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1) Inventory errors, if not discovered, will self-correct in two years.
2) Direct materials cost that varies with the number of units produced is an example of
a fixed cost of production.
3) Medicare taxes are withheld from an employee's pay only until the employee has
earned a specific amount each year.
4) Activity-based costing provides more accurate and useful cost data than traditional
systems.
5) The account for each supplier of merchandise will appear in the accounts payable
subsidiary ledger.
6) Methods that ignore present value in capital investment analysis include the cash
payback method.
7) Job cost sheets can provide information to managers on unit cost trends, the cost
impact of continuous improvement in the manufacturing process, the cost impact of
materials changes, and the cost impact of direct materials price or direct labor rate
changes over time.
8) When a partner invests noncash assets in a partnership, the assets are recorded at the
partner's book value.
9) Like many taxes deducted from employee earnings, federal income taxes are subject
to a maximum amount per employee per year.
10) For a current liability to exist, the following two tests must be met. The liability
must be due usually within a year and must be paid out of current assets.
11) Factory overhead includes all manufacturing costs except direct materials and direct
labor.
12) If fixed costs are $500,000 and variable costs are 60% of break-even sales, profit is
zero when sales revenue is $930,000.
13) The rates at which services are charged to each division are called service
department charge rates.
14) Accounting information users need reports about the economic activities and
condition of businesses.
15) It is not necessary to post the closing entries to the general ledger.
16) Make or buy options often arise when a manufacturer has excess productive
capacity in the form of unused equipment, space, and labor.
17) When a process cost accounting system records the purchase of materials, the
Materials account is credited.
18) Estimated cash payments are planned reductions in cash from all of the following
except:
A.manufacturing and operating expenses
B.capital expenditures
C.notes and accounts receivable collections
D.payments for interest or dividends
19) For which of the following businesses would the process cost system be
appropriate?
A.Book retailer
B.Dress designer
C.Lumber mill
D.Printing firm
20) In cost-volume-profit analysis, all costs are classified into the following two
categories:
A.mixed costs and variable costs
B.sunk costs and fixed costs
C.discretionary costs and sunk costs
D.variable costs and fixed costs
21) Partnership income and losses are usually divided on the basis of interest, salaries,
and stated ratios because
A.partners seldom contribute time and resources equally
B.this method reflects the amount of time devoted to the partnership by the partners
C.it is simpler than following the legal rules
D.it prevents arguments among the partners
22) Budgets need to be fair and attainable for employees to consider the budget
important in their normal daily activities. Which of the following is not considered a
human behavior problem?
A.Setting goals among managers that conflict with one another
B.Setting goals too tightly making it difficult to meet performance expectation
C.Allowing employees the opportunity to be a part of the budget process
D.Allowing goals to be so low that employees develop a spend it or lose it attitude
23) At the end of the current year, Accounts Receivable has a balance of $550,000;
Allowance for Doubtful Accounts has a credit balance of $5,500; and net sales for the
year total $2,500,000. An analysis of receivables estimates uncollectible receivables as
$25,000.
Determine the net realizable value of accounts receivable after adjustment. (Hint:
Determine the amount of the adjusting entry for bad debt expense and the adjusted
balance Allowance of Doubtful Accounts.)
A.$550,000
B.$544,500
C.$525,000
D.$575,000
24) A factor in determining the rate of return on investment--the ratio of income from
operations to sales--is called:
A.profit margin
B.indirect expenses
C.investment turnover
D.cost
25) The primary goal of managerial accounting is to provide information to:
A.investors
B.creditors
C.management
D.external auditors
26) Department G had 3,600 units, 25% completed at the beginning of the period,
11,000 units were completed during the period, 3,000 units were one-fifth completed at
the end of the period, and the following manufacturing costs were debited to the
departmental work in process account during the period:
Assuming that all direct materials are placed in process at the beginning of production
and that the first-in, first-out method of inventory costing is used, what is the total cost
of 3,600 units of beginning inventory which were completed during the period (round
unit cost calculations to four decimal places)?
A.$62,206
B.$16,163
C.$40,000
D.$19,275
27) A company records their inventory purchases at standard cost but also records
purchase price variances. The company purchased 5,000 widgets $8.00. The standard
cost for the widgets is $7.60. Which of the following would be included in the journal
entry?
A.$38,000 Debit to Accounts Payable
B.$ 2,000 Credit to Direct Materials Price Variance
C.$ 2,000 Debit to Accounts Payable
D.$ 2,000 Debit to Direct Materials Price Variance
28) Amir Designs purchased a one-year liability insurance policy on March 1st of this
year for $7,200 and recorded it as a prepaid expense. Which of the following amounts
would be recorded for insurance expense during the adjusting process at the end of
Amirs first month of operations on March 31st?
A.$7,200
B.$720
C.$600
D.$6,600
29) Merchandise with an invoice price of $3,000 is purchased on September 2 subject
to terms of 2/10, n/30, FOB destination. Freight costs paid by the seller totaled $200.
What is the cost of the merchandise if paid on September 12, assuming the discount is
taken?
A.$3,140
B.$3,136
C.$2,744
D.$2,940
30) In the income statement of a manufacturing company, what replaces purchases in
the cost of goods section of a retail company?
A.Finished goods
B.Cost of merchandise available
C.Cost of goods manufactured
D.Work in process completed
31) Given the following cost and activity observations for Taco Companys utilities, use
the high-low method to calculate Tacos variable utilities costs per machine hour.
A.$10.00
B.$.60
C.$.40
D.$.52
32) Racer Industries has fixed costs of $900,000. Selling price per unit is $250 and
variable cost per unit is $130.
Required:
a. How many units must Racer sell in order to break even?
b. How many units must Racer sell in order to earn a profit of $480,000?
c. A new employee suggests that Racer Industries sponsor a company 10-K as a form of
advertising. The cost to sponsor the event is $7,200. How many more units must be sold
to cover this cost?
33) A debit or credit memo describing entries in the company's bank account may be
enclosed with the bank statement. An example of a credit memo is
A.deposited checks returned for insufficient funds
B.a promissory note left for collection
C.a service charge
D.notification that a customer's check for $375 was recorded by the company as $735
on the deposit ticket
34) Under the perpetual inventory system, all purchases of merchandise are debited to
the account entitled
A.Merchandise Inventory
B.Cost of Merchandise Sold
C.Cost of Merchandise Available for Sale
D.Purchases
35) Every controlling account must have its own
A.revenue ledger
B.general ledger
C.subsidiary ledger
D.journal
36) The balance sheets at the end of each of the first two years of operations indicate
the following:
If net income is $115,000 and interest expense is $30,000 for 2012, and the market
price is $30, What is the price-earnings ratio on common stock for 2012 (Round
intermediate calculation to two decimal place and final answers to one decimal place)?
A.16.9
B.12.1
C.14.4
D.13.3
37) Austin, Inc. made a Prepaid Rent payment of $3,500 on January 1st. The companys
monthly rent is $700. The amount of Prepaid Rent that would appear on the January 31
balance sheet after adjustment is:
A.$2,800
B.$700
C.$3,500
D.$1,750
38) On February 12, Addison, Inc. purchased 6,000 shares of Lucas Company at $22
per share plus a $240 brokerage fee. On August 22, Lucas paid a $0.42 dividend per
share. On November 10, 4,000 shares of Lucas stock were sold for $28 per share less a
$160 brokerage fee. The journal entry for the sale would include:
A.a debit to Cash for $111,840
B.a credit to Investments for $112,000
C.a credit to Loss on Sale for $23,680
D.a debit to Cash for $112,000
39) The following budget data are available for Happy Company:
If factory overhead is to be applied based on direct labor dollars, the predetermined
overhead rate is
A.199%
B.196%
C.$14.92
D.$15.65
40) If the allowance method of accounting for uncollectible receivables is used, what
general ledger account is credited to write off a customer's account as uncollectible?
A.Uncollectible Accounts Expense
B.Accounts Receivable
C.Allowance for Doubtful Accounts
D.Interest Expense
41) Which of the following would be most effective in a small owner/manager-operated
business?
A.Profit centers
B.Centralization
C.Investment centers
D.Cost centers
42) The production department is proposing the purchase of an automatic insertion
machine. They have identified 3 machines and have asked the accountant to analyze
them to determine the best cash payback.
A.Machine A
B.Machine C
C.Machine B
D.All are equal
43) On June 1, 2014, Aaron Company purchased equipment at a cost of $120,000 that
has a depreciable cost of $90,000 and an estimated useful life of 3 years and 30,000
hours.
Using straight line depreciation, calculate depreciation expense for the second year.
A.$17,500
B.$30,000
C.$12,500
D.$40,000
44) Income statement information for Lucy Company is provided below:
Using vertical analysis of the income statement for Lucy Company, determine the gross
profit margin.
A.100%
B.70%
C.40%
D.60%
45) When a partnership is formed, assets contributed by the partners should be recorded
on the partnership books at their
A.book values on the partners' books prior to their being contributed to the partnership
B.fair market value at the time of the contribution
C.original costs to the partner contributing them
D.assessed values for property purposes
46) What is the purpose of the Statement of Cost of Goods Manufactured?
A.to determine the ending materials inventory
B.to determine the ending work in process inventory
C.to determine the amounts transferred to finished goods
D.all of the answers are true
47) Which one of the fixed asset accounts listed below will not have a related contra
asset account?
A.Office Equipment
B.Land
C.Delivery Equipment
D.Building
48) Miramar Industries manufactures two products, A and B. The manufacturing
operation involves three overhead activities - production setup, material handling, and
general factory activities. Miramar uses activity-based costing to allocate overhead to
products. An activity analysis of the overhead revealed the following estimated costs
and activity bases for these activities:
Each products total activity in each of the three areas are as follows:
What is the activity rate for General Overhead?
A.$4.00 per direct labor hour
B.$60.00 per direct labor hour
C.$6.67 per direct labor hour
D.$10.00 per direct labor hour
49) Match the following terms with the best definition given.
1>Actual cost > standard cost at actual volumes A. Nonfinancial performance measure
2>Normal standard B. Unfavorable cost variance
3>Actual cost < standard cost at actual volumes C. Favorable cost variance
4>Theoretical standard D. Currently attainable standard
5>An example is number of customer complaints. E. Ideal standard
50) A company is contemplating investing in a new piece of manufacturing machinery.
The amount to be invested is $100,000. The present value of the future cash flows at the
companys desired rate of return is $105,000. The IRR on the project is 12%. Which of
the following statements is true?
A.The project should not be accepted because the net present value is negative
B.The desired rate of return used to calculate the present value of the future cash flows
is less than 12%
C.The desired rate of return used to calculate the present value of the future cash flows
is more than 12%
D.The desired rate of return used to calculate the present value of the future cash flows
is equal to 12%
51) Sharp and Townson had capital balances of $60,000 and $120,000 respectively on
January 1 of the current year. On May 8, Sharp invested an additional $10,000 in the
partnership. During the year, Sharp and Townson withdrew $25,000 and $45,000
respectively. After closing all expense and revenue accounts at the end of the year,
Income Summary has a credit balance of $90,000, that Sharp and Townson have agreed
to split on a 2:1 basis, respectively.
52) The present value of $40,000 to be received in one year, at 6% compounded
annually, is (rounded to nearest dollar)
A.$37,736
B.$42,400
C.$40,000
D.$2,400
53) Vincent Corporation has 100,000 share of $100 par common stock outstanding. On
June 30, Vincent Corporation declared a 5% stock dividend to be issued on July 30 to
stockholders of record July 15. The market price of the stock was $132 a share on June
30. Journalize the entries required on June 30, July 15 and July 30.
54) Blackwell Industries received a 120-day, 9% note for $180,000, dated August 10
from a customer on account.
Required:
55) According to a summary of the payroll of Scotland Company, $450,000 was subject
to the 7.0% social security tax and $500,000 was subject to the 1.5% Medicare tax.
Federal income tax withheld was $98,000. Also, $15,000 was subject to state (4.2%)
and federal (0.8%) unemployment taxes.
Required:
56) The payroll register of Seaside Architecture Company indicates $970 of Social
Security and $257 of Medicare tax withheld on total salaries of $16,500 for the period.
Federal withholding for the period totaled $4,235. Provide the journal entry for the
periods payroll.
57) Tipper Co. is considering a 10-year project that is estimated to cost $700,000 and
has no residual value. Tipper seeks to earn an average rate of return of 15% on all
capital projects. Determine the necessary average annual income (using straight-line
depreciation) that must be achieved on this project for this project to be acceptable to
Tipper Co.
58) Income statement information for Lucy Company is provided below:
Prepare a vertical analysis of the income statement for Lucy Company.
