeted amounts.
Answer:
A company has the choice of either selling 500 defective units as scrap or rebuilding
them. The company could sell the defective units as they are for $7.00 per unit.
Alternatively, it could rebuild them with incremental costs of $2.00 per unit for
materials, $3per unit for labor, and $1 per unit for overhead, and then sell the rebuilt
units for $15 each. What should the company do?
A. Sell the units as scrap.
B. Rebuild the units.
C. It does not matter because both alternatives have the same result.
D. Neither sell nor rebuild because both alternatives produce a loss. Instead, the
company should store the units permanently.
E. Throw the units away.
Answer:
A company issued 25-year, 8% bonds with a par value of $900,000. The company
received $1,000,000 cash for the bonds. Using the straight-line method, the amount of
interest expense for the first semiannual interest period is:
A. $36,000
B. $34,000
C. $38,000
D. $40,000
E. $32,000
Answer:
McCartney, Harris, and Hussin are dissolving their partnership. Their partnership
agreement allocates income and losses equally among the partners. The current period’s
ending capital account balances are McCartney, $15,000, Harris, $15,000, Hussin,
$(2,000). After all the assets are sold and liabilities are paid, but before any
contributions to cover any deficiencies, there is $28,000 in cash to be distributed.
Hussin pays $2,000 to cover the deficiency in his account. The general journal entry to
record the final distribution would be:
A.
B.
C.
D.
E.
Answer:
Presented below are terms preceded by letters (a) through (j) and followed by a list of
definitions (1) through (10). Enter the letter of the term with the definition, using the
space preceding the definition.
(a) Cost variance
(b) Volume variance
(c) Price variance
(d) Quantity variance
(e) Standard costs
(f) Controllable variance
(g) Fixed budget
(h) Flexible budget
(i) Variance analysis
(j) Management by exception
__________ (1) The difference between the total budgeted overhead cost and the
overhead cost that was allocated to products using the predetermined fixed overhead
rate.
__________ (2) A planning budget based on a single predicted amount of sales or
production volume; unsuitable for evaluations if the actual volume differs from the
predicted volume.
__________ (3) Preset costs for delivering a product, component, or service under
normal conditions.
__________ (4) A process of examining the differences between actual and budgeted
sales or costs and describing them in terms of the amounts that resulted from price and
quantity differences.
__________ (5) The difference between actual and budgeted sales or cost caused by the
difference between the actual price per unit and the budgeted price per unit.
__________ (6) A budget prepared based on predicted amounts of revenues and
expenses corresponding to the actual level of output.
__________ (7) The difference between actual and budgeted cost caused by the
difference between the actual quantity and the budgeted quantity.
__________ (8) The combination of both overhead spending variances (variable and
fixed) and the variable overhead efficiency variance.
__________ (9) A management process to focus on significant variances and give less
attention to areas where performance is close to the standard.
__________ (10) The difference between actual cost and standard cost, made up of a
price variance and a quantity variance.
Answer:
Fairway’s April sales forecast projects that 6,000 units will sell at a price of $10.50 per
unit. The desired ending inventory is 30% higher than the beginning inventory, which
was 1,000 units. Budgeted purchases of units in April would be:
A. 6,000 units
B. 7,000 units
C. 6,300 units
D. 7,300 units
E. Some other amount
Answer:
The rate that yields a net present value of zero for an investment is the:
A. Internal rate of return.
B. Accounting rate of return.
C. Net present value rate of return.
D. Zero rate of return.
E. Payback rate of return.
Answer:
The difference between actual and standard cost caused by the difference between the
actual price and the standard price is called the:
A. Standard variance.
B. Quantity variance.
C. Volume variance.
D. Controllable variance.
E. Price variance.
Answer:
Information to prepare the statement of cash flows usually comes from (a) comparative
balance sheets, (b) current income statement, and (c) additional information.
Answer:
Revenue expenditures:
A. Are additional costs of plant assets that do not materially increase the asset’s life or
its productive capabilities.
B. Are known as balance sheet expenditures.
C. Extend the asset’s useful life.
D. Substantially benefit future periods.
E. Are debited to asset accounts.
Answer:
Given the following information, determine the cost of goods sold at December 31
using the weighted-average periodic inventory method:
December 2: 5 units were purchased at $7 per unit.
December 9: 10 units were purchased at $9.40 per unit.
December 11: 12 units were sold at $35 per unit.
December 15: 20 units were purchased at $10.15 per unit.
December 22: 18 units were sold at $35 per unit.
A. $282.15
B. $332.10
C. $284.70
D. $290.70
E. $210.30
Answer:
Which of the following companies would be best served by a plantwide overhead rate?
A. A company that manufactures many different products and whose operations are an
equal mix of labor and mechanized work.
B. A company that manufactures few products and whose operations are labor
intensive.
C. A company that manufactures many different products and whose operations are
highly mechanized.
D. A company whose products use overhead resources in very different ways.
E. A company whose products differ in batch size and complexity and consume
different amounts of overhead resources.
Answer:
On January 1 a company purchased a five-year insurance policy for $1,800 with
coverage starting immediately. If the purchase was recorded in the Prepaid Insurance
account and the company records adjustments only at year-end, the adjusting entry at
the end of the first year is:
A. Debit Prepaid Insurance, $1,800; credit Cash, $1,800.
B. Debit Prepaid Insurance, $1,440; credit Insurance Expense, $1,440.
C. Debit Prepaid Insurance, $360; credit Insurance Expense, $360.
D. Debit Insurance Expense, $360; credit Prepaid Insurance, $360.
E. Debit Insurance Expense, $360; credit Prepaid Insurance, $1,440.
Answer:
Temper Company has credit sales of $3.10 million for year 2013. Temper estimates
that .9% of the credit sales will not be collected. On December 31, 2013, the companys
Allowance for Doubtful Accounts has an unadjusted credit balance of $2,222.
Assuming the company uses the percent of sales method, what is the amount that
Temper will enter as the Bad Debt Expense in the December 31 adjusting journal entry?
A. $25,246.40
B. $27,468.40
C. $23,024.40
D. $27,900.00
E. $24,420.40
Answer:
A company expects its three departments to yield the following income for next year:
Compute the change to the companys total net income if Dept. C is eliminated.
A. $300 decrease
B. $300 increase
C. $2,800 decrease
D. $2,800 increase
E. $6,800 decrease
Answer:
Reference: 22_06
Mach Co. operates three manufacturing departments as profit centers. The following
information is available for its most recent year:
Which departent has the greatest departmental contribution to overhead and what is the
amount contributed?
A. Dept. 3; $ 400,000
B. Dept. 1; $1,000,000
C. Dept. 2; $ 100,000
D. Dept. 3; $ 250,000
E. Dept. 2; $ 150,000
Answer:
The accounts receivable ledger:
A. Is for recording credit sales.
B. Is for storing transactions data for individual customers.
C. Is for storing transactions data for individual creditors.
D. Is for recording cash receipts from customers.
E. Is also the controlling account.
Answer:
A hybrid costing system would be most appropriate when:
A. A manufacturer is able to standardize processes while at the same time attempting to
cater to individual customer needs.
B. Large quantities of identical products are being produced.
C. The volume of production is low and costs are high.
D. There is no standardization of units of production.
E. The volume of production is low and standardized products are produced.
Answer:
A company reports the following information for its first year of operations:
If the companys cost per unit of finished goods using variable costing is $2,375, what is
total variable overhead?
A. $237,500
B. $75,000
C. $312,500
D. $406,250
E. $97,500
Answer:
A company had the following stockholders’ equity on January 1:
On January 10, the company declared a 40% stock dividend to holders of record on
January 25, to be distributed January 31. The market value of the stock on January 10
prior to the dividend was $20 per share. What is the book value per common share on
February 1?
Answer:
A company has 500,000 common shares authorized, 400,000 common shares issued,
and 15,000 common shares in treasury stock at the current year-end. It paid $0.24 per
share in cash dividends during the year. The year-end market price of the stock is $15.
Calculate (1) the total dividends paid and (2) the dividend yield.
Answer:
A company purchased equipment valued at $200,000 on January The equipment has an
estimated useful life of six years or 5 million units. The equipment is estimated to have
a salvage value of $13,400. Assuming the straight-line method of depreciation, what is
the book value at the end of the second year?
A $166,667.00
B. $88,977.80
C. $96,416.25
D. $168,900.00
E. $137,800.00
Answer:
Identify the three basic forms of business organizations.
Answer:
What is depreciation of plant assets? What are the factors to consider in computing
depreciation?
Answer:
What are the limitations of using variable costing?
Answer:
The _________________________ method of amortizing a bond discount allocates an
equal portion of the total bond interest expense to each interest period.
Answer:
The __________________ principle requires that an accounting information system
must be able to adapt to changes in the company, business environment, and needs of
decision makers.
Answer:
FOB _________________ means ownership of goods transfers to the buyer when the
goods arrive at the buyer’s place of business. The seller is responsible for paying
shipping charges and bears the risk of damage or loss in transit.
Answer:
Duval, Inc., budgets direct materials at $1/liter and requires 4 liters per unit of finished
product. April’s activities show usage of 832 liters to complete 196 units at a cost of
$798.72.
Calculate the direct materials price and quantity variances.
Answer:
The account used to record a premium on issued stock is titled
______________________________________________.
Answer:
What is the effect of an error in the ending inventory balance on the income
statement?
Answer:
______________________ are preset costs for delivering a product or service under
normal conditions.
Answer:
Cycle time is the sum of _____________ plus ____________ plus __________ plus
______________.
Answer:
Perkins Company provides the following data developed for its master budget:
Prepare flexible budgets for sales of 20,000, 22,000, and 24,000 units. Use a
contribution margin format.
Answer:
