A company had net sales of $82,000, cost of goods sold of $70,000, and other expenses
of $2,000. Its gross margin ratio equals:
A. 37%
B. 2.44%
C. 14.63%
D. 16.67%
E. 683.33%
Answer:
A seller of goods or services, which is usually a manufacturer or wholesaler, is known
as a:
A. Vendor
B. Payee
C. Vendee
D. Creditor
E. Debtor
Answer:
Which of the following is the usual final step in the accounting cycle?
A. Journalizing transactions.
B. Preparing an adjusted trial balance.
C. Preparing a post-closing trial balance.
D. Preparing the financial statements.
E. Preparing a work sheet.
Answer:
In a responsibility accounting system:
A. Controllable costs are assigned to managers who are responsible for them.
B. Each accounting report contains all items allocated to a responsibility center.
C. Organized and clear lines of authority and responsibility are only incidental.
D. All managers at a given level have equal authority and responsibility.
E. Control over costs belongs only to the top level of management.
Answer:
Reference: 22_03
Bridgestreet, Inc. has three operating departments: Cutting, Assembling, and Finishing.
Cutting has 5,000 employees and occupies 15,000 square feet. Assembling has 4,000
employees and occupies 12,000 square feet. Finishing has 1,000 employees and
occupies 23,000 square feet. Indirect factory costs for the current period were
Administrative $170,000 and Maintenance $212,000. Administrative costs are allocated
to operating departments based on the number of workers and maintenance costs are
allocated to operating departments based on square footage occupied.
Based on the above data, determine the maintenance cost allocated to each operating
department of Bridgestreet, Inc.
A. Cutting: $ 70,666 Assembling: $ 70,666 Finishing: $ 70,666
B. Cutting: $ 15,000 Assembling: $ 12,000 Finishing: $ 23,000
C. Cutting: $ 63,600 Assembling: $ 50,880 Finishing: $ 97,520
D. Cutting: $127,333 Assembling: $127,333 Finishing: $127,333
E. Cutting: $115,000 Assembling: $ 91,680 Finishing: $175,720
Answer:
The number of days’ sales uncollected:
A. Is used to evaluate the liquidity of receivables.
B. Is calculated by dividing accounts receivable by sales.
C. Measures a company’s ability to pay its bills on time.
D. Measures a company’s debt to income.
E. Is calculated by dividing sales by accounts receivable.
Answer:
Use the following information and the indirect method to calculate the net cash
provided or used by operating activities:
A. $12,700
B. $13,900
C. $20,900
D. $28,400
E. $35,900
Answer:
Dina Corp. uses a job order cost accounting system. Four jobs were started during the
current year. The following is a record of the costs incurred:
Actual overhead costs were $55,800. The predetermined overhead allocation rate is
$2.40 per direct labor hour. During the year, Jobs 1010, 1012, and 1013 were
completed. Also, Jobs 1010 and 1013 were sold for $387,000. Assuming that this is
Dina’s first year of operations:
(A. Calculate the balance in the Goods in Process Inventory, Finished Goods Inventory,
and Cost of Goods Sold accounts.
(B. Does the Factory Overhead account balance indicate an over- or underapplication of
overhead? Prepare the entry to close this out assuming the amount is not material.
Answer:
Use the following data to find the direct labor rate variance.
A. $6,125 unfavorable
B. $7,000 unfavorable
C. $7,000 favorable
D. $12,250 favorable
E. $6,125 favorable
Answer:
The purchase of raw materials on account in a process costing system is recorded with
a:
A. Debit to Purchases and credit to Cash.
B. Debit to Purchases and a credit to Accounts Payable.
C. Debit to Raw Materials Inventory and a credit to Accounts Payable.
D. Debit to Accounts Payable and a credit to Raw Materials Inventory.
E. Debit to Goods in Process Inventory and a credit to Accounts Payable
Answer:
Which of the following is a true statement regarding the treatment of accounts payable,
sales tax payable, and unearned revenues?
A. Both GAAP and IFRS treat these accounts as estimated liabilities.
B. GAAP treats them as estimated liabilities, while IFRS treats these accounts as
contingent liabilities.
C. IFRS treats them as estimated liabilities, while GAAP treats theses accounts as
contingent liabilities.
D. Both GAAP and IFRS treat these accounts as known liabilities.
E. IFRS treats them as known liabilities, while GAAP treats these accounts as
contingent liabilities.
Answer:
A company produces three different products that all require processing on the same
machines. There are only 27,000 machine hours available in each year. Production
information for each product is:
Required:
a. Determine the preferred sales mix if there are no market constraints on any of the
products.
b. Determine the preferred sales mix if the demand is limited to 5,000 units for each
product.
c. Determine the preferred sales mix if the demand is limited to 3,000 units for each
product.
Answer:
Fees earned (but not yet received in cash) by a business in exchange for services that it
has provided appear on which of the following statements?
A. Income statement
B. Statement of cash received
C. Statement of retained earnings
D. Statement of cash flows
E. Schedule of accounts receivable
Answer:
A term describing a firm’s normal range of operating activities is:
A. Relevant range of operations.
B. Break-even level of operations.
C. Margin of safety of operations.
D. Relevant operating analysis.
E. High-low level of operations.
Answer:
Robert Haddon contributed $70,000 in cash and some land worth $130,000 to open a
new business, RH Consulting. Which of the following general journal entries will RH
Consulting make to record this transaction?
A.
B.
C.
D.
E.
Answer:
A manufacturing company uses a job order cost accounting system. Overhead is applied
using direct labor hours as an allocation base. Total costs for a particular job were
$5,720. Of this amount $2,600 was direct labor and $1,040 was direct material. The
company pays $26 per hour of direct labor and $2 per pound of direct materials. What
is this companys overhead rate?
A. $26.00 per direct labor hour.
B. $20.80 per direct labor hour.
C. $ 4.00 per direct labor hour.
D. $80.00 per direct labor hour.
E. $2,080 per direct labor hour.
Answer:
Rodriguez, Sate, and Melton are dissolving their partnership. Their partnership
agreement allocates income and losses equally among the partners. The current period’s
ending capital account balances are Rodriguez, $32,000; Sate, $28,000; and Melton,
$(4,000). After all the assets are sold and liabilities are paid, but before any
contributions are considered to cover any deficiencies, there is $56,000 in cash to be
distributed. Melton pays $2,000 to cover the deficiency in her account. The final
distribution of cash would be as follows:
A. Rodriquez $30,000 and State $26,000.
B. Rodriquez $32,000 and State $26,000.
C. Rodriquez $30,000 and State $28,000.
D. Rodriquez $30,000 and State $27,000.
E. Rodriquez $31,000 and State $27,000.
Answer:
Use the following data to determine the cost of goods manufactured.
A. $65,800
B. $45,800
C. $49,500
D. $52,300
E. $47,100
Answer:
The Machining Department started the current month with beginning goods in process
inventory of $10,000. During the month, it was assigned the following costs: direct
materials, $76,000; direct labor, $24,000; and factory overhead, 50% of direct labor
cost. Also, inventory with a cost of $109,000 was transferred out of the department to
the next phase in the process. The ending balance of the Goods in Process Inventory
account for the Machining Department is:
A. $13,000
B. $1,000
C. $49,000
D. $110,000
E. $3,000
Answer:
A company’s beginning work in process inventory consisted of 20,000 units that were
one-fifth complete with respect to direct labor. These beginning units were completed
and another 90,000 units were started during the current period. Of those started, 60,000
were finished and the remaining 30,000 were one-third complete at the end of the
period. Using FIFO, the equivalent units of production were:
A. 60,000
B. 74,000
C. 76,000
D. 86,000
E. 90,000
Answer:
Classifying costs by behavior involves:
A. Identifying fixed cost and variable cost.
B. Identifying cost of goods sold and operating costs.
C. Identifying all costs.
D. Identifying costs in a physical manner.
E. Identifying both quantitative and qualitative cost factors.
Answer:
Shelby and Mortonson formed a partnership with capital contributions of $300,000 and
$400,000, respectively. Their partnership agreement calls for Shelby to receive a
$60,000 per year salary. Also, each partner is to receive an interest allowance equal to
10% of a partner’s beginning capital investments. The remaining income or loss is to be
divided equally. If the net income for the current year is $125,000, then Shelby and
Mortonson’s respective shares are:
A. $62,500; $62,500
B. $90,000; $35,000
C. $87,500; $37,500
D. $85,000; $40,000
E. $92,000; $33,000
Answer:
Swola Company reports the following annual cost data for its single product.
This product is normally sold for $25 per unit. If Swola increases its production to
200,000 units, while sales remain at the current 75,000 unit level, by how much would
the companys gross margin increase or decrease under variable costing?
A. $187,500 increase.
B. $112,500 increase.
C. There will be no change in gross margin.
D. $112,500 decrease.
E. $187,500 decrease.
Answer:
A firm expects to sell 25,000 units of its product at $11 per unit. Pretax income is
predicted to be $60,000. If the variable costs per unit are $6, total fixed costs must be:
A. $65,000
B. $90,000
C. $125,000
D. $215,000
E. $275,000
Answer:
A company had no office supplies at the beginning of the year. During the year, the
company purchased $250 worth of office supplies. On December 31, $75 worth of
office supplies remained. How much should the company report as office supplies
expense for the year?
A. $75
B. $125
C. $175
D. $250
E. $325
Answer:
A corporation issued 6,000 shares of its $10 par value common stock in exchange for
land that has a market value of $84,000. The entry to record this transaction would
include:
A. A debit to Common Stock for $60,000.
B. A debit to Land for $60,000.
C. A credit to Land for $60,000.
D. A credit to Contributed Capital in Excess of Par Value, Common Stock for $24,000.
E. A credit to Common Stock for $84,000.
Answer:
The accounting guideline prescribing that financial statement information be supported
by independent, unbiased evidence other than someone’s belief or opinion is the:
A. Business entity principle
B. Monetary unit principle
C. Going-concern principle
D. Objectivity principle
E. Full disclosure principle
Answer:
A company expects to produce and sell 9,000 units of a single product. Management
desires an 18% return on assets of $1,750,000. The following additional company
information is available:
Compute markup per unit. Assume that markup percentage equals desired profit divided
by total costs.
A. $35
B. $84
C. $110
D. $125
E. $160
Answer:
Match the following terms to the appropriate definitions.
__________ (1) Managerial accounting
__________ (2) Continuous improvement
__________ (3) Raw materials inventory
__________ (4) Customer orientation
__________ (5) Just-in-time manufacturing
__________ (6) Goods in process inventory
__________ (7) Lean business model
__________ (8) Balanced scorecard
__________ (9) Prime costs
__________(10) Raw Materials Inventory Turnover
(a) An idea that rejects the notions of “good enough” and “acceptable” and challenges
employees and managers to continually experiment with new and improved business
practices.
(b) Goods a company acquires to use in making products.
(c) The ratio which computes how many times a company turns over its raw materials
inventory in a period.
(d) A system that acquires inventory and produces only when needed.
(e) An approach that aids continuous improvement by augmenting financial measures
with information on the drivers or indicators of future financial performance along the
four dimensions of (1) financial; (2) customer; (3) internal business processes; (4)
learning and growth.
(f) Expenditures directly associated with the manufacture of finished goods; includes
direct materials and direct labor.
(g) An idea that means that employees understand the changing needs and wants of
their customers and align their management and operating practices accordingly.
(h) Products in the process of being manufactured but not yet complete.
(i) A model whose goal is to eliminate waste while satisfying the customer and
providing a positive return to the company.
(j) An activity that provides financial and nonfinancial information to an organization’s
managers and other internal decision makers.
Answer:
Net income of Lucky Company was $52,000. The accounting records reveal
depreciation expense of $99,000 as well as increases in prepaid rent, salaries payable,
and income taxes payable of $74,000, $15,700, and $14,000, respectively. What is the
net cash flow provided (used) by operating activities?
A. $254,700
B. $47,300
C. $195,300
D. $150,700
E. $106,700
Answer:
The document that is an itemized statement of goods prepared by a vendor listing the
customer’s name, items sold, sales prices, and terms of the sale is the:
A. Purchase requisition
B. Purchase order
C. Invoice
D. Receiving report
E. Invoice approval
Answer:
Reference: 21_09
This information comes from the records of Dina Co. for the current period:
Factory overhead (based on budgeted production of 24,500 units)
Variable overhead $2.25/direct labor hour
Fixed overhead $1.95/direct labor hour
Calculate the direct materials price and quantity variances, direct labor rate and
efficiency variances, and the overhead controllable and volume variances. In each case,
state whether the variance is favorable or unfavorable.
Answer:
The ________________ ratio reflects the liquidity of a company’s accounts
receivable.
Answer:
A corporation received its charter and began business this year. The company is
authorized to issue 50,000 shares of $100 par, 10%, noncumulative, nonparticipating
preferred stock and 500,000 shares of no-par common stock. The following selected
transactions occurred during this year:
Prepare journal entries to record these transactions.
Answer:
An employee earned $3,450 wages for the current period. Calculate the total and
individual amounts to be withheld for Social Security (6.2%), Medicare (1.45%) and
federal income tax (15%) assuming the entire employee’s pay is subject to FICA taxes.
Answer:
Explain debits and credits and their role in the accounting system.
Answer:
Shin Company has a loan agreement that provides it with cash today. The company
must repay this loan in four years with $25,000. Shin agrees to a 6% interest rate. The
present value factor for four periods, 6%, is 0.7921. What is the amount of cash that
Shin Company receives today?
Answer:
Presented below is selected financial information for Stanley’s Bike Shop. Using the
appropriate information, prepare its balance sheet at December 31, 2014.
Answer:
What are raw materials inventory turnover and days sales in raw materials inventory?
What is the purpose of these measures?
Answer:
The third step in the analyzing and recording process is to post the information to
_________________________.
Answer:
Samm’s Department Store operates three departments (A, B, and C). If total costs of
$4,500 are to be allocated on the basis of square feet of space, (Dept. A = 1,500 sq. ft.;
Dept. B = 900 sq. ft.; Dept. C = 600 sq. ft.) then Dept. A’s share (in percent) of the
$4,500 cost would be ________%; Dept. B would be ______%, and Dept. C would be
__________%. The amount of cost allocated to Dept. C would be $__________.
Answer:
On January 1, 2013, a company issued 10%, 10-year bonds payable with a par value of
$720,000. The bonds pay interest on July 1 and January 1. The bonds were issued for
$817,860 cash, which provided the holders an annual yield of 8%. Prepare the general
journal entry to record the first semiannual interest payment, assuming the company
uses the straight-line method of amortization.
Answer:
Define and discuss the differences between operating, investing, and financing
activities.
Answer:
A favorable variance for a cost means that when compared to the budget, the actual cost
is ____________________ than the budgeted cost.
Answer:
________________________ costing treats fixed overhead as a period cost.
Answer:
Explain the difference between the retail inventory method and gross profit inventory
method for valuing inventory.
Answer:
General-purpose financial statements include the (1) ___________________, (2)
___________________, (3) _____________________________, (4)
________________________ and (5) _____________________________.
Answer:
Define standard costs. How do they assist management?
Answer:
______________ is the area of accounting aimed at serving external users.
Answer:
Whistler Company determined that in the production of their products last period, they
had a favorable price variance and an unfavorable quantity variance for direct materials.
What might be the cause of this pattern of variances?
Answer:
Compare the different depreciation methods (straight-line, units-of-production, and
double-declining-balance) with respect to the computation of depreciation per period
and the total depreciation over the life of the asset.
Answer: