1) The decision to accept an additional volume of business should be based on a
comparison of the revenue from the additional business with the sunk costs of
producing that revenue.
2) If all columns of a completed work sheet balance, you can be sure that no errors were
made in its preparation.
3) Indirect materials are accounted for as factory overhead because they are not clearly
identified with specific product units.
4) A company received a $15,000, 90-day, 10% note receivable. The journal entry to
record receipt of the note includes a debit to Notes Receivable.
5) Since goodwill is an intangible, it is amortized each year using the straight-line
method, the same as other intangibles are amortized.
6) Standard material costs, standard labor costs, and standard overhead costs can be
obtained from standard cost tables published by the Institute of Management
Accountants.
7) The greater the times interest earned ratio, the greater the risk a company is exposed
to.
8) With activity-based costing, complex products are assigned a larger portion of
overhead.
9) Financing activities include receiving cash dividends from investments in other
companies’ stocks.
10) Costs may be classified by many different cost classifications.
11) In a process costing system, the entry to record cost of materials assigned to a
production department requires a debit to the Raw Materials Inventory account and a
credit to the Work in Process Inventory account for that department.
12) The cash flow on total assets ratio is computed by dividing cash flows from
operations by average total assets.
13) Changes in accounting estimates are:
A.Considered accounting errors.
B.Reported as prior period adjustments.
C.Accounted for with a cumulative “catch-up” adjustment.
D.Extraordinary items.
E.Accounted for in current and future periods.
14) Crestfield leases office space for $7,000 per month. On January 3, the company
incurs $12,000 to improve the leased office space. These improvements are expected to
yield benefits for 10 years. Crestfield has 4 years remaining on its lease. What journal
entry would be needed to record the expense for the first year related to the
improvements?
A.Debit Amortization Expense $1,200; credit Accumulated Amortization $1,200.
B.Debit Depletion Expense $3,000; credit Accumulated Depletion $3,000.
C.Debit Depreciation Expense $1,200; credit Accumulated Depreciation $1,200.
D.Debit Depletion Expense $12,000; credit Accumulated Depletion $12,000.
E.Debit Amortization Expense $3,000; credit Accumulated Amortization $3,000.
15) On December 31, 2015 Carmack Company’s Prepaid Insurance account had a
balance before adjustment of $6,000. The insurance was purchased on July 1 of the
same year for one year of insurance coverage. The adjusting entry needed on December
31 is:
A.Debit Prepaid Insurance $6,000; credit Cash $6,000.
B.Debit Insurance Expense $3,000; credit Accounts Payable $3,000.
C.Debit Insurance Expense $3,000; credit Prepaid Insurance $3,000.
D.Debit Cash $6,000; credit Prepaid Insurance $6,000.
E.Debit Insurance Expense $6,000; credit Accounts Payable $6,000.
16) On December 31, a company needed to estimate its ending inventory to prepare its
annual financial statements. The following information is currently available:
Inventory as of January 1: $120,500
Net sales for the year: $400,000
Net purchases for the year: $270,500
This company typically achieves a gross profit ratio of 15%. Ending Inventory under
the gross profit method would be:
A.$102,425.
B.$10,425.
C.$9,000.
D.$51,000.
E.$51,425.
17) The following information pertains to the Packer Corporation. Calculate the cost of
goods sold for the period:
A.$250,000.
B.$290,000.
C.$242,000.
D.$258,000.
E.$246,000.
18) All of the following statements regarding recognition of receivables under U.S.
GAAP and IFRS are true except:
A.U.S. GAAP and IFRS have similar asset criteria that apply to recognition of
receivables.
B.Receivables that arise from revenue-generating activities are subject to broadly
similar criteria for U.S. GAAP and IFRS.
C.The realization principle under GAAP implies an arm’s length transaction occurs.
D.GAAP refers to the earnings process and IFRS refers to risk transfer and ownership
reward.
E.Differences arise mainly from industry-specific guidance under U.S. GAAP.
19) Henry, Luther, and Gage are dissolving their partnership. Their partnership
agreement allocates each partner 1/3 of all income and losses. The current period’s
ending capital account balances are Henry, $45,000; Luther, $37,000; and Gage,
$(5,000). After all assets are sold and liabilities are paid, there is $77,000 in cash to be
distributed. Gage is unable to pay the deficiency. What amount of cash will Gage
receive upon liquidation?
A.$25,667.
B.$20,667.
C.$30,667.
D.Gage will be invoiced for $5,000.
E.$0.
20) Andrew Industries purchased $165,000 of raw materials on account during the
month of March. The beginning Raw Materials Inventory balance was $22,000, and the
materials used to complete jobs during the month were $141,000 direct materials and
$13,000 indirect materials. What amount will Andrew transfer to Work In Process
Inventory for the month of March?
A.$165,000
B.$154,000
C.$13,000
D.$141,000
E.$33,000
21) Fallon and Springer formed a partnership on January 1 . Fallon contributed $90,000
cash and equipment with a market value of $60,000. Springer’s investment consisted of:
cash, $30,000; inventory, $20,000; all at market values. Partnership net income for Year
1 and Year 2 was $75,000 and $120,000, respectively.
1) Determine each partner’s share of the net income for each year, assuming each of the
following independent situations:
(a) Income is divided based on the partners’ failure to sign an agreement.
(b) Income is divided based on a 2:1 ratio (Fallon: Springer).
(c) Income is divided based on the ratio of the partners’ original capital investments.
(d) Income is divided based on interest allowance of 12% on the original capital
investments; salary allowance to Fallon of $30,000 and Springer of $25,000; and the
remainder to be divided equally.
2) Prepare the journal entry to record the allocation of the Year 1 income under
alternative (d) above.
22) Keita Co. reported net income of $213.4 million, net cash provided by operating
activities of $151.3 million, total cash flows of $187.7 million, and average total assets
of 2,314.8 million at the end of the year. Calculate the cash flow on total assets ratio for
Keita.
23) The Gardner Company expects sales for October of $248,000. Experience suggests
that 45% of sales are for cash and 55% are on credit. The company collects 50% of its
credit sales in the month of sale and 50% in the month following sale. Budgeted
Accounts Receivable on September 30 is $67,000. What is the amount of cash expected
to be collected in October?
A.$124,000.
B.$178,600.
C.$179,800.
D.$111,600.
E.$246,800.
24) The following information is available for Montrose Company at December 31:
Based on this information, the amounts considered Cash and Cash Equivalents,
respectively on December 31 are:
A.Cash $10,430; Cash equivalents $20,400
B.Cash $8,540; Cash equivalents $22,290
C.Cash $8,790; Cash equivalents $26,400
D.Cash $19,190; Cash equivalents $16,000
E.Cash $11,235; Cash equivalents $26,400
25) All of the following are classified as liabilities except:
A.Accounts Receivable.
B.Notes Payable.
C.Wages Payable.
D.Accounts Payable.
E.Taxes Payable.
26) At the end of June, the job cost sheets for Kennedy Manufacturing show the
following total costs accumulated on three custom jobs.
Job 203 was started in production in May and the following costs were assigned to it in
May: direct materials, $12,000; direct labor, $6,000; and overhead $8,700. Jobs 204 and
205 are started in June. Overhead cost is applied with a predetermined rate based on
direct labor cost. Jobs 203 and 204 are finished in June, and Job 205 will be finished in
July. No raw materials are used indirectly in June. Using this information, answer the
following questions assuming the company’s predetermined overhead rate did not
change.
a. What is the cost of the raw materials requisitioned in June for each of the three jobs?
b. How much direct labor cost is incurred during June for each of the three jobs?
c. What predetermined overhead rate is used during June?
d. How much total cost is transferred to finished goods during June?
27) Chung Corporation uses a job order costing system. Five jobs were worked on
during the current year. The predetermined overhead rate is 20% of direct labor costs.
The following cost information is available (all materials and time ticket information
applies to direct costs):
Part 1-Complete the job cost sheets for each job.
Part 2-Identify the amounts of each of the following accounts at the end of the period
a. Work in Process ____________________
b. Finished Goods ____________________
c. Cost of Goods Sold ____________________
28) Luker Corporation uses a process costing system. The company had $160,500 of
beginning Finished Goods Inventory on October 1. It transferred in $837,000 of goods
completed during the period. The ending Finished Goods Inventory balance on October
31 was $158,200. The entry to account for the cost of goods sold in October is:
A.Debit Cost of Goods Sold $837,000; credit Finished Goods Inventory $837,000.
B.Debit Cost of Goods Sold $839,300; credit Work in Process Inventory $839,300.
C.Debit Finished Goods Inventory $837,000; credit Work in Process Inventory
$837,000.
D.Debit Finished Goods Inventory $158,200; credit Cost of Goods Sold $158,200.
E.Debit Cost of Goods Sold $839,300; credit Finished Goods Inventory $839,300.
30) The total compensation an employee earns including wages, salaries, commissions,
bonuses, and any compensation earned before deductions such as taxes is called
___________________.
31) From the adjusted trial balance for Fabricated Products Company given below,
prepare the necessary closing entries.
32) Data for Kennedy Realty are as follows:
The owner, Finn Kennedy, withdrew a total of $30,000 for personal use during the year.
Using the above data, prepare Kennedy Realty’s Statement of Owner’s Equity for the
year ended December 31.
33) Sabor Company uses a perpetual inventory system and purchased $17,800 of
merchandise on April 7 with credit terms of 1/10, n/30. Merchandise with a cost of
$1,800 was damaged and returned to the seller on April 10. On April 16 the company
paid the amount due. Prepare the journal entries to record the transactions on all three
dates.
34) BBB Company sends a $2,500 invoice to a customer for catering services it
provided during the month. Set up the necessary T-accounts below and show how this
transaction would be recorded directly in those accounts.
35) A company reported net income of $132,000, operating cash flows of $87,000, total
cash flows of $112,000, and average total assets of $1,053,000. Calculate its cash flow
on total assets ratio.
36) The group responsible for and have final authority for managing a corporation’s
activities is(are) the ________________________________.
37) The following calendar year information about the Tchulahota Corporation is
available on December 31:
The company applies overhead on the basis of 125% of direct labor costs. Calculate the
amount of over- or underapplied overhead.
38) When one company owns more than 50% of another company’s voting stock and
has control over the investee company, the investee is called the
_______________________.