If the costs for direct materials, direct labor, and factory overhead were $60,000,
$35,000, and $25,000, respectively, for 20,000 equivalent units of production, the
conversion cost per equivalent unit was $6.
Answer:
Under the Internal Revenue Code, corporations are required to pay federal income
taxes.
Answer:
A deficit in Retained Earnings is reported in the stockholders’ equity section of the
balance sheet.
Answer:
If the standard to produce a given amount of product is 600 direct labor hours at $15
and the actual was 500 hours at $17, the time variance was $1,700 unfavorable.
Answer:
A budget can be an effective means of communicating management’s plans to the
employees of a business.
Answer:
The task of preparing a budget should be the sole task of the most important department
in an organization.
Answer:
Although marketable securities may be retained for several years, they continue to be
classified as temporary, provided they are readily marketable and can be sold for cash at
any time.
Answer:
For tax purposes, a Limited Liability Company may elect to be treated as a partnership.
Answer:
If the cost of materials is not a significant portion of the total product cost, the materials
may be classified as part of factory overhead cost.
Answer:
The objective of transfer pricing is to encourage each division manager to transfer
goods and services between divisions if overall company income can be increased by
doing so.
Answer:
In preparing a bank reconciliation, the amount of outstanding checks is added to the
balance per bank statement.
Answer:
Of the three widely used inventory costing methods (FIFO, LIFO, and average cost),
the LIFO method of costing inventory assumes costs are charged based on the most
recent purchases first.
Answer:
Bonds are sold at face value when the contract rate is equal to the market rate of
interest.
Answer:
When using the FIFO inventory costing method, the most recent costs are assigned to
the cost of goods sold.
Answer:
If the adjustment for depreciation for the year is inadvertently omitted, the assets on the
balance sheet at the end of the period will be understated.
Answer:
For efficiency of operations and better control over cash, a company should maintain
only one bank account.
Answer:
Period costs include direct materials and direct labor.
Answer:
The total on the “Accounts Payable Creditors Balances” report at January 31, the end of
the first month of operations, agrees with the total of the Accounts Payable debit
column in the cash payments journal for the same period.
Answer:
A staff department has no direct authority over a line department.
Answer:
In many retail businesses, inventory is the largest current asset.
Answer:
The buyer will include the sales tax as part of the cost of items purchased for use.
Answer:
Generally, all deductions made from an employee’s gross pay are required by law.
Answer:
A 15% change in sales will result in a 15% change in net income.
Answer:
Cost of oil used to lubricate factory machinery and equipment is an example of a direct
materials cost.
Answer:
For paying their payroll, most employers use payroll checks drawn on a special bank
account.
Answer:
The fact that workers are unable to meet a properly determined direct labor standard is
sufficient cause to change the standard.
Answer:
The reduction in the par or stated value of common stock, accompanied by the issuance
of a proportionate number of additional shares, is called a stock split.
Answer:
The job order costing system is not used by service organizations.
Answer:
Withdrawals decrease owner’s equity and are listed on the income statement as a
deduction from revenue.
Answer:
Under the cost method, when treasury stock is purchased by the corporation, the par
value and the price at which the stock was originally issued are important.
Answer:
Retained earnings represents past net incomes less past dividends, therefore any balance
in this account would be listed on the income statement.
Answer:
In computerized accounting systems, reports may be generated at any time.
Answer:
Purchase requisitions for Purchasing and the number of payroll checks for Payroll
Accounting are examples of activity bases.
Answer:
The Accumulated Depreciation’s account balance is the sum of the depreciation expense
recorded in past periods.
Answer:
If fixed costs are $650,000 and the unit contribution margin is $30, the sales necessary
to earn an operating income of $30,000 are 14,000 units.
Answer:
In a process cost system, product costs are accumulated by processing department
rather than by job.
Answer:
Revenues are equal to the difference between cash receipts and cash payments.
Answer:
The excess of revenue over the expenses incurred in earning the revenue is called
capital.
Answer:
Which of the following is not part of a three-step process that a growing business uses
for the evolution of its accounting systems?
A.analysis
B.design
C.implementation
D.feedback
Answer:
The Cardinal Company had a finished goods inventory of 55,000 units on January 1. Its
projected sales for the next four months were: January – 200,000 units; February –
180,000 units; March – 210,000 units; and April – 230,000 units. The Cardinal Company
wishes to maintain a desired ending finished goods inventory of 20% of the following
months sales.
What would be the budgeted inventory for March 31st?
A.46,000
B.36,000
C.Cannot be determined from the data given
D.42,000
Answer:
The standard factory overhead rate is $10 per direct labor hour ($8 for variable factory
overhead and $2 for fixed factory overhead) based on 100% capacity of 30,000 direct
labor hours. The standard cost and the actual cost of factory overhead for the production
of 5,000 units during May were as follows:
What is the amount of the factory overhead controllable variance?
A.$10,000 favorable
B.$2,500 unfavorable
C.$10,000 unfavorable
D.$2,500 favorable
Answer:
The debit recorded in the journal to reimburse the petty cash fund is to
A.Petty Cash
B.Accounts Receivable
C.Cash
D.various accounts for which the petty cash was disbursed
Answer:
Allowance for Doubtful Accounts has a credit balance of $1,300 at the end of the year
(before adjustment). The company prepares an analysis of customers’ accounts to
estimate the amount of uncollectible accounts of $41,900. Which of the following
adjusting entries would be made to record the Bad Debt Expense for the year?
A.debit Allowance for Doubtful Accounts, $40,600; credit Bad Debt Expense, $40,600
B.debit Allowance for Doubtful Accounts $43,200; credit Bad Debt Expense, $43,200
C.debit Bad Debt Expense, $43,200; credit Allowance for Doubtful Accounts, $43,200
D.debit Bad Debt Expense, $40,600; credit Allowance for Doubtful Accounts, $40,600
Answer:
A voucher is usually supported by
A.a supplier’s invoice
B.a purchase order
C.a receiving report
D.all of the above
Answer:
On August 1, Kim Company accepted a 90-day note receivable as payment for services
provided to Hsu Company. The terms of the note were $20,000 face value and 6%
interest. On October 30, the journal entry to record the collection of the note should
include a
A.credit to Notes Receivable for $20,300
B.debit to Interest Receivable for $300
C.credit to Interest Revenue for $300
D.debit to Notes Receivable for $20,000
Answer:
Balance sheet and income statement data indicate the following:
Based on the data presented above, what is the number of times bond interest charges
were earned (round to one decimal point)?
A.3.7
B.4.4
C.4.5
D.3.5
Answer:
On January 1, 2014, Gemstone Company obtained a $165,000, 10-year, 7% installment
note from Guarantee Bank. The note requires annual payments of $23,492, with the first
payment occurring on the last day of the fiscal year. The first payment consists of
interest of $11,550 and principal repayment of $11,942. The journal entry to record the
issuance of the installment note for cash on January 1, 2014 would include:
A.a debit to Interest Expense of $11,550
B.a credit to Interest Payable of $11,550
C.a credit to Notes Payable of $165,000
D.a debit to Notes Payable of $165,000
Answer:
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.
Answer:
The units of an item available for sale during the year were as follows:
There are 50 units of the item in the physical inventory at December 31. The periodic
inventory system is used. Determine the ending inventory cost by (a) the first-in,
first-out method, (b) the last-in, first-out method, and (c) the average cost method.
Show your work.
Answer:
Which of the following is not a prerequisite to paying a cash dividend?
A.formal action by the board of directors
B.market value in excess of par value per share
C.sufficient cash
D.sufficient retained earnings
Answer:
Within the United States, the dominant body in the primary development of accounting
principles is the
A.American Institute of Certified Public Accountants (AICPA)
B.American Accounting Association (AAA)
C.Financial Accounting Standards Board (FASB)
D.Institute of Management Accountants (IMA)
Answer:
The following data is given for the Harry Company:
Overhead is applied on standard labor hours.
The direct labor rate variance is:
A.6,000U
B.6,000F
C.33,000F
D.33,000U
Answer:
Using the perpetual inventory system, journalize the entries for the following selected
transactions:
(a) Sold merchandise on account, for $12,000. The cost of the merchandise sold was
$6,500.
(b) Sold merchandise to customers who used MasterCard and VISA, $9,500. The cost
of the merchandise sold was $5,300.
(c) Sold merchandise to customers who used American Express, $2,900. The cost of the
merchandise sold was $1,700.
(d) Paid an invoice from First National Bank for $385, representing a service fee for
processing MasterCard and VISA sales.
(e) Received $4,325 from American Express Company after a $115 collection fee had
been deducted.
Answer:
When posting the column totals of a cash payments journal, a debit should be posted to
A.Cash
B.Accounts Payable
C.Sales Discounts
D.Unearned Revenue
Answer:
Davidson, Inc. incurred the following transactions during the month of January. Record
the appropriate ones in the Cash receipts journal. If a transaction should not be recorded
in the Cash receipts journal, indicate where it should be posted.
(a) On January 3rd a one-year insurance policy was purchased for $2,400. The account
number for Prepaid Insurance is 16.
(b) On January 5th Davidson received a payment on account from Pasher Industries of
$625.
(c) On January 12th Davidson made sales on account of $3,500 and sales for cash of
$2,300. The Fees Earned account number is 41.
(d) On January 26th Davidson received $1,250 in rent revenue from a tenant who leases
a portion of their building. The Rent Revenue account number is 44.
(e) On January 29th Davidson received a payment on account from Gooden, Inc. for
$2,000.
Answer:
On the statement of cash flows, the cash flows from operating activities section would
include
A.receipts from the issuance of capital stock
B.receipts from the sale of investments
C.payments for the acquisition of investments
D.cash receipts from sales activities
Answer:
If there is a balance in the unearned subscriptions account after adjusting entries are
made, it represents a(n)
A.deferral
B.accrual
C.drawing
D.revenue
Answer:
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
Answer:
Poobah Manufacturers Inc. has estimated total factory overhead costs of $95,000 and
10,000 direct labor hours for the current fiscal year. If job number 117 incurred 2,300
direct labor hours, the work in process account will be debited and factory overhead
will be credited for:
A.$21,850
B.$2,300
C.$95,000
D.cannot be determined
Answer:
Bonds Payable has a balance of $900,000 and Premium on Bonds Payable has a balance
of $10,000. If the issuing corporation redeems the bonds at 103, what is the amount of
gain or loss on redemption?
A.$1,200 loss
B.$1,200 gain
C.$17,000 loss
D.$17,000 gain
Answer:
What type of analysis is indicated by the following?
A.vertical analysis
B.horizontal analysis
C.liquidity analysis
D.common-size analysis
Answer:
Mocha Company manufactures a single product by a continuous process, involving
three production departments. The records indicate that direct materials, direct labor,
and applied factory overhead for Department 1 were $100,000, $125,000, and
$150,000, respectively. Work in process at the beginning of the period for Department 1
was $75,000, and work in process at the end of the period totaled $60,000. The records
indicate that direct materials, direct labor, and applied factory overhead for Department
2 were $50,000, $60,000, and $70,000, respectively. In addition, work in process at the
beginning of the period for Department 2 totaled $75,000, and work in process at the
end of the period totaled $60,000. The journal entry to record the flow of costs into
Department 3 during the period is:
A.Work in Process–Department 3585,000
Work in Process–Department 2585,000
B.Work in Process–Department 3570,000
Work in Process–Department 2570,000
C.Work in Process–Department 3555,000
Work in Process–Department 2555,000
D.Work in Process–Department 3165,000
Work in Process–Department 2165,000
Answer:
The following lots of a particular commodity were available for sale during the year:
The firm uses the periodic system and there are 25 units of the commodity on hand at
the end of the year.
What is the amount of the inventory at the end of the year using the LIFO method?
A.$1,685
B.$1,575
C.$1,805
D.$3,815
Answer:
Allowance for Doubtful Accounts has a credit balance of $500 at the end of the year
(before adjustment), and bad debt expense is estimated at 3% of net credit sales. If net
credit sales are $300,000, the amount of the adjusting entry to record the estimated
uncollectible accounts receivables is
A.$8,500
B.$8,500
C.$9,000
D.Cannot be determined
Answer:
Use the correct number to designate each item below:
1) direct materials
2) selling and administrative expense
3) factory overhead
4) direct labor
a) rent expense on factory building
b) sales supplies used
c) factory supplies used
d) indirect materials used
e) wages of assembly line personnel
f) cost of primary material used to make product
g) depreciation on office equipment
h) rent on office facilities
i) insurance expired on factory equipment
j) utilities incurred in the office
k) advertising expense
Answer:
What is the best explanation for this journal entry?
A.Received cash for services performed
B.Received cash for services to be performed in the future.
C.Paid cash in advance for services to be done.
D.Paid cash for services to be performed.
Answer:
The type of account and normal balance of Petty Cash is a(n)
A.revenue, credit
B.asset, debit
C.liability, credit
D.expense, debit
Answer:
On the first day of the fiscal year, Lisbon Co. issued $1,000,000 of 10-year, 7% bonds
for $1,050,000, with interest payable semiannually. Orange Inc. purchased the bonds on
the issue date for the issue price. If the company uses the straight-line method for
amortizing the premium, the journal entry to record the first semiannual interest
payment by Lisbon Co. would include a debit to:
A.Interest Payable for $30,000
B.Interest Expense for $32,500
C.Cash for $70,000
D.Premium on Bonds Payable for $5,500
Answer:
The following production data were taken from the records of the Finishing Department
for June:
Determine the number of conversion equivalent units of production in the June 30
Finishing Department inventory, assuming that the first-in, first-out method is used to
cost inventories.
A.68,000 units
B.70,400 units
C.66,200 units
D.4,200 units
Answer:
In a job order cost accounting system, when goods that have been ordered are received,
the receiving department personnel count, inspect the goods, and complete a:
A.purchase order
B.sales invoice
C.receiving report
D.purchase requisition
Answer:
The debits to Work in Process–Assembly Department for April, together with data
concerning production, are as follows:
All direct materials are placed in process at the beginning of the process and the
average cost method is used to cost inventories.
The materials cost per equivalent unit (to the nearest cent) for April is:
A.$2.60
B.$2.81
C.$3.02
D.$2.26
Answer:
Cash investments made by the owner to the business are reported on the statement of
cash flows in the
A.financing activities section
B.investing activities section
C.operating activities section
D.supplemental statement
Answer:
Below is a table for the present value of $1 at Compound interest.
Below is a table for the present value of an annuity of $1 at compound interest.
Using the tables above, what would be the internal rate of return of an investment of
$294,840 that would generate an annual cash inflow of $70,000 for the next 5 years?
A.6%
B.10%
C.12%
D.cannot be determined from the data given.
Answer:
Perfect Stampers makes and sells aftermarket hub caps. The variable cost for each hub
cap is $4.75 and the hub cap sells for $9.95. Perfect Stampers has fixed costs per month
of $3,120. Compute the contribution margin per unit and break-even sales in units and
in dollars for the month.
Answer:
On June 1, the cash account balance was $96,750. During June, cash receipts totaled
$305,000 and the June 30 balance was $75,880. Determine the cash payments made
during June.
Answer:
A company reports the following:
Determine the company’s price-earnings ratio. Round your answer to one decimal place.
Answer:
The Cash and Accounts Receivable for a company are provided below:
Based on this information, what is the amount and percentage of increase or decrease
that would be shown in a balance sheet with horizontal analysis?
Answer:
Westsouth Publishing reports the following segment data regarding its textbook sales:
Perform a horizontal analysis and a vertical analysis for Westsouth Publishing
Company. Round to one decimal place.
Answer:
On July 1, 2010, Howard Co. acquired patents rights for $40,000. The patent has a
useful life of 8 years and a legal life of 15 years. Journalize the adjusting entry on
December 31, 2010 to recognize the amortization.
Journal
Answer:
Briefly describe the three-step process of accounting system development.
Answer:
Job order manufacturing and process manufacturing are two major costing systems used
in manufacturing. Briefly contrast the characteristics of these two systems.
Answer:
On January 2nd, Dog Mart prepaid $30,000 rent for the year and recorded the
prepayment in an asset account. Prepare the January 31st adjusting entry for rent
expense.
Answer:
Holiday Decorations Unique has been approached by the community college to make
special decorations for the faculty and staff. The college is willing to buy 5,000
Christmas ornaments with their own design for $6.00 each. The company normally sells
its decorations for $12.00 each. A break down of their costs is as follows:
Should Holiday Decorations Unique accept the special order made by the college? The
company has enough excess capacity to make this order.
Answer:
Proposals A and B each cost $500,000 and have 5-year lives. Proposal A is expected to
provide equal annual net cash flows of $109,000, while the net cash flows for Proposal
B are as follows:
Determine the cash payback period for each proposal. Round answers to two decimal
places.
Answer:
Top Notch, LLC provides repair services for oil rigs. The firm has 5 members in the
LLC, which did not change between 2011 and 2012. During 2012, the business
expanded into three new regions of the country. The following revenue and employee
information is provided:
a. For 2011 and 2012, determine the revenue per employee (excluding members).
b. Interpret the trend between the two years.
Answer:
Match the following terms with the best definition given.
Answer:
Durrand Corporation’s accumulated depreciation increased by $12,000, while patents
decreased by $2,200 between consecutive balance sheet dates. There were no purchases
or sales of depreciable or intangible assets during the year. In addition, the income
statement showed a gain of $4,300 from sale of land. Reconcile a net income of
$65,000 to net cash flow from operating activities.
Answer:
Falcon Company acquired an adjacent lot to construct a new warehouse, paying
$40,000 and giving a short-term note for $410,000. Legal fees paid were $13,275,
delinquent taxes assessed were $14,500, and fees paid to remove an old building from
the land were $15,800. Materials salvaged from the demolition of the building were
sold for $6,800. A contractor was paid $890,000 to construct a new warehouse.
Determine the cost of the land to be reported on the balance sheet and show your work.
Answer:
Convert each of the following estimates of useful life to a straight-line depreciation
rate, stated as a percentage.
Answer:
On January 1st, Great Designs Company had a debit balance of $1,450 in the Office
Supplies account. During the month, Great Designs purchased $115 and $160 of office
supplies and journalized them to the Office Supplies asset account upon purchasing. On
January 31st, an inspection of the office supplies cabinet shows that only $350 of Office
Supplies remains in the locker. Prepare the January 31st adjusting entry for Office
Supplies.
Answer:
Select the correct subsidiary ledger and appropriate posting for each of the following
customer and creditor activities.
Answer:
A company had stock outstanding as follows during each of its first three years of
operations: 2,500 shares of $10, $100 par, cumulative preferred stock and 50,000 shares
of $10 par common stock. The amounts distributed as dividends are presented below.
Determine the total and per share dividends for each class of stock for each year by
completing the schedule.
Answer:
Cuisine Inc. manufactures flatware sets. The budgeted production is for 80,000 sets in
2012. Each set requires 2.5 hours to polish the material. If polishing labor costs $15.00
per hour, determine the direct labor budget for 2012.
Answer: