If the underapplied factory overhead amount is immaterial, it is transferred to Cost of
Goods Sold at the end of the fiscal year.
Answer:
The Sarbanes-Oxley Act of 2002 was passed by Congress due to the public outcry after
the financial scandals of the early 2000s.
Answer:
Direct materials cost that varies with the number of units produced is an example of a
fixed cost of production.
Answer:
Assuming that the quantities of inventory on hand during the current year were
sufficient to meet all demands for sales, a decrease in the inventory turnover for the
current year when compared with the turnover for the preceding year indicates an
improvement in inventory management.
Answer:
The document that serves as the basis for recording direct labor on a job cost sheet is
the time ticket.
Answer:
A capital expenditures budget is prepared before the operating budgets.
Answer:
A large retained earnings account means that there is cash available to pay dividends.
Answer:
An account receivable is typically classified as a revenue.
Answer:
Under the periodic inventory system, the cost of merchandise sold is recorded when
sales are made.
Answer:
While some businesses have been granted charters under state laws, most businesses
receive their charters under federal laws.
Answer:
The financial statements of a proprietorship should include the owner’s personal assets
and liabilities.
Answer:
It is beneficial for two related companies to use the cost price approach for transfer
pricing when both of the companies operate as cost centers and are not concerned with
the revenue.
Answer:
An advantage of the current ratio is that it considers the makeup of the current assets.
Answer:
If merchandise costing $3,500, terms FOB destination, 2/10, n/30, with prepaid freight
costs of $125, is paid within 10 days, the amount of the purchases discount is $70.
Answer:
If the profit margin for a division is 8% and the investment turnover is 1.20, the rate of
return on investment is 9.6%.
Answer:
A buyer who acquires merchandise under credit terms of 1/10, n/30 has 30days after the
invoice date to take advantage of the cash discount.
Answer:
A compensating balance occurs when a bank may require a company to maintain a
maximum cash balance.
Answer:
If income from operations for a division is $5,000, invested assets are $25,000, and
sales are $30,000, the profit margin is 20%.
Answer:
In preparing a bank reconciliation, the amount of an error indicating the recording of a
check in the journal for an amount larger than the amount of the check is added to the
balance per company’s records.
Answer:
Sellers and buyers are required to record trade discounts.
Answer:
Free cash flow is the measure of operating cash flow available for corporate purposes
after providing sufficient fixed asset additions to maintain current productive capacity
and dividends.
Answer:
Prime costs are the combination of direct labor costs and factory overhead costs.
Answer:
Using the job order cost system, service organizations are able to bill customers on a
weekly or monthly basis, even when the job has not been completed.
Answer:
A proof of the equality of debits and credits in the ledger at the end of an accounting
period is called a balance sheet.
Answer:
By using the rate of return on investment as a divisional performance measure,
divisional managers will always be motivated to invest in proposals which will increase
the overall rate of return for the company.
Answer:
In net present value analysis for a proposed capital investment, the expected future net
cash flows are averaged and then reduced to their present values.
Answer:
Care must be taken involving capital investment decisions, since normally a long-term
commitment of funds is involved and operations could be affected for many years.
Answer:
A primary difference between the direct write-off and allowance method is whether or
not bad debts is based on a percentage of sales.
Answer:
If income from operations for a division is $6,000, invested assets are $25,000, and
sales are $30,000, the investment turnover is 1.2.
Answer:
Budget preparation is best determined in a top-down managerial approach.
Answer:
A corporation is a business that is legally separate and distinct from its owners.
Answer:
Under the indirect method, expenses that do not affect cash are added to net income in
the operating activities section of the statement of cash flows.
Answer:
The theory of constraints is a manufacturing strategy that focuses on reducing the
influence of bottlenecks on a process.
Answer:
On the first day of the current fiscal year, $2,000,000 of 10-year, 7% bonds, with
interest payable annually, were sold for $2,125,000. Present entries to record the
following transactions for the current fiscal year:
(a) Issuance of the bonds.
(b) First annual interest payment.
(c) Amortization of bond premium for the year, using the straight-line method of
amortization.
Answer:
The purpose of an audit is to
A.determine whether or not a company is a good investment.
B.render an opinion on the fairness of the statements.
C.determine whether or not a company complies with corporate social responsibility.
D.determine whether or not a company is a good credit risk.
Answer:
Accounts receivable from sales transactions were $51,000 at the beginning of the year
and $64,000 at the end of the year. Net income reported on the income statement for the
year was $105,000. Exclusive of the effect of other adjustments, the cash flows from
operating activities to be reported on the statement of cash flows prepared by the
indirect method is
A.$105,000
B.$118,000
C.$92,000
D.$169,000
Answer:
The entry to record the flow of direct labor costs into production in a job order cost
accounting system is:
A.debit Factory Overhead, credit Work in Process
B.debit Finished Goods, credit Wages Payable
C.debit Work in Process, credit Wages Payable
D.debit Factory Overhead, credit Wages Payable
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. The records further indicate that direct materials, direct labor,
and applied factory overhead for Department 2 were $55,000, $65,000, and $80,000,
respectively. In addition, work in process at the beginning of the period for Department
1 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 1 during the period for
direct materials is:
A.Work in Process–Department 1100,000
Materials100,000
B.Work in Process–Department 155,000
Materials55,000
C.Materials100,000
Work in Process–Department 1100,000
D.Materials55,000
Work in Process–Department 155,000
Answer:
Below is budgeted production and sales information for Flushing Company for the
month of December:
The unit selling price for product XXX is $5 and for product ZZZ is $15.
Budgeted production for product XXX during the month is:
A.498,000 units
B.502,000 units
C.534,000 units
D.566,000 units
Answer:
The manufacturing cost of Carrie Industries for the first three months of the year are
provided below:
Using the high-low method, determine the (a) variable cost per unit, and (b) the total
fixed cost.
Answer:
Businesses that are separated into two or more manageable units in which managers
have authority and responsibility for operations are said to be:
A.decentralized
B.consolidated
C.diversified
D.centralized
Answer:
Morgan Company has the following segment revenues for fiscal 2011 and 2010.
Prepare a vertical analysis of the segment data.
Answer:
The expected average rate of return for a proposed investment of $4,800,000 in a fixed
asset, using straight line depreciation, with a useful life of 20 years, no residual value,
and an expected total net income of $10,560,000 is:
A.24%
B.22%
C.45%
D.10%
Answer:
The term “inventory” can indicate
A.merchandise held for sale in the normal course ofbusiness
B.equipment used to manufacture products
C.supplies
D.any asset
Answer:
The comparative balance sheet of Colson Company, for 2011 and the preceding year
ended December 31, 2010 appears below in condensed form:
The income statement for the current year is as follows:
Additional data for the current year are as follows:
(a) Fully depreciated equipment costing $39,000 was scrapped, no salvage, and
equipment was purchased for $157,000.
(b) Bonds payable for $100,000 were retired by payment at their face amount.
(c) 5,000 shares of common stock were issued at $15 for cash.
(d) Cash dividends declared were paid $28,000.
(e) All sales are on account.
Prepare a statement of cash flows, using the direct method of reporting cash flows from
operating activities.
Answer:
The journal entry a company records for the payment of interest, interest expense, and
amortization of bond discount is
A.debit Interest Expense, credit Cash and Discount on Bonds Payable
B.debit Interest Expense, credit Cash
C.debit Interest Expense and Discount on Bonds Payable, credit Cash
D.debit Interest Expense, credit Interest Payable and Discount on Bonds Payable
Answer:
The cost of wages paid to employees directly involved in the manufacturing process in
converting materials into finished product is classified as:
A.factory overhead cost
B.direct labor cost
C.miscellaneous costs
D.direct materials cost
Answer:
The following adjusting journal entry does not include an explanation. Select the best
explanation for the entry.
A.Adjust supplies inventory to actual
B.Record purchase of supplies
C.Reduce supplies expense
D.Record sale of supplies
Answer:
An employee receives an hourly rate of $45, with time and a half for all hours worked
in excess of 40 during the week. Payroll data for the current week are as follows: hours
worked, 48; federal income tax withheld, $950; Social security tax rate, 6.5% on
maximum of $100,000; and Medicare tax rate, 1.5% on all earnings; state
unemployment compensation tax, 3.4% on the first $7,000; federal unemployment
compensation tax, .8% on the first $7,000.
Calculate the employer’s payroll tax expense if:
a. this is the first payroll of the year and the employee has no cumulative earnings for
the year to date.
b. the employee’s cumulative earnings for the year prior to this week equal $6,200.
c. the employee’s cumulative earnings for the year prior to this week equal $98,700.
Employee wages = (40 x $45 + 8 x $67.50) $2,340
Answer:
Doug Miller is the owner and operator of Miller’s Arcade. At the end of its accounting
period, December 31, 2010, Miller’s Arcade has assets of $450,000 and liabilities of
$125,000. Using the accounting equation, determine the following amounts:
Answer:
The account Unrealized Gain (Loss) on Trading Securities should be included in the
A.Income statement as Other Revenue (Expenses)
B.Balance sheet as an adjustment to the asset account
C.Balance sheet as an adjustment to Stockholders’ Equity
D.Statement of Retained Earnings
Answer:
Which of the following applications of the rules of debit and credit is true?
A.decrease Prepaid Insurance with a credit and the normal balance is a credit
B.increase Accounts Payable with a credit and the normal balance is a debit
C.increase Supplies Expense with a debit and the normal balance is a debit
D.decrease Cash with a debit and the normal balance is a credit
Answer:
On November 14th the Milling Department has accepted Job 111407A for 1,000 pounds
of Cereal Mix. The bill of materials (BOM) for the Cereal Mix is:
Manufacturing overhead is applied at $5.75 per pound completed, and $75.75 of
materials are returned to Raw Materials Inventory. The recipe produced 1,025 pounds
of cereal mix.
(a) Write the journal entry to transfer raw materials to Job 111407A.
(b) Write the journal entry to provide labor to Job 111407A.
(c) Write the journal entry to return 50 pounds oats, 5 pounds of barley, and 5 quarts of
honey back to raw materials inventory.
(d) Write the journal entry to apply manufacturing overhead to Job 111407A.
(e) Write the journal entry to transfer Job 111407A to finished goods on November
14th.
Answer:
Cost of goods manufactured is equal to:
A.total manufacturing costs plus ending materials inventory less beginning materials
inventory
B.cost of goods sold plus beginning work in process inventory less ending work in
process inventory
C.total manufacturing costs plus ending work in process inventory less beginning work
in process inventory
D.total manufacturing costs plus beginning work in process inventory less ending work
in process inventory
Answer:
Golden Sales has bought $135,000 in fixed assets on January 1st associated with sales
equipment. The residual value of these assets is estimated at $10,000 after they service
their 4 year service life. Golden Sales managers want to evaluate the options of
depreciation.
(a) Compute the annual straight-line depreciation and provide the sample depreciation
journal entry to be posted at the end of each of the years.
(b) Write the journal entries for each year of the service life for these assets using the
double- declining balance method.
Answer:
The employee earnings record would contain which column that the payroll register
would probably not contain?
A.deductions
B.payment
C.earnings
D.cumulative earnings
Answer:
Indicate the section (operating activities, investing activities, financing activities, or
none) in which each of the following would be reported on the statement of cash flows
prepared by the indirect method:
(a) Gain on sale of fixed assets
(b) Net income
(c) Retirement of long-term debt
(d) Sale of capital stock
(e) Distribution of stock dividends
(f) Payment of cash dividends
(g) Purchase of fixed assets
(h) Sale of fixed assets
(i) Receipt of interest revenue
(j) Payment of interest expense
Answer:
Which of the following are basic phases of the management process?
A.Supervising and directing
B.Decision making and supervising
C.Organizing and directing
D.Planning and controlling
Answer:
What is the amount of Raw Materials Used?
A.$5,000
B.$65,000
C.$75,000
D.$30,000
Answer:
Merchandise with a list price of $4,700 is purchased on account, terms FOB shipping
point, 1/10, n/30. The seller prepaid freight costs of $100. Prior to payment, $1,400 of
the merchandise is returned. The correct amount is paid within the discount period.
Record the foregoing transactions of the buyer in the sequence indicated below,
assuming a perpetual inventory system is used.
(a) Purchased the merchandise.
(b) Recorded receipt of the credit memo for merchandise returned.
(c) Paid the amount owed.
Answer:
A company is contemplating investing in a new piece of manufacturing machinery. The
amount to be invested is $150,000. The present value of the future cash flows generated
by the project is $145,000. Should they invest in this project?
A.yes, because the rate of return on the project exceeds the desired rate of return used to
calculate the present value of the future cash flows.
B.no, because the rate of return on the project is less than the desired rate of return used
to calculate the present value of the future cash flows.
C.no, because net present value is +$5,000
D.yes, because the rate of return on the project is equal to the desired rate of return used
to calculate the present value of the future cash flows.
Answer:
The following selected transactions relate to cash collections for a firm that maintains a
$100 change fund at all times. Present entries to record the transactions for each of the
two days of cash receipts from sales.
Answer:
Cameron Manufacturing Co.’s static budget at 5,000 units of production includes
$40,000 for direct labor and $5,000 for variable electric power. Total fixed costs are
$20,000. At 8,000 units of production, a flexible budget would show:
A.variable costs of $64,000 and $25,000 of fixed costs
B.variable costs of $64,000 and $20,000 of fixed costs
C.variable costs of $72,000 and $20,000 of fixed costs
D.variable and fixed costs totaling $104,000
Answer:
A manufacturing company applies factory overhead based on direct labor hours. At the
beginning of the year, it estimated that factory overhead costs would be $360,000 and
direct labor hours would be 30,000. Actual factory overhead costs incurred were
$377,200, and actual direct labor hours were 36,000. What is the amount of overapplied
or underapplied manufacturing overhead at the end of the year?
A.$6,000 overapplied.
B.$6,000 underapplied.
C.$54,800 overapplied.
D.$54,800 underapplied.
Answer:
On March 29th, customers who owe $10,500.00 for purchases made on Sonic Sales
Company submit payments of $4,250.00. Journalize this event.
Answer:
Maxi Company’s perpetual inventory records indicate that $820,300 of merchandise
should be on hand on October 31, 2014. The physical inventory indicates that $781,900
is actually on hand. Journalize the adjusting entry for the inventory shrinkage for Maxi
Company for the year ended October 31, 2014.
Answer:
Vision Service Company has the following debits and credits from two transactions
presented in a customer account:
NAME: Roswell Communications, Inc.
Address: 345 Alien Way
Describe each transaction and the source of each posting.
Answer:
The board of directors declared cash dividends total $168,000 during The comparative
balance sheet indicated dividends payable of $46,000 at the beginning of the year and
$42,000 at the end of the year. What was the amount of cash payment to stockholders
during the year?
Answer:
The units of Manganese Plus available for sale during the year were as follows:
There are 15 units of the product in the physical inventory at November The periodic
inventory system is used. Determine the difference in gross profit between the LIFO
and FIFO inventory cost systems.
Answer:
A corporation was organized on January 1 of the current year, with an authorization of
20,000 shares of $4 preferred stock, $12 par, and 100,000 shares of $3 par common
stock.
The following selected transactions were completed during the first year of operations:
Journalize the transactions.
Answer:
The Stamping Department accepted Job 051507A on May 15th to make 1,000 funnels.
Answer:
Explain the meaning of the business entity concept.
Answer:
Posner Company wrote off the following accounts receivable as uncollectible for the
first year of its operations ending December 31, 2011:
Answer:
On January 2, Safe Boating Monthly received a check for $96 from a subscriber for a
12-month subscription. The January issue was mailed on January 15th. Prepare the
necessary entries for the month of January.
Answer:
Match each of the following terms with the correct definition below.
Answer:
List the objectives of internal control and give an example of how each is implemented.
Answer:
Journalize the following transactions of Upton Drugs:
Answer:
Ptarmigan Company produces two products. Product A has a contribution margin of
$20 and requires 4 machine hours. Product B has a contribution margin of $18 and
requires 3 machine hours. Determine the most profitable product assuming the machine
hours are the constraint.
Answer:
Explain the interrelationship between the Balance Sheet and the Statement of Cash
Flows.
Answer:
Cavy Company completed 26,000 units during the year at a cost of $2,139,800. The
beginning finished goods inventory was 5,000 units at $405,000. Determine the cost of
goods sold for 20,000 units, assuming a FIFO cost flow.
Answer:
Describe a classified balance sheet.
Answer: