Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
1) A cost is considered controllable at a given level of managerial responsibility if
a.the manager has the power to incur the cost within a given time period
b.the cost has not exceeded the budget amount in the master budget
c.it is a variable cost, but it is uncontrollable if it is a fixed cost
d.it changes in magnitude in a flexible budget
2) In the financial statements, organization costs appears
a.immediately below Retained Earnings in the stockholders' equity section
b.in the income statement
c.as part of paid-in capital in the stockholders' equity section
d.as an intangible asset
3) DArien Company incurred the following costs for 70,000 units:
Variable costs$420,000
Fixed costs 392,000
DArien has received a special order from an Armenian company for 3,000 units. There
is sufficient capacity to fill the order without jeopardizing regular sales. Filling the
order will require spending an additional $6,600 for shipping.
If DArien wants to break even on the order, what should the unit sales price be?
a.$8.20
b.$6.00
c.$11.60
d.$13.80
4) aAll of the following are services offered by public accountants except
a.budgeting
b.auditing
c.tax planning
d.consulting
5) At January 1, 2014, Alligator Industries reported owners equity of $150,000. During
2014, Alligator had a net loss of $30,000 and owner drawings of $15,000. At December
31, 2014, the amount of owners equity is
a.$105,000
b.$120,000
c.$135,000
d.$165,000
6) Accumulated Depletion
a.is used by all companies with natural resources
b.has a normal debit balance
c.is a contra-asset account
d.is never shown on the balance sheet
7) Management accountants would not
a.assist in budget planning
b.prepare reports primarily for external users
c.determine cost behavior
d.be concerned with the impact of cost and volume on profits
8) Which of the following is a true statement about process cost systems?
a.In process cost systems, costs are accumulated but not assigned
b.A process cost system has one work in process account for each process
c.In process cost systems, costs are summarized on job cost sheets
d.Unit costs are not computed in process cost systems
9) Leoparod Company developed the following unit information for January, 2014, its
first month of operations:
Per UnitTotal Costs
Sales price$20
Variable costs
Direct materials5
Direct labor3
Variable manufacturing overhead4
Selling and administrative expenses2
Fixed selling and administrative expenses$31,000
Fixed manufacturing overhead46,000
During January, 16,000 units were produced and 12,000 units were sold.
Instructions
(a)Prepare an income statement under the variable costing approach using the CVP
format.
(b)What would be the net income (loss) if the absorption cost approach had been used?
Explain any income difference between absorption and variable costing.
10) Using $2,400,000 as the total manufacturing costs, compute the cost of goods
manufactured using the following information.
Raw materials inventory, January 1$ 20,000
Raw materials inventory, December 3140,000
Work in process, January 122,000
Work in process, December 3128,000
Finished goods, January 142,000
Finished goods, December 3130,000
Raw materials purchases1,200,000
Direct labor560,000
Factory utilities160,000
Indirect labor90,000
Factory depreciation400,000
Operating expenses420,000
a.$2,394,000
b.$2,406,000
c.$2,422,000
d.$2,380,000
11) The following information pertains to Ortiz Company. Assume that all balance sheet
amounts represent both average and ending balance figures. Assume that all sales were
on credit.
Assets
Cash and short-term investments$ 45,000
Accounts receivable (net)40,000
Inventory20,000
Property, plant and equipment 210,000
Total Assets$305,000
Liabilities and Stockholders Equity
Current liabilities$ 50,000
Long-term liabilities95,000
Stockholders equitycommon 160,000
Total Liabilities and Stockholders Equity$305,000
Income Statement
Sales$ 110,000
Cost of goods sold 66,000
Gross profit44,000
Operating expenses 30,000
Net income$ 14,000
Number of shares of common stock6,000
Market price of common stock$20
Dividends per share.50
What is the accounts receivable turnover for Ortiz?
a.1.3 times
b.1.1 times
c.2.8 times
d.12.7 times
12) Avett Furniture Store has credit sales of $400,000 in 2014 and a debit balance of
$600 in the Allowance for Doubtful Accounts at year end. As of December 31, 2014,
$130,000 of accounts receivable remain uncollected. The credit manager prepared an
aging schedule of accounts receivable and estimates that $7,000 will prove to be
uncollectible.
On March 4, 2015, the credit manager authorizes a write-off of the $1,200 balance
owed by B. Fernitti.
Instructions
(a)Prepare the adjusting entry to record the estimated uncollectible accounts expense in
2014 .
(b)Show the balance sheet presentation of accounts receivable on December 31, 2014 .
(c)On March 4, before the write-off, assume the balance of Accounts Receivable
account is $160,000 and the balance of Allowance for Doubtful Accounts is a credit of
$3,000. Make the appropriate entry to record the write-off of the Ferntti account. Also
show the balance sheet presentation of accounts receivable before and after the
write-off.
13) Jackson Company is a publicly held corporation whose $1 par value stock is
actively traded at $64 per share. The company issued 3,000 shares of stock to acquire
land recently advertised at $200,000. When recording this transaction, Barton Company
will
a.debit Land for $200,000
b.credit Common Stock for $192,000
c.debit Land for $192,000
d.credit Paid-In Capital in Excess of Par for $196,000
14) A company's cost of capital refers to the
a.rate management expects to pay on all borrowed and equity funds
b.total cost of a capital project
c.cost of printing and registering common stock shares
d.rate of return earned on total assets
15) The formula for computing the overhead volume variance is
a.fixed overhead rate times (actual hours less standard hours allowed)
b.variable overhead rate times (actual hours less standard hours allowed)
c.fixed overhead rate times (normal capacity hours less standard hours allowed)
d.variable overhead rate times (normal capacity hours less standard hours allowed)
16) Which of the following reasons best explains why a company that experiences
seasonal fluctuations in sales may purchase investments in debt or stock securities?
a.The company may have excess cash
b.The company may generate a significant portion of its earnings from investment
income
c.The company may invest for the strategic reason of establishing a presence in a
related industry
d.The company may invest for speculative reasons to increase the value in pension
funds
17) Which of the following is not a significant date with respect to dividends?
a.The declaration date
b.The incorporation date
c.The record date
d.The payment date
18) Viejo Inc. earns $450,000 and pays cash dividends of $150,000 during 2014 . Cruz
Corporation owns 73,500 of the 210,000 outstanding shares of Viejo.
How much revenue from investment should Viejo report in 2014?
a.$52,500
b.$105,000
c.$157,500
d.$210,000
19) Able Baker, and Carter have partnership capital account balances of $600,000 each.
Income and losses are shared equally. Carter agrees to sell three-fourths of his
ownership interest to Able for $525,000 and one-fourth to Baker for $187,500. Able and
Baker will use personal assets to purchase Carters interest. The partnership's entry to
record Carters withdrawal from the partnership would be
a.Carter, Capital 712,500
Cash 712,500
b.Carter, Capital 712,500
Able, Capital 350,000
Baker, Capital 125,000
c.Carter, Capital 600,000
Able, Capital 450,000
Baker, Capital 150,000
d.Able, Capital 534,375
Baker, Capital 178,125
Carter, Capital 712,500
20) In developing a flexible budget within a relevant range of activity,
a.only fixed costs are included
b.it is necessary to relate variable cost data to the activity index chosen
c.it is necessary to prepare a budget at 1,000 unit increments
d.variable and fixed costs are combined and are reported as a total cost
21) Wright Company has a $500,000 balance in Accounts Receivable and a $12,000
debit balance in Allowance for Doubtful Accounts. Credit sales for the period totaled
$1,400,000. What is the amount of the bad debt adjusting entry if Wright uses a
percentage of credit sales basis (at 3%) or a percentage of receivables basis (at 8%)?
% Credit Sales% Receivables
a.$42,000$40,000
b.$30,000$28,000
c.$42,000$52,000
d. $30,000$28,000
22) The direct write-off method of accounting for bad debts
a.uses an allowance account
b.uses a contra-asset account
c.does not require estimates of bad debt losses
d.is the preferred method under generally accepted accounting principles
23) When budgeted and actual results are not the same amount, there is a budget
a.error
b.difference
c.anomaly
d.by-product
24) In general, the shorter the time period, the difficulty of making the proper
adjustments to accounts
a.is increased
b.is decreased
c.is unaffected
d.depends on if there is a profit or loss
25) Electric Sunset Company gathered the following reconciling information in
preparing its July bank reconciliation:
Cash balance per books, 7/31$22,000
Deposits in transit1,200
Notes receivable and interest collected by bank4,400
Bank charge for check printing80
Outstanding checks8,000
NSF check680
The adjusted cash balance per books on July 31 is
a.$17,640
b.$18,840
c.$25,640
d.$26,840
26) If an unprofitable segment is eliminated
a.it is impossible for net income to decrease
b.fixed expenses allocated to the eliminated segment will be eliminated
c.variable expenses of the eliminated segment will be eliminated
d.it is impossible for net income to increase
27) The partnership agreement of Ashford and Cohen provides for salary allowances of
$90,000 to Ashford and $70,000 to Cohen, with the remaining income or loss to be
divided equally. During the year, Ashford and Cohen each withdraw cash equal to 80%
of their salary allowances. If partnership net income is $200,000, Ashfords equity in the
partnership would
a.increase more than Cohens
b.decrease more than Cohens
c.increase the same as Cohens
d.decrease the same as Cohens
28) If Manufacturing Overhead has a debit balance at the end of the period, then
a.overhead has been underapplied
b.the overhead assigned to Work in Process Inventory is more than the overhead
incurred
c.overhead has been overapplied
d.management must take corrective action
29) Under GAAP, companies can choose which inventory system?
PerpetualPeriodic
a.YesNo
b.YesYes
c.NoYes
d.YesNo
30) In computing ROI, land held for future use
a.will hurt the performance measurement of an investment center's manager
b.is important in evaluating the performance of a profit center manager
c.is included in the calculation of operating assets
d.is considered a nonoperating asset
31) Natural resources are
a.depreciated using the units-of-activity method
b.physically extracted in operations and are replaceable only by an act of nature
c.reported at their market value
d.amortized over a period no longer than 40 years
32) On January 1, Borge Inc. issued $3,000,000, 8% bonds for $2,817,000. The market
rate of interest for these bonds is 9%. Interest is payable annually on December 31 .
Borge uses the effective-interest method of amortizing bond discount. At the end of the
first year, Borge should report unamortized bond discount of:
a.$164,700
b.$169,470
c.$157,647
d.$153,000
33) Under the equity method, the investor records dividends received by crediting
a.Dividend Revenue
b.Investment Income
c.Revenue from Investment
d.Stock Investments
34) Given the following account balances at year end, compute the total intangible
assets on the balance sheet of Kepler Enterprises.
Cash$1,500,000
Accounts Receivable 4,000,000
Trademarks 1,000,000
Goodwill3,000,000
Research & Development Costs2,000,000
a.$10,000,000
b.$6,000,000
c.$4,000,000
d.$8,000,000
35) Sam Wainwright is a new accountant with Ground floor Company. Ground floor
purchased merchandise on account for $18,000. The credit terms are 1/10, n/30. Sam
has talked with the company's banker and knows that he could earn 4% on any money
invested in the company's savings account.
Instructions
(a)Should Sam pay the invoice within the discount period or should he keep the
$18,000 in the money market account and pay at the end of the credit period? Support
your recommendation with a calculation showing which action would be best.
(b)If Sam forgoes the discount, it may be viewed as paying an interest rate of 2% for the
use of $18,000for 20 days. Calculate the annual rate of interest that this is equivalent to.
36) The relationship of current assets to current liabilities is used in evaluating a
company's
a.operating cycle
b.revenue-producing ability
c.short-term debt paying ability
d.long-range solvency
37) JRF, Inc. produces a product requiring 8 pounds of material costing $3.60 per
pound. During Febrauary, JRF purchased 4,200 pounds of material for $14,112 and
used the material to produce 500 products. What was the materials price variance for
Febrauary?
a.$1,008 F
b.$960 F
c.$720 U
d.$288 U
38) Materials costs of $1,000,000 and conversion costs of $1,020,000 were charged to a
processing department in the month of September. Materials are added at the beginning
of the process, while conversion costs are incurred uniformly throughout the process.
There were no units in beginning work in process, 20,000 units were started into
production in September, and there were 5,000 units in ending work in process that
were 40% complete at the end of September.
What was the total amount of manufacturing costs assigned to the 5,000 units in the
ending work in process?
a.$505,000
b.$550,000
c.$370,000
d.$200,000
39) Bridal Dreams, Inc. makes customized wedding gowns. The customer selects a
pattern for the basic gown, and then selects fabric and trim. Once the design and the
materials have been agreed upon, a Statement of Estimated Cost is signed by the
company and by the customer.
Overhead is applied based on the number of days a gown is in process. Usually, five
gowns are being worked on at a time. Therefore, each gown is charged 1/5 of a daily
estimated overhead amount.
Customer June Wilson's wedding dress took four days to complete. However, after the
first three days had elapsed, Angelina Pitt, a movie personality, suddenly decided to get
married, and ordered a very lavish gown. All other work was suspended, and the work
on Ms. Wilson's dress was delayed six days. The final day of its construction was on the
tenth day after it had been begun.
Required:
You are the accounting manager for Bridal Dreams. Write a memo to the billing
department. Instruct them as to the appropriate number of overhead days to charge to
Ms. Wilson's account.
40) Romaro CompanyPerth Division is a new state of the art production facility that
manufactures landing gears for airplanes. The ending September 30th work in process
is comprised of labor and overhead and is approximately 60% complete. All materials
are assumed to be 100% complete. Total materials costs during the period totaled
$840,000.
Instructions
As the new plant accountant, you are asked to complete the production cost report
which appears as follows:
ROMARO COMPANYPerth Division
Assimilation Department
Production Cost Report
For the Month Ended September 30, 2014
Equivalent Units
QUANTITIESPhysical UnitsMaterialsConversion Costs
Units to be accounted for
Work in process, September 1300
Started into production 900
Total units1,200
Units accounted for
Transferred out700700700
Work in process, September 30 500 500
Total units1,2001,200
COSTS
Unit CostsMaterialsConversion CostsTotal
Costs in September$840,000$$1,100,000
Equivalent units
Unit costs$$260$
Costs to be accounted for
Work in process, Sept. 1$ 243,400
Started into production
Total costs$
Cost Reconciliation Schedule
Costs accounted for
Transferred out$
Work in process, September
Materials$
Conversion costs 78,000
Total costs$1,100,000
41) Identify the impact on the accounting equation of each of the following
transactions.
1>Purchase office supplies on account.
2>Paid secretary weekly salary.
3>Purchased office furniture for cash.
4>Received monthly utility bill to be paid at later time.
42) You are at a company picnic and the company president starts a conversation with
you. The president says Since we use the perpetual inventory system, there is no reason
to take a physical count of our inventory. What is your response to the presidents
remarks?
43) Smoke, Inc. makes and sells buckets. Each bucket uses 1/2 pound of plastic.
Budgeted production of buckets in units for the next three months is as follows:
AprilMayJune
Budgeted production21,00022,00024,000
The company wants to maintain monthly ending inventories of plastic equal to 25% of
the following month's budgeted production needs. The cost of plastic is $2.20 per
pound.
Instructions
Prepare a direct materials purchases budget for the month of May.
44) Before month-end adjustments are made, the February 28 trial balance of Neutral
Milk Hotel contains revenue of $7,000 and expenses of $4,400. Adjustments are
necessary for the following items:
Depreciation for February is $1,800.
Revenue recognized but not yet billed is $2,700.
Accrued interest expense is $700.
Revenue collected in advance that is now recognized is $2,500.
Portion of prepaid insurance expired during February is $400.
Instructions
Calculate the correct net income for Neutral Milk Hotels Income Statement for
February.
45) Delaney Company reported the following information for 2014:
OctoberNovemberDecember
Budgeted sales$310,000$320,000$360,000
Budgeted purchases$120,000$128,000$144,000
All sales are on credit.
Customer amounts on account are collected 60% in the month of sale and 40% in the
following month.
Instructions
Compute the amount of cash Delaney will receive during November.
46) Rachel Bells Havens is a friend of yours from high school. She decided to become a
beautician after leaving high school, rather than to attend college. She recently opened
her own shop, and has contracted her services to a local hospital. She is paid a monthly
fee for her services, and receives a small gratuity from each of the patients.
She has just received her first set of financial statements from her accountant. She is
quite upset. The statements show a cash balance of $3,600 at the end of the month, but a
net income of only $500. She has written you a letter, asking you whether such a
situation is possible, or whether she should find another accountant.
Required:
Write a short letter to your friend. Use proper form. Answer her question completely,
but briefly.
47) Record the following transactions for Adcock Company.
1>On April 12, sold $11,000 of merchandise to Milton Inc., terms 2/10, n/30.
2>On April 15, Milton returned $2,000 of merchandise.
3>On April 22, Milton paid for the merchandise.
48) When credit sales are made, _________________ Expense is considered a normal
and necessary risk of doing business on a credit basis.
