Direct labor cost is an example of a period cost.
Answer:
Assets are increased with debits and decreased with credits.
Answer:
The budgeted balance sheet assumes that all operating and financing plans are met.
Answer:
The process of recording a transaction in the journal is called journalizing.
Answer:
Standard costs should always be revised when they differ from actual costs.
Answer:
Since there are few rules to restrict how an organization chooses to arrange its own
internal data for decision making, managerial accounting provides ample opportunity
for creativity and change.
Answer:
Sales reported on the income statement were $372,000. The accounts receivable
balance declined $4,500 over the year. The amount of cash received from customers
was $367,500.
Answer:
An increase in the accounts receivable turnover may be due to an improvement in the
collection of receivables or to a change in the granting of credit and/or in collection
practices.
Answer:
Obligations that depend on past events and that are based on future possible events are
contingent liabilities.
Answer:
Depositing all cash, checks, etc. in a bank and paying with checks is an internal control
procedure over cash.
Answer:
If the standard to produce a given amount of product is 1,000 units of direct materials at
$11 and the actual was 800 units at $12, the direct materials quantity variance was
$1,000 unfavorable.
Answer:
Developing and retaining quality managers is an advantage of decentralization.
Answer:
Since the costs of producing an intermediate product do not change regardless of
whether the intermediate product is sold or processed further, these costs are not
considered in deciding whether to further process a product.
Answer:
When a new partner is admitted to a partnership, bonuses attributable to either the old
partnership or to the incoming partner may be recognized in accordance with the
agreement among the partners.
Answer:
Interest payments on 12% bonds with a face value of $20,000 and interest paid
semiannually would be $2,400 every 6 months.
Answer:
If factory overhead applied exceeds the actual costs, overhead is said to be
underapplied.
Answer:
The anticipated purchase of a fixed asset for $400,000, with a useful life of 5 years and
no residual value, is expected to yield total net income of $200,000 for the 5 years. The
expected average rate of return on investment is 50%.
Answer:
The buyer determines how much to pay for bonds by computing the present value of
future cash receipts using the contract rate of interest.
Answer:
After all noncash assets have been converted to cash and all liabilities paid, A, B, and C
have capital balances of $10,000 (debit), $5,000 (debit), and $25,000 (credit). The cash
available for distribution to the partners is $10,000.
Answer:
Under a periodic inventory system, the merchandise on hand at the end of the year is
determined by a physical count of the inventory.
Answer:
When a large quantity of merchandise is purchased, a reduction allowed on the sale
price is called a trade discount.
Answer:
Senior executives cannot be criminally prosecuted for the wrong doings they commit on
behalf of the companies where they work.
Answer:
The par value of common stock must always be equal to its market value on the date the
stock is issued.
Answer:
The worksheet and the financial statements both require dollar signs.
Answer:
After the account balances have been extended from the Adjusted Trial Balance
columns on the work sheet, the difference between the initial totals of the Balance Sheet
debit and credit columns is Net Income or Net Loss.
Answer:
A manager in a cost center also has responsibility and authority over the revenues and
the costs.
Answer:
The objectives of budgeting are (1) establishing specific goals for future operations, (2)
executing plans to achieve the goals, and (3) periodically comparing actual results with
these goals.
Answer:
When old equipment is traded in for a new equipment, the difference between the list
price and the trade in allowance is called boot.
Answer:
It is beneficial for divisions in a company to negotiate a transfer price when the
supplying division has unused capacity in its plant.
Answer:
A company realizes that the last two day’s revenue for the month was billed but not
recorded. The adjusting entry on December 31 is debit Accounts Receivable and credit
Fees Earned.
Answer:
If the dividend amount of preferred stock, $50 par value, is quoted as 8%, then the
dividends per share would be $4.
Answer:
On June 1, $50,000 of treasury bonds were purchased between interest dates. The
broker commission was $500. The bonds pay interest at 12%, which is paid
semiannually on January 1 and July 1. What is the total cost to be debited to the
Investment – Treasury Bonds account?
A.$50,000
B.$50,500
C.$49,500
D.$53,000
Answer:
If $1,000,000 of 8% bonds are issued at 103 1/2, the amount of cash received from the
sale is
A.$1,080,000
B.$965,000
C.$1,000,000
D.$1,035,000
Answer:
What effect will this adjustment have on the accounting records?
A.Increase net income
B.Increase revenues reported for the period
C.Decrease liabilities
D.All of these are true.
Answer:
Which of the following below increases cash?
A.depreciation expense
B.acquisition of treasury stock
C.borrowing money by issuing a six-month note
D.the declaration of a cash dividend
Answer:
The benefits of comparing actual performance of the operations against planned goals
include all of the following except:
A.providing prompt feedback to employees about their performance relative to the goal
B.preventing unplanned expenditures
C.helping to establish spending priorities
D.determining how managers are performing against prior years’ actual operating
results
Answer:
The posting references in the following purchases journal are indicated by letters.
Identify each posting reference [(a) through (i)] as representing (1) a posting to a
general ledger account, (2) a posting to a subsidiary ledger account, or (3) that no
posting is required.
Answer:
Using the FIFO method, the cost of goods completed and transferred out during July
was (use average cost per unit rounded to four decimal places in computations)
A.$227,270
B.$225,060
C.$236,905
D.$228,200
Answer:
If the expected sales volume for the current period is 8,000 units, the desired ending
inventory is 1,400 units, and the beginning inventory is 1,200 units, the number of units
set forth in the production budget, representing total production for the current period,
is:
A.10,600
B. 8,200
C. 66,000
D. 6,800
Answer:
If the effect of the credit portion of an adjusting entry is to increase the balance of a
liability account, which of the following describes the effect of the debit portion of the
entry?
A.increases the balance of a contra asset account
B.increases the balance of an asset account
C.decreases the balance of an owner’s equity account
D.increases the balance of an expense account
Answer:
Nuthatch Corporation began its operations on September 1 of the current year.
Budgeted sales for the first three months of business are $260,000, $375,000, and
$400,000, respectively, for September, October, and November. The company expects
to sell 30% of its merchandise for cash. Of sales on account, 80% are expected to be
collected in the month of the sale and 20% in the month following the sale.
The cash collections in October from accounts receivable are:
A.$246,400
B.$262,500
C.$210,000
D.$294,500
Answer:
Debts owed by a business are referred to as
A.accounts receivables
B.expenses
C.owner’s equity
D.liabilities
Answer:
Which of the following is an example of a factory overhead cost?
A.Repair and maintenance cost on the administrative building
B.Factory heating and lighting cost
C.Insurance premiums on salespersons’ automobiles
D.President’s salary
Answer:
A credit may signify a
A.decrease in assets
B.decrease in liabilities
C.decrease in capital
D.decrease in revenue
Answer:
What cost concept used in applying the cost-plus approach to product pricing covers
selling expenses, administrative expenses, and desired profit in the “markup”?
A.Total cost concept
B.Product cost concept
C.Variable cost concept
D.Sunk cost concept
Answer:
Which of the following is not a prime cost?
A.Supervisor’s wages
B.Direct labor wages
C.Machine operator wages
D.Assembly line wages
Answer:
Which one of the following would not be considered an advantage of the corporate
form of organization?
A.Government regulation
B.Separate legal existence
C.Continuous life
D.Limited liability of stockholders
Answer:
The use of standards for nonmanufacturing expenses is:
A.not as common as it is for manufacturing costs
B.as common as it is for manufacturing costs
C.not useful
D.impossible
Answer:
Which of the following costs are NOT included in finished goods inventory?
A.Direct labor
B.Factory overhead
C.Company president’s salary
D.Direct materials
Answer:
The accounting equation may be expressed as
A.Assets = Equities – Liabilities
B.Assets + Liabilities = Owner’s Equity
C.Assets = Revenues less Liabilities
D.Assets – Liabilities = Owner’s Equity
Answer:
Indirect costs incurred in a manufacturing environment that cannot be traced directly to
a product are treated as:
A.period costs and expensed when incurred
B.product costs and expensed when the goods are sold
C.product costs and expenses when incurred
D.period costs and expensed when the goods are sold
Answer:
A summary of the time tickets for August follows:
Present the journal entries to record (a) the labor cost incurred and (b) the application of
factory overhead to production for August. The factory overhead rate is 70% of direct
labor cost.
Answer:
A chart of accounts is
A.the same as a balance sheet
B.usually a listing of accounts in alphabetical order
C.usually a listing of accounts in financial statement order
D.used in place of a ledger
Answer:
Given the following costs and activities for Downing Company electrical costs, use the
high-low method to calculate Downing’s variable electrical costs per machine hour.
A.$2.08
B.$6.00
C.$0.60
D.$1.20
Answer:
The Zoe Corporation has the following information for the month March. Determine
the (a) cost of goods manufactured, and (b) cost of goods sold.
Answer:
Which of the following is an example of a prepaid expense?
A.Supplies
B.Accounts Receivable
C.Unearned Subscriptions
D.Unearned Fees
Answer:
Motel Corporation is analyzing a capital expenditure that will involve a cash outlay of
$208,240. Estimated cash flows are expected to be $40,000 annually for seven years.
The present value factors for an annuity of $1 for 7 years at interest of 6%, 8%, 10%,
and 12% are 5.582, 5.206, 4.868, and 4.564, respectively. The internal rate of return for
this investment is:
A.10%
B.6%
C.12%
D.8%
Answer:
For each of the following errors, considered individually, indicate whether the error
would cause the trial balance totals to be unequal. If the error would cause the trial
balance total to be unequal, indicate whether the debit or credit total is higher and by
how much.
A. Payment of a cash withdrawal of $6,800 was journalized and posted as a debit of
$8,600 to Salaries Expense and a credit of $8,600 to Cash.
B. A fee of $9,780 earned was debited to Accounts Receivable for $7,980 and credited
to Fees Earned for $9,780.
C. A payment of $3,000 to a creditor was posted as a credit of $3,000 to Accounts
Payable and a credit of $3,000 to Cash.
Answer:
A company is preparing its their Cash Budget. The following data has been provided for
cash receipts and payments.
The company’s cash balance at January 1st is $290,000. This company desires a
minimum cash balance of $340,000.
What is the amount of excess cash or deficiency of cash (after considering the
minimum cash balance required) for March?
A.$214,200 excess
B.$15,800 excess
C.$60,000 deficiency
D.$25,300 excess
Answer:
Prepaid insurance is reported on the balance sheet as a
A.current asset
B.fixed asset
C.current liability
D.long-term liability
Answer:
Dotterel Corporation uses the variable cost concept of product pricing. Below is cost
information for the production and sale of 35,000 units of its sole product. Dotterel
desires a profit equal to a 11.2% rate of return on invested assets of $350,000.
The unit selling price for the company’s product is:
A.$16.32
B.$13.44
C.$12.10
D.$13.72
Answer:
Which type of accountant typically practices as an individual or as a member of a
public accounting firm?
A.Certified Public Accountant
B.Certified Payroll Professional
C.Certified Internal Auditor
D.Certified Management Accountant
Answer:
For each of the following, identify whether it would be disclosed as an operating (O),
financing (F), or investing (I) activity on the statement of cash flows under the indirect
method.
a. Purchased buildings
b. Sold Patents
c. Net income
d. Issued Common Stock
e. Paid cash dividends
f. Depreciation expense
Answer:
On August 1, Jones Corporation’s packaging department had Work in Process inventory
of 8,000 units that were 75% complete with respect to materials and 30% complete with
respect to conversion costs. The cost of these units was $99,525 ($62,000 transferred-in
from previous departments, $28,775 in materials, and $8,750 in labor and overhead).
During August, 125,000 units were transferred into the department. These units had
accumulated costs in previous departments of $1,418,560. The packaging department
incurred costs of $799,225 for materials and $498,010 for conversion costs in August
and transferred 131,000 units out of the department. The 2,000 units remaining in
ending inventory are 50% complete with respect to materials and 20% complete with
respect to conversion costs. Jones Corporation uses the average cost method to cost its
inventories.
Required
a. Calculate the cost per equivalent unit for transferred-in costs, materials, and
conversion costs.
b. Calculate the cost of the units transferred out of the department.
c. Calculate the cost of the ending inventory.
Answer:
A firm operated at 80% of capacity for the past year, during which fixed costs were
$210,000, variable costs were 70% of sales, and sales were $1,000,000. Operating
profit was:
A.$90,000
B.$210,000
C.$590,000
D.$490,000
Answer:
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
Answer:
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 expense accounts at the end of the period.
Answer:
Snipe Company has been purchasing a component, Part Q, for $19.20 a unit. Snipe is
currently operating at 70% of capacity and no significant increase in production is
anticipated in the near future. The cost of manufacturing a unit of Part Q, determined by
the absorption costing method, is estimated as follows:
Prepare a differential analysis report, dated March 12 of the current year, on the
decision to make or buy Part Q.
Answer:
Match the value to the appropriate account. For the year ended 2012 ABC had the
following transactions:
– issued 10,000 shares of $2.00 par value common stock for $12.00 per share
– issued 3,000 shares of $50 par value 6% preferred stock for $70 per share
– purchased 1000 shares of previously issued common stock for $15.00 per share
-reported net income of $200,000
– declared and paid a total dividend of $40,000
Assume that retained earnings had a beginning balance of $75,000.
Answer:
On May 1, 2015, Chase Inc. purchases $60,000 of 10-year, 6% Manus Corporation
bonds dated March 1, 2015 at 100 plus accrued interest. What entry would Chase record
when purchasing the bonds?
Answer:
The following is the adjusted trial balance for Nadia Company.
Prepare an Income Statement, Balance Sheet, and Statement of Owner’s Equity. Assume
that the capital account started with a beginning balance of $10,000.
Answer:
Based upon the following data estimate the cost of ending merchandise inventory:
Answer:
Sabas Company has 40,000 shares of $100 par, 1% preferred stock and 100,000 shares
of $50 par common stock. The following amounts were distributed as dividends:
Determine the dividends per share for preferred and common stock for each year.
Answer:
Racer Industries has fixed costs of $900,000. Selling price per unit is $250 and variable
cost per unit is $130.
a. How many units must Racer sell in order to break even?
b. How many units must Racer sell in order to earn a profit of $480,000?
c. A new employee suggests that Racer Industries sponsor a company 10-K as a form of
advertising. The cost to sponsor the event is $7,200. How many more units must be sold
to cover this cost?
Answer:
A business pays bi-weekly salaries of $20,000 every other Friday for a ten-day period
ending on that day. The last pay day of December is Friday, December 27. Assuming
the next pay period begins on Monday, December 30, journalize the adjusting entry
necessary at the end of the fiscal period (December 31).
Answer:
Maxim Technologies projected sales of 35,000 computers for 2012. The estimated
January 1, 2012, inventory is 3,000 units, and the desired December 31, 2012, inventory
is 9,000 units. What is the budgeted production (in units) for 2012?
Answer:
The following are inputs and outputs to the help desk.
Operator training
Number of calls per day
Maintenance of computer equipment
Number of operators
Number of complaints
Identify whether each is an input or an output to the help desk.
Answer:
Balances of the current asset and current liability accounts at the end and beginning of
the year are as follows:
Use the direct method to prepare the cash flows from operating activities section of a
statement of cash flows.
Answer:
The following information was extracted from the Stone Company’s records.
Gross Sales $232,566
Gross Profit $87,990
Sales Discounts $1,125 (= 1/2 % of Net Sales)
Total Operating Expenses $88, 440
Selling Expenses $33, 560
Complete the following:
Answer:
Morgan Olsen owns and operates Crystal Pool Service Company. On January 1, 2014,
Morgan Olsen, Capital had a balance of $252,000. During the year Morgan invested an
additional $32,000 and withdrew $52,400. For the year ended December 31, 2014
Crystal Pool Service Company reported a net income of $73,200. Prepare a Statement
of Owner’s Equity for the year ended December 31,
Answer:
Match each of the following terms associated with notes receivable with the best
description of that term.
Answer:
Finewood Cabinet Manufacturers uses flexible budgets that are based on the following
manufacturing data for the month of July:
Prepare a flexible budget for Finewood based on production of 10,000, 15,000, and
20,000 units.
Answer:
Match the following stockholder’s equity concepts to the best answer.
Answer:
Complete the following data taken from the condensed income statements for
merchandising Companies A, B, & C.
Answer: