Admitting a partner into a partnership by accepting assets is a personal transaction
between one or more current partners and the new partner.
Answer:
Fixed costs change in the short run depending upon managements decision to accept or
reject special orders.
Answer:
Goodwill is the amount by which a company’s value exceeds the value of its individual
assets and liabilities.
Answer:
Net realizable value for damaged or obsolete goods is equal to the sales price plus the
cost of making the sale.
Answer:
The cash flow on total assets ratio reflects the companys actual cash flows and,
therefore, is affected by the accounting constraints of recognition and measurement for
net income.
Answer:
A company produces garden benches that go through two operations, operation 1A1
and operation 2B2, before they are complete. Expected costs and activities for the two
departments are shown below. Both departments have departmental overhead rates
based on machine hours. Therefore, the overhead rates for department 1A1 and
department 2B2 are the same.
Answer:
The statement of cash flows explains how transactions and events impact the
end-of-period cash balance to produce the end-of-period net income balance.
Answer:
Break-even analysis is a special case of cost-volume-profit analysis.
Answer:
Deposits in transit are deposits made and recorded by the depositor but not yet
recorded on the bank statement.
Answer:
Common Stock normally has a debit balance.
Answer:
An installment note is an obligation to the issuing company that requires a series of
periodic payments to the holder.
Answer:
The time value of money concept works on the principle that a dollar tomorrow is
worth more than a dollar today.
Answer:
A compound journal entry affects no more than two accounts.
Answer:
Contribution margin divided by sales equals contribution margin ratio.
Answer:
Cash paid out for merchandise is considered to be an operating activity.
Answer:
When a credit customer returns merchandise, a seller that uses the perpetual system
would debit Sales Returns and Allowances and credit Accounts Receivable and also
debit Merchandise Inventory and credit Cost of Goods Sold.
Answer:
When a company has no excess capacity, the use of cost-based transfer pricing is
preferred.
Answer:
A manufacturer’s cost of goods manufactured is the sum of direct materials, direct labor,
and factory overhead costs incurred in producing products.
Answer:
The use of a plantwide overhead rate is not acceptable for external reporting under
GAAP .
Answer:
The process of preparing departmental income statements starts with allocating service
departments.
Answer:
Past performance is the best overall basis for evaluating current performance and
assessing the need for corrective action.
Answer:
Sales less variable costs equals manufacturing margin.
Answer:
The gain or loss from retirement of debt is reported under cash flows from operations
on the statement of cash flows using the direct method.
Answer:
Process cost accounting systems are used only by companies that manufacture physical
products; companies and other organizations that provide services to their customers do
not use process cost accounting.
Answer:
Factory overhead is often collected and summarized in a factory overhead ledger.
Answer:
Risk is the amount of uncertainty about the return we expect to earn in the future.
Answer:
Long-term investments in debt securities not classified as held-to-maturity securities
are classified as available-for-sale securities.
Answer:
Products are the first stage cost objects when using a departmental overhead rate
method.
Answer:
Given the following data, total product cost per unit under absorption costing is $11.40.
Answer:
According to the seller, a customer’s promise to pay is called an account payable.
Answer:
A long-term investment is recorded at cost when purchased.
Answer:
The traditional costing approach assigns all manufacturing costs to products.
Answer:
Management’s intent and the marketability of a security determine whether or not a
security is classified as a long-term or short-term investment.
Answer:
Multiplying the contribution margin ratio by the expected change in sales equals the
expected change in contribution margin.
Answer:
Two common ways of retiring bonds before maturity are to (1) exercise a call option or
(2) purchase them on the open market.
Answer:
Evaluation of the performance of a department involves only financial measures.
Answer:
A company’s fiscal year must correspond with the calendar year.
Answer:
Return on equity increases when the expected rate of return from the acquired assets is
higher than the interest rate on the debt issued to finance the acquired assets.
Answer:
The ratio of the sales volume for the various products sold by a company is called the:
A. Current product mix.
B. Relevant mix.
C. Sales mix.
D. Inventory cost ratio.
E. Production ratio.
Answer:
Reference: 19_04
Cool Pools, a manufacturer of above ground pools, began operations on January 1 of
the current year. During this time, the company produced 45,000 units and sold 44,000
units at a sales price of $60 per unit. Cost information for this year is shown in the
following table:
Given the Cool Pools Company data, what is net income using variable costing?
A. $1,649,480
B. $1,648,600
C. $1,627,150
D. $1,709,480
E. $1,708,600
Answer:
On June 30, 2014, Apricot Co. paid $5,000 cash for management services to be
performed over a two-year period. Apricot follows a policy of recording all prepaid
expenses to asset accounts at the time of cash payment.
The adjusting entry on December 31, 2014, for Apricot would include:
A. A debit to Management Services Expense for $1,250.
B. A debit to Prepaid Management Services Expense for $1,250.
C. A credit to Management Services Expense for $3,750.
D. A debit to Prepaid Management Services Expense for $3,750.
E. A credit to Management Services Payable for $1,250.
Answer:
Regardless of the system used in departmental cost analysis:
A. Direct costs are allocated, indirect costs are not.
B. Indirect costs are allocated, direct costs are not.
C. Both direct and indirect costs are allocated.
D. Neither direct nor indirect costs are allocated.
E. Total departmental costs will always be the same.
Answer:
A company had inventory on November 1 of 5 units at a cost of $20 each. On
November 2, they purchased 10 units at $22 each. On November 6, they purchased 6
units at $25 each. On November 8, 8 units were sold for $55 each. Using the LIFO
perpetual inventory method, what was the value of the inventory on November 8 after
the sale?
A. $304
B. $296
C. $288
D. $280
E. $276
Answer:
Damaged and obsolete goods:
A. Are never included in inventory.
B. Are included in inventory at their full cost.
C. Are included in inventory at their net realizable value.
D. Should be disposed of immediately.
E. Are assigned a value of zero.
Answer:
A company had a $22,000 favorable direct labor efficiency variance during a time
period when the standard rate per direct labor hour was $22 and the actual rate per
direct labor hour was $21. If the standard direct labor hours allowed for production
were 5,000, what is the amount of actual direct labor hours worked during this period?
A. 6,000 hours
B. 4,000 hours C. 88,000 hours
D. 110,000 hours
E. 22,000 hours
Answer:
The date the board of directors votes to pay a dividend is called the:
A. Date of stockholders’ meeting
B. Date of declaration
C. Date of record
D. Date of payment
E. Liquidating date
Answer:
A company that applies process costing is most frequently characterized by:
A. Low standardization and high production volume.
B. Custom orders and homogeneous products.
C. Repetitive production and heterogeneous products.
D. Repetitive production and low production volume.
E. Homogeneous product and high production volume.
Answer:
Book value per share:
A. Reflects the value per share if a company is liquidated at balance sheet amounts.
B. Is assets divided by equity.
C. Is assets divided by the number of common share outstanding.
D. Measures the worth of assets.
E. Is equal to par value per share.
Answer:
Reference: 17_03
Heritage Industries produces miniature models of farm equipment. These collectibles
are in great demand. It takes two operations, molding and finishing, to complete the
miniatures. Next years expected activities are shown in the following table:
Heritage Industries uses departmental overhead rates and is planning on a $3 per direct
labor hour overhead rate for the molding department. Compute the estimated
manufacturing overhead cost for the molding department given the information shown
in the table.
A. $487,500
B. $195,000
C. $292,500
D. $243,750
E. $692,500
Answer:
Which of the following accounts would be closed with a debit?
A. Sales Discounts
B. Sales Returns and Allowances
C. Cost of Goods Sold
D. Operating Expenses
E. Sales
Answer:
The consistency concept:
A. Requires a company to consistently use the same accounting method of inventory
valuation unless a change will improve financial reporting.
B. Requires a company to use one method of inventory valuation exclusively.
C. Requires that all companies in the same industry use the same accounting methods of
inventory valuation.
D. Is also called the full disclosure concept.
E. Is also called the matching concept
Answer:
A company purchases merchandise on November 2 at a $2,400 invoice price (terms
3/10, n/30) and then pays all amounts owed on November 12. Using periodic inventory
and net purchases methods, what are the proper entries to record these two transactions?
A.
nventoryDiscounts Lostecord these two transactions.thod, what are the proper entries to
record the pury purchases
B.
C.
D.
E.
Answer:
Beyer Corporation is considering buying a machine for $25,000. Its estimated useful
life is five years, with no salvage value. Beyer anticipates annual net income after taxes
of $1,500 from the new machine. What is the accounting rate of return assuming that
Beyer uses straight-line depreciation and that income is earned uniformly throughout
each year?
A. 6.0%
B. 8.0%
C. 8.5%
D. 10.0%
E. 12.0%
Answer:
Obsolescence:
A. Occurs when an asset is at the end of its useful life.
B. Refers to a plant asset that is no longer useful in producing goods and services.
C. Refers to the insufficient capacity of a company’s plant assets to meet the company’s
productive demands.
D. Occurs when an asset’s salvage value is less than its replacement cost.
E. Does not affect plant assets.
Answer:
A company borrowed $50,000 cash from the bank and signed a six-year note at 7%.
The present value factor for an annuity for six years at 7% is 4.7665. The annual
annuity payments equal $10,490. The present value of the loan is:
A. $10,490
B. $11,004
C. $50,000
D. $52,450
E. $238,325
Answer:
The beginning and ending finished goods inventories of a company were $91,000 and
$94,000 respectively. If cost of goods sold equaled $800,000, what is the amount of
cost of goods manufactured for this period?
A. $706,000
B. $709,000
C. $797,000
D. $803,000
E. $3,000
Answer:
Which inventory valuation method assigns a value to the inventory on the balance
sheet that approximates current cost and also mimics the actual flow of goods for most
businesses?
A. FIFO
B. Weighted average
C. LIFO
D. Specific identification
E. First in still here
Answer:
Williams Company began business on May 1. They use the perpetual inventory
method. The following transactions involving purchases and cash disbursements
occurred during the first week of May:
a. Use the purchases journal and the cash disbursements journal to record these
transactions
b. Prepare a schedule of accounts payable as of May 7. There were no accounts payable
on May 1.
Answer:
Collins and Farina are forming a partnership. Collins is investing a building that has a
market value of $80,000. However, the building carries a $56,000 mortgage that will be
assumed by the partnership. Farina is investing $20,000 cash. The balance of Collins’
Capital account will be:
A. $80,000
B. $24,000
C. $56,000
D. $44,000
E. $60,000
Answer:
Prepare the required general journal entries to record the following transactions for the
Bell Company.
(a.) Purchased $40,000 of raw materials on account.
(b.) Used $12,000 of direct materials in the Mixing Department, and $17,000 of direct
materials in the Assembly Department.
(c.) Used $5,000 of indirect materials.
Answer:
Reference: 20_04
Kyoto, Inc. predicts the following sales in units for the coming four months:
Although each month’s ending inventory of finished units should be 60% of the next
month’s sales, the March 31 finished goods inventory is only 100 units. A finished unit
requires five pounds of raw material B. The March 31 raw materials inventory has 200
pounds of B. Each month’s ending inventory of raw materials should be 30% of the
following month’s production needs.
Kyotos budgeted production for May is:
A. 200 units
B. 212 units
C. 268 units
D. 280 units
E. 292 units
Answer:
Superior Products Manufacturing identified the following data in its two production
departments.
Make the following independent calculations (Round to two decimals).
a. Compute a plantwide overhead rate using machine hours as the allocation base.
b. Compute a plantwide overhead rate using direct labor hours as the allocation base.
Answer:
Reference: 21_06
The following information describes a company’s use of direct labor in a recent period:
The entry to record the labor costs and variances would include a:
A. debit to Goods in Process for $675,000.
B. debit to Factory Payroll for $675,000.
C. debit to Direct Labor Rate Variance.
D. debit to Direct Labor Efficiency Variance.
E. debit to Direct Labor Cost Variance.
Answer:
On January 1, 2013, Jacob issues $800,000 of 9%, 13-year bonds at a price of 96½. Six
years later, on January 1, 2019, Jacob retires 20% of these bonds by buying them on the
open market at 105½. All interest is accounted for and paid through December 31,
2018, the day before the purchase. The straight-line method is used to amortize any
bond discount or premium. What is the journal entry to record the first semiannual
interest payment on June 30, 2013?
A.
B.
C.
D.
E.
Answer:
On May 1, 2014, Giltus Advertising Company received $1,500 from Julie Bee for
advertising services to be completed April 30, The cash receipt was recorded as
unearned fees. At December 31, 2014, $500 of the fees had been earned. The adjusting
entry on December 31, 2014, should include:
A. A debit to Unearned Fees for $500.
B. A credit to Unearned Fees for $500.
C. A credit to Earned Fees for $1,000.
D. A debit to Earned Fees for $1,000.
E. A debit to Earned Fees for $500.
Answer:
An exchange of value between two entities is called:
A. The accounting equation.
B. Recordkeeping or bookkeeping.
C. A business transaction.
D. An asset.
E. Net Income.
Answer:
Penn Company uses a job order cost accounting system. In the last month, the system
accumulated labor time tickets totaling $24,600 for direct labor and $4,300 for indirect
labor. These costs were accumulated in Factory Payroll as they were paid. Which entry
should Penn make to assign the Factory Payroll?
(A) Payroll Expense 28,900
Cash
28,900
(B) Payroll Expense 24,600
Factory Overhead 4,300
Factory Payroll
28,900
(C) Goods in Process Inventory 24,600
Factory Overhead 4,300
Factory Payroll
28,900
(D) Goods in Process Inventory 24,600
Factory Overhead 4,300
Accrued Wages Payable
28,900
(E) Goods in Process Inventory 28,900
Factory Payroll
28,900
A. A
B. B
C. C
D. D
E. E
Answer:
A companys international division had sales of $20 billion, net income of $1.5 billion,
and average invested assets of $2 billion. What is this divisions profit margin?
A. 75%
B. 10%
C. 7.5%
D. 133%
E. $18 billion
Answer:
General Chemical produced 10,000 gallons of Greon and 20,000 gallons of Baron. Joint
costs incurred in producing the two products totaled $7,500. At the split-off point,
Greon has a market value of $6 per gallon and Baron $2 per gallon. What portion of the
joint costs should be allocated to Greon if the basis is market value at point of
separation?
A. $2,500
B. $3,000
C. $4,500
D. $5,625
E. $1,500
Answer:
During the year, Able Co. purchased $23,750 worth of supplies, at the end of the year,
the supplies expense on the adjusted trial balance was $29,340 and the balance sheet
showed a balance of $810 in the supplies account. What was the supplies balance at the
beginning of the year?
Answer:
Selected information from Michaels Company’s flexible budget follows:
Michaels Company applies overhead to production at a rate of $31.25 per unit based on
a normal operating level of 80% of capacity. For the current period, Michaels Company
produced 5,400 units and incurred $62,000 of fixed overhead costs and $96,000 of
variable overhead costs. The company used 11,000 labor hours to produce the 5,400
units. Calculate the variable overhead spending and efficiency variances and the fixed
overhead spending and volume variances. Indicate whether each variance is favorable
or unfavorable.
Answer:
What is a lease? Be sure to explain the differences between an operating lease and a
capital lease.
Answer:
Define the debt to equity ratio and explain its use when it comes to analyzing the risk
of a companys financial structure.
Answer:
A department store has budgeted cost of goods sold for August of $60,000 for its
women’s coats. Management wants to have $12,000 of coats in inventory at the end of
the month to prepare for the winter season. Beginning inventory in August was $8,000.
What dollar amount of coats should be purchased to meet the above plans?
Answer:
Investments in trading securities are always classified as ______________ and are
reported as _______________ on the balance sheet.
Answer:
How are the direct write-off method and the allowance method applied in accounting
for uncollectible accounts receivables?
Answer:
On March 1, a company issues bonds with a par value of $300,000. The bonds mature
in 10 years and pay 6% annual interest, payable each June 30 and December 31. The
bonds sell at par value plus interest accrued since January 1. Prepare the general journal
entry to record the issuance of the bonds on March 1.
Answer:
What is a trial balance? What is its purpose?
Answer:
How do companies decide what allocation bases to use to allocate indirect costs to
departments?
Answer:
Writing off an uncollectible account receivable when the allowance method of
accounting for uncollectible accounts is used, a company should debit
_______________________ and credit accounts receivable.
Answer:
Reference: 16_04
Refer to the following information about the Painting Department in the Richardson
Factory for the month of June:
If FIFO is used, what is the total cost of all units that were completed and transferred to
finished goods during June? What is the total cost of the ending goods in process
inventory?
Answer:
When preparing the operating section of the statement of cash flows using the indirect
method, noncash expenses are _____________ net income.
Answer:
A product is sold for $45 and has variable costs of $33 per unit. The total fixed costs for
the firm are $180,600. If the firm desires to earn a pretax income of $77,400, how many
units must be sold?
Answer:
A company is authorized to issue 50,000 shares of $50 par, 10%, noncumulative,
nonparticipating preferred stock, and 500,000 shares of no-par common stock. Prepare
journal entries to record the following selected transactions that occurred during this
year:
Answer:
The difference between the actual overhead cost incurred and the standard overhead
applied is the __________________________.
Answer:
A corporation reports the following year-end stockholders’ equity:
Determine the following:
(1) Par value for the preferred stock.
(2) Book value per share for both preferred stock and common stock assuming a call
price per share of $52 for preferred and no dividends in arrears.
Answer:
Reference: 16_05
Refer to the following incomplete table of cost information:
What was the cost of goods transferred out of the Grating Department and into the
Bagging Department?
Answer:
A company has 10%, 20-year bonds outstanding with a par value of $500,000. The
company calls the bonds at 96 when the unamortized discount is $24,500. Calculate the
gain or loss on the retirement of these bonds.
Answer:
