The JIT operating philosophy requires a push-through production system.
There is no limit to the amount of income subject to the FUTA tax.
Corporate earnings are subject to double taxation.
Budgets identify potential constraints before they become problems.
An adjusted trial balance must be prepared before the adjusting entries can be recorded.
Which of the following isTRUE of activity-based costing?
A.It is also called single-plantwide overhead costing.
B.It is helpful when companies manufacture one product.
C.It categorizes all indirect costs by activity.
D.The total overhead costs accumulate in one cost pool.
To assign production costs to products manufactured, managers must trace all period
costs to units produced and prepare process cost reports.
If a bond has a face interest rate of 6 percent, a face value of $40,000, and pays interest
semiannually, each interest payment will amount to $1,200.
The payback period equals the cost of the capital investment divided by net income.
A merchandiser’s operating cycle concludes with the sale of goods.
Under the perpetual inventory system, cost of goods sold is not recorded until the end
of the accounting period.
Which of the following documents initiates the purchasing of materials?
A.Job order cost sheet
B.Receiving report
C.Purchase request
D.Purchase order
Susan’s Plastics Inc. manufactures a line of office desk accessories. The company’s
newest and most popular product is a plastic paper holder for holding the paper up
while working at the computer. Production began on February 1, 2014. Plastic is poured
into molds to form the product, and the entire process takes place in the Molding
Department. After the liquid plastic is poured (signifying the beginning of the process),
the molds must be cooled slowly before the paper holder is separated from the mold.
Statistics for 2014 are shown below.
Ending work in process inventory: All direct materials were added at the beginning of
the process, and the average stage of completion of these units as to conversion costs is
80 percent.
No units were lost or spoiled during the year.
a. Prepare a process cost report using the FIFO costing method for the Molding
Department using five steps. Include T-accounts to recap both costs and units for the
Work in Process Inventory account.
b. Identify the amount to be transferred out of Work in Process Inventory and prepare
the necessary entry in journal form to do so.
Use this information to answer the following question.
A periodic inventory system is used.
Using LIFO, the cost assigned to ending inventory is
A.$3,480.
B.$8,112.
C.$2,664.
D.$8,928.
Using the high-low method and the information below, compute the monthly total fixed
costs for Coral Corporation.
A.$8,000
B.$2,420
C.$5,500
D.$5,580
The indirect method of preparing a statement of cash flows
A.eliminates the need for a schedule of noncash investing and financing transactions.
B.provides a different result than the direct method.
C.adjusts net income for changes in current accounts.
D.shows collections from customers rather than the change in Accounts Receivable.
Which of the following events does not require a journal entry?
A.Purchase of a one-year insurance policy.
B.Agreement to perform a service at a future date.
C.Payment for a service performed previously.
D.All of these choices.
Use this balance sheet and income statement to answer the following question. Use
ending balances whenever average balances are required for computing ratios.
The current ratio for National Textile is
A.1.20.
B.1.75.
C..67.
D.1.50.
Which of the following products would probably be produced by a company using a
process costing system?
A.House
B.Wedding gowns
C.Bags
D.Movie
Susan Kane won the mayoral election in the City of Ashley partly on the basis of her
charge that Allen Ross, the former mayor, was responsible for the budget deficit. After
taking office, she hired a major international accounting firm to straighten things out.
This excerpt appeared in an article from a leading business publication, West End
Business Review:
[A riddle] Q: When is a budget deficit not a deficit?
A: When it is a surplus, of course.
Ashley Mayor Susan Kane was once again caught with egg on her face last week as she
and her financial advisers tried to defend that riddle. On one hand, Comptroller Jim
Guan, a Kane appointee, testified in hearings that the city had actually ended 20×5 with
a $6 million surplus, not the much-reported deficit. He said further that the modest
surplus grew to $54 million as a result of tax-enrichment supplements to the 20×5
balance sheet.
On the other hand, the mayor stuck by the same guns she used last year on her
predecessor. The city had ended 20×5, under the Allen Ross administration, not merely
without a surplus, but with a deficit. The apparent discrepancy can be explained.
Like most U.S. cities, Ashley operates under a modified accrual accounting basis. This
is a combination of the cash basis and the accrual basis. The modified accrual basis
differs from the accrual basis in that revenue is recorded when it is collected. The
collection of Ashley’s parking tax, which is assessed on all city parking lots and
garages, is an example.
The tax is assessed and collected on a quarterly basis, but the city doesn’t collect the
amount due for the last quarter of 20×6 until the first quarter of 20×7. Under ideal
accrual methods, the parking revenues should be recorded in the 20×6 financial
statements. Under a cash approach, the revenues would be recorded in the 20×7 budget.
What the city did before was to record the money whenever it was advantageous
politically. That, combined with the infamous revolving funds, allowed the city to hide
the fact it was running large deficits under former Mayor Ross. That also means that no
one really knew where the city stood.
The auditors are now reallocating the parking revenues to the 20×7 budget but are
accruing other revenues by shifting the period of collection from a year in the past.
Overall, more revenues were moved into earlier fiscal years than into later years,
inflating those budgets. Thus, the 20×7 deficit is a surplus.
The article concluded:
The upshot is that both Mayor Kane and Mr. Guan (the comptroller) were correct. There
was a deficit in the 20×5 corporate or checkbook fund, but because of corrections taking
place now, a surplus exists.
a. Do you agree with the way the auditors handled parking revenues? Support your
answer by explaining which method of accounting you think a city should use.
b. Comment on the statement, ‘Systematically applied accounting principles will allow
all to know exactly where the city stands.’
Which of the following is a facility-level cost?
A.Testing products
B.Redesigning the process
C.Maintaining the factory
D.Materials handling
During April, Department A started 400,000 units of product in a particular production
process. The beginning work in process inventory was 40,000 units, and the ending
inventory was 50,000 units. Direct materials are introduced at the start of processing,
and beginning and ending inventories are considered to be 40 percent complete with
respect to conversion costs. Department A uses the FIFO costing method.
The number of units started and completed in Department A during April was
A.450,000.
B.350,000.
C.360,000.
D.160,000.
When direct materials are issued from inventory to production under a job order costing
system, an increase is recorded in the
A.Overhead account.
B.Work in Process Inventory account.
C.Materials Inventory account.
D.Finished Goods Inventory account.
Which of the following is indicated by a favorable fixed overhead volume variance of a
manufacturing company?
A.The creation of excess inventory
B.The actual overhead exceeded the budgeted overhead
C.Sales exceeded production
D.Variable overhead costs were less than fixed overhead costs
The carrying value of a depreciable asset purchased 3 years ago equals
A.original cost minus depreciation expense for the current period.
B.original cost minus accumulated depreciation.
C.the estimated cost to replace the asset at today’s price.
D.the estimated amount that the asset could be sold for in today’s market.
A company pays for 25 percent of its purchases by credit terms n/60, 40 percent of its
purchases by credit terms n/30, and the remaining 35 percent by a two-month advance
payment. The sources for June’s cash payments schedule for direct materials would not
include which of the following?
A.June’s schedule of expected cash payments for direct materials
B.August’s schedule of expected cash payments for direct materials
C.May’s schedule of expected cash payments for direct materials
D.April’s schedule of expected cash payments for direct materials
The ability to pay bills when due and to meet unexpected needs for cash most closely
describes
A.cash flow adequacy.
B.long-term solvency.
C.liquidity.
D.profitability.
Cloud Nine International uses a process costing system. Assume that direct materials
are added at the beginning of the period and that direct labor and overhead are added
continuously throughout the process. The company uses the average costing method.
The following data are available for one of its accounting periods:
Equivalent units for direct materials of Cloud Nine International are
A.180,000.
B.206,000.
C.176,000.
D.191,000.
Which of the following accounts is not found in closing entries?
A.Accumulated Depreciation’“Equipment
B.Owner’s Capital
C.Income Summary
D.Withdrawals
Which of the following items would be considered a revenue expenditure?
A.Plant assets
B.Routine maintenance
C.Addition
D.Betterment
The board of directors of Lark Corporation declared a cash dividend of $3.50 per share
on 57,000 shares of common stock on June 14, 20×5. The dividend is to be paid on July
15, 20×5, to shareholders of record on July 1, 20×5. The proper entry to be recorded on
June 14, 20×5 is,
Why would it be less risky for a wealthy individual to incorporate his or her business
rather than to operate it as a sole proprietorship or partnership?
Using the following data, prepare a classified balance sheet as of December 31, 20×5,
for Paula’s Picture Frame Company.
Use the following information to calculate the ratios requested below. Round answers to
two decimal places. Show your work.
Use this information to answer the following question. These facts concern the
long-term stock investments of DeBord Corporation:
The entry to set up the Allowance to Adjust Long-Term Investments to Market in 2014
is:
Distinguish between push-through and pull-through production methods. How does
pull-through production meet the requirements of a just-in-time operating environment?
Jamie Enterprises purchased a warehouse by signing a long-term $400,000 mortgage
with monthly payments of $3,100. The mortgage carries an interest rate of 9 percent.
Prepare entries in journal form without explanations to record the purchase and the
second and third monthly payments. Round answers to the nearest dollar.
Assume that on December 1, a $6,000, 90-day, 10 percent note receivable was received
from a customer as an extension of his past-due account. The entry that would be made
to record the note is:
From the following items in the Income Statement columns of the work sheet of Sailors
Co. at December 31, 20×5, prepare the closing entries without explanations, assuming
that a $100 withdrawal was made by the owner during the period.
