1) Hill Co. can further process Product O to produce Product P. Product O is currently
selling for $60 per pound and costs $42 per pound to produce. Product P would sell for
$82 per pound and would require an additional cost of $13 per pound to produce.
The differential revenue of producing Product P is $22 per pound.
2) The costs of initially producing an intermediate product should be considered in
deciding whether to further process a product, even though the costs will not change,
regardless of the decision.
3) The accounts included on specialized journals should not be customized for a
businesses particular activities.
4) Minerals removed from the earth are classified as intangible assets.
5) The computations involved in the net present value method of analyzing capital
investment proposals are more involved than those for the average rate of return
method.
6) The post reference notation used in the journal is the page number.
7) Partnership’s asset accounts should be changed from cost to fair market value when a
new partner is admitted to a firm or an existing partner withdraws and dies.
8) While setting standards, the managers should never allow for spoilage or machine
breakdowns in their calculations.
9) The par value of stock is an arbitrary per share amount defined in many states as
legal capital.
10) A proof of the equality of debits and credits in the ledger at the end of an accounting
period is called a balance sheet.
11) Which of the following best describes accounting?
A.records economic data but does not communicate the data to users according to any
specific rules
B.is an information system that provides reports to users regarding economic activities
and condition of a business
C.is of no use by individuals outside of the business
D.is used only for filling out tax returns and for financial statements for various type of
governmental reporting requirements
12) Cost of Materials Used $45,000
Direct Labor costs $48,000
Factory Overhead $39,000
Work in Process, beg. $28,000
Work in Process, end. $18,000
Finished Goods,beg. $28,000
Finished Goods, end. $18,000
What is Cost of Goods Sold?
A.$152,000
B.$142,000
C.$10,000
D.$128,000
13) 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 Jefferson’s total income from operations increase?
A.$37,500
B.$100,000
C.$62,500
D.$150,000
14) Cash receipts received from the issuance of a mortgage notes payable would be
classified as
A.investing activities
B.operating activities
C.either financing or investing activities
D.financing activities
15) A company manufactured 50,000 units of a product at a cost of $450,000. They sold
40,000 units for $15 each. What is the gross margin?
A.$750,000
B.$240,000
C.$600,000
D.$450,000
16) Which of the following expressions is termed the profit margin factor as used in
determining the rate of return on investment?
A.Sales/Income From Operations
B.Income From Operations/Sales
C.Invested Assets/Sales
D.Sales/Invested Assets
17) Use the following information in the adjusted trial balance for Stockton Company
to answer the following questions.
Determine the Owners Equity ending balance for the period.
A.$12,150
B.$15,730
C.$6,480
D.$21,400
18) Management accountants usually provide for a minimum cash balance in their cash
budgets for which of the following reasons:
A.stockholders demand a minimum cash balance
B.to comply with U.S. GAAP
C.it provides a safety buffer for variations in estimates
D.to have funds available for major capital expenditures
19) Assume that divisional income from operations amounts to $192,000 and top
management has established 15% as the minimum rate of return on divisional assets
totaling $1,000,000. The residual income for the division is:
A.$42,000
B.$28,800
C.$92,000
D.$0
20) If a gain of $11,000 is realized in selling (for cash) office equipment having a book
value of $55,000, the total amount reported in the cash flows from investing activities
section of the statement of cash flows is
A.$44,000
B.$11,000
C.$55,000
D.$66,000
21) Income tax was $175,000 for the year. Income tax payable was $30,000 and
$40,000 at the beginning and end of the year. Cash payments for income tax reported on
the cash flow statement using the direct method is
A.$175,000
B.$165,000
C.$205,000
D.$215,000
22) In a common size income statement, the 100% figure is:
A.net cost of goods sold
B.net income
C.gross profit
D.net sales
23) Standard costs are divided into which of the following components?
A.Variance Standard and Quantity Standard
B.Materials Standard and Labor Standard
C.Quality Standard and Quantity Standard
D.Price Standard and Quantity Standard
24) Use the accounting equation to answer each of the independent questions below:
a. At the beginning of the year Norton Company assets were $75,000 and its owners
equity was $38,000. During the year, assets increased by $18,000 and liabilities
increased by $4,000. What was the owners equity at the end of the year?
b. At the beginning of the year Turpin Industries had liabilities of $44,000 and owners
equity of $66,000. If assets increased by $10,000 and liabilities decreased by $5,000,
what was the owners equity at the end of the year?
25) Which of the following entries records the withdrawal of cash by Sue Martin,
owner of a proprietorship, for personal use?
A.debit Sue Martin, Capital; credit Cash
B.debit Sue Martin, Drawing; credit Cash
C.debit Salaries Expense; credit Cash
D.debit Salaries Expense; credit Salaries Payable
26) The recording of the jobs shipped and customers billed would include a debit to:
A.Accounts Payable
B.Cash
C.Finished Goods
D.Cost of Goods Sold
27) Benton and Orton are partners who share income in the ratio of 1:3 and have capital
balances of $70,000 and $30,000 respectively. Ramsey is admitted to the partnership
and is given a 40% interest by investing $20,000. What is Bentons capital balance after
admitting Ramsey?
A.$20,000
B.$7,000
C.$70,000
D.$63,000
28) Which of the following is not included in conversion costs?
A.Direct labor
B.Factory overhead
C.Indirect labor
D.Direct materials
29) An investor purchased 500 shares of common stock, $25 par, for $21,750.
Subsequently, 100 shares were sold for $49.50 per share. What is the amount of gain or
loss on the sale?
A.$12,750 gain
B.$600 gain
C.$600 loss
D.$9,250 loss
30) The process of initially recording a business transaction is called
A.closing
B.posting
C.journalizing
D.balancing
31) If merchandise inventory is being valued at cost and the purchase price is steadily
falling, which method of costing will yield the largest net income?
A.average cost
B.LIFO
C.FIFO
D.weighted average
32) Based on the information below, journalize the entries for the Seller and the Buyer.
Both use a perpetual inventory system.
(a) Seller sold merchandise on account to the buyer, $4,750, terms 2/10, net 30, FOB
shipping point. The cost of the merchandise is $2,850. The seller prepays the freight of
$75.
(b) Buyer returns $ 700 of merchandise as defective. The cost of the merchandise is
$420.
(c) Buyer pays within the discount period.
33) Present entries to record the following transactions:
(a) Established a petty cash fund of $235.00.
(b) The petty cash fund now has a balance of $42.80. Replenished the fund, based on
the following disbursements as indicated by a summary of the petty cash receipts: office
supplies, $74.50; miscellaneous administrative expense, $92.75; and miscellaneous
selling expense, $18.60.
(c) Increased the petty cash fund to $300.00.
34) Basic inventory data for April 30 are presented below for a business that employs
the lower of cost or market basis of inventory valuation.
35) ABC Corporation has three service departments with the following costs and
activity base:
ABC has three operating divisions, Micro, Macro and Super. Their revenue, cost and
activity information are as follows:
What will the income of the Micro Division be after all service department allocations?
A.$305,000
B.$650,000
C.$345,000
D.$610,000
36) The inventory data for an item for November are:
Using a perpetual system, what is the cost of the merchandise sold for November if the
company uses FIFO?
A.$610
B.$600
C.$590
D.$580
37) The two categories of cost comprising conversion costs are:
A.direct labor and indirect labor
B.direct labor and factory overhead
C.factory overhead and direct materials
D.direct labor and direct materials
38) A voucher is usually supported by
A.a supplier’s invoice
B.a purchase order
C.a receiving report
D.all of the above
39) What type of analysis is indicated by the following?
A.vertical analysis
B.horizontal analysis
C.liquidity analysis
D.common-size analysis
40) Benson and Orton are partners who share income in the ratio of 2:3 and have capital
balances of $60,000 and $40,000 respectively. Ramsey is admitted to the partnership
and is given a 40% interest by investing $20,000. What is Bensons capital balance after
admitting Ramsey?
A.$20,000
B.$24,000
C.$48,800
D.$71,200
41) ABC Corporation has three service departments with the following costs and
activity base:
ABC has three operating divisions, Micro, Macro and Super. Their revenue, cost and
activity information are as follows:
What is the service department charge rate for Graphics Production?
A.$2.00
B.$10.00
C.$6.66
D.$.50
42) Factory overhead includes:
A.factory rent and direct labor
B.direct materials and direct labor
C.indirect materials and direct materials
D.indirect labor and indirect materials
43) Which of the following would most likely be classified as a current liability?
A.Two-year Notes Payable
B.Bonds Payable
C.Mortgage Payable
D.Unearned Rent
44) Chasteen Company acquired mineral rights for $9,100,000. The mineral deposit is
estimated at 65,000,000 tons. During the current year, 18,375,000 tons were mined and
sold.
Required:
45) Fill in the missing numbers using the formula for Fixed Asset Turnover:
46) The assets and liabilities of Amos Moving Services at March 31, 2014, the end of
the current year, and its revenue and expenses for the year are listed below. The capital
of the owner was $180,000 at April 1, 2013, the beginning of the current year. Mr.
Amos invested an additional $25,000 in the business during the year.
Prepare an income statement for the current year ended March 31, 2014.
47)
The payroll register of Seaside Architecture Company indicates $870 of Social Security
and $217 of Medicare tax withheld on total salaries of $14,500 for the period. Assume
earnings subject to state and federal unemployment compensation taxes are $5,250. at
the federal rate of 0.8% and state rate of 5.4%. Provide the journal entry to record the
payroll tax expense for the period.
48) Describe the features of a voucher system and list typical supporting documents for
a voucher.
49) For each of the following, explain whether the issue would require you to prepare a
journal entry for your company, assuming any original entry is correct. If an entry is
required, please include it as part of your answer.
(1) The bank recorded your deposit as $91 rather than the actual amount of $191.
(2) Two outstanding checks amounted to $450.
(3) Company check number 538 for postage was recorded incorrectly by the company
bookkeeper as $50 instead of $59.
(4) The bank paid a check for $500 after the company had issued a stop payment and
voided the check.
(5) An EFT deposit was made by one of the companys customers, Atlas Design, for
merchandise received. The sale had previously been recorded when shipped and was
equal to the payment amount of $125.
50) The following totals for the month of February were taken from the payroll register
of Arcon Company:
How much is the total payroll expense for Arcon Company for this payroll?
Assume that the monthly salaries expense remains the same for the entire year and no
employees are hired or fired during that time. Based on what you learned in Chapter 11
about payroll taxes, do you expect the total payroll expense to stay the same every
month? Explain.
51) On September 1, 2012, Parsons Company purchased $84,000, 10 year, 7%
government bonds at 100 plus accrued interest. The semi-annual interest payment dates
are June 30 and December 31. Interest calculations are done by the month. Required:
52) Using the following accounts and their amounts, prepare in good format a
Statement of Owners Equity for Bright Futures Company, month ended August 31,
2011: