Canberra Company uses a job order cost accounting system. During the current month,
the factory payroll of $180,000 was paid in cash. The amount of labor classified as
direct labor was three times greater than the amount classified as indirect labor. What
amount should be debited to Factory Overhead for indirect labor for this month?
A. $135,000
B. $180,000
C. $45,000
D. $60,000
E. $20,000
Answer:
Under absorption costing, a company had the following unit costs when 8,000 units
were produced.
Compute the total production cost per unit under absorption costing if 30,000 units had
been produced.
A. $31.75
B. $27.25
C. $26.25
D. $24.25
E. $17.50
Answer:
The annual federal unemployment tax return is:
A. Form 940
B. Form 1099
C. Form 104
D. Form W-2
E. Form W-4
Answer:
Long-term investments:
A. Are current assets
B. Include funds earmarked for a special purpose such as bond sinking funds
C. Must be readily convertible to cash
D. Are expected to be converted into cash within one year
E. Include only equity securities
Answer:
Match the appropriate shared cost categories with the appropriate allocation bases (a)
through (e):
(a) Square footage of floor space.
(b) Number of employees in department.
(c) Sales in department.
(d) Time spent/used in department.
(e) Number of items processed.
(f) Not an allocated cost.
__________ (1) Office expense
__________ (2) Utilities expense
__________ (3) Payroll processing costs
__________ (4) Cleaning costs
__________ (5) Rent
__________ (6) Advertising
__________ (7) Depreciation on departmental equipment
__________ (8) Data processing costs
Answer:
A company shows a $600 balance in prepaid insurance in the Unadjusted Trial Balance
columns of the work sheet. The Adjustments columns show expired insurance of $200.
This adjusting entry results in:
A. $200 less in net income.
B. $200 more in net income.
C. $200 difference between the debit and credit columns of the unadjusted trial balance.
D. $200 of prepaid insurance.
E. An error in the financial statements.
Answer:
The following are all of the accounts of Flaherty Company that have a balance at the
end of August. All accounts have normal balances:
a. Calculate net income
b. Determine the amount of retained earnings to be shown on the August 31 balance
sheet.
Answer:
A company issued five-year, 7% bonds with a par value of $100,000. The market rate
when the bonds were issued was 6.5%. The company received $101,137 cash for the
bonds. Using the effective interest method, the amount of recorded interest expense for
the first semiannual interest period is:
A. $3,500.00
B. $7,000.00
C. $3,286.95
D. $6,573.90
E. $1,750.00
Answer:
A company that uses the allowance method to account for its bad debts had credit sales
of $740,000 in 2013, including a $720 sale to Linda Paul. On December 31, 2013, the
company estimated its bad debts at 1.5% of its credit sales. On June 1, 2014, the
company wrote off as uncollectible the $720 account of Linda Paul; and on December
21, 2014, Linda Paul unexpectedly paid her account in full. Prepare the necessary
journal entries (a) on December 31, 2013, to reflect the estimate of bad debts expense;
(b) on June 1, 2014, to write off the bad debt; and (c) on December 21, 2014, to record
the unexpected collection.
Answer:
The cost object(s) of the activity-based costing method is(are):
A. The unit of product.
B. The production departments of the company.
C. The production activities of the company.
D. The production activities in the first stage and the unit of product in the second stage.
E. The unit of product in the first stage and the production activities in the second stage.
Answer:
Cost-volume-profit analysis is based on three basic assumptions. Which of the
following is not one of these assumptions?
A. Total fixed costs remain constant over changes in volume.
B. Curvilinear costs change proportionately with changes in volume throughout the
relevant range.
C. Variable costs per unit of output remain constant as volume changes.
D. Sales price per unit remains constant as volume changes.
E. The relationship between volume, costs, and profits do not necessarily hold outside
the relevant range.
Answer:
Match each of the following terms with the appropriate definition:
A) Accounts receivable turnover
B) Installment accounts receivable
C) Materiality constraint
D) Dishonoring a note
E) Allowance method
F) Factor
G) Full disclosure principle
H) Maker of a note
I) Direct write-off
J) Principal of a note
Answer:
Reference: 21_02
Kermit Enterprises has collected the following data on one of its products:
The direct materials price variance is:
A. $30,000 favorable
B. $30,000 unfavorable
C. $22,500 favorable
D. $37,500 unfavorable
E. $37,500 favorable
Answer:
Ending liabilities are 67,000, beginning equity was $87,000, common stock issued
during year totaled $31,000, expenses for the year were $22,000, dividends declared
totaled $13,000, ending equity for the year is $181,000, and beginning assets for the
year were $222,000.
What was beginning liabilities for the year?
A. $154,000
B. $155,000
C. $212,000
D. $248,000
E. $135,000
Answer:
Identify each of the following accounts as a revenue (R), expense (E), asset (A),
liability, (L) or equity (OE) by placing initials (R, E, A, L, or OE) in the blanks.
Answer:
A set of procedures and approvals that is designed to control cash disbursements and
the acceptance of obligations is referred to as a(n):
A. Internal cash system
B. Petty cash system
C. Cash disbursement system
D. Voucher system
E. Cash control system
Answer:
If the credit balance of the Allowance for Doubtful Accounts account exceeds the
amount of a bad debt being written off, the entry to record the write-off against the
allowance account results in:
A. An increase in the expenses of the current period.
B. A reduction in current assets.
C. A reduction in equity.
D. No effect on the expenses of the current period.
E. A reduction in current liabilities.
Answer:
The Mad Hatter Company owns a machine that manufactures two types of chimney
caps. Production time is .20 hours for cap A and .40 hours for cap B. The machines
capacity is 2,000 hours per year. Both products are sold to a single customer who has
agreed to buy all of the companys output up to a maximum of 1,000 units of cap A and
6,000 units of cap B. Selling prices and variable costs per unit are shown below. Based
on this information, what is the Mad Hatters most profitable sales mix?
A. 10,000 units of cap A.
B. 5,000 units of cap B.
C. 1,000 units of cap A and 5,000 units of cap B.
D. 1,000 units of cap A and 6,000 units of cap B.
E. 1,000 units of cap A and 4,500 units of cap B.
Answer:
A proxy is:
A. A legal document that gives a designated agent of a stockholder the power to vote
the stock.
B. A contractual commitment by an investor to purchase unissued shares of stock.
C. An amount of assets defined by state law that stockholders must invest and leave
invested in a corporation.
D. The right of common stockholders to protect their proportionate interests in a
corporation by having the first opportunity to purchase additional shares of common
stock issued by the corporation.
E. An arbitrary amount assigned to no-par stock by the corporation’s board of directors.
Answer:
Identify each of the following items as either (a) cash or (b) cash equivalent.
A) Cash
B) Cash
C) Cash equivalent
D) Cash equivalent
E) Cash
F) Cash
G) Cash
H) Cash
I) Cash
J) Cash equivalent
Answer:
A company is considering a new project that will cost $19,000. This project would
result in additional annual revenues of $6,000 for the next five years. The $19,000 cost
is an example of a(n):
A. Sunk cost
B. Fixed cost
C. Incremental cost
D. Uncontrollable cost
E. Opportunity cost
Answer:
The following present value factors are provided for use in this problem:
Norman Co. wants to purchase a machine for $40,000 but needs to earn an 8% return.
The expected year-end net cash flows are $12,000 in each of the first three years and
$16,000 in the fourth year. What is the machine’s net present value (rounded to the
nearest whole dollar)?
A. $(9,075)
B. $2,685
C. $42,685
D. $(28,240)
E. $52,000
Answer:
A company paid $0.75 in cash dividends per share. It has earnings per share of $3.50
and a market price per share of $37. Its dividend yield equals:
A. 11.7%
B. 2.0%
C. 10.9%
D. 21.4%
E. 46.7%
Answer:
If a company paid $350,000 in bonuses, and net income prior to the bonus was
$4,200,000, what was the bonus percentage offered to the employees during 2010?
A. 6.2%
B. 5.7%
C. 9.1%
D. 8.3%
E. 6.8%
Answer:
The Goods in Process Inventory account for the AB Corp. follows:
The cost of units transferred to finished goods is:
A. $97,000
B. $105,900
C. $88,100
D. $95,200
E. $92,500
Answer:
Benny and Frieda are art students who often received compliments on the t-shirts they
designed and made themselves. In need of funds for fall semester, they decide to sell
these t-shirts at a small stand at the South Haven Beach during the summer. Rent on the
beach stand is $1,600 per month. Variable costs per t-shirt are $4.75.
a. Complete the following table which estimates total costs and cost per t-shirt at the
indicated levels of activity for this t-shirt stand. Round the costs per t-shirt to two
decimal places.
b. Benny and Frieda need to each earn $5,000 before the fall term starts. They plan to
sell the t-shirts for $15.
1) Will they be able to meet their goal? Support your comments with computations.
2) What other factors might affect this business venture?
Answer:
Based on the following information, prepare the November bank reconciliation for the
Avisa Company.
The following information is available for the Avisa Company for the month of
November:
a. On November 30, after all transactions have been recorded, the balance in the
company’s Cash account has a balance of $27,202.
b. The company’s bank statement shows a balance on November 30 of $29,279.
c. Outstanding checks at November 30 include check #3030 in the amount of $1,525
and check #3556 in the amount of $1,459.
d. A credit memo included with the bank statement indicates that the bank collected
$780 on a noninterest-bearing note receivable for Avisa. The bank deducted a $10
collection fee and credited the remainder of $770 to Avisa’s account.
e. A debit memo included with the bank statement shows a $67 NSF check from a
customer, J. Brown.
f. A deposit placed in the bank’s night depository on November 30 totaled $1,675 and
did not appear on the bank statement.
g. Examination of the checks on the bank statement with the entries in the accounting
records reveals that check #3445 for the payment of an account payable was correctly
written for $2,450, but was recorded in the accounting records as $2,540.
h. Included with the bank statement was a debit memorandum in the amount of $25 for
bank service charges. It has not been recorded on the company’s books.
Answer:
Given the following information:
What is the amount that needs to be reimbursed?
A. $365.27
B. $289.06
C. $280.73
D. $181.22
E. $230.29
Answer:
Barley Enterprises Inc. expects its three departments to yield the following income for
next year:
Which of the following statements is true regarding Flowers business segments?
A. If Dept. F is eliminated, overall profit will increase by $2,000.
B. Overall profit will decline no matter which of these segments is eliminated.
C. If Dept. E is eliminated, overall profit will decline $4,000.
D. If Dept. D is eliminated, overall profit will decrease by $2,000.
E. Eliminating Dept. F will reduce overall profit more than eliminating Dept. D.
Answer:
Assume that the Hood River Juice Company applies factory overhead to its production
departments on the basis of 65% of direct labor costs. Direct labor in the Squeezing
Department was $80,000 and direct labor in the Filtering Department was $12,000. The
entry to apply overhead to these production departments is:
A. Factory Overhead Squeezing 52,000
Factory Overhead Filtering 7,800
Work in Process
59,800
B. Factory Overhead 59,800
Work in Process Squeezing
52,000
Work in Process Filtering
7,800
C. Factory Overhead 59,800
Factory Payroll
59,800
D. Work in Process Squeezing 52,000
Work in Process Filtering 7,800
Factory Overhead
59,800
E. Factory Payroll 59,800
Cash
59,800
Answer:
Bentels Co. desires a December 31 ending inventory of 2,840 units. Budgeted sales for
December are 4,000 units. The November 30 inventory was 1,800 units. Budgeted
purchases are:
A. 5,040 units
B. 1,240 units
C. 6,840 units
D. 4,000 units
E. 5,800 units
Answer:
When evaluating a special order, management should:
A. Only accept the order if the incremental revenue exceeds all product costs.
B. Only accept the order if the incremental revenue exceeds fixed product costs.
C. Only accept the order if the incremental revenue exceeds total variable product costs.
D. Only accept the order if the incremental revenue exceeds full absorption product
costs.
E. Only accept the order if the incremental revenue exceeds regular sales revenue.
Answer:
Reference: 21_06
The following information describes a company’s use of direct labor in a recent period:
The direct labor efficiency variance is:
A. $28,000 unfavorable
B. $28,000 favorable
C. $45,000 unfavorable
D. $45,000 favorable
E. $17,000 unfavorable
Answer:
A company reported net income of $100,000 and average total assets of $425,000.
Calculate its return on total assets.
Answer:
An employer has an employee benefit package that includes employer-paid health
insurance and an employer-paid retirement program. During January, the employer-paid
health insurance equaled $7,500 and the amount the employer agreed to contribute to
the employee retirement program was 10% of the employees’ $150,000 gross salaries.
Prepare the general journal entry to record these employee benefits.
Answer:
Wiffery Company had the following trading securities in its portfolio at December 31.
The Market AdjustmentTrading account had balance of zero prior to year-end
adjustment. Prepare the appropriate adjusting journal entry.
Answer:
____________________ is the accounting system component that keeps data in a form
accessible to information processors.
Answer:
A company has already incurred an $81,000 cost in partially producing its three
products. Their selling prices when partially and fully processed are shown in the table
below with the additional costs necessary to finish their processing. Based on this
information, should any products be processed further?
Answer:
Explain the purpose of financial statement analysis for both external and internal
users.
Answer:
Use the following calendar-year information to prepare David Company’s statement of
cash flows using the direct method. You may omit the schedule reconciling net income
and net cash provided or used by operating activities.
Answer:
An annuity is a series of equal payments occurring at equal intervals.
Answer:
When factory payroll is assigned to specific jobs, ______________________ is
debited.
Answer:
A company produces two boat models, Montauk and Orient. Both products are being
considered for major investment projects next year. Relevant data follow:
Required:
Use the payback period to evaluate these two investment projects.
Answer:
_____________________ is a class of stock assigned a value by the corporation in its
charter.
Answer:
___________ expenses are those expenses that support a company’s overall operations
and include expenses related to accounting, human resource management, and financial
management.
Answer:
A ______________________ incurs costs without directly generating revenues.
Answer:
On April 1 of the current year, a company paid $150,000 to purchase 7%, 10-year
bonds that had a par value of $150,000 and paid interest semiannually on October 1 and
April 1. The company intends to hold the bonds until they mature. Prepare the journal
entry to recognize accrued interest as of December 31 of the current year.
Answer:
An internal control system refers to the policies and procedures managers use to
__________, ensure reliable accounting, promote efficient operations, and urge
adherence to company policies.
Answer:
Times interest earned ratio is computed by dividing _______________ by interest
expense.
Answer:
What is the effect of dividend preferences on preferred stock? Explain how a dividend
is distributed in the case of cumulative preferred stock with dividends in arrears.
Answer:
A company sold stock for $733,000. The shares had a par value of $6.26 each. After the
transaction, the paid-in capital in excess of par common stock account had a balance of
$420,000. How many shares did the company sell?
Answer:
Beauty Company purchased a machine valued at $565,000 on September 1. The
equipment has an estimated useful life of eight years or 5.5 million units. The
equipment is estimated to have a salvage value of $48,300. Assuming the double
declining balance method of depreciation is used, what is depreciation expense that
needs to be recorded at the end of the second year?
Answer: