1) Most large companies will use only one inventory costing methods for all of its
different segments.
2) When a new partner is admitted by making an investment in the partnership, the old
partners’ capital accounts are always credited.
3) By using the rate of return on investment as a divisional performance measure,
divisional managers will always be motivated to invest in proposals which will increase
the overall rate of return for the company.
4) The buyer determines how much to pay for bonds by computing the present value of
future cash receipts using the contract rate of interest.
5) The accounting rate of return method of analyzing capital budgeting decisions
measures the average rate of return from using the asset over its entire life.
6) If the costs for direct materials, direct labor, and factory overhead were $277,300,
$52,600, and $61,000, respectively, for 14,000 equivalent units of production, the total
conversion cost was $390,900.
7) Three measures of investment center performance are income from operations, rate
of return on investment, and residual income.
8) When using the estimate based on sales method, the entry to record uncollectible
accounts expense includes a credit to the Accounts Receivable account.
9) A prior period adjustment should be reported as an adjustment to the retained
earnings balance at the beginning of the period in which the adjustment was made.
10) The cost of a manufactured product generally consists of direct materials cost,
direct labor cost, and factory overhead cost.
11) Zero-coupon bonds do not provide for interest payments.
12) Hill Co. can further process Product O to produce Product P. Product O is currently
selling for $60 per pound and costs $42 per pound to produce. Product P would sell for
$82 per pound and would require an additional cost of $13 per pound to produce.
The differential cost of producing Product P is $13 per pound.
13) Expenditures that increase operating efficiency or capacity for the remaining useful
life of a fixed asset are betterments.
14) The direct labor costs and factory overhead costs incurred by a production
department are referred to as conversion costs.
15) The depreciable cost of a building is the same as its acquisition cost.
16) All nine transactions for Dalton Survey Company for September, the first month of
operations, are recorded in the following T accounts:
Indicate the following for each debit and each credit:
Present your answers in the following form:
17) The following selected account balances appeared on the financial statements of the
Washington Company:
The Washington Company uses the direct method to calculate net cash flow from
operating activities.
Cash collections from customers are
A.$56,000
B.$52,000
C.$60,000
D.$45,000
18) Prepare the journal entries for the following transactions for Batson Co.
(a) Batson Co. purchased 1,200 shares of the total of 100,000 outstanding shares of
Michael Corp. stock for $20.75 per share plus a $70 commission.
(b) Michaels total earnings for the period are $84,000.
(c) Michael paid a total of $40,000 in cash dividends to shareholders of record.
19) Given the following cost data, what type of cost is shown?
A.mixed cost
B.variable cost
C.fixed cost
D.none of the above
20) All of the following below are needed for the calculation of straight-line
depreciation except
A.cost
B.residual value
C.estimated life
D.units produced
21) Held-to-Maturity securities
A.are reported at their fair market value on the balance sheet date
B.include both stocks and bonds
C.are primarily purchased to earn interest revenue
D.all of the above
22) If Department K had 2,500 units, 45% completed, in process at the beginning of the
period, 15,000 units were completed during the period, and 1,200 units were 40%
completed at the end of the period, what was the number of equivalent units of
production for the period for conversion if the first-in, first-out method is used to cost
inventories? Assume the completion percentage applies to both direct materials and
conversion cost.
A.16,855
B.16,605
C.13,460
D.14,355
23) Which of the following is an example of a variable component of a payroll system?
A.hours worked
B.medicare tax rate
C.rate of pay
D.social security number
24) The two most widely used methods for determining the cost of inventory are
A.FIFO and LIFO
B.FIFO and average
C.LIFO and average
D.gross profit and average
25) A cash purchase of supplies should be recorded in the
A.Cash Receipts journal
B.Purchase journal
C.General journal
D.Cash Payments journal
26) Match each of the following terms with the appropriate definition below.
1>Expense account for recording shipping costs paid by the seller. A. Purchases
2>Account used to record shipping cost of merchandise by the buyer under a periodic
inventory system. B. Merchandise Inventory
3>Discounts off the list price offered by wholesalers. C. Sales Discounts
4>Account where returned merchandise or price adjustments are recorded by the buyer
under the periodic inventory system. D. Delivery Expense
5>Early payment discount offered to customers by the seller. E. Trade Discount
6>Account where returned merchandise or price adjustments are recorded by the seller.
F. Purchase Returns and Allowances
7>Account used to record merchandise purchased under a periodic inventory system. G.
Freight In
8>Account used to record merchandise purchased under a perpetual inventory system.
H. Sales Returns and Allowances
27) Jamison Company developed the following reconciling information in preparing its
June bank reconciliation:
Using the above information, determine the cash balance per books (before
adjustments) for the Jamison Company.
A.$8,065
B.$10,565
C.$15,065
D.$6,435
28) Which of the following is not true about why a service firm will use the job order
costing system?
A.to help control costs
B.to determine client billing
C.to determine department costs within the firm
D.to determine profit
29) Accounts are classified in the ledger
A.chronologically
B.alphabetically
C.in accordance with their appearance in the financial statements
D.so that accounts used most often are listed first
30) The following information has been condensed from the December 31 balance
sheets of Hanson Co.:
(a) Determine the ratio of fixed assets to long-term liabilities for 2012 and 2011.
(b) Determine the ratio of liabilities to stockholders’ equity for 2012 and 2011.
(c) Comment on the year-to-year changes for both ratios.
Round your answers to two decimal place.
31) In which of the following types of accounts are decreases recorded by debits?
A.assets
B.revenues
C.expenses
D.drawing
32) The following information is available for Carter Corporation for 2012:
1) Materials inventory decreased $4,000 during 2012.
2) Materials inventory on December 31, 2012, was 50% of materials inventory on
January 1, 2012.
3) Beginning work in process inventory was $145,000.
4) Ending finished goods inventory was $65,000.
5) Purchases of direct materials were $154,700.
6) Direct materials used were 2.5 times the cost of direct labor.
7) Total manufacturing costs incurred were $246,400, 80% of cost of goods
manufactured and $156,000 less than cost of goods sold.
Compute:
a) finished goods inventory on January 1, 2012
b) work in process inventory on December 31, 2012
c) direct labor incurred
d) factory overhead incurred
e) direct materials used
33) Denzel Jones owns and operates Crystal Cleaning Company. Recently, Denzel
withdrew $10,000 from Crystal Cleaning, and he contributed $6,000, in his name, to
Habitat for Humanity. The contribution of the $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
34) The account type and normal balance of Unearned Revenue is
A.revenue, credit
B.expense, debit
C.liability, credit
D.asset, debit
35) The Keith Company reports the following data.
Determine Keith Companys operating leverage.
36) If the two totals of a trial balance are not equal, it could be due to
A.failure to record a transaction
B.recording the same erroneous amount for both the debit and the credit parts of a
transaction
C.an error in determining the account balances, such as a balance being incorrectly
computed
D.recording the same transaction more than once
37) If Department H had 600 units, 60% completed, in process at the beginning of the
period, 6,000 units were completed during the period, and 700 units were 30%
completed at the end of the period, what was the number of equivalent units of
production for conversion costs for the period, if the first-in, first-out method is used to
cost inventories?
A.7,300
B.5,640
C.6,700
D.5,850
38) 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.
1>100,000 A. Preferred Stock
2>235,000 B. Additional Paid in Capital – Common Stock
3>330,000 C. Additional Paid in Capital – Preferred Stock
4>15,000 D. Common Stock
5>60,000 E. Retained Earnings
6>$150,000 F. Total Paid in Capital
7>20,000 G. Total Stockholders Equity
8>550,000 H. Treasury Stock
39) When the allowance method is used to account for uncollectible accounts, Bad
Debts Expense is debited when
A.a customer’s account becomes past due
B.an account becomes bad and is written off
C.a sale is made
D.management estimates the amount of uncollectibles
40) If fixed costs are $600,000 and the unit contribution margin is $40, what is the
break-even point if fixed costs are increased by $90,000?
A.17,250
B.15,000
C.8,333
D.9,667
41) The total manufacturing cost variance consists of:
A.Direct materials price variance, direct labor cost variance, and fixed factory overhead
volume variance
B.Direct materials cost variance, direct labor rate variance, and factory overhead cost
variance
C.Direct materials cost variance, direct labor cost variance, variable factory overhead
controllable variance
D.Direct materials cost variance, direct labor cost variance, factory overhead cost
variance
42) Thompson Company developed the following reconciling information in preparing
its October bank reconciliation:
Using the above information, determine the cash balance per books (before
adjustments) for the Thompson Company.
A.$11,050
B.$19,450
C.$15,950
D.$11,150
43) Mangrill, Inc. reported net income for the year ending December 31, 2012 of
$483,500. Dividends paid during the year totaled $42,900. The company holds
available-for-sale securities with an original cost of $162,000 and a fair value of
$171,000 at the end of the year. They also hold trading securities with an original cost
of $150,000 and a fair value of $147,000. Retained Earnings on January 1, 2012 was
$736,400 and Accumulated Other Comprehensive Income on January 1, 2012 was
$16,200.
Required:
Calculate the following balances to be reported in the financial statements dated
December 31, 2012.
(1) Valuation Allowance for Available-for-Sale securities
(2) Comprehensive Income
(3) Retained Earnings
(4) Accumulated Other Comprehensive Income
44) Given the following data, prepare an amortization schedule (use the straight line
method)
1/1/10 – issued $800,000, 9%, 3 year bonds, interest paid annually on 12/31 to yield 8%
Use the following format (round to nearest dollar, may have small rounding difference);
Date Cash paid Int. expense Amortization Bond carry value
45) The end-of-period spreadsheet (work sheet) for the current year for Jamal Company
shows Balance Sheet columns with a debit total of $614,210 and a credit total of
$630,430. This is before the amount for net income or net loss has been included. In
preparing the income statement from work sheet, what is the amount of net income or
net loss?
46) Sinclair Companys 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.
Required:
Reconcile a net income of $92,000 to net cash flow from operating activities.
47) 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.
48) Based upon the following data estimate the cost of ending merchandise inventory:
49) Prepare the journal entry for materials and labor, based on the following:
