1) The costs of materials and labor that do not enter directly into the finished product
are classified as cost of goods sold.
2) The cost of production report reports the cost charged to production and the costs
allocated to finished goods and work in process.
3) If the standard to produce a given amount of product is 1,000 units of direct materials
at $11 and the actual was 800 units at $12, the direct materials quantity variance was
$2,200 unfavorable.
4) The present value of the periodic bond interest payments is the value today of the
amount of interest to be received at the at the end of each interest period.
5) Prime costs consists of direct materials, indirect materials, and direct labor.
6) The plant managers in a cost center can be held responsible for major differences
between budgeted and actual costs in their plants.
7) The budget procedure that requires all levels of management to start from zero in
estimating sales, production, and other operating data is called continuous budgeting.
8) The basic procedure of posting from a revenue journal is to make all postings at the
end of the month.
9) Entries required to close the balances of the temporary accounts at the end of the
period are called final entries.
10) If the standard to produce a given amount of product is 1,000 units of direct
materials at $11 and the actual was 800 units at $12, the direct materials quantity
variance was $1,000 unfavorable.
11) The face value of a term bond is payable at a single specific date in the future.
12) The equity reporting for a Limited Liability Company is similar to that of a
partnership but the changes in capital are shown on a statement of members’ equity.
13) Variable costs are costs that remain constant in total dollar amount as the level of
activity changes.
14) Ordinarily, a corporation owning a significant portion of the voting stock of another
corporation accounts for the investment using the equity method.
15) The systematic allocation of land’s cost to expense is called depreciation.
16) A financial statement showing each item on the statement as a percentage of one
key item on the statement is called common-sized financial statements.
17) Use the following information in the adjusted trial balance for Stockton Company
to answer the following questions.
Determine the net income (loss) for the period.
A.Net Income $9,250
B.Net Loss $790
C.Net Loss $5,670
D.Net Income $3,580
18) Which of the following situations increase owners equity?
A.Supplies are purchased on account
B.Services are provided on account
C.Cash is received from customers
D.Utility bill will be paid next month
19) Deferred revenue is revenue that is
A.earned and the cash has been received
B.earned but the cash has not been received
C.not earned and the cash has not been received
D.not earned but the cash has been received
20) Beginning inventory, purchases, and sales for Product – Weld TM are as follows:
Assuming a perpetual inventory system and the first-in, first-out method, determine (a)
the cost of the merchandise sold for the September 30 sale and (b) the inventory on
September 30.
21) Accounts receivable resulting from sales to customers amounted to $40,000 and
$31,000 at the beginning and end of the year, respectively. Income reported on the
income statement for the year was $120,000. Exclusive of the effect of other
adjustments, the cash flows from operating activities to be reported on the statement of
cash flows is
A.$120,000
B.$129,000
C.$151,000
D.$111,000
22) The following information pertains to Carlton Company. Assume that all balance
sheet amounts represent both average and ending balance figures. Assume that all sales
were on credit.
Assets
Liabilities and Stockholders Equity
Income Statement
What is the dividend yield for this company? Round your answer to one decimal point.
A.4.5%
B.9.0%
C.16.6%
D.22.2%
23) At the end of the fiscal year, the usual adjusting entry for accrued salaries owed to
employees was omitted. Which of the following statements is true?
A.Salary Expense for the year was understated
B.The total of the liabilities at the end of the year was overstated
C.Net income for the year was understated
D.Owner’s equity at the end of the year was understated
24) Partners Ken and Macki each have a $40,000 capital balance and share income and
losses in a 3:2. Cash equals $20,000, noncash assets equal $120,000, and liabilities
equal $60,000. If the noncash assets are sold for $60,000, and both partners agree to
make up an capital deficits with personal cash contributions, Partner Macki will
eventually receive cash of
A.$0
B.$4,000
C.$16,000
D.$24,000
25) The recording of the jobs completed would include a debit to:
A.Factory Overhead
B.Finished Goods
C.Work in Process
D.Cost of Goods Sold
26) Due to Medicare reimbursement cuts, Loving Home Care is considering shutting
down its Certified Nursing Assistant (CNA) Division. Fixed costs will have to be
transferred to the Nursing Division if the CNA division is discontinued. Based on the
following income statement make a recommendation to the president regarding this
decision.
27) If title to merchandise purchases passes to the buyer when the goods are delivered
to the buyer, the terms are
A.consigned
B.n/30
C.FOB shipping point
D.FOB destination
28) The net income reported on the income statement for the current year was
$275,000. Depreciation recorded on fixed assets and amortization of patents for the
year were $40,000 and $9,000, respectively. Balances of current asset and current
liability accounts at the end and at the beginning of the year are as follows:
What is the amount of cash flows from operating activities reported on the statement of
cash flows prepared by the indirect method?
A.$198,000
B.$324,000
C.$352,000
D.$296,000
29) A company with working capital of $720,000 and a current ratio of 2.2 pays a
$125,000 short-term liability. The amount of working capital immediately after
payment is
A.$845,000
B.$595,000
C.$720,000
D.$125,000
30) Sinking Fund Investments would be classified on the balance sheet as
A.a current asset
B.a fixed asset
C.an investment
D.a deferred debit
31) The journal entry a company records for the payment of interest, interest expense,
and amortization of bond premium is
A.debit Interest Expense, credit Cash and Premium on Bonds Payable
B.debit Interest Expense, credit Cash
C.debit Interest Expense and Premium on Bonds Payable, credit Cash
D.debit Interest Expense, credit Interest Payable and Premium on Bonds Payable
32) In management’s internal control report that is now required of all public
companies, which of the following does not have a direct effect on a company’s internal
control system?
A.internal auditors
B.independent accountants
C.Board of Director’s audit committee
D.Board of Trustees
33) Select the proper journal entry to record the movement of 1,700 units of part
number 116B to work in process when each unit of 116B has a value of $2.00.
A.Raw Material Inventory 3,400
Work in Process 3,400
B.Work in Process 3,400
Factory Overhead 3,400
C.Work in Process 3,400
Raw Material Inventory 3,400
D.Work in Process 3,400
Cash 3,400
34) The Crafter Company had the following assets and liabilities as of December 31,
2012:
Determine the quick ratio for the end of the year (rounded to one decimal point).
A.6.7
B.13.0
C.4.2
D.3.5
35) 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 total overhead allocated to Product A using activity-based costing?
A.$194,500
B.$162,500
C.$32,000
D.$224,000
36) The following account appears in the ledger after only part of the postings have
been completed for July, the first month of the current fiscal year:
Factory overhead is applied to jobs at the rate of 60% of direct labor cost. The actual
factory overhead incurred for July was $75,000. Jobs completed during the month
totaled $301,200.
(a) Prepare the journal entries to record (1) the application of factory overhead to
production during July and (2) the jobs completed duringJuly.
(b) What is the balance of the factory overhead account on July 31?
(c) Was factory overhead overapplied or underapplied on July 31?
(d) Determine the cost of the unfinished jobs on July 31.
37) The charter of a corporation provides for the issuance of 100,000 shares of common
stock. Assume that 60,000 shares were originally issued and 10,000 were subsequently
reacquired. What is the amount of cash dividends to be paid if a $2 per share dividend is
declared?
A.$ 60,000
B.$ 20,000
C.$120,000
D.$100,000
38) Compute conversion costs given the following data: Direct Materials, $347,500;
Direct Labor, $186,300; Factory Overhead, $187,900; and Selling Expenses, $45,290.
A.$533,800
B.$187,900
C.$721,700
D.$374,200
39) Yakking Co. manufactures mobile cellular equipment and develops a price for the
product by using the variable cost concept. Yakking incurs variable costs of $1,900,000
in the production of 100,000 units while fixed costs total $50,000. The company
employs $4,725,000 of assets and wishes to earn a profit equal to a 10% rate of return
on assets.
Round your markup percentage to one decimal place, and other intermediate
calculations and final answer to two decimal places.
40) Kissimmee Paint Co. reported the following data for the month of July. There were
no beginning inventories and all units were completed (no work in process).
In the month of July, 28,000 of the 30,000 units manufactured were sold at a price of
$80 per unit.
(a) Prepare a variable costing income statement.
(b) Prepare an absorption costing income statement.
(c) Briefly explain why there is a difference in income from operations between the two
methods.
41) If fixed costs are $46,800, the unit selling price is $42, and the unit variable costs
are $24, what is the break-even sales (units)?
A.2,400
B.1,950
C.1,114
D.2,600
42) A corporation issues for cash $10,000,000 of 8%, 30-year bonds, interest payable
annually, at a time when the market rate of interest is 9%. The straight-line method is
adopted for the amortization of bond discount or premium. Which of the following
statements is true?
A.The amount of annual interest paid to bondholders remains the same over the life of
the bonds
B.The amount of annual interest expense decreases as the bonds approach maturity
C.The amount of annual interest paid to bondholders increases over the 30-year life of
the bonds
D.The carrying amount decreases from its amount at issuance date to $10,000,000 at
maturity
43) Which of the following is not characteristic of a process cost system?
A.The system may use several work in process inventory accounts
B.Manufacturing costs are grouped by department rather than by jobs
C.The system accumulates costs per job
D.The system emphasizes time periods rather than the time it takes to complete a job
44) Which of the following costs are NOT included in finished goods inventory?
A.Direct labor
B.Factory overhead
C.Company president’s salary
D.Direct materials
45) Several transactions are listed below, with the accounting equation stated to the
right side of each. Use the following identification codes to indicate the effects of each
transaction on the accounting equation. Write your answers in the space provided under
the accounting equation. You need an identification code for each element of the
accounting equation. An example is given before the first transaction.
Assets = Liabilities + Owners Equity
Example John Smith invests in his new business by giving it his personal drill press
valued at $3,500. I__ ___NE__ ___ I____
A) Cash sales are made.
B) Equipment is purchased on credit.
C) Payment is made for the equipment purchased on credit in (B). _____
D) The company sold excess supplies to another company on credit. ________ _______
________
E) Cash is collected from customers for accounts receivable balances. ________
_______ ________
46) Williams Company reports production costs for 2015 as follows:
Williams Companys period costs for 2015 amount to:
A.$345,000
B.$250,000
C.$400,000
D.$175,000
47) The bank statement for Gatlin Co. indicates a balance of $7,735.00 on June30,
2010. After the journals for June had been posted, the cash account had a balance of
$4,098.00.
(a) Cash sales of $742.00 had been erroneously recorded in the cash receipts journal as
$724.
(b) Deposits in transit not recorded by bank, $425.00.
(c) Bank debit memo for service charges, $35.00.
(d) Bank credit memo for note collected by bank, $2,475 including $75 interest.
(e) Bank debit memo for $256.00 NSF (not sufficient funds) check from Janice Smith, a
customer.
(f) Checks outstanding, $1,860.00.
Record the appropriate journal entries that would be necessary for Gatlin Co.
48) If total assets decreased by $88,000 during a period of time and owner’s equity
increased by $71,000 during the same period, then the amount and direction (increase
or decrease) of the period’s change in total liabilities is
A.$17,000 increase
B.$88,000 decrease
C.$159,000 increase
D.$159,000 decrease
49) Materials used by Jefferson Company in producing Division C’s product are
currently purchased from outside suppliers at a cost of $10 per unit. However, the same
materials are available from Division A. Division A has unused capacity and can
produce the materials needed by Division C at a variable cost of $8.50 per unit. A
transfer price of $9.50 per unit is negotiated and 25,000 units of material are
transferred, with no reduction in Division A’s current sales.
How much would Division A’s income from operations increase?
A.$0
B.$75,000
C.$25,000
D.$50,000
50) What is a major advantage of using percentages rather than dollar changes in doing
horizontal and vertical analysis?
51) During the month of April, Cavy Company incurred factory overhead as follows:
Journalize the entry to record the factory overhead incurred during April.
52) A copy machine acquired on March 1, 2011 with a cost of $705 has an estimated
useful life of 4 years. Assuming that it will have a residual value of $125, determine the
depreciation for the first year by the double-declining-balance method.
53) Assume that three identical units of merchandise are purchased during October, as
follows:
Assume one unit is sold on October 31 for $28. Determine Cost of Merchandise Sold,
Gross Profit, and Ending Inventory under the Average Cost method.
54) Skyline, Inc. purchased a portfolio of available-for-sale securities during 2012. The
cost and fair value of this portfolio on December 31, 2012, was as follows:
Required:
Provide the journal entry to record the adjustment of the available-for-sale security
portfolio to fair value on December 31, 2012.
Where will the information from the journal entry be reported on the financial
statements?
55) The accountant for Franklin Company prepared the following list of account
balances from the companys records for the year ended December 31, 2011:
Based on this information, is Franklin Company profitable? Explain your answer.
56) Journalize the following entries on the books of Winston Co. for August 1,
September 1, and November 30. (Assume a 360-day year is used for interest
calculations.)
