Merchandise inventory is reported in the long-term assets section of the balance sheet.
Answer:
Accounting is an information and measurement system that identifies, records, and
communicates financial information to users.
Answer:
In applying the lower of cost or market method to inventory valuation, market is
defined as the current replacement cost.
Answer:
A company’s history indicates that 20% of its sales are for cash and the rest are on
credit. Collections on credit sales are 20% in the month of the sale, 50% in the next
month, and 30% the following month. Projected sales for January, February, and March
are $75,000, $92,000, and $60,000, respectively. The March expected cash receipts
from all current and prior credit sales are $80,500.
Answer:
A single-step income statement includes cost of goods sold as another expense and
shows only one subtotal for total expenses.
Answer:
Kinetic Company estimates that overhead costs for the next year will be $1,600,000 for
indirect labor and $400,000 for factory utilities. The company uses direct labor hours as
its overhead allocation base. If 50,000 direct labor hours are planned for this next year,
then the plantwide overhead rate is $.025 per direct labor hour.
Answer:
In a process manufacturing system, products pass through a series of sequential
processes.
Answer:
Sales Discounts, Sales Returns and Allowances, and Cost of Goods Sold are all closed
to the Income Summary account with debits.
Answer:
The first five steps in the accounting cycle include analyzing transactions, journalizing,
posting, preparing an unadjusted trial balance, and recording adjusting entries.
Answer:
An unadjusted trial balance is a listing of accounts and their balances prepared before
adjustments are recorded.
Answer:
Errors in the period-end inventory balances only have an impact on the current period’s
records and financial statements.
Answer:
Factory overhead includes selling and administrative expenses because they are indirect
costs of a product.
Answer:
Investing activities involve the buying and selling of assets such as land and equipment
that are held for long-term use in the business.
Answer:
The chart of accounts is a list of all the accounts used by a company and a
corresponding identification number.
Answer:
Assets invested by a partner into a partnership remain the property of the individual
partner.
Answer:
The cost of equipment purchased by a company last year would be an avoidable cost.
Answer:
There are only two methods to derive an estimated line of cost behavior: the high-low
method and the scatter diagram.
Answer:
The cost-benefit principle affects all other accounting system principles.
Answer:
Companies promoting continuous improvement strive to achieve practical standards
rather than ideal standards.
Answer:
A company had sales of $350,000 and cost of goods sold of $200,000, which means
gross profit is equal to $550,000.
Answer:
Long-term investments include investments in land or other assets not used in a
company’s operations.
Answer:
A payroll register is a cumulative record of an employee’s hours worked, gross
earnings, deductions, and net pay.
Answer:
Service firms, unlike manufacturing firms, should only use actual costs when
determining a selling price for their services.
Answer:
A high merit rating means that an employer has high employee turnover or seasonal
hiring.
Answer:
An overhead cost variance is the difference between the actual overhead incurred for
the period and the standard overhead applied.
Answer:
The FASB recommends that the operating section of the statement of cash flows be
reported using the direct method.
Answer:
A materials requisition is a source document used by materials managers of a
manufacturing company to order raw materials from suppliers; it serves the same
purpose as a purchase order in a merchandising company.
Answer:
The payback method, unlike the net present value method, does not ignore cash flows
after the point of cost recovery.
Answer:
The use of internal controls provides guaranteed protection against losses due to
operating activities.
Answer:
The FIFO inventory method assumes that costs for the most recently purchased items
are the first to be charged to the cost of goods sold.
Answer:
Operating leases are long-term or noncancelable leases in which the lessor transfers all
the risks and rewards of ownership to the lessee.
Answer:
A company had cash sales of $49,527, credit sales of $38,540, sales returns and
allowances of $7,100, and sales discounts of $4,375. The company’s net sales for this
period equal:
A. $80,967
B. $83,692
C. $88,067
D. $76,592
E. $99,542
Answer:
The Institute of Management Accountants has developed a code of ethics that requires
management accountants to behave in certain ways. Which of the following behaviors
is not required?
A. Competence.
B. Integrity.
C. Maintenance of confidentiality.
D. Communication of information in credible manner.
E. Timeliness.
Answer:
The financial statement that shows beginning and ending retained earnings balances
and the effects of net income (loss) and a dividend for the period is the:
A. Statement of financial position.
B. Statement of cash flows.
C. Balance sheet.
D. Income statement.
E. Statement of retained earnings.
Answer:
Another name for a capital expenditure is:
A. Revenue expenditure
B. Asset expenditure
C. Long-term expenditure
D. Contributed capital expenditure
E. Balance sheet expenditure
Answer:
A written promise to pay a definite sum of money on a specific future date is a(n):
A. Unearned revenue
B. Prepaid expense
C. Credit account
D. Note payable
E. Account receivable
Answer:
Which of the following statements are true?
A. If the trial balance is in balance, it proves that no errors have been made in recording
and posting transactions.
B. The trial balance is a book of original entry.
C. Another name for trial balance is chart of accounts.
D. The trial balance is a list of all accounts from the ledger with their balances at a point
in time.
E. The trial balance is another name for the balance sheet as long as debits balance with
credits.
Answer:
Source documents include all of the following except:
A. Sales tickets
B. Ledgers
C. Checks
D. Purchase orders
E. Bank statements
Answer:
A company had net sales of $31,500 and ending accounts receivable of $2,700 for the
current period. Its days’ sales uncollected is equal to:
A. 11.7 days
B. 23.3 days
C. 31.3 days
D. 42.5 days
E. 46.6 days
Answer:
A company expects to produce and sell 15,000 units of a single product. Management
desires a 15% return on assets of $2,000,000. The following additional company
information is available:
Compute selling price per unit given that markup percentage equals desired profit
divided by total costs.
A. $80
B. $100
C. $20
D. $72
E. $92
Answer:
If a company failed to make the end-of-period adjustment to remove the amount earned
from the Unearned Management Fees account, there would be:
A. An overstatement of net income.
B. An overstatement of assets.
C. An overstatement of liabilities.
D. An overstatement of equity.
E. An understatement of liabilities.
Answer:
Which of the following characteristics applies to process cost accounting and not to job
order cost accounting?
A. Use of a predetermined overhead rate.
B. Identifiable lots of production.
C. Equivalent units of production.
D. Labor time ticket for each employee.
E. Use of a single Goods in Process account.
Answer:
On October 1, Robertson Company sold merchandise in the amount of $5,800 to
Alberts, with credit terms of 2/10, n/30. The cost of the items sold is $4,000. Robertson
uses the periodic inventory system. On October 4, Alberts returns some of the
merchandise. The selling price of the merchandise is $500 and the cost of the
merchandise returned is $350. The entry or entries that Robertson must make on
October 4 is:
A.
B.
C.
D.
E.
Answer:
Reporting of discontinued segments includes:
A. Income or loss from operating the discontinued segment net of tax and gain or loss
from disposal of the segment’s net assets net of tax.
B. Extraordinary items.
C. Changes in accounting principle.
D. Items that are both unusual and infrequent.
E. Writing off of receivables.
Answer:
Reference: 19_01
Advanced Company reports the following information for the current year. All
beginning inventory amounts equaled $0 this year.
Given Advanced Companys data, compute cost per unit of finished goods under
absorption costing.
A. $20.00
B. $34.17
C. $25.32
D. $23.00
E. $28.50
Answer:
A partnership recorded the following journal entry:
This entry reflects:
A. Acceptance of a new partner who invests $70,000 and receives a $20,000 bonus.
B. Withdrawal of a partner who pays a $10,000 bonus to each of the other partners.
C. Addition of a partner who pays a bonus to each of the other partners.
D. Additional investment into the partnership by Tanner and Jackson.
E. Withdrawal of $10,000 each by Tanner and Jackson upon the admission of a new
partner.
Answer:
Refer to: Figure 14_03
Use the following information for Acme, Inc., as of December 31 to answer the next
questions:
What is the total amount of manufacturing costs added to Goods In Process?
A. $393,000.
B. $325,000.
C. $389,500.
D. $397,000.
E. $307,500.
Answer:
A company has two products: A and B. It uses activity-based costing and has prepared
the following analysis showing budgeted cost and activity for each of its three activity
cost pools:
Annual production and sales level of Product A is 34,300 units, and the annual
production and sales level of Product B is 69,550 units. What is the approximate
overhead cost per unit of Product B under activity-based costing?
A. $3.00
B. $2.00
C. $10.28
D. $15.00
E. $2.33
Answer:
Days’ sales in inventory is calculated as:
A. Ending inventory divided by sales times 365.
B. Cost of goods sold divided by ending inventory.
C. Ending inventory divided by cost of goods sold times 365.
D. Cost of goods sold divided by ending inventory times 365.
E. Ending inventory divided by cost of goods sold.
Answer:
Bimrose Manufacturing uses process cost accounting and FIFO for its three-department
operation. Direct materials are added at the beginning of the Department 1 process, at
the halfway point of the Department 2 process, and at the beginning of the Department
3 process. Direct labor and overhead are incurred evenly throughout all departments’
processes. The following information is available for September:
(a) Determine the number of units started and completed in Department 1, and the
number of units transferred into and completed in Departments 2 and 3.
(b) Determine the equivalent units of production for direct materials, direct labor, and
overhead for each department.
Answer:
A company has the following per unit original costs and replacement costs for its
inventory:
Part A: 50 units with a cost of $5 and replacement cost of $4.50.
Part B: 75 units with a cost of $6 and replacement cost of $6.50.
Part C: 160 units with a cost of $3 and replacement cost of $2.50.
Under the lower of cost or market method, the total value of this company’s ending
inventory must be reported as:
A. $1,180.00.
B. $1,075.00.
C. $1,112.50 or $1075.00, depending upon whether LCM is applied to individual items
or the inventory as a whole.
D. $1,112.50.
E. $1180.00 or $1075.00, depending upon whether LCM is applied to individual items
or to the inventory as a whole.
Answer:
S. Reising contributed $48,000 in cash plus equipment valued at $73,000 to the Reising
Construction Partnership. The journal entry to record the transaction for the partnership
is:
A.
B.
C.
D.
E.
Answer:
Assets created by selling goods and services on credit are:
A. Accounts payable
B. Accounts receivable
C. Liabilities
D. Expenses
E. Equity
Answer:
A company had a profit margin of 5%. If net income equaled $83,000 and average total
assets equaled $45,000, how much were net sales?
A. $4,150
B. $2,250
C. $1,660,000
D. $6,400
E. $128,000
Answer:
Ginger Company’s product has a contribution margin per unit of $11.25 and a
contribution margin ratio of 22.5%. What is the selling price of the product?
A. $5
B. $20
C. $30
D. $40
E. $50
Answer:
Given the following information:
What is the amount of cash over and short?
A. Debit $84.73.
B. Credit $84.73.
C. Debit $160.94.
D. Credit $160.94.
E. No cash over or short would be recorded.
Answer:
Hou Company applies factory overhead to its production departments on the basis of
90% of direct labor costs. In the Assembly Department, Hou had $125,000 of direct
labor cost, and in the Finishing Department, Hou had $35,000 of direct labor cost. The
entry to apply overhead to these production departments is:
A. Factory Overhead Assembly 112,500
Factory Overhead Finishing 31,500
Work in Process
144,000
B. Factory Overhead 144,000
Work in Process Assembly
112,500
Work in Process Finishing
31,500
C. Factory Overhead 144,000
Factory Payroll
144,000
D. Work in Process Assembly 112,500
Work in Process Finishing 31,500
Factory Overhead
144,000
E. Factory Payroll 144,000
Cash
144,000
Answer:
A contingent liability:
A. Is always of a specific amount.
B. Is a potential obligation that depends on a future event arising out of a past
transaction or event.
C. Is an obligation not requiring future payment.
D. Is an obligation arising from the purchase of goods or services on credit.
E. Is an obligation arising from a future event.
Answer:
A company has sales of $2,458,422, a gross profit ratio of 23%, a days sales in
inventory ratio of 12.4, and total current assets of $539,600. What is the ending
inventory for the year?
A. $46,013
B. $58,000
C. $64,310
D. $61,715
E. $55,951
Answer:
A depreciable asset currently has a $24,500 book value. The company owning the asset
uses straight-line depreciation. They paid $37,000 for this asset and consider it to have a
$2,000 salvage value with a seven-year useful life. How long has the company owned
this asset?
A. 2.5 years
B. 2.36 years
C. 2.1 years
D. 7 years
E. Cannot be determined from the given information.
Answer:
A company had service revenue of $250,000, rent expense of $10,000, utility expense
of $3,500, salary expense of $18,500, depreciation expense of $9,000, advertising
expense of $4,500, dividends in the amount of $18,000, and a beginning balance in
retained earnings of $17,900. What is the balance in the income summary account
before it is closed for the period?
A. $250,000
B. $45,500
C. $204,500
D. $222,400
E. $232,100
Answer:
A company purchased property for a building site. The costs associated with the
property were:
What portion of these costs should be allocated to the cost of the land and what portion
should be allocated to the cost of the new building?
A. $175,800 to Land; $18,800 to Building
B. $190,000 to Land; $3,800 to Building
C. $190,800 to Land; $1,000 to Building
D. $192,800 to Land; $0 to Building
E. $193,800 to Land; $0 to Building
Answer:
For each item shown below, indicate whether it is a product cost or a period cost, by
placing an X in the appropriate column. For each item that is a product cost, also
indicate whether it is a direct cost or an indirect cost with respect to a unit of finished
product.
Answer:
The following are the steps in the accounting cycle. List them in the order in which
they are completed:
Prepare adjusted trial balance.
Post transactions.
Prepare an unadjusted trial balance.
Journalize transactions.
Prepare the financial statements.
Close the temporary accounts.
Adjust the ledger accounts.
Prepare a post-closing trial balance.
Analyze transactions.
Answer:
In a process cost accounting system, factory wages are debited to _______________,
and when direct labor is used, that account is credited and ____________________ is
debited. When indirect labor is used, the ________________________ account is
debited and ______________________ is credited.
Answer:
_________________________ leases are short-term or cancelable leases in which the
lessor retains the risks and rewards of ownership.
Answer:
All cash transactions eventually affect noncash ___________ accounts.
Answer:
What are rolling budgets? Why are rolling budgets prepared?
Answer:
The fourth step in accounting for production activity in a period is to prepare a cost
reconciliation, which reconciles _____________________ with the
_____________________.
Answer:
Assume the Freshii Company is preparing its master budget for the first quarter of its
calendar year. The following forecasted data relate to the first quarter:
Prepare a budgeted income statement for this first quarter.
Answer:
Investments in equity securities where the investor has a controlling influence are
accounted for using the ________________________________.
Answer:
July 31, 2013, the end of the quarter is on a Wednesday. Employees get paid each
Friday for the week worked. Abel Co. has five employees who earn $100 per day each.
Assuming the proper adjusting journal entry was made on June 30, prepare the journal
entry to record the payment of wages on August 2.
Answer:
If Blue Jay Enterprises actual overhead incurred during a period was $49,050 and the
company reported an unfavorable overhead controllable variance of $1,800 and a
favorable overhead volume variance of $1,350, how much standard overhead cost was
assigned to the products produced during the period?
Answer:
When a company has no reportable nonoperating activities, its income from operations
is reported as ___________________.
Answer:
Marble Corporation had the following balances in its stockholders’ equity accounts at
December 31, 2012:
The following transactions occurred during 2013:
Based on the above information, prepare a statement of stockholders’ equity for 2013.
Use the form below.
Answer:
What are the four steps of the total cost method of determining a product selling price?
Answer:
A company uses activity-based costing to determine the costs of its three products: A,
B, and C. The activity rates and activity levels for each of the companys three activity
cost pools are shown below.
Compute the companys budgeted cost for each of the three activities under
activity-based costing.
Answer: