1) Joint costs can be allocated either using a physical basis or a value basis.
2) The payment of cash dividends to shareholders is classified as a financing activity.
3) Both financial and managerial accounting affect user’s decisions and actions.
4) Stockholders’ equity consists of paid-in capital and retained earnings.
5) The cost of units transferred from Work in Process Inventory to Finished Goods
Inventory is called the cost of goods manufactured.
6) Ferguson Co. has a $200 petty cash fund. At the end of the first month the
accumulated receipts represent $43 for delivery expenses, $127 for merchandise
inventory, and $12 for miscellaneous expenses. The fund has a balance of $18. The
journal entry to record the reimbursement of the account includes a:
A.Debit to Petty Cash for $200.
B.Debit to Cash Over and Short for $18.
C.Credit to Cash for $182.
D.Credit to Inventory for $127.
E.Credit to Cash Over and Short for $18.
7) Schrank Company is trying to decide how many units of merchandise to order each
month. The company’s policy is to have 20% of the next month’s 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.14,000.
B.20,000.
C.22,000.
D.24,000.
E.28,000.
8) Minor Electric has received a special one-time order for 1,500 light fixtures (units) at
$5 per unit. Minor currently produces and sells 7,500 units at $6.00 each. This level
represents 75% of its capacity. Production costs for these units are $4.50 per unit, which
includes $3.00 variable cost and $1.50 fixed cost. To produce the special order, a new
machine needs to be purchased at a cost of $1,000 with a zero salvage value.
Management expects no other changes in costs as a result of the additional production.
If Minor wishes to earn $1,250 on the special order, the size of the order would need to
be:
A.4,500 units.
B.2,250 units.
C.1,125 units.
D.625 units.
E.300 units.
9) Larry Bar opened an frame shop and completed these transactions:
1> Larry started the shop by investing $40,000 cash and equipment valued at $18,000.
2> Purchased $70 of office supplies on credit.
3> Paid $1,200 cash for the receptionist’s salary.
4> Sold a custom frame service and collected a $1,500 cash on the sale.
5> Completed framing services and billed the client $200.
What was the balance of the cash account after these transactions were posted?
A.$300.
B.$41,500.
C.$40,300.
D.$38,500.
E.$38,700.
10) A company that makes which of the following types of products would best be
suited for a job costing system?
A.Fruit juice
B.Bathing suits
C.Snack chips
D.Compact discs
E.Custom jewelry
11) Sinking fund bonds:
A.Require the issuer to set aside assets at specified amounts to retire the bonds at
maturity.
B.Require equal payments of both principal and interest over the life of the bond issue.
C.Decline in value over time.
D.Are registered bonds.
E.Are bearer bonds.
12) Match the following terms with the definitions.
13) Using the following accounts and an overhead rate of 90% of direct labor cost,
determine the amount of applied overhead.
A.$79,200.
B.$167,200.
C.$34,320.
D.$88,000.
E.$35,376.
14) The following information pertains to the Frameworks Corporation for May.
Calculate the cost of goods sold for the period:
A.$164,300.
B.$126,800.
C.$125,300.
D.$146,300.
E.$128,300.
15) Cliff Company traded in an old truck for a new one. The old truck had a cost of
$75,000 and accumulated depreciation of $60,000. The new truck had an invoice price
of $125,000. Huffington was given a $12,000 trade-in allowance on the old truck,
which meant they paid $113,000 in addition to the old truck to acquire the new truck. If
this transaction has commercial substance, what is the recorded value of the new truck?
A.$15,000
B.$75,000
C.$113,000
D.$125,000
E.$128,000
16) Short-term notes payable:
A.Cannot replace an account payable.
B.Can be issued in return for money borrowed from a bank.
C.Are not negotiable.
D.Are a conditional promise to pay.
E.Rarely involve interest charges.
17) Product A has a sales price of $10 per unit. Based on a 10,000-unit production level,
the variable costs are $6 per unit and the fixed costs are $3 per unit. Using a flexible
budget for 12,500 units, what is the budgeted operating income from Product A?
A.$12,500.
B.$25,000.
C.$20,000.
D.$30,000.
E.$35,000.
18) The direct method of reporting operating cash flows:
A.Is recommended but not required by the FASB.
B.Must be used by all companies.
C.Is used by most companies.
D.Is considered supplementary disclosure.
E.Is not recommended by the FASB, but is commonly used.
19) A company’s current inventory consists of 5,000 units purchased at $6 per unit.
Replacement cost has now fallen to $5 per unit. What is the entry the company must
record to adjust inventory to market?
A.Debit Merchandise Inventory $25,000; credit Cost of Goods Sold $25,000.
B.Debit Cost of Goods Sold $30,000; credit Merchandise Inventory $30,000.
C.Debit Cost of Goods Sold $5,000; credit Merchandise Inventory $5,000.
D.Debit Loss on Inventory $5,000; credit Cost of Goods Sold $5,000.
E.Debit Merchandise Inventory $30,000; credit Cost of Goods Sold $25,000.
20) The Work in Process Inventory account for DG Manufacturing follows. Compute
the cost of jobs completed and transferred to Finished Goods Inventory.
The cost of units transferred to finished goods is:
A.$97,000.
B.$105,900.
C.$88,100.
D.$95,200.
E.$92,500.
21) _________________ are probable future payments of assets or services that a
company is presently obligated to make as a result of past transactions or events.
22) Using the information given below, prepare an income statement and owner’s equity
statement for Rapid Car Services from the adjusted trial balance. Owner Stella Grafton
did not make any additional investments in the company during the year.
23) Avro Corporation has $875,000 in stockholders’ equity and 350,000
weighted-average shares of common stock outstanding. Calculate the book value per
common share.
24) Nesbit Co. has two operating (production) departments supported by a number of
service departments. The following information was collected for a recent period:
Indirect costs are allocated as follows: salaries on the basis of sales, office expenses on
the basis of the number of employees, and all other costs on the basis of square footage.
Additional information about the production departments follows:
Sales for the Machining Department are $724,404 and sales for the Assembly
Department are $356,796. Determine the departmental contribution to overhead and the
departmental net income for each production department.
25) Noncash financing and investing activities are disclosed in a ____________ or in a
separate ______________________________.