1) Matt Warren and Associates, a C. P. A. firm, uses job order costing to capture the
costs of its audit jobs. There were no audit jobs in process at the beginning of
November. Listed below are data concerning the three audit jobs conducted during
November.
McCartneyLennonRingo
Direct materials$930$500$350
Auditor labor costs$5,700$6,300$3,600
Auditor hours809045
Overhead costs are applied to jobs on the basis of auditor hours, and the predetermined
overhead rate is $60 per auditor hour. The McCartney job is the only incomplete job at
the end of November. Actual overhead for the month was $12,500
Instructions
(a)Determine the cost of each job.
(b)Indicate the balance of the Work in Process account at the end of November.
(c)Calculate the ending balance of the Manufacturing Overhead account for November.
2) Debit balances in variance accounts represent
a.unfavorable variances
b.favorable variances
c.favorable for price variances; unfavorable for quantity variances
d.favorable for quantity variances; unfavorable for price variances
3) The per share amount normally assigned by the board of directors to a large stock
dividend is
a.the market value of the stock on the date of declaration
b.the average price paid by stockholders on outstanding shares
c.the par or stated value of the stock
d.zero
4) In a periodic inventory system, a return of defective merchandise to a supplier is
recorded by crediting
a.Accounts Payable
b.Inventory
c.Purchases
d.Purchase Returns and Allowances
5) Crue Company had the following transactions during 2014:
Sales of $4,500 on account
Collected $2,500 for services to be performed in 2015
Paid $1,625 cash in salaries
Purchased airline tickets for $250 in December for a trip to take place in 2015
What is Crues 2014 net income using cash basis accounting?
a.$625
b.$875
c.$5,125
d.$5,375
6) On January 2, Angle Corporation acquired 40% of the outstanding common stock of
Bobbe Company for $550,000. For the year ended December 31, Bobbe reported net
income of $90,000 and paid cash dividends of $30,000 on its common stock. At
December 31, the carrying value of Angle’s investment in Bobbe under the equity
method is
a.$538,000
b.$550,000
c.$586,000
d.$574,000
7) Garland Company received proceeds of $188,000 on 10-year, 6% bonds issued on
January 1, 2013 . The bonds had a face value of $200,000, pay interest semi-annually
on June 30 and December 31, and have a call price of 101 . Garland uses the
straight-line method of amortization.
What is the carrying value of the bonds on January 1, 2015?
a.$200,000
b.$190,400
c.$197,350
d.$189,200
8) The journal entry to record a return of merchandise purchased on account under a
periodic inventory system would be
a.Accounts Payable
Purchase Returns and Allowances
b.Purchase Returns and Allowances
Accounts Payable
c.Accounts Payable
Inventory
d.Inventory
Accounts Payable
9) On September 23, Sebadoh Company received a $350 check from Surfer Rosa Inc.
for services to be performed in the future. The bookkeeper for Sebadoh Company
incorrectly debited Cash for $350 and credited Accounts Receivable for $350. The
amounts have been posted to the ledger. To correct this entry, the bookkeeper should
a.debit Cash $350 and credit Unearned Service Revenue $350
b.debit Accounts Receivable $350 and credit Unearned Service Revenue $350
c.debit Accounts Receivable $350 and credit Cash $350
d.debit Accounts Receivable $350 and credit Service Revenue $350
10) When the allowance method of accounting for uncollectible accounts is used, Bad
Debt Expense is recorded
a.in the year after the credit sale is made
b.in the same year as the credit sale
c.as each credit sale is made
d.when an account is written off as uncollectible
11) Which one of the following would not be considered an expense of a partnership in
determining income for the period?
a.Expired insurance
b.Salary allowance to partners
c.Supplies used
d.Freight-out
12) Taylon’s Seafood used high-low data from June and July to determine its variable
cost of $18 per unit. Additional information follows:
MonthUnits producedTotal costs
June2,000$48,000
July1,000 30,000
If Tommys produces 2,200 units in August, how much is its total cost expected to be?
a.$52,800
b.$57,600
c.$39,600
d.$51,600
13) Partridge Bookstore had 500 units on hand at January 1, costing $9 each. Purchases
and sales during the month of January were as follows:
DatePurchasesSales
Jan. 14375 @ $14
17250 @ $10
25250 @ $11
29260 @ $16
Partridge does not maintain perpetual inventory records. According to a physical count,
365 units were on hand at January 31 .
The cost of the inventory at January 31, under the FIFO method is:
a.$3,285
b.$3,650
c.$3,900
d.$4,015
14) Goods in transit should be included in the inventory of the buyer when the
a.public carrier accepts the goods from the seller
b.goods reach the buyer
c.terms of sale are FOB destination
d.terms of sale are FOB shipping point
15) A balance sheet shows
a.revenues, liabilities, and owner’s equity
b.expenses, drawings, and owner’s equity
c.revenues, expenses, and drawings
d.assets, liabilities, and owner’s equity
16) On the dividend record date,
a.a dividend becomes a current obligation
b.no entry is required
c.an entry may be required if it is a stock dividend
d.Dividends Payable is debited
17) Wayton Medical Center is considering purchasing an ultrasound machine for
$1,135,000. The machine has a 10-year life and an estimated salvage value of $40,000.
Installation costs and freight charges will be $24,300 and $700, respectively. The Center
uses straight-line depreciation.
The medical center estimates that the machine will be used five times a week with the
average charge to the patient for ultrasound of $850. There are $10 in medical supplies
and $40 of technician costs for each procedure performed using the machine.
Instructions
(a)Compute the payback period for the new ultrasound machine.
(b)Compute the annual rate of return for the new machine.
18) An adjusting entry
a.affects two balance sheet accounts
b.affects two income statement accounts
c.affects a balance sheet account and an income statement account
d.is always a compound entry
19) When determining the proceeds received when issuing a bond, the factor applied to
the amount of the interest payments is determined from the table for the
1>present value of 1 .
2>present value of an annuity of 1 .
a.1
b.2
c.Both 1 and 2
d.Neither 1 nor 2
20) As an incentive for customers to pay their accounts promptly, a business may offer
its customers
a.a sales discount
b.free delivery
c.a sales allowance
d.a sales return
21) If a company has net sales of $700,000 and cost of goods sold of $455,000, the
gross profit percentage is
a.25%
b.35%
c.65%
d.100%
22) The net income of the Crowe and Browning partnership is $450,000. The
partnership agreement specifies that Crowe and Browninghave a salary allowance of
$120,000 and $180,000, respectively. The partnership agreement also specifies an
interest allowance of 10% on capital balances at the beginning of the year. Each partner
had a beginning capital balance of $300,000. Any remaining net income or net loss is
shared equally.
What is Crowes share of the $450,000 net income?
a.$120,000
b.$150,000
c.$165,000
d.$195,000
23) The income statement for the year 2014 of Fugazi Co. contains the following
information:
Revenues$70,000
Expenses:
Salaries and Wages Expense$45,000
Rent Expense12,000
Advertising Expense10,000
Supplies Expense6,000
Utilities Expense2,500
Insurance Expense 2,000
Total expenses 77,500
Net income (loss)$ (7,500)
The entry to close the revenue account includes a
a.debit to Income Summary for $7,500
b.credit to Income Summary for $7,500
c.debit to Revenues for $70,000
d.credit to Revenues for $70,000
24) Jared Manufacturing is planning to sell 1,200 boxes of ceramic tile, with production
estimated at 1,120 boxes during May. Each box of tile requires 44 pounds of clay mix
and a quarter hour of direct labor. Clay mix costs $0.50 per pound and employees of the
company are paid $15.00 per hour. Manufacturing overhead is applied at a rate of 110%
of direct labor costs. Jacob has 5,200 pounds of clay mix in beginning inventory and
wants to have 6,000 pounds in ending inventory.
What is the total amount to be budgeted for manufacturing overhead for the month?
a.$4,620
b.$4,950
c.$18,480
d.$19,800
25) The responsibility for expressing management’s budgeting goals in financial terms
is performed by the
a.accounting department
b.top management
c.lower level of management
d.budget committee
26) The calculation of depreciation using the declining balance method,
a.ignores salvage value in determining the amount to which a constant rate is applied
b.multiplies a constant percentage times the previous year’s depreciation expense
c.yields an increasing depreciation expense each period
d.multiplies a declining percentage times a constant book value
27) Profit margin is calculated by dividing
a.sales by cost of goods sold
b.gross profit by net sales
c.net income by stockholders’ equity
d.net income by net sales
28) Net sales are $8,000,000, beginning total assets are $2,500,000, and the asset
turnover is 4.0 times. What is the ending total asset balance?
a.$2,000,000
b.$1,500,000
c.$2,500,000
d.$2,500,000
29) Which of the following transactions does not affect cash during a period?
a.Write-off of an uncollectible account
b.Collection of an accounts receivable
c.Sale of treasury stock
d.Exercise of the call option on bonds payable
30) Sales are $500,000 and variable costs are $200,000. What is the contribution margin
ratio?
a.50%
b.40%
c.60%
d.Cannot be determined because amounts are not expressed per unit
31) The master budget for a service enterprise
a.will have the same types of budgets as a merchandiser
b.may include a sales budget for sales revenue
c.will not include a budgeted income statement
d.includes a service revenue budget based on expected client billings
32) Dividends are predominantly paid in
a.earnings
b.property
c.cash
d.stock
33) The cost of freight-in
a.is to be included in the standard cost of direct materials
b.is considered a selling expense
c.should have a separate standard apart from direct materials
d.should not be included in a standard cost system
34) In a recent year Chandler Corporation had net income of $150,000, interest expense
of $40,000, and tax expense of $20,000. What was Chandler Corporations times interest
earned ratio for the year?
a.5.25
b.4.75
c.3.75
d.4.25
35) This problem consists of four independent mini-problems. Omit headings other than
those already given.
1>Lavery Manufacturing produces and sells containers designed to hold liquid
beverages. The sales budget for 2014 is as follows:
1st quarter 120,000 units3rd quarter 180,000 units
2nd quarter 160,000 units4th quarter 140,000 units
Lavery desires an ending inventory equal to 30% of the next quarter’s sales. January 1,
2014 inventory is 36,000 units. Unit sales during the 1st quarter of 2015 are estimated
at 120,000 units.
Instructions: Compute required production for the year, showing quarterly data.
DescriptionQuarter 1Quarter 2Quarter 3Quarter 4
2>Bailey Manufacturers is preparing its direct labor budget for the second quarter of
2014 from the following budgeted production figures: April70,000 units; May100,000
units; and June110,000 units. Each unit requires 1 hour of direct labor. The hourly wage
rates are expected to be $15 in April and May and $17 in June.
Instructions: Prepare a direct labor budget for the quarter, showing monthly data.
DescriptionAprilMayJuneQuarter
3>Brunswick Company makes 70% of its sales on credit. Experience shows that 60%
of the credit customers pay in the month of sale, 30% within the following month, the
rest in the next month. Total sales for January, February, March, and April are estimated
at $280,000; $320,000; $400,000; and $340,000, respectively.
Instructions: Determine budgeted cash receipts for March and April.
DescriptionMarchApril
4>Pauls Sporting Goods is preparing its annual cash budget, showing quarterly data, for
2014 . A $20,000 cash balance is desired at the end of each quarter. Borrowings are in
$1,000 increments at 12% annual interest. The company borrows at the beginning of a
quarter based on the estimated deficiency. Interest is paid only when principal is repaid
at the end of a quarter with excess cash. The maximum amount of principal was repaid
in the second quarter. The cash balance on December 31, 2013 is $21,000. Total
receipts and disbursements, other than borrowings and principal or interest payments,
are estimated at:
Quarter 1Quarter 2Quarter 3Quarter 4
Disbursements:$226,000$226,000$244,000$260,000
Receipts:216,000230,000245,000253,000
Instructions: Prepare a schedule of estimated borrowings and repayments of principal
and interest for 2014 and its quarters.
DescriptionQuarter 1Quarter 2Quarter 3Quarter 4
36) Match the items below by entering the appropriate code letter in the space provided.
A.Mutual agencyG.Purchase of an interest
B.Unlimited liabilityH.Partnership liquidation
C.Partnership agreementI.Capital deficiency
D.Income ratioJ.Distribution of cash to partners in
E.Partners’ capital statement liquidation of a partnership.
F.Admission by investment
1>Each partner is personally and individually liable for partnership debts.
2>Made on basis of partners’ capital balances.
3>Explains changes in individual partner’s capital accounts during a period.
4>Each partner can bind the partnership so long as the action appears to be appropriate
for the partnership.
5>Business terminates.
6>Results in an increase in total net assets and total capital of the partnership.
7>Capital account with a debit balance.
8>The basis for sharing income and losses.
9>Total net assets and total capital of the partnership do not change.
10>Written contract establishing duties and responsibilities of partners.
37) Roy Company developed the following data for the current year:
Beginning work in process inventory$170,000
Direct materials used104,000
Actual overhead200,000
Overhead applied150,000
Cost of goods manufactured175,000
Total manufacturing costs490,000
Roy Company’s ending work in process inventory is
a.$490,000
b.$485,000
c.$454,000
d.$449,000
38) In a perpetual inventory system, the Cost of Goods Sold account is used
a.only when a cash sale of merchandise occurs
b.only when a credit sale of merchandise occurs
c.only when a sale of merchandise occurs
d.whenever there is a sale of merchandise or a return of merchandise sold
39) A retail store credited the Sales Revenue account for the sales price and the amount
of sales tax on sales. If the sales tax rate is 5% and the balance in the Sales Revenue
account amounted to $136,500, what is the amount of the sales taxes owed to the taxing
agency?
a.$130,000
b.$136,500
c.$6,825
d.$6,500
40) Give the definition of current assets and current liabilities and provide two
examples of each.
41) Taget Company estimates that annual manufacturing overhead costs will be
$640,000. Estimated annual operating activity bases are: direct labor cost $460,000,
direct labor hours 40,000 and machine hours 80,000. The actual manufacturing
overhead cost for the year was $641,000 and the actual direct labor cost for the year
was $456,000. Actual direct labor hours totaled 40,250 and machine hours totaled
79,000. Taget applies overhead based on direct labor hours.
Instructions
Compute the predetermined overhead rate and determine the amount of manufacturing
overhead applied. Determine if overhead is over- or underapplied and the amount.
42) Mike Dooley’s regular hourly wage is $16 an hour. He receives overtime pay at the
rate of time and a half. The FICA tax rate is 7.65%. Mike is paid every two weeks. For
the first pay period in January, Mike worked 86 hours of which 6 were overtime hours.
Mike’s federal income tax withholding is $350 and his state income tax withholding is
$110. Mike has authorized that $50 be withheld from his check each pay period for
savings bonds.
Instructions
Compute Mike Dooley’s gross earnings and net pay for the pay period showing each
payroll deduction in arriving at net pay.
43) Hu, Marcos, and Letterman share income on a 6:3:1 basis. They have capital
balances of $80,000, $60,000, and $45,000, respectively, when Buffett is admitted to
the partnership.
Instructions
Prepare the journal entry to record the admission of Buffett into the partnership if
Buffett purchases one-half of Hus equity for $45,000; one-half of Marcoss equity for
$22,000; and one-third of Lettermans equity for $18,000.
44) What is responsibility accounting? Explain the purpose of responsibility
accounting.
45) Sales Returns and Allowances and Sales Discounts are both ______________
accounts and have _______________ normal balances.
46) The ledger account balances for Galaxie 500 Company are listed below.
Accounts Payable$ 6,000
Accounts Receivable7,000
Cash5,200
Owners Capital11,000
Owners Drawings4,000
Service Revenue30,000
Salaries and Wages Expense20,800
Unearned Service Revenue2,000
Utilities Expense12,000
Instructions
Prepare a trial balance in proper form for Galaxie at December 31, 2014 .
47) The cost of demolishing an old building on land that has been acquired so that a
new building can be constructed should be charged to the ______________ account.