1) A company sells sofas with a 6-month warranty. In January, the company sold
100,000 sofas at $1,750 each; and 500 sofas needed repairs during that same month.
The total repairs amounted to $85,000 costs from the upholstery materials inventory. It
is estimated that 2% of all units sold will need repairs under warranty at an estimated
cost of $200 per unit. Prepare the journal entries to record (a) estimated warranty
expense for January and (b) warranty repair costs for January.
2) Bering Rock acquires a granite quarry at a cost of $590,000, which is estimated to
contain 200,000 tons of granite and is expected to take 6 years to remove. What journal
entry would be needed to record the expense for the first year assuming 38,000 tons
were removed?
A.Debit Depletion Expense $112,100; credit Accumulated Depletion $112,100.
B.Debit Amortization Expense $112,100; credit Natural Resources $112,100.
C.Debit Depreciation Expense $93,158; credit Accumulated Depreciation $93,158.
D.Debit Depletion Expense $93,158; credit Accumulated Depletion $93,158.
E.Debit Depreciation Expense $98,333; credit Accumulated Depreciation $98,333.
3) Jasper makes a $25,000, 90-day, 7% cash loan to Clayborn Co. Jasper’s entry to
record the collection of the note and interest at maturity should be:
A.Debit Cash for $25,000; credit Notes Receivable $25,000.
B.Debit Cash $25,437.50; credit Interest Revenue $437.50; credit Notes Receivable
$25,000.
C.Debit Cash $25,437.50; credit Notes Receivable for $25,437.50.
D.Debit Notes Payable $25,000; Debit Interest Expense $1,750; credit Cash $26,750.
E.Debit Cash $26,750; credit Interest Revenue $1,750, credit Notes Receivable
$25,000.
4) Which of the following accounts would appear on a schedule of cost of goods
manufactured?
A.Raw materials, factory insurance expired, indirect labor.
B.Raw materials, work in process, finished goods.
C.Direct labor, delivery equipment, and depreciation on factory equipment.
D.Direct materials, indirect labor, sales salaries.
E.Direct labor, factory repairs and maintenance, wages payable.
5) The following segment information is available for the three regions of the country in
which Fresh Snacks, Inc. does business (all amounts are in millions):
a. Determine the segment return on assets for each geographic segment.
b. Comment on the results. How do the segments compare with respect to profitability?
6) A system of accounting in which costs are accumulated and then measured per unit at
the end of a period by combining costs per equivalent unit from various departments is
a:
A.General cost accounting system.
B.Process costing system.
C.Job order cost accounting system.
D.Manufacturing cost accounting system.
E.Work in Process accounting system.
7) An employee earned $43,300 working for an employer in the current year. The
current rate for FICA Social Security is 6.2% payable on earnings up to $117,000
maximum per year and the rate for FICA Medicare 1.45%. The employer’s total FICA
payroll tax for this employee is:
A.$8,950.50.
B.$5,638.05.
C.$3,312.45.
D.$2,684.60.
E.$0, since the FICA tax is only deducted from an employee’s pay.
8) Use the following information to compute the cost of goods manufactured:
A.$36,650.
B.$30,950.
C.$30,650.
D.$30,350.
E.$31,650.
9) A company had net cash flows from operations of $341,000, net income of $286,000
and average total assets of $1,850,000. The cash flow on total assets ratio equals:
A.83.9%
B.542.5%
C.15.5%
D.18.4%
E.646.9%
10) Mesa Corp. allocates overhead to production on the basis of direct labor costs.
Mesa’s total estimated overhead is $450,000 and estimated direct labor is $180,000.
Determine the amount of overhead to be allocated to finished goods inventory if there is
$20,000 of total direct labor cost in the jobs in the finished goods inventory.
A.$8,000.
B.$20,000.
C.$70,000.
D.$50,000.
E.$90,000.
11) On December 1, Watson Enterprises signed a $24,000, 60-day, 4% note payable as
replacement of an account payable with Erikson Company. What is the journal entry
that should be recorded upon signing the note?
A.Debit Accounts Receivable $24,000; credit Notes Receivable $24,000
B.Debit Accounts Payable $24,000; credit Notes Payable $24,000
C.Debit Accounts Payable $24,160; credit Notes Payable $24,160
D.Debit Notes Payable $24,000; debit Interest Expense $160; credit Accounts Payable
$24,160
E.Debit Notes Payable $24,000; debit Interest Expense $160; credit Cash $24,160
12) A firm produces and sells two products, Plus and Max. The following information is
available relating to setup costs (a part of factory overhead):
Using number of setups as the activity base, the amount of setup cost allocated to each
unit of product for Plus and Max, respectively is:
A.$21.60; $.54.
B.$54.00; $27.00.
C.$60.00; $60.00.
D.$108.00; $2.70.
E.$200.00; $16,000.
13) On December 31, 2015 Winters Company’s Prepaid Rent account had a balance
before adjustment of $6,000. Three months’ rent was paid in advance on December 1.
The adjusting entry needed on December 31 is:
A.Debit Prepaid Rent $6,000; credit Cash $6,000.
B.Debit Rent Expense $2,000; credit Accounts Payable $2,000.
C.Debit Rent Expense $2,000; credit Prepaid Rent $2,000.
D.Debit Cash $2,000; credit Prepaid Rent $2,000.
E.Debit Rent Expense $6,000; credit Accounts Payable $6,000.
14) What is the maturity date of a 120-day note receivable dated March 5?
15) On July 1, a corporation issued 15,000 shares of no-par common stock with a stated
value of $3 per share in exchange for a tract of land having a market value of $215,000.
Prepare the general journal entry to record this transaction.
16) On April 1, Year 1, Astor Corp. purchased and placed a plant asset in service. The
following information is available regarding the plant asset:
Make the necessary adjusting journal entries at December 31, Year 1, and December 31,
Year 2 to record depreciation for each year under the straight-line depreciation method.
17) Match the following terms with the definitions.
18) ___________________ is the process of allocating the cost of plant assets to the
income statement over their expected useful lives.
19) A(n) ________________________ requires a future outlay of cash and is relevant
for current and future decision making.