1) One of the advantages of decentralization is that delegating authority to managers
closest to the operation always results in better decisions.
2) In the absorption costing income statement, deduction of the cost of goods sold from
sales yields net profit.
3) A mixed cost has characteristics of both a variable and a fixed cost.
4) Accounts reported on the balance sheet that are carried forward from year to year are
known as permanent accounts.
5) Even when a trial balance is in balance, there may be errors in the individual
accounts.
6) The capital expenditures budget summarizes future plans for acquisition of fixed
assets.
7) To determine cash payments for merchandise for the cash flow statement using the
direct method, a decrease in accounts payable is added to the cost of merchandise sold.
8) Generally accepted accounting principles do not normally allow the use of the direct
write-off method of accounting for uncollectible accounts.
9) In using the variable cost concept of applying the cost-plus approach to product
pricing, fixed manufacturing costs and fixed selling and administrative expenses must
be covered by the markup.
10) A corporation has 12,000 shares of $20 par value stock outstanding that has a
current market value of $150. If the corporation issues a 4-for-1 stock split, the market
value of the stock will fall to approximately $50.
11) It is easier to quantify costs of controlling quality than the costs of failing to control
quality.
12) Only managers are encouraged to submit capital investment proposals because they
know the processes and are able to match investments with long-term goals.
13) Hill Co. can further process Product O to produce Product P. Product O is currently
selling for $60 per pound and costs $42 per pound to produce. Product P would sell for
$82 per pound and would require an additional cost of $13 per pound to produce.
The differential revenue of producing Product P is $82 per pound.
14) A cost that will not be affected by later decisions is termed an opportunity cost.
15) Posting a part of a transaction to the wrong account will cause the trial balance
totals to be unequal.
16) The cost of a patent with a remaining legal life of 10 years and an estimated useful
life of 7 years is amortized over 10 years.
17) It is correct to rely exclusively on past cost data when establishing standards.
18) Planning is the process of monitoring operating results and comparing actual results
with the expected results.
19) When an account receivable is collected in cash, the total assets of the business
increase.
20) Closing entries for a merchandising business are not similar to those for a service
business.
21) 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
22) A corporation purchases 10,000 shares of its own $10 par common stock for $35
per share, recording it at cost. What will be the effect on total stockholders’ equity?
A.increase, $100,000
B.increase, $350,000
C.decrease, $100,000
D.decrease, $350,000
23) Accounting designed to meet the needs of decision-makers inside the business is
referred to as:
A.general accounting
B.financial accounting
C.managerial accounting
D.external accounting
24) Which of the following concepts relate to separating the reporting of business and
personal economic transactions?
A.cost concept
B.unit of measure concept
C.business entity concept
D.objectivity concept
25) The finished goods account is the controlling account for the:
A.cost ledger
B.materials ledger
C.work in process ledger
D.stock ledger
26) The entries to record cost and sale of a finished good on account is:
A.debit Cost of Goods Sold, credit Finished Goods
B.debit Cost of Goods Sold, credit Finished Goods, debit Accounts Receivable, credit
Sales
C.debit Sales Expense, credit Finished Goods, credit Cash, credit Accounts Receivable
D.debit Work in Process, credit Finished Goods, debit Accounts Receivable, credit
Sales
27) On January 1, 2014, Blanton Companys Valuation Allowance for Trading
Investments account has a debit balance of $23,200. On December 31, 2014, the cost of
the trading securities portfolio was $80,000. The fair value was $98,000. Which of the
following would Blanton report on the income statement for 2014?
A.an Unrealized Loss on Trading Investments of $5,200
B.an Unrealized Gain on Trading Investments of $5,200
C.an Unrealized Gain on Trading Investments of $18,000
D.an Unrealized Loss on Trading Investments of $18,000
28) The Zoe Corporation has the following information for the month March.
Determine the (a) cost of goods manufactured, and (b) cost of goods sold.
29) The budgeted cell conversion cost rate includes which of the following?
A.only factory overhead
B.only direct labor and direct materials
C.direct labor, direct materials, and factory overhead
D.only direct labor and factory overhead
30) 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.
31) Which of the following is(are) reason(s) for easy identification and control of
variable manufacturing costs under the variable costing method?
A.variable and fixed costs are reported separately
B.variable costs can be controlled by the operating management
C.fixed costs, such as property insurance, are normally the responsibility of higher
management not the operating management
D.All of the above are true
32) The total manufacturing cost variance is
A.the difference between actual costs and standard costs for units produced
B.the flexible budget variance plus the time variance
C.the difference between planned costs and standard costs for units produced
D.none of the above
33) Raven Company is considering replacing equipment which originally cost $500,000
and which has $420,000 accumulated depreciation to date. A new machine will cost
$790,000. What is the sunk cost in this situation?
A.$370,000
B.$790,000
C.$80,000
D.$290,000
34) The cost graphs in the illustration below shows various types of cost behaviors.
For each of the following costs, identify the cost graph that best describes its cost
behavior as the number of units produced and sold increases:
(a) Sales commissions of $6,000 plus $.05 for each item sold.
(b) Rent on warehouse of $12,000 per month.
(c) Insurance costs of $2,500 per month.
(d) Per-unit cost of direct labor.
(e) Total salaries of quality control supervisors. One supervisor must be added for each
additional work shift.
(f) Total employer pension costs of $.35 per direct labor hour.
(g) Per-unit straight-line depreciation costs.
(h) Per-unit cost of direct materials.
(i) Total direct materials cost.
(j) Electricity costs of $5,000 per month plus $.0004 per kilowatt-hour.
(k) Per-unit cost of plant superintendent’s salary.
(l) Salary of the night-time security guard of $3,800 per month.
(m) Repairs and maintenance costs of $3,000 for each 2,000 hours of factory machine
usage.
(n) Total direct labor cost.
(o) Straight-line depreciation on factory equipment.
35) Land costing $140,000 was sold for $173,000 cash. The gain on the sale was
reported on the income statement as other income. On the statement of cash flows, what
amount should be reported as an investing activity from the sale of land?
A.$173,000
B.$140,000
C.$313,000
D.$33,000
36) In a profit center, the department manager has responsibility for and the authority to
make decisions that affect:
A.not only costs and revenues, but also assets invested in the center
B.the assets invested in the center, but not costs and revenues
C.both costs and revenues for the department or division
D.costs and assets invested in the center, but not revenues
37) Examples of transforming a traditional manufacturing environment to a just-in-time
environment is to do all of the following except
A.form partnerships with reliable suppliers
B.reorganize operational processes to organized product lines
C.train employees to perform various operations
D.increase raw materials to produce more thereby increasing finished goods inventory
38) When a company discards machinery that is fully depreciated, this transaction
would be recorded with the following entry
A.debit Accumulated Depreciation; credit Machinery
B.debit Machinery; credit Accumulated Depreciation
C.debit Cash; credit Accumulated Depreciation
D.debit Depreciation Expense; credit Accumulated Depreciation
39) On April 1, 2011, Albert Company purchased $50,000 of Tetter Companys 12%
bonds at 100 plus accrued interest of $2,000. On June 30, 2011, Albert received its first
semiannual interest. On February 1, 2012, Albert sold $40,000 of the bonds at 103 plus
accrued interest. The journal entry Albert will record on April 1, 2011 for the purchase
of the bonds will include:
A.a credit to Interest Payable for $2,000
B.a debit to Investments – Tetter Company for $52,000
C.a debit for Cash of $50,000
D.a debit to Investments – Tetter Company for $50,000
40) Schedule of Activity Costs
From the above schedule, calculate the (a) prevention and (b) appraisal costs.
41) Which of the following is not a reason standard costs are separated in two
components?
A.the price and quantity variances need to be identified separately to correct the actual
major differences
B.identifying variances determines which manager must find a solution to major
discrepancies
C.if a negative variance is over-shadowed by a favorable variance, managers may
overlook potential corrections
D.variances brings attention to discrepancies in the budget and requires managers to
revise budgets closer to actual
42) Assume that divisional income from operations amounts to $192,000 and top
management has established 15% as the minimum rate of return on divisional assets
totaling $1,000,000. The residual income for the division is:
A.$42,000
B.$28,800
C.$92,000
D.$0
43) The financial statement that presents a summary of the revenues and expenses of a
business for a specific period of time, such as a month or year, is called a(n)
A.prior period statement
B.retained earnings statement
C.income statement
D.balance sheet
44) Determine the amount to be added to Allowance for Doubtful Accounts in each of
the following cases and indicate the ending balance in each case.
45) Merchandise inventory at the end of the year was understated. Which of the
following statements correctly states the effect of the error?
A.net income is understated
B.net income is overstated
C.cost of merchandise sold is understated
D.merchandise inventory reported on the balance sheet isoverstated
46) Factory overhead includes:
A.factory rent and direct labor
B.direct materials and direct labor
C.indirect materials and direct materials
D.indirect labor and indirect materials
47) On the statement of cash flows, the cash flows from operating activities section
would include
A.receipts from the issuance of capital stock
B.payment for interest on short-term notes payable
C.payments for the purchase of investments
D.payments for cash dividends
48) A firm operated at 80% of capacity for the past year, during which fixed costs were
$210,000, variable costs were 70% of sales, and sales were $1,000,000. Operating
profit was:
A.$90,000
B.$210,000
C.$590,000
D.$490,000
49) Bonds with a face amount $1,000,000, are sold at 108. The entry to record the
issuance is
A.Cash 1,000,000
Premium on Bonds Payable 80,000
Bonds Payable 1,080,000
B.Cash 1,080,000
Premium on Bonds Payable 80,000
Bonds Payable 1,000,000
C.Cash 1,080,000
Discount on Bonds Payable 80,000
Bonds Payable 1,000,000
D.Cash 1,080,000
Bonds Payable 1,080,000
50) All of the following employees hold line positions in Anthea Electric EXCEPT:
A.vice president of production
B.vice president of finance
C.manager of the Valhalla Plant
D.vice president of sales
51) Which of the following is NOT a way in which process and job order cost systems
are similar?
A.Both accumulate product costs–direct materials, direct labor, and factory overhead
B.Both allocate product cost to units produced
C.Both maintain perpetual inventories
D.Both use job order cost cards
52) Garrett Company sells merchandise with a one year warranty. In 2012, sales
consisted of 3,500 units. It is estimated that warranty repairs will average $15 per unit
sold, and 30% of the repairs will be made in 2012 and 70% in 2013. In the 2012 income
statement, Garrett should show warranty expense of
A.$36,750
B.$15,750
C.$52,500
D.$0
53) What type of company would normally offer trade discounts to its customers?
A.Service companies
B.Retailers
C.Wholesalers
D.On-line retailers
54) A product cost is:
A.expensed in the period in which it is incurred
B.shown with current liabilities on the balance sheet
C.shown on the income statement with the operating expenses
D.expensed in the period the product is sold
55) Match the following cost flow assumption to their inventory costing method:
1>Cost flow is in the reverse order in which the cost were incurred. A. Average Cost
2>Cost flow matches the unit sold to the unit purchased. B. Last-in, Last-out (LIFO)
3>Cost flow is in the order in which the costs were incurred. C. Specific Identification
4>Cost flow is an average of the costs. D. First-in, First-out (FIFO)
56) Complete each of the columns on the table below, indicating in which section each
item would be reported on the statement of cash flow (Operating, Investing, or
Financing), the amount that would be reported, and whether the item would create an
increase or decrease in cash. For item that affect more than one section of the statement,
indicate all affected. Assume the indirect method of reporting cash flows operating
activities.
The first item has been completed as an example.
57) Prior to adjustment at August 31, 2014, Salary Expense has a debit balance of
$298,500. Salaries owed but not paid as of the same date total $7,200.
Present the entries to record the following:
(1) Accrued salaries as of August 31.
(2) Closing of Salary Expense as of August 31.
58) Income statement information for Sharif Corporation is provided below:
Required: Prepare a vertical analysis of the given income statement information for
Sharif Corporation.
59) Oak Company produces a chair that requires 6 yds. of material per unit. The
standard price of one yard of material is $7.50. During the month, 8,500 chairs were
manufactured, using 48,875 yards. Journalize the entry to record the standard direct
materials used in production.
60) The Mountain Springs Water Company has two departments, Purifying and
Bottling. The Bottling Department had 3,000 liters in beginning work in process
inventory (30% complete). During the period 71,000 liters were completed. The ending
work in process was 5,000 liters (70% completed). What are the total equivalent units
for direct materials (using the FIFO method) if materials were added at the beginning of
the process?
61) The Torre Company has the following balances in stockholders equity on December
31st.
Answer the following questions:
1> How many shares of treasury stock are owned?
2> What was the average market price per share at which common stock was issued?
3> What was the average market price per share at which preferred stock was issued?
4> What is the total value of the Paid in Capital portion of stockholders equity?
5> What is the total value of stockholders equity?
6> How many shares of common stock are outstanding?
7> If net income for the year was $75,000 and a preferred stock dividend of $20,000
was paid,
what was the beginning value of retained earnings? How much is earnings per share for
the year?
62) The Supplies account had a beginning balance of $1,750. Supplies purchased during
the period totaled $3,500. At the end of the period before adjustment, $350 of supplies
were on hand. Prepare the adjusting entry for supplies.