If the cost of employee wages is not a significant portion of the total product cost, the
wages are classified as direct materials cost.
Answer:
Receivables that are expected to be collected in cash in eighteen months or less are
reported in the Current Asset section of the balance sheet.
Answer:
Bondholders claims on the assets of the corporation rank ahead of stockholders.
Answer:
A disadvantage to using the residual income performance measure is that it encourages
managers to spend only the minimum acceptable rate of return on assets set by upper
management.
Answer:
A bond is usually divided into a number of individual bonds of $500 each.
Answer:
When merchandise is sold for $600 plus 6% sales tax, the Sales account should be
credited for $636.
Answer:
The ratio of net sales to assets measures how effectively a business is using its assets to
generate sales.
Answer:
The purchase of supplies for cash would be recorded in the purchases journal.
Answer:
Net sales is equal to sales minus cost of merchandise sold.
Answer:
When common stock is issued in exchange for land, the land should be recorded in the
accounts at the par amount of the stock issued.
Answer:
The use of subsidiary ledgers is limited to Accounts Payable and Accounts Receivable.
Answer:
The cash budget is affected by the sales budget, the various budgets for manufacturing
costs and operating expenses, and the capital expenditures budget.
Answer:
The amount of the “adjusted balance” appearing on the bank reconciliation as of a given
date is the amount that is shown on the balance sheet for that date.
Answer:
Investment turnover (as used in determining the rate of return on investment) focuses
on the rate of profit earned on each sales dollar.
Answer:
The balance in Retained Earnings should be interpreted as representing surplus cash left
over for dividends.
Answer:
It is necessary for a company to use the same depreciation method for all of its
depreciable assets.
Answer:
The primary role of accounting is to determine the amount of taxes a business will be
required to pay to taxing entities.
Answer:
For a construction contractor, the wages of carpenters would be classified as factory
overhead cost.
Answer:
Unit variable cost does not change as the number of units of activity changes.
Answer:
The bank reconciliation is an important part of the system of internal controls.
Answer:
The FIFO method separates work done on beginning inventory in the previous period
from work done on it in the current period.
Answer:
If the standard to produce a given amount of product is 500 direct labor hours at $15
and the actual was 600 hours at $17, the rate variance was $1,200 favorable.
Answer:
Receiving a bill or otherwise being notified that an amount is owed is not recorded until
the amount is paid.
Answer:
The number of days’ sales in inventory is one means of expressing the relationship
between the cost of goods sold and inventory.
Answer:
The ratio of fixed assets to long-term liabilities provides a measure of a firm’s ability to
pay dividends.
Answer:
When an account receivable that has been written off is subsequently collected, the
account receivable is said to be reinstated.
Answer:
Cost-volume-profit analysis can be presented in both equation form and graphic form.
Answer:
To record a bond investment between interest payment periods, Investment in Bonds
would be debited and Cash and Interest Revenue would be credited.
Answer:
In a general partnership, each partner is individually liable to creditors for debts
incurred by the partnership, to the extent of the partner’s capital balance.
Answer:
Under the periodic inventory system, a physical inventory is taken to determine the cost
of the inventory on hand and the cost of the merchandise sold.
Answer:
If a company mistakenly counts more items during a physical inventory than actually
exist, how will the error affect their bottom line?
A.No change to net income.
B.Net income will be overstated
C.Net income will be understated.
D.Only gross profit will be affected.
Answer:
The characteristic of a partnership that gives the authority to any partner to legally bind
the partnership and all other partners to business contracts is called
A.unlimited liability
B.ease of formation
C.mutual agency
D.dissolution
Answer:
Excel Products Inc. pays its employees semimonthly. The summary of the payroll for
December 31, 2012 indicated the following:
For the year ended 2012, $40,000 of the December 31 payroll is subject to social
security tax of 6%; $120,000 is subject to Medicare tax of 1.5%; $10,000 is subject to
state unemployment tax of 4.3% and federal unemployment tax of 0.8%. As of January
1, 2013 all of the $120,000 is subject to all payroll taxes. Present the journal entries for
payroll tax expense if the employees are paid (a) December 31 of the current year, (b)
January 2 of the following year.
Answer:
Goods purchased on account for future use in the business, such as supplies, are called
A.prepaid liabilities
B.revenues
C.prepaid expenses
D.liabilities
Answer:
According to a summary of the payroll of Scotland Company, $450,000 was subject to
the 7.0% social security tax and $500,000 was subject to the 1.5% Medicare tax.
Federal income tax withheld was $98,000. Also, $15,000 was subject to state (4.2%)
and federal (0.8%) unemployment taxes. The journal entry to record accrued salaries
would include:
A.a debit to Salary Payable of $313,000
B.a credit to Salary Payable of $363,000
C.a debit to Salary Expense of $363,000
D.a credit to Salary Expense of $313,000
Answer:
Calculate the variable factory overhead controllable variance using the above
information:
A.$8,981.75 Favorable
B.$7,280.75 Unfavorable
C.$8,981.75 Unfavorable
D.$7,280.75 Favorable
Answer:
Down-Under, an aquatic supply store, makes the following five payments during
August. Journalize them in the Cash Payments Journal as appropriate.
(a) On August 2nd, Down-Under paid Pondmaster, Inc with check 6420 for 6 pumps at
$435.00 each. The pumps had been purchased in July on account.
(b) On August 10th, Down-Under purchased $785.00 of office supplies from Business
Systems with check 6421.
(c) On August 15th, Down-Under pays Aqua Magic $215.00 on account with check
6422.
(d) On August 27th, Down-Under pays an invoice for merchandise received earlier
from Spindrifter, Inc. for eight drains at $73.50 each. They wrote check 6423.
(e) On August 31st, Down-Under purchased $65.00 of Koi clay from The Natural
Wonder Company by writing check 6424. (Utilize Pond Supplies Expense).
Answer:
Sales to customers who use bank credit cards such as MasterCard and Visa are usually
recorded by a
A.debit to Bank Credit Card Sales, debit to Credit Card Expense, and a credit to Sales
B.debit to Cash and a credit to Sales
C.debit to Cash, credit to Credit Card Expense, and a credit to Sales
D.debit to Sales, debit to Credit Card Expense, and a credit to Cash
Answer:
Prepare the journal entries for the following transactions for Morgan Co.
(a) Morgan Co. purchased 32,000 shares of the total of 100,000 outstanding shares of
Gordon Corp. stock for $10 per share plus a $400 commission.
(b) Gordon Corp.’s total earnings for the period are $80,000.
(c) Gordon Corp. paid a total of $45,000 in cash dividends.
Answer:
The recording of the jobs completed would include a credit to:
A.Factory Overhead
B.Finished Goods
C.Work in Process
D.Cost of Goods Sold
Answer:
Notes may be issued
A.when assets are purchased
B.to creditor’s to temporarily satisfy an account payable created earlier
C.when borrowing money
D.all of the above
Answer:
Four financial statements are usually prepared for a business. The statement of cash
flows is usually prepared last. The statement of owner’s equity (OE), the balance sheet
(B), and the income statement (I) are prepared in a certain order to obtain information
needed for the next statement. In what order are these three statements prepared?
A.I,OE, B
B.B, I, OE
C.OE, I, B
D.B,OE, I
Answer:
At the beginning of the period, the Cutting Department budgeted direct labor of
$155,000, direct material of $165,000 and fixed factory overhead of $15,000 for 9,000
hours of production. The department actually completed 10,000 hours of production.
What is the appropriate total budget for the department, assuming it uses flexible
budgeting?
A.$416,000
B.$370,556
C.$368,889
D.$335,000
Answer:
An employee receives an hourly rate of $15, with time and a half for all hours worked
in excess of 40 during the week. Payroll data for the current week are as follows: hours
worked, 48; federal income tax withheld, $120; cumulative earnings for the year prior
to this week, $24,500; Social security tax rate, 6% on maximum of $100,000; and
Medicare tax rate, 1.5% on all earnings; state unemployment compensation tax, 3.4%
on the first $7,000; federal unemployment compensation tax, .8% on the first $7,000.
What is the net amount to be paid to the employee?
A.$568.74
B.$601.50
C.$660.00
D.$574.90
Answer:
The Sharpe Company reports the following information for 2012:
Compute:
a) product costs
b) period costs
Answer:
Identify each of the following as either internal or external users of accounting
information.
A. Payroll Manager
B. Bank
C. President’s Secretary
D. Internal Revenue Service
E. Raw Material Vendors
F. Social Security Administration
G. Health Insurance Provider
H. Managerial Accountant
Answer:
According to a summary of the payroll of Scotland Company, $450,000 was subject to
the 7.0% social security tax and $500,000 was subject to the 1.5% Medicare tax.
Federal income tax withheld was $98,000. Also, $15,000 was subject to state (4.2%)
and federal (0.8%) unemployment taxes. The journal entry to record accrued payroll
taxes would include:
A.a debit to SUTA Payable of $630
B.a debit to SUTA Payable of $18,900
C.a credit to SUTA Payable of $630
D.a credit to SUTA Payable of $18,900
Answer:
The following financial information was summarized from the accounting records of
Train Corporation for the current year ended December 31:
The income from operations for the Rails Division is:
A.$60,800
B.$33,600
C.$8,700
D.$21,150
Answer:
Answer the following questions for each of the errors listed below, considered
individually:
(a) Did the error cause the trial balance totals to be unequal?
(b) What is the amount of the difference between the trial balance totals (where
applicable)?
(c) Which of the trial balance totals, debit or credit, is the larger (where applicable)?
Present your answers in columnar form, using the following headings:
Errors:
Answer:
Which of the following below is not a characteristic of a Limited Liability Company?
A.unlimited life
B.limited legal liability
C.taxable
D.moderate ability to raise capital
Answer:
Rogers Company reported net income of $35,000 for the year. During the year,
accounts receivable increased by $7,000, accounts payable decreased by $3,000 and
depreciation expense of $8,000 was recorded. Net cash provided by operating activities
for the year is
A.$53,000.
B.$47,000.
C.$33,000
D.$37,000.
Answer:
The following information is for employee Ella Dodd for the week ended March15.
Total hours worked: 48
Rate: $15 per hour, with double time for all hours in excess of 40
Federal income tax withheld: $200
United Fund deduction: $50
Cumulative earnings prior to current week: $6,400
Tax rates:
Social security: 6% on maximum earnings of $100,000. Medicare tax:
5% on all earnings.
State unemployment: 3.4% on maximum earnings of $7,000; on employer
Federal unemployment: 0.8% on maximum earnings of $7,000; on employer
Answer:
Which one of the steps below is not aided by the preparation of the work sheet?
A.preparing the adjusted trial balance
B.posting to the general ledger
C.preparing the financial statements
D.preparing the closing entries
Answer:
Beachside Coffee Shop, in an effort to stream line its accounting system, has decided to
utilize a Cash Receipts Journal in its operation. What will be recorded on the post ref
column of this transaction?
A.10
B.15
C.42
D.
Answer:
Each individual entry in the Revenue Journal is posted to
A.the Accounts Receivable controlling account
B.the accounts receivable subsidiary ledger
C.the Revenue controlling account
D.the accounts receivable subsidiary ledger and the controlling account
Answer:
The Stewart Cake Factory sells chocolate cakes, birthday decorated cakes, and specialty
cakes. The factory is experiencing a bottleneck and is trying to determine which cake is
more profitable. Even though the company may have to limit the orders that it takes,
they are concerned about customer service and satisfaction.
(A) Calculate the contribution margin per hour per cake.
(B) Determine which cakes the company should try to sell more of first, second, and
then last.
Answer:
According to the just-in-time philosophy,
A.finished goods should always be available in case a customer wants something.
B.employees should be expert at one function rather than be cross-trained for multiple
functions.
C.movement of the product and material is reduced.
D.the product moves from process to process until completion.
Answer:
Indirect labor and indirect materials are classified as:
A.factory overhead and product costs
B.factory overhead and period costs
C.operating costs and period costs
D.operating costs and product costs
Answer:
When units manufactured exceed units sold:
A.variable costing income equals absorption costing income
B.variable costing income is less than absorption costing income
C.variable costing income is greater than absorption costing income
D.variable costing income is greater by the number of units produced multiplied by the
variable cost ratio.
Answer:
Bobbi and Stuart are partners. The partnership capital of Bobbi is $40,000 and Stuart is
$70,000. Bobbi sells his interest in the partnership to John for $50,000. The journal
entry to record the admission of John as a new partner would include
A.a credit to John’s capital for $40,000
B.a credit to Stuart’s capital for $10,000
C.a credit John’s capital for $50,000
D.a credit to John’s capital for $40,000 and a credit to Stuart’s capital for $10,000
Answer:
Tennessee Corporation is analyzing a capital expenditure that will involve a cash outlay
of $109,332. Estimated cash flows are expected to be $36,000 annually for four years.
The present value factors for an annuity of $1 for 4 years at interest of 10%, 12%, 14%,
and 15% are 3.170, 3.037, 2.914, and 2.855, respectively. The internal rate of return for
this investment is:
A.9%
B.10%
C.12%
D.3%
Answer:
Magpie Corporation uses the total cost concept of product pricing. Below is cost
information for the production and sale of 60,000 units of its sole product. Magpie
desires a profit equal to a 25% rate of return on invested assets of $700,000.
The cost per unit for the production and sale of the company’s product is:
A.$12.11
B.$12.88
C.$15
D.$13.50
Answer:
Journalize the following entries on the books of the borrower and creditor. Label
accordingly. (Assume a 360-day year is used for interest calculations.)
Answer:
Prior to liquidating their partnership, Samuel and Brian had capital accounts of $60,000
and $240,000, respectively. The partnership assets were sold for $120,000. The
partnership had no liabilities. Samuel and Brian share income and losses equally.
a. Determine the amount of Samuel’s deficiency.
b. Determine the amount distributed to Brian, assuming Samuel is unable to satisfy the
deficiency.
Answer:
On March 1, Upton Company’s packaging department had Work in Process inventory of
8,820 units, which had been transferred in from the finishing department. These units
had accumulated costs of $315,000 in previous departments and $16,000 for conversion
costs in the packaging department.
During March, 30,000 units were transferred into the department. These units had
accumulated costs of $770,000 in the previous departments. The packaging department
incurred $54,000 in conversion costs during the month.
Seven hundred units remained in ending inventory on March 31. These units were 80%
complete with respect to conversion costs.
Calculate the cost per equivalent unit for transferred-in costs and for conversion costs
for the packaging department using the average cost method.
Answer:
A company reports the following:
Determine the number of times interest charges are earned. Round your answer to one
decimal place.
Answer:
Sinclair Company’s accumulated depreciation-equipment increased by $6,000, while
patents decreased by $2,200 between balance sheet dates. There were no purchases or
sales of depreciable or intangible assets during the year. In addition, the income
statement showed a loss of $3,200 from the sale of investments.
Answer:
Dixon Sales has seven sales employees which receive weekly paychecks. Each earns
$10.25 per hour and each has worked 40 hours in the pay period. Each employee pays
12% of gross in Federal Income Tax, 3% in State Income Tax, 6% of gross in Social
Security Tax, 1.5% of gross in Medicare Tax, and 1/2% in State Disability Insurance.
Journalize the recognition of the pay period ending January 19th which will be paid to
the employees January 26th. (Keep in mind that none of the employees is subject to a
ceiling amount for social security.)
Answer:
Discuss the similarities and differences between accounts receivables, notes receivables
and other receivables.
Answer:
What is the purpose of an adjusted trial balance? What type(s) of error does it detect?
What type(s) of error does it not detect?
Answer:
The inventory at April 1, 2012, and the costs charged to Work in Process–Department
B during April for Hawk Company are as follows:
During April, all direct materials are transferred from Department A, the units in
process at April 1 were completed, and of the 10,000 units entering the department, all
were completed except 1,200 units which were 25% completed as to conversion costs.
Inventories are costed by the first-in, first-out method.
Prepare a cost of production report for April.
Answer:
Read each transaction and identify the appropriate journal that it should be recorded in;
1) Owner withdrew supplies
2) Sale made on account
3) Payment to vendor on account
4) Payment received from customer on account
5) Purchases on account
6) Adjusting journal entry for supplies used
7) Owner withdrew cash
8) Company borrows money from bank
9) Record monthly depreciation
10) Close revenue accounts at month end
Answer:
For Garrison Corporation, the working capital at the end of the current year is $10,000
more than the working capital at the end of the preceding year, reported as follows:
Answer:
Discuss internal and external users of accounting information. What areas of accounting
provide them with information? Give an example of the type of report each type of user
might use.
Answer:
On February 13, Epperson Company issue for cash 75,000 shares of no-par common
stock (with a stated value of $125) at $140. On September 9, Epperson issued at par
15,000 share of 1%, $60 par preferred stock at par for cash On November 23, Epperson
issued for cash 8,000 shares of 1%, $60 par preferred stock at $70.
Answer:
List the 4 most common special journals used in accounting and describe the
transaction recorded in each journal.
Answer:
A summary of cash flows for Lopez Wedding Planning for the year ended December
31, 2011 is shown below.
Prepare a statement of cash flows for Lopez Wedding Planning for the year ended
December 31, 2011.
Answer:
Airflow Company sells a product in a competitive marketplace. Market analysis
indicates that their product would probably sell at $28.00 per unit. Airflow management
desires a profit equal to a 20% rate of return on invested assets of $1,400,000. They
anticipate selling 50,000 units. Their current full cost per unit for the product is $25 per
unit.
(1) What is the amount of profit per unit?
(2) What is the target cost per unit if they meet the market dictated price and
management’s desired profit?
Answer:
A project has estimated annual net cash flows of $90,000. It is estimated to cost
$324,000. Determine the cash payback period.
Answer:
Answer: