1) The lowest contribution margin per scarce resource is the most profitable.
2) A bottleneck begins when demand for the companys product exceeds the ability to
produce the product.
3) When using the direct write-off method off accounting for uncollectible receivables,
the account Allowance for Doubtful Accounts is debited when a specific account is
determined to be uncollectible.
4) Depreciation expense on factory equipment is part of factory overhead cost.
5) Conversion cost is the combination of direct labor cost and factory overhead cost.
6) Foreign currency translation adjustment is an example of an item that would be
included in Other Comprehensive Income.
7) In addition to the differential costs in an equipment replacement decision, the
remaining useful life of the old equipment and the estimated life of the new equipment
are important considerations.
8) The fact that workers are unable to meet a properly determined direct labor standard
is sufficient cause to change the standard.
9) A restriction/appropriation of retained earnings establishes cash assets that are set
aside for a specific purpose.
10) Direct costs can be specifically traced to a cost object.
11) Net income for the year was $29,500. Accounts receivable increased $2,500, and
accounts payable increased $5,400. Under the indirect method, the cash flow from
operations is $32,400.
12) Just-in-Time (JIT) manufacturing is also called make-to-order manufacturing.
13) The sales budget is derived from the production budget.
14) If a corporation is liquidated, preferred stockholders are paid before the creditors
and before the common stockholders.
15) If a corporation had net income of $60,000 and $20,000 in cash dividends were
declared and paid then the retained earnings account would increase by $40,000.
16) The adjustment for accrued fees was debited to Accounts Payable instead of
Accounts Receivable. This error will be detected when the Adjusted Trial Balance is
prepared.
17) Which of the following budgets provides the starting point for the preparation of the
direct labor cost budget?
A.Direct materials purchases budget
B.Cash budget
C.Production budget
D.Sales budget
18) The Kaumajet Factory produces two products – table lamps and desk lamps. It has
two separate departments – finishing and production. The overhead budget for the
finishing department is $550,000, using 500,000 direct labor hours. The overhead
budget for the production department is $400,000 using 80,000 direct labor hours.
If the budget estimates that a table lamp will require 2 hours of finishing and 1 hours of
production, what is the total amount of factory overhead to be allocated to table lamps
using the multiple production department factory overhead rate method with an
allocation base of direct labor hours, if 75,000 units are produced?
A.$368,250
B.$540,000
C.$832,500
D.$475,000
19) The Mountain Springs Water Company has two departments. Purifying and
Bottling. The Bottling Department received 67,000 liters from the Purifying
Department. During the period, the Bottling Department completed 65,000 liters,
including 3,000 liters of work in process at the beginning of the period. The ending
work in process was 5,000 liters. How many liters were started and completed during
the period?
A.62,000
B.64,000
C.60,000
D.70,000
20) ____ manufacturing deals with several suppliers in hopes of finding the best price.
A.Traditional
B.Just-In-Time
C.Economic
D.Productivity improvement
21) Identify which section the statement of cash flows (using the indirect method)
would present information regarding the following activities: (Use O for operating, I for
investing, or F for financing):
a. Issued common stock
b. Redeemed bonds
c. Issued preferred stock
d. Purchased patents
e. Net income
f. Paid cash dividends
g. Purchased treasury stock
h. Sold long-term investment.
i. Sold equipment.
j. Purchased buildings
k. Issued bonds
22) Garrison Company uses the retail method of inventory costing. They started the
year with an inventory that had a retail cost of $45,000. During the year they purchased
an inventory with a retail cost of $300,000. After performing a physical inventory, they
calculated their inventory cost at retail to be $80,000. The mark up is 100% of cost.
Determine the ending inventory at its estimated cost.
A.$160,000
B.$80,000
C.$40,000
D.$45,000
23) The type of account and normal balance of Accumulated Depreciation is
A.asset, credit
B.asset, debit
C.contra asset, credit
D.contra asset, debit
24) The transfer price which uses a variety of cost concepts is the
A.Negotiated price approach
B.Standard cost approach
C.Cost price approach
D.Market price approach
25) Blanton Corporation purchased 15% of the outstanding shares of common stock of
Worton Corporation as a long-term investment. Subsequently, Worton Corporation
reported net income and declared and paid cash dividends. What journal entry would
Blanton Corporation use to record the dividends it receives?
A.debit Investment in Worton Corporation; credit Cash
B.debit Cash; credit Dividend Revenue
C.debit Investment in Worton Corporation; credit Income of Worton Corporation
D.debit Cash; credit Investment in Worton Corporation
26) At the end of the current year, Accounts Receivable has a balance of $550,000;
Allowance for Doubtful Accounts has a credit balance of $5,500; and net sales for the
year total $2,500,000. An analysis of receivables estimates uncollectible receivables as
$25,000.
Determine the net realizable value of accounts receivable after adjustment. (Hint:
Determine the amount of the adjusting entry for bad debt expense and the adjusted
balance Allowance of Doubtful Accounts.)
A.$550,000
B.$544,500
C.$525,000
D.$575,000
27) Indicate the section (operating activities, investing activities, financing activities, or
none) in which each of the following would be reported on the statement of cash flows
prepared by the indirect method:
(a) Gain on sale of fixed assets
(b) Net income
(c) Retirement of long-term debt
(d) Sale of capital stock
(e) Distribution of stock dividends
(f) Payment of cash dividends
(g) Purchase of fixed assets
(h) Sale of fixed assets
(i) Receipt of interest revenue
(j) Payment of interest expense
28) Corporate annual reports typically do not contain which of the following?
A.management discussion and analysis
B.SEC statement expressing an opinion
C.accompanying foot notes
D.auditor’s report
29) The entry to record the amortization of a premium on bonds payable on an interest
payment date includes:
A.debit Premium on Bonds Payable, credit Interest Revenue
B.debit Interest Expense, credit Premium on Bond Payable
C.debit Interest Expense, debit Premium on Bonds Payable, credit Cash
D.debit Bonds Payable, credit Interest Expense
30) The journal entry Stanton will record on February 1, 2015, will include:
A.a credit to Interest Revenue for $1,500
B.a credit to Gain on Sale of Investments for $1,500
C.a credit to Cash for $52,500
D.a credit to Interest Receivable for $600
31) The following data are taken from the financial statements:
32) The posting process will include the transfer of the following information from the
journal to the account.
A.date, amount (debit or credit)
B.date, amount (debit or credit), journal page number
C.amount (debit or credit), account number
D.date, amount (debit or credit) account number
33) Computer equipment (office equipment) purchased 6 1/2 years ago for $170,000,
with an estimated life of 8 years and a residual value of $10,000, is now sold for
$60,000 cash. (Appropriate entries for depreciation had been made for the first six years
of use.) Journalize the following entries:
(a) Record the depreciation for the one-half year prior to the sale, using the straight-line
method.
(b) Record the sale of the equipment.
(c) Assuming that the equipment had been sold for $25,000 cash, prepare the entry for
(b) above to record the sale.
34) Sales for the year were $600,000. Accounts receivable were $100,000 and $80,000
at the beginning and end of the year. Cash received from customers to be reported on
the cash flow statement using the direct method is
A.$700,000
B.$600,000
C.$580,000
D.$620,000
35) Which of the following is a body established by the Sarbanes-Oxley Act of 2002 for
the accounting professionals?
A.Generally Accepted Accounting Practices for Public Accountants Board
B.Public Company Accounting Oversight Board
C.Congressional Accounting Oversight Board
D.none of these
36) 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
37) A business pays bi-weekly salaries of $20,000 every other Friday for a ten-day
period ending on that day. The adjusting entry necessary at the end of the fiscal period
ending on the second Wednesday of the pay period includes a:
A.debit to Salary Expense of $8,000
B.debit to Salary Payable of $8,000
C.credit to Salary Expense of $16,000
D.credit to Salary Payable of $16,000
38) During the period, labor costs incurred on account amounted to $275,000 including
$200,000 for production orders and $75,000 for general factory use. In addition, factory
overhead charged to production was $32,000. From the following, select the entry to
record the direct labor costs.
A.Work in Process200,000
Wages Payable200,000
B.Work in Process275,000
Wages Payable275,000
C.Wages Payable 275,000
Work in Process275,000
D.Wages Payable200,000
Work in Process200,000
39) If fixed costs are $350,000, the unit selling price is $29, and the unit variable costs
are $20, what is the break-even sales (units) if the variable costs are decreased by $4?
A.26,924 units
B.12,069 units
C.21,875 units
D.38,889 units
40) On December 31, Strike Company has decided to sell one of its batting cages. The
initial cost of the equipment was $310,000 with an accumulated depreciation of
$260,000. Depreciation has been taken up to the end of the year. The company found a
company that is willing to buy the equipment for $55,000. What is the amount of the
gain or loss on this transaction?
A.Cannot be determined
B.No gain or loss
C.Gain of $ 5,000
D.Gain of $55,000
41) Yankton Company began the year without an investment portfolio. During the year
they purchased investments classified as trading securities at a cost of $13,000. At the
end of the year, the market value of the securities was $11,000. The Yankton Company’s
financial statements for the current year should show
A.a loss of $2,000 on the income statement and net trading securities of $13,000 on the
balance sheet
B.no loss on the income statement and net trading securities of $13,000 on the balance
sheet
C.no loss on the income statement, net trading securities of $11,000 and an unrealized
loss of $2,000 as a stockholders equity adjustment on the balance sheet
D.a loss of $2,000 on the income statement and temporary investments of $11,000 on
the balance sheet
42) Which of the following companies would be more likely to use the specific
identification inventory costing method?
A.Gordons Jewelers
B.Lowes
C.Best Buy
D.Wal-Mart
43) Bonds Payable has a balance of $1,000,000 and Discount on Bonds Payable has a
balance of $10,000. If the issuing corporation redeems the bonds at 97.5, what is the
amount of gain or loss on redemption?
A.$10,000 loss
B.$25,000 loss
C.$25,000 gain
D.$15,000 gain
44) The Tom Company reports the following data.
Determine Tom Companys operating leverage.
45) Fixed costs are $50 per unit and variable costs are $125 per unit. Production was
130,000 units, while sales were 125,000 units. Determine (a) whether variable cost
income from operations is less than or greater than absorption costing income from
operations, and (b) the difference in variable costing and absorption costing income
from operations.
46) A separate account for each material is found in a
A.general ledger
B.materials ledger
C.receiving report
D.job cost sheet
47) The formula to compute direct labor rate variance is to calculate the difference
between
A.actual costs + (actual hours * standard rate)
B.actual costs – standard cost
C.(actual hours * standard rate) – standard costs
D.actual costs – (actual hours * standard rate)
48) Denzel Jones is the major stockholder of Crystal Cleaning Company. Recently,
Denzel received $10,000 of dividends from Crystal Cleaning. After receiving the
dividends, he contributed $6,000, in his name, to Habitat for Humanity. The
contribution of $6,000 should be recorded on the accounting records of which of the
following entities?
A.Crystal Cleaning and Habitat for Humanity
B.Denzel Jones’ personal records and Habitat for Humanity
C.Denzel Jones personal records and Crystal Cleaning
D.Denzel Jones personal records, Crystal Cleaning, and Habitat for Humanity
49) What is the present value of $8,000 to be received at the end of six years, if the
required rate of return is 15%?
50) Amos Moving Services account balances at March 31, 2014, the end of the current
year, are listed below. The Retained Earnings balance was $180,000 at April 1, 2013,
the beginning of the current year.
Based on the data provided for Amos Moving Services, prepare an income statement
for the current year ended March 31, 2014.
51) Journalize the following, assuming a 360-day year is used for interest calculations:
52) Flagger Company began operations on January 1, 2011. The accountant prepared
the following list of account balances from the companys records for the first year
ended December 31, 2011:
Prepare an income statement for Flagger Company in good form.
53) The inventory at May 1 and the costs charged to Work in Process–Department B
during May for Stella Company are as follows:
During May, all direct materials are transferred from Department A, the units in process
at May 1 were completed, and of the 55,000 units entering the department, all were
completed except 6,000 units which were 70% completed. Inventories are costed by the
first-in, first-out method.
Prepare a cost of production report for May. Round unit cost data to four decimal places
and total cost to nearest cent.
54) Big Wheel, Inc. collects 25% of its sales on account in the month of the sale and
75% in the month following the sale. If sales on account are budgeted to be $150,000
for March and receipts from sales on account total $162,500 in April, what are budgeted
sales on account for April?
55) On the basis of the following data, determine the estimated cost of the inventory as
of March 31 by the retail method, presenting details of the computation in good order.
56) Prepare an income statement and a retained earnings statement for the month ended
September 30, 2011, from the T accounts below of Carson Company.
