1) Activity-based costing is much easier to apply than single plantwide factory
overhead allocation.
2) Safeguarding inventory and proper reporting of the inventory in the books are the
reasons for controlling the inventory.
3) A receiving report is prepared when purchased materials are first received by the
manufacturing department.
4) The bank often informs the company of bank service charges by including a credit
memo with the monthly bank statement.
5) If a company uses average costing instead of FIFO they will still get the same unit
costs.
6) Maximum effectiveness and efficiency are reached when the just-in-time (JIT)
philosophy is used only by manufacturers.
7) If divisional income from operations is $100,000, invested assets are $850,000, and
the minimum rate of return on invested assets is 8%, the residual income is $68,000.
8) In preparing the statement of cash flows, the correct order of reporting cash activities
is Financing, Operating, Investing.
9) Prime costs consists of direct materials, indirect materials, and direct labor.
10) Favorable volume variances are never harmful, since achieving them encourages
managers to run the factory above normal capacity.
11) In using the product cost concept of applying the cost-plus approach to product
pricing, selling expenses, administrative expenses, and profit are covered in the markup.
12) Break-even analysis is one type of cost-volume-profit analysis.
13) Notes payable may be issued to creditors to satisfy accounts payable created earlier.
14) Gross profit minus selling expenses equals net income.
15) A diagram of the operating structure of an organization is called an organization
chart.
16) The entry to record the disposal of fixed assets will include a credit to accumulated
depreciation.
17) The accounting cycle begins with preparing an unadjusted trial balance.
18) When the market rate of interest on bonds is higher than the contract rate, the bonds
will sell at
A.a premium
B.their face value
C.their maturity value
D.a discount
What is the amount of Direct Materials used?
A.$2,000
B.$4,000
C.$8,000
D.$14,000
20) Accrued revenues would appear on the balance sheet as
A.assets
B.liabilities
C.equity
D.prepaid expenses
21) The term applied to the amount of cost to transfer to expense resulting from a
decline in the utility of intangible assets is
A.amortization
B.depletion
C.depreciation
D.allocation
22) Debtors are interested in the times-interest-earned ratio because they want to
A.know what rate of interest the corporation is paying
B.have adequate protection against a potential drop in earnings jeopardizing their
interest payments
C.be sure their debt is backed by collateral
D.know the tax effect of lending to a corporation
23) From the following list of accounts taken from Lamars accounting records, identify
those that would appear on the income statement.
(a) Rent Expense
(b) Land
(c) Capital Stock
(d) Fees Earned
(e) Dividends
(f) Wages Expense
(g) Taxes Payable
24) A companys 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, 25% the following month, and 5% is uncollectible. Projected sales for
December, January, and February are $60,000, $85,000, and $95,000, respectively. The
February expected cash receipts from all current and prior credit sales is:
A.$61,200
B.$57,000
C.$66,400
D.$90,250
25) An installment note payable for a principal amount of $94,000 at 6% interest
requires Lawson Company to repay the principal and interest in equal annual payments
of $22,315 beginning December 31, 2014, for each of the next five years. After the final
payment, the carrying amount on the note will be
A.$ 1,263
B.$21,053
C.$22,315
D.$ 0
26) Allowance for Doubtful Accounts has a debit balance of $600 at the end of the year
(before adjustment), and an analysis of accounts in the customers ledger indicates
uncollectible receivables of $13,000. Which of the following entries records the proper
adjusting entry for bad debt expense?
A.debit Bad Debt Expense, $600; credit Allowance for Doubtful Accounts, $600
B.debit Bad Debt Expense, $12,400; credit Allowance for Doubtful Accounts, $12,400
C.debit Allowance for Doubtful Accounts, $600; credit Bad Debt Expense, $600
D.debit Bad Debt Expense, $13,600; credit Allowance for Doubtful Accounts, $13,600
27) Which of the following is the correct flow of manufacturing costs?
A.Raw materials, work in process, finished goods, cost of goods sold
B.Raw materials, finished goods, cost of goods sold, work in process
C.Work in process, finished goods, raw materials, cost of goods sold
D.Cost of goods sold, raw materials, work in process, finished goods
28) Three identical units of Item Steele Plate are purchased during March, as shown
below.
Assume that one unit is sold on March 23 for $1,125. Determine the gross profit for
March and ending inventory on March 31 using (a) FIFO, (b) LIFO, and (c) average
cost methods.
29) A business is considering a cash outlay of $300,000 for the purchase of land, which
it could lease for $36,000 per year. If alternative investments are available which yield
an 18% return, the opportunity cost of the purchase of the land is:
A.$54,000
B.$36,000
C.$18,000
D.$72,000
30) An analysis in which all the components of an income statement are expressed as a
percentage of net sales is called
A.vertical analysis
B.horizontal analysis
C.liquidity analysis
D.solvency analysis
31) Avey Corporation had $275,000 in invested assets, sales of $330,000, income from
operations amounting to $49,500 and a desired minimum rate of return of 7.5%. The
rate of return on investment for Avey Corporation is:
A.8%
B.10%
C.18%
D.7.5%
32) In credit terms of 3/15, n/45, the “3” represents the
A.number of days in the discount period
B.full amount of the invoice
C.number of days when the entire amount is due
D.percent of the cash discount
33) Match each of the following terms associated with the best description of that term.
1>Another term for selling receivables. A. Accounts Receivable
2>All money claims against other entities. B. Aging Report
3>Records bad debt expense only when a specific customers account is deemed
worthless. C. Allowance for Doubtful Accounts
4>A contra asset that represents the amount of estimated uncollectible receivables at a
specific date. D. Direct Write-off Method
5>A receivable created from selling merchandise or services on account. E. Bad Debt
Expense
6>The difference between Accounts Receivable and Allowance for Doubtful Accounts.
F. Net Realizable Value
7>Operating expense recorded as a result of receivables becoming uncollectible. G.
Factoring
8>Measures how frequently during the year accounts receivables are being turned into
cash. H. Receivables
9>A list of customer accounts sorted by age classes. I. Accounts Receivable Turnover
34) The Clydesdale Company has sales of $4,500,000. It also has invested assets of
$2,000,000 and operating expenses of $3,600,000. The company has established a
minimum rate of return of 7%.
What is Clydesdale Company’s profit margin?
A.20%
B.80%
C.44.4%
D.18%
35) Identify each of the following expenditures as chargeable to (a) Land, (b) Land
Improvements, (c) Buildings, (d) Machinery and Equipment, or (e) other account.
36) The exclusive right to use a certain name or symbol is called a
A.goodwill
B.patent
C.trademark
D.copyright
37) 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
38) Tara Companys budget includes the following credit sales for the current year:
September, $25,000; October, $36,000; November, $30,000; December, $32,000.
Experience has shown that payment for the credit sales is received as follows: 15% in
the month of sale, 60% in the first month after sale, 20% in the second month after sale,
and 5% is uncollectible. How much cash can Tara Company expect to collect in
November as a result of current and past credit sales?
A.$19,700
B.$28,400
C.$30,000
D.$31,100
39)
Which of the graphs in Figure 20-1 illustrates the behavior of a total variable cost?
A.Graph 2
B.Graph 3
C.Graph 4
D.Graph 1
40) Match each of the following terms with the best definition given.
1>Target selling price to be achieved in the long term. A. Engineering Change Order
2>Includes manufacturing cost plus selling and administrative expenses. B. Total cost
concept
3>A document that initiates a product or process change. C. Setup
4>Variable manufacturing costs plus variable selling and administrative costs are
included in cost per unit. D. Normal selling price
5>Changing tooling when preparing for a new product. E. Variable cost concept
41) A check drawn by a company for $340 in payment of a liability was recorded in the
journal as $430. This item would be included on the bank reconciliation as a(n)
A.addition to the balance per the company’s records
B.addition to the balance per the bank statement
C.deduction from the balance per the bank statement
D.deduction from the balance per the company’s records
42) Who among the following uses financial reports?
A.management
B.creditors
C.investors
D.all are correct
43) Balance sheet accounts
A.represent amounts accumulated during a specific period of time
B.are called real accounts
C.have zero balances after the closing entries have been posted
D.are equal to assets and liabilities
44) Which of the following is a manufacturing business?
A.Amazon.com
B.Wal-Mart
C.Ford Motors
D.Delta Airlines
45) Which of the items below is not a business entity?
A.entrepreneurship
B.proprietorship
C.partnership
D.corporation
46) Assets are
A.always lower than liabilities
B.equal to liabilities less stockholders equity
C.the same as expenses because they are acquired with cash
D.financed by owners and/or creditors
47) Mason Corporation had $650,000 in invested assets, sales of $700,000, income
from operations amounting to $99,000, and a desired minimum rate of return of 15%.
The profit margin for Mason is:
A.7.1%
B.20%
C.15.2%
D.14.1%
48) The systematic examination of the differences between planned and actual
contribution margin is termed the:
A.gross profit analysis
B.contribution margin analysis
C.sales mix analysis
D.volume variance analysis
49) Expenses that are incurred directly or entirely in connection with the sale of
merchandise are classified as
A.selling expenses
B.general expenses
C.other expenses
D.administrative expenses
50) Fortune Corporations comparative balance sheet for current assets and liabilities
was as follows:
Adjust 2012 net income of $65,000 for changes in operating assets and liabilities to
arrive at cash flows from operating activities using the indirect method.
51) The Mountain Springs Water Company has two departments. Purifying and
Bottling. The Bottling Department received 67,000 liters from the Purifying
Department. During the period, the Bottling Department completed 65,000 liters,
including 3,000 liters of work in process at the beginning of the period. The ending
work in process was 5,000 liters. How many liters were started and completed during
the period?
52) Crain Company budgeted 35,000 direct labor hours and incurred 40,000 direct labor
hours. It incurred $780,000 of overhead and estimated overhead was $735,000.
What is Crains predetermined overhead rate? Was overhead overapplied or
underapplied for the year? By how much?
53) On January 7th, Damien Lawson deposited $95,000 in a bank account in the name
of JumpStart in return for shares of stock in the corporation. Prepare the journal entry to
record this transaction.
54) From the following data for Norton Company for the year ended December31, 2012
prepare a multiple-step income statement. Show parenthetically earnings per share for
the following: income from continuing operations, loss on discontinued operations (less
applicable income tax), income before extraordinary item, extraordinary item (less
applicable income tax), and net income.
55) Prepare the journal entry for materials and labor, based on the following:
56) Product J is one of the many products manufactured and sold by Oceanside
Company. An income statement by product line for the past year indicated a net loss for
Product J of $12,250. This net loss resulted from sales of $275,000, cost of goods sold
of $186,500, and operating expenses of $85,750. It is estimated that 30% of the cost of
goods sold represents fixed factory overhead costs and that 40% of the operating
expense is fixed. If Product J is retained, the revenue, costs, and expenses are not
expected to change significantly from those of the current year. Because of the large
number of products manufactured, the total fixed costs and expenses are not expected to
decline significantly if Product J is discontinued.
Prepare a differential analysis report, dated February 8 of the current year, on the
proposal to discontinue Product J.
57) Balances of the current asset and current liability accounts at the end and beginning
of the year are as follows:
Use the direct method to prepare the cash flows from operating activities section of a
statement of cash flows.
58) Marcos Company, which had 35,000 shares of common stock outstanding, declared
a 4-for-1 stock split.
Required: