1) The desired selling price for a product will be the same under both variable and total
cost.
2) The equity method is usually more appropriate for accounting for investments where
the purchaser does not have significant influence over the investee.
3) The first step in determining the cost of goods completed and ending inventory
valuation using process costing is to calculate equivalent units of production.
4) Use of the retail inventory method requires taking a physical count of inventory.
5) Other income and expenses are items that are not related to the primary operating
activity.
6) Variable costs are costs that vary on a per-unit basis with changes in the activity
level.
7) Companies that use the average costing method for process costing have unit costs
that include costs from more that one accounting period.
8) Both the initial cost of the asset and the accumulated depreciation will be taken off
the books with the disposal of the asset.
9) Residual value is not incorporated in the initial calculations for
double-declining-balance depreciation.
10) A decrease in the ratio of liabilities stockholders’ equity indicates an improvement
in the margin of safety for creditors.
11) Sales to customers who use nonbank credit cards, such as American Express, are
generally treated as credit sales.
12) Sarbanes-Oxley requires companies to maintain strong and effective internal
controls and thus prevent fraud and misleading financial statements.
13) Both job order and process cost accounting use equivalent units of production to
determine costs.
14) Trade receivables occur when two companies trade or exchange notes receivables.
15) The acquisition of land in exchange for common stock is an example of noncash
investing and financing activity.
16) The statement of cash flows is not one of the basic financial statements.
17) On the balance sheet for a manufacturing business, the cost of direct materials,
direct labor, and factory overhead, which have entered into the manufacturing process
but are associated with products that have not been finished, is reported as direct
materials inventory.
18) To determine the six month interest payment amount on a bond, you would take
one-half of the market rate times the face value of the bond.
19) On June 8, Alton Co. issued an $95,000, 6%, 120-day note payable to Seller Co.
What is the due date of the note?
A.October 8
B.October 7
C.October 6
D.October 5
20) The number of days’ sales in receivables
A.is an estimate of the length of time the receivables have been outstanding
B.measures the number of times the receivables turn over eachyear
C.is Net Credit Sales divided by Average Receivables
D.is not meaningful and therefore is not used
21) If the cost of direct materials is a small portion of total production cost, it may be
classified as part of:
A.direct labor cost
B.selling and administrative costs
C.miscellaneous costs
D.factory overhead cost
22) Mocha Company manufactures a single product by a continuous process, involving
three production departments. The records indicate that direct materials, direct labor,
and applied factory overhead for Department 1 were $100,000, $125,000, and
$150,000, respectively. The records further indicate that direct materials, direct labor,
and applied factory overhead for Department 2 were $55,000, $65,000, and $80,000,
respectively. In addition, work in process at the beginning of the period for Department
1 totaled $75,000, and work in process at the end of the period totaled $60,000.
The journal entry to record the flow of costs into Department 1 during the period for
direct materials is:
A.Work in Process–Department 1100,000
Materials100,000
B.Work in Process–Department 155,000
Materials55,000
C.Materials100,000
Work in Process–Department 1100,000
D.Materials55,000
Work in Process–Department 155,000
23) When referring to a note receivable or promissory note
A.the maker is the party to whom the money is due
B.the note is not considered a formal credit instrument
C.the note cannot be factored to another party
D.the note may be used to settle an accounts receivable
24) If title to merchandise purchases passes to the buyer when the goods are shipped
from the seller, the terms are
A.n/30
B.FOB shipping point
C.FOB destination
D.consigned
25) Department E had 4,000 units in Work in Process that were 40% completed at the
beginning of the period at a cost of $12,500. 14,000 units of direct materials were added
during the period at a cost of $28,700. 15,000 units were completed during the period,
and 3,000 units were 75% completed at the end of the period. All materials are added at
the beginning of the process. Direct labor was $32,450 and factory overhead was
$18,710.
The number of equivalent units of production for the period for conversion if the
average cost method is used to cost inventories was:
A.15,650
B.14,850
C.18,000
D.17,250
26) Which of the following is considered an unusual item affecting the prior periods
income statement?
A.Change in accounting principles
B.Fixed asset impairments
C.Extraordinary item
D.Discontinued operations
27) Assume that Division J has achieved income from operations of $165,000 using
$900,000 of invested assets. If management desires a minimum rate of return of 11%,
the residual income is:
A.$99,000
B.$18,150
C.$264,000
D.$66,000
28) Which of the following represents an inflow of cash and therefore would be
reported on the statement of cash flows?
A.retirement of bond payable
B.acquisition of treasury stock
C.declaration of stock dividends
D.issuance of long-term debt
29) Discuss the (1) focus and (2) financial statement emphasis of (a) the percent of sales
and (b) the analysis of receivables methods of estimating bad debts.
30) The revenue recognition concept
A.is not in conflict with the cash method of accounting
B.determines when revenue is credited to a revenue account
C.states that revenue is not recorded until the cash is received
D.controls all revenue reporting for the cash basis of accounting
31) Which of the following is considered to be an accrued expense?
A.A computer technician has installed the latest software updates and was paid on the
same day
B.A computer technician has been paid in advance to install software updates as they
become available
C.A computer technician has just signed an agreement with you regarding pricing for
future work
D.A computer technician has installed the latest software updates, but you have not
received their invoice for payment
32) Jackson and Campbell have capital balances of $100,000 and $300,000
respectively. Jackson devotes full time and Campbell one-half time to the business.
Determine the division of $150,000 of net income in ratio of capital balances.
A.$75,000 and $75,000
B.$37,500 and $112,500
C.$100,000 and $50,000
D.$50,000 and $100,000
33) Select the type of business that is most likely to obtain large amounts of resources
by issuing stock.
A.Partnership
B.Corporation
C.Proprietorship
D.None are correct.
34) The following information is for the standard and actual costs for the Happy
Corporation.
Standard Costs:
Budgeted units of production – 16,000 (80% of capacity)
Standard labor hours per unit – 4
Standard labor rate – $26 per hour
Standard material per unit – 8 lbs.
Standard material cost – $ 12 per pound
Standard variable overhead rate – $15 per labor hour
Budgeted fixed overhead – $640,000
Fixed overhead rate is based on budgeted labor hours at 80% capacity.
Actual Cost:
Actual production – 16,500 units
Actual material purchased and used – 130,000 pounds
Actual total material cost – $1,600,000
Actual labor – 65,000 hours
Actual total labor costs – $1,700,000
Actual variable overhead – $1,000,000
Actual fixed overhead – $640,000
Actual variable overhead – $1,000,000
Determine: (a) the quantity variance, price variance, and total direct materials cost
variance; (b) the time variance, rate variance, and total direct labor cost variance; and
(c) the volume variance, controllable variance, and total factory overhead cost variance.
35) Due to various fraudulent business practices and accounting coverups in the early
2000s, Congress enacted the Sarbanes-Oxley Act of 2002. The Act was responsible for
establishing a new oversight board for public accountants called the
A.Generally Accepted Accounting Practices for Public Accountants Board
B.Public Company Accounting Oversight Board
C.Congressional Accounting Oversight Board
D.None are correct
36) During May, Blast sold 650 portable CD players for $50 each. Each CD player cost
Blast $25 to purchase and carried a one-year warranty. If 10 percent of the goods sold
typically need to be replaced over the warranty period, what amount should Blast debit
Product Warranty Expense for in May?
A.$3,250
B.$1,625
C.$ 650
D.$1,300
37) Details of invoices for purchases of merchandise are as follows:
Returns and
Merchandise Freight Terms Allowances
(a) $2,800 $45 FOB shipping point, 1/10, n/30 $200
(b) 7,600 — FOB destination, n/30 800
(c) 1,400 55 FOB shipping point, 2/10, n/30 600
(d) 500 — FOB destination, 1/10, n/30
Determine the amount to be paid in full settlement of each of the invoices, assuming
that credit for returns and allowances was received prior to payment and that all
invoices were paid within the discount period.
38) Mandy Corporation sells a single product. Budgeted sales for the year are
anticipated to be 640,000 units, estimated beginning inventory is 98,000 units, and
desired ending inventory is 80,000 units. The quantities of direct materials expected to
be used for each unit of finished product are given below.
Material A .50 lb. per unit @ $ .60 per pound
Material B 1.00 lb. per unit @ $1.70 per pound
Material C 1.20 lb. per unit @ $1.00 per pound
The dollar amount of direct material C used in production during the year is:
A.$746,400
B.$724,800
C.$824,400
D.$758,160
39) Which of the following is considered to be unearned revenue?
A.Concert tickets sold last month for yesterdays performance
B.Concert tickets sold yesterday on credit for yesterdays performance
C.Concert tickets that were not sold for the current performance
D.Concert tickets sold for next months performance
40) Which of the following costs incurred by a paper manufacturer would be included
in the group of costs referred to as conversion costs?
A.Advertising costs
B.Raw lumber (direct materials)
C.Machine operator’s wages (direct labor)
D.Sales salaries
41) Heedy Company is trying to decide how many units of merchandise to order each
month. The company policy is to have 20% of the next months sales in inventory at the
end of each month. Projected sales for August, September, and October are 30,000
units, 20,000 units, and 40,000 units, respectively. How many units must be purchased
in September?
A.24,000
B.18,000
C.28,000
D.22,000
42) Cash investments made by the owner to the business are reported on the statement
of cash flows in the
A.financing activities section
B.investing activities section
C.operating activities section
D.supplemental statement
43) Which of the following would be deducted from the balance per books on a bank
reconciliation?
A.Service charges
B.Outstanding checks
C.Deposits in transit
D.Notes collected by the bank
44) Which of the following is the correct formula to calculate the predetermined factory
overhead rate?
A.Estimated total factory overhead costs divided by estimated activity base
B.Actual total factory overhead costs divided by estimated activity base
C.Estimated total factory overhead costs divided by actual activity base
D.Actual total factory overhead costs divided by actual activity base
45) Which of the following is always recorded in the general journal?
A.rendering services for cash
B.purchases of supplies on account
C.rendering services on account
D.closing entries
46) Bob Evans owns a business, Beachside Realty, that rents condominiums and
furnishings. Below is the adjusted trial balance at December 31, 2010.
Prepare the entry required to close the revenue accounts at the end of the period.
47) Complete the following worksheet for Danilo Enterprises.
Danilo Enterprises
Worksheet
For the Year Ended December 31, 2010
48) A corporation was organized on January 1 of the current year, with an authorization
of 20,000 shares of $4 preferred stock, $12 par, and 100,000 shares of $3 par common
stock.
The following selected transactions were completed during the first year of operations:
Required: Journalize the transactions.
49) Donner Company is selling a piece of land adjacent to their business. An appraisal
reported the market value of the land to be $120,000. The Focus Company initially
offered to buy the land for $107,000. The companies settled on a purchase price of
$115,000. On the same day, another piece of land on the same block sold for $122,000.
Under the cost concept, what is the amount that will be used to record this transaction in
the accounting records?
50) Macy Company has 10,000 shares of 2% cumulative preferred stock of $50 par and
25,000 shares of $75 par common stock. The following amounts were distributed as
dividends:
Required:
Determine the dividends per share for preferred and common stock for each year.
