1) Which one of the following best describes a job cost sheet?
a.It is a form used to record the costs chargeable to a specific job and to determine the
total and unit costs of the completed job
b.It is used to track manufacturing overhead costs to specific jobs
c.It is used by management to understand how direct costs affect profitability
d.It is a daily form that management uses for tracking worker productivity on which
employee raises are based
2) Treasury stock is generally accounted for by the
a.cost method
b.market value method
c.par value method
d.stated value method
3) Just-in-time processing requires
a.a constant build-up of finished goods inventory just in case unexpected or rush orders
are received
b.that suppliers of the company be able to deliver on short notice exact quantities of raw
materials
c.that the quality control system be eliminated so that production is completed without
interruption
d.an increase in the level of raw materials inventory so that production can be
completed just-in-time before the delivery date promised
4) Cost of goods available for sale is computed by adding
a.beginning inventory to net purchases
b.beginning inventory to the cost of goods purchased
c.net purchases and freight-in
d.purchases to beginning inventory
5) Quasar Corporation had net income of $210,000 and paid dividends to common
stockholders of $63,000 in 2014 . The weighted average number of shares outstanding
in 2014 was 50,000 shares. Quasar Corporation’s common stock is selling for $30 per
share on the New York Stock Exchange.
Quasar Corporation’s payout ratio for 2014 is
a.24%
b.30%
c.26%
d.$3.33 per share
6) Prepare the necessary journal entries on the books of Kelly Carpet Company to
record the following transactions, assuming a perpetual inventory system (you may
omit explanations):
(a)Kelly purchased $45,000 of merchandise on account, terms 2/10, n/30.
(b)Returned $3,000 of damaged merchandise for credit.
(c)Paid for the merchandise purchased within 10 days.
7) Which of the following statements about standard costs is false?
a.Properly set standards should promote efficiency
b.Standard costs facilitate management planning
c.Standards should not be used in “management by exception”
d.Standard costs can simplify the costing of inventories
8) The one characteristic that all entries recorded in a cash payments journal have in
common is:
a.a credit to the cash account
b.a debit to the cash account
c.that they all represent purchases of merchandise
d.that they are all posted to the accounts payable subsidiary ledger
9) Under IFRS
a.comparative prior-period information must be presented, but financial statements need
not be provided annually
b.comparative prior-period informaton must be presented, and financial statements must
be provided annually
c.comparative prior-period information is not required, and financial statements need
not be provided annually
d.comparative prior-period information is not required, but financial statements must be
provided annually
10) Cost of goods manufactured in a manufacturing company is analogous to
a.Ending inventory in a merchandising company
b.Beginning inventory in a merchandising company
c.Cost of goods available for sale in a merchandising company
d.Cost of goods purchased in a merchandising company
11) An activity index might be referred to as a cost
a.driver
b.multiplier
c.element
d.correlation.
12) Rackett Industries is preparing its direct labor budget for May. Projections for the
month are that 33,400 units are to be produced and that direct labor time is three hours
per unit. If the labor cost per hour is $11, what is the total budgeted direct labor cost for
May?
a.$1,062,600
b.$1,082,400
c.$1,102,200
d.$1,188,000
13) A corporation issued $600,000, 10%, 5-year bonds on January 1, 2014 for
$648,666, which reflects an effective-interest rate of 7%. Interest is paid semiannually
on January 1 and July 1 . If the corporation uses the effective-interest method of
amortization of bond premium, the amount of bond interest expense to be recognized
on July 1, 2014, is
a.$30,000
b.$21,000
c.$32,434
d.$22,703
14) Match the items in the two columns below by entering the appropriate code letter in
the space provided.
A.Managerial accounting F.Work in process inventory
B.Financial accounting G.Direct materials
C.Planning H.Manufacturing overhead
D.DirectingI. Period costs
E.Controlling J.Value chain
_____1>The cost of products that are partially complete.
_____2>The function of keeping activities in accordance with plans.
_____3>Primarily concerned with internal users and reports pertain to subunits of the
entity.
_____4>Materials that can be physically and directly associated with manufacturing a
product.
_____5>The function of setting goals and objectives.
_____6>Indirect costs of manufacturing a product.
_____7>Primarily concerned with external users and reports pertain to the entity as a
whole.
_____8>Costs that are noninventoriable.
_____9>All activities associated with providing a product or service.
_____10>The function of coordinating diverse activities to produce a smooth-running
operation.
15) A company shows the following balances:
Sales Revenue$2,500,000
Sales Returns and Allowances450,000
Sales Discounts50,000
Cost of Goods Sold1,400,000
What is the gross profit percentage?
a.30%
b.44%
c.56%
d.70%
16) Pension funds and mutual funds regularly invest in debt and stock securities to
a.generate earnings
b.house excess cash until needed
c.meet strategic goals
d.control the company in which they invest
17) The following items are taken from the financial statements of the Postal Service
for the year ending December 31, 2014:
Accounts payable$ 18,000
Accounts receivable11,000
Accumulated depreciation equipment28,000
Advertising expense21,000
Cash15,000
Owners capital (1/1/14)102,000
Owners drawings14,000
Depreciation expense12,000
Insurance expense3,000
Note payable, due 6/30/1570,000
Prepaid insurance (12-month policy)6,000
Rent expense17,000
Salaries and wages expense32,000
Service revenue133,000
Supplies4,000
Supplies expense6,000
Equipment210,000
The current assets should be listed on Postal Services balance sheet in the following
order:
a.cash, accounts receivable, prepaid insurance, equipment
b.cash, prepaid insurance, supplies, accounts receivable
c.cash, accounts receivable, prepaid insurance, supplies
d.equipment, supplies, prepaid insurance, accounts receivable, cash
18) The following information is for Sunny Day Real Estate:
Sunny Day Real Estate
Balance Sheet
December 31, 2014
Cash$ 25,000Accounts Payable$ 60,000
Prepaid Insurance30,000Salaries and Wages Payable15,000
Accounts Receivable50,000Mortgage Payable 85,000
Inventory70,000Total Liabilities160,000
Land Held for Investment85,000
Land120,000
Building$100,000
Less AccumulatedOwners Capital 370,000
Depreciation(20,000)80,000
Trademark 70,000Total Liabilities and
Total Assets$530,000Owners Equity$530,000
The total dollar amount of liabilities to be classified as current liabilities is
a.$15,000
b.$60,000
c.$75,000
d.$160,000
19) Which of the following is not an operating budget?
a.Direct labor budget
b.Sales budget
c.Production budget
d.Cash budget
20) A static budget is appropriate in evaluating a manager’s performance if
a.actual activity closely approximates the master budget activity
b.actual activity is less than the master budget activity
c.the company prepares reports on an annual basis
d.the company is a not-for-profit organization
21) LIFO can be used
a.under neither GAAP nor IFRS
b.under IFRS but not GAAP
c.under GAAP but not IFRS
d.under both GAAP and IFRS
22) The current controllable margin for Stom Division is $124,000. Its current operating
assets are $400,000. The division is considering purchasing equipment for $120,000
that will increase annual controllable margin by an estimated $20,000. If the equipment
is purchased, what will happen to the return on investment for Stom Division?
a.An increase of 16.1%
b.A decrease of 13.3%
c.A decrease of 3.3%
d.A decrease of 7.2%
23) Which of the following is correct regarding cost systems?
Job OrderProcess
a.Work in process accountseveralone for each process
b.Work in process accountoneone
c.Work in process accountoneone for each process
d.Work in process accountseveralone
24) During July, the following purchases and sales were made by Big Dan Company.
There was no beginning inventory. Big Dan Company uses a perpetual inventory
system.
PurchasesSales
July 340 units @ $12July 1350 units
1140 units @ $132220 units
2020 units @ $15
Under the LIFO method, the cost of goods sold for each sale is:
July 13July 22
a.$600$240
b. 640300
c. 650300
d. 750260
25) Notification by the bank that a deposited customer check was returned NSF requires
that the company make the following adjusting entry:
a.Accounts Receivable
Cash
b.Cash
Accounts Receivable
c.Miscellaneous Expense
Accounts Receivable
d.No adjusting entry is necessary
26) A company decides to exchange its old machine and $231,000 cash for a new
machine. The old machine has a book value of $189,000 and a fair value of $210,000
on the date of the exchange. The cost of the new machine would be recorded at
a.$420,000
b.$441,000
c.$399,000
d.cannot be determined
27) If a corporation has only one class of stock, it is referred to as
a.classless stock
b.preferred stock
c.solitary stock
d.common stock
28) A company has an average inventory on hand of $60,000 and the days in inventory
is 73 days. What is the cost of goods sold?
a.$300,000
b.$4,380,000
c.$600,000
d.$2,190,000
29) In an analogous sense, external user is to internal user as generally accepted
accounting principles are to
a.timely
b.special-purpose
c.relevance to decision
d.SEC
30) Zen Company has accumulated the following budget data for the year 2014 .
1>Sales: 60,000 units, unit selling price $50.
2>Cost of one unit of finished goods: Direct materials 2 pounds at $5 per pound, direct
labor 1.5 hours at $10 per hour, and manufacturing overhead $6 per direct labor hour.
3>Inventories (raw materials only): Beginning, 20,000 pounds; ending, 30,000 pounds.
4>Raw materials cost: $5 per pound.
5>Selling and administrative expenses: $320,000.
6>Income taxes: 30% of income before income taxes.
Instructions
(a)Prepare a schedule showing the computation of cost of goods sold for 2014 .
(b)Prepare a budgeted income statement for 2014 .
31) Depreciable cost is the
a.book value of an asset less its salvage value
b.cost of an asset less its salvage value
c.cost of an asset less accumulated depreciation
d.book value of an asset
32) The culmination of preparing operating budgets is the
a.budgeted balance sheet
b.production budget
c.cash budget
d.budgeted income statement
33) The use of remittance advices for mail receipts is an example of
a.documentation procedures
b.other controls
c.physical controls
d.independent internal verification
34) The best managed companies will have
a.no uncollectible accounts
b.a very strict credit policy
c.a very lenient credit policy
d.some accounts that will prove to be uncollectible
35) An alternative name for Bad Debt Expense is
a.Deadbeat Expense
b.Uncollectible Accounts Expense
c.Collection Expense
d.Credit Loss Expense
36) A recent accounting graduate from East Southwest State University evaluated the
operating performance of Patel Company’s four divisions. The following presentation
was made to Patel ‘s Board of Directors. During the presentation, the accountant made
the recommendation to eliminate the Northern Division stating that total net income
would increase by $60,000. (See analysis below.)
Other Three DivisionsNorthern Division Total
Sales revenue$2,000,000$480,000$2,480,000
Cost of Goods Sold 950,000 400,000 1,350,000
Gross Profit1,050,00080,0001,130,000
Operating Expenses 800,000 140,000 940,000
Net Income$ 250,000$ (60,000)$ 190,000
For the other divisions, cost of goods sold is 80% variable and operating expenses are
70% variable. The cost of goods sold for the Northern Division is 35% fixed, and its
operating expenses are 75% fixed. If the division is eliminated, only $5,000 of the fixed
operating costs will be eliminated.
Instructions
Do you concur with the new accountant’s recommendation? Present a schedule to
support your answer.
37) Journalize the following business transactions in general journal form. Identify each
transaction by number. You may omit explanations of the transactions.
1>The owner, Athena Lu, invests $40,000 in cash in starting a real estate office
operating as a sole proprietorship.
2>Purchased $400 of supplies on credit.
3>Purchased equipment for $8,000, paying $2,000 in cash and signed a 30-day, $6,000,
note payable.
4>Real estate commissions billed to clients amount to $4,000.
5>Paid $700 in cash for the current month’s rent.
6>Paid $200 cash on account for supplies purchased in transaction 2 .
7>Received a bill for $600 for advertising for the current month.
8>Paid $2,200 cash for office salaries and wages.
9>Lu withdrew $1,500 from the business for living expenses.
10>Received a check for $3,000 from a client in payment on account for commissions
billed in transaction 4 .
38) If bonds were issued at a premium, then the contractual interest rate was
_____________ than the market interest rate.
39) Liabilities are classified on the balance sheet as being _______________ liabilities
or ______________ liabilities.
40) Three doctors, Marshall Murrey, Andrew Shaw, and Austin Taylor, opened a family
medicine clinic. All three doctors had been lifelong friends. All belonged to the same
religious faith. All were very active in church affairs, and tried to mold their
professional behavior to their religious beliefs.
About a year ago, Dr. Murrey announced that he was leaving the church. The others
noticed that his personality also began to change. He began to dress in flamboyant
styles, and he started wearing expensive-looking jewelry. His temper became
unstableone minute he was calm, and the next, he might be throwing charts down the
hall and screaming. He started coming to the office late, and forgetting to see some of
his patients before he left again. The other two at first were stunned at the changes. His
wife asked them whether they thought he might have a drinking problem. After finally
deciding to investigate, they found what looked to them like a large amount of cocaine,
(hundreds of plastic sacks of white powder) tucked away in boxes of old medical
equipment.
Frightened, Drs. Shaw and Taylor decided to act quickly. Their partnership agreement
said nothing about dissolving the partnershiponly about what to do if one of them died.
They therefore secretly rented office space across town and began to move the most
necessary equipment and supplies to the new office. A month later, they changed the
locks on the old office and began seeing patients in the new office without any notice to
Dr. Murrey at all. Dr. Murrey simply came in at around ten o’clock as usual, and found
himself locked out of an empty office.
Required:
Did Drs. Shaw and Taylor l act ethically in their ending of the partnership? Explain.
41) Compute the asset turnover based on the following:
Beginning total assets$ 800,000
Ending total assets1,200,000
Net income300,000
Net sales2,500,000
42) Given the following information, determine the adjusted cash balance per books
from the following information:
Balance per books as of June 30, $8,600.
Outstanding checks, $820.
NSF check returned with bank statement, $130.
Deposit mailed the afternoon of June 30, $300.
Check printing charges, $30.
Interest earned on checking account, $12.
43) 1>Winder Construction gave up a used crane and $82,000 cash for a new crane. The
old crane cost $210,000, had $84,000 of accumulated depreciation, and a fair market
value of $136,000. The exchange had commercial substance. In recording this
exchange, for how much should the new crane be recorded?
$_____________
2>Preston Builders gave up a used diesel-powered electric generator and $17,000 cash
for a new truck. The generator cost $105,000, had $65,000 of accumulated depreciation,
and a fair market value of $40,000. The exchange had commercial substance. In
recording this exchange, for how much should the new truck be recorded?
$_____________
3>Appleton Mining purchased a coal mine for $4,200,000. The mine was expected to
produce 12,000,000 tons of coal over twenty years with no salvage value. During the
first year, 800,000 tons of coal were mined and sold. How much is depletion expense
for the first year?
$_____________
4>Salt Industries purchased equipment costing $100,000 on January 1, 2014 . The
equipment has a five-year useful life, $10,000 salvage value, and is being depreciated
using the straight-line method. It was sold at an $8,000 gain on July 1, 2018 . How
much was the selling price of the equipment?
$_____________
5>Vystar Corporation incurred $380,000 of research and development costs to produce
a high technology solar computer, paid filing fees of $15,000 to register a patent on this
product, and paid $84,000 to successfully defend the patent against infringement by a
competitor. All of these costs were incurred in late December 2014 . Production of solar
computers began on January 1, 2015 . While the patent has a legal life of 20 years the
company determines that the patents useful life is 15 years. How much is amortization
expense for 2015?
$_____________
44) Equipment with an invoice price of $20,000 was purchased and freight costs were
$900. The cost of the equipment would be $______________.
45) For each of the independent events listed below, analyze the impact on the indicated
items at the end of the current year by placing the appropriate code letter in the box
under each item.
Code: O = item is overstated
U = item is understated
NA = item is not affected
