1) Closing entries are entered directly on to the work sheet.
2) The balance in a bond discount account should be reported on the balance sheet as a
deduction from the related bonds payable.
3) Zero-coupon bonds do not provide for interest payments.
4) In using the variable cost concept of applying the cost-plus approach to product
pricing, fixed manufacturing costs and both fixed and variable selling and
administrative expenses must be covered by the markup.
5) Push manufacturing is also referred to as make-to-order processing.
6) Fords Expedition sport utility vehicle is its most profitable model. Therefore, Ford
need not promote its Expedition model anymore.
7) In a just-in-time (JIT) system, direct labor is included in conversion costs.
8) Principle of exceptions allows managers to focus on correcting variances between
standard costs and actual costs.
9) Budgets are prepared in the Accounting Department and monitored by various
department managers.
10) Under the just-in-time production concept, employees are better utilized if they are
experts in one operation rather than wasting time training them to learn various
production operations.
11) For a period during which the quantity of inventory at the end was larger than that
at the beginning, income from operations reported under variable costing will be larger
than income from operations reported under absorption costing.
12) In a process costing system, each process will have a work in process inventory
account.
13) If employees are given bonuses for exceeding normal standards, the standards may
be very effective in motivating employees.
14) Deferrals are recorded transactions that delay the recognition of an expense or
revenue.
15) Bonds payable would be listed at their carrying value on the balance sheet.
16) After analyzing transactions, the next step would be to post the transactions in the
ledger.
17) 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.
18) An unfavorable volume variance may be due to a failure of supervisors to maintain
an even flow of work.
19) The abbreviation FOB stands for Free On Board.
20) Champion Company purchased and installed carpet in its new general offices on
March 30 for a total cost of $18,000. The carpet is estimated to have a 15-year useful
life and no residual value.
21) Harold Corporation just started business in January 2012. They had no beginning
inventories. During 2012 they manufactured 12,000 units of product, and sold 10,000
units. The selling price of each unit was $20. Variable manufacturing costs were $4 per
unit, and variable selling and administrative costs were $2 per unit. Fixed
manufacturing costs were $24,000 and fixed selling and administrative costs were
$6,000.
What would be the Harold Corporations Net income for 2012 using variable costing?
A.$114,000
B.$110,000
C.$4,000
D.$106,000
22) The receivable that is usually evidenced by a formal instrument of credit is a(n)
A.trade receivable
B.note receivable
C.accounts receivable
D.income tax receivable
23) If total assets decreased by $88,000 during a period of time and stockholders equity
increased by $71,000 during the same period, then the amount and direction (increase
or decrease) of the period’s change in total liabilities is
A.$17,000 increase
B.$88,000 decrease
C.$159,000 increase
D.$159,000 decrease
24) Classify the following costs as direct, indirect, or neither:
a) indirect labor incurred
b) factory equipment depreciation
c) indirect materials used
d) office equipment depreciation
e) direct materials used
f) insurance expired on administrative facilities
g) direct labor incurred
h) administrative office salaries
i) salespersons salaries
j) utilities on factory building
k) utilities on administrative facilities
25) Two features of internal control are presented in the following sections. Each is
followed by a list of four irregularities that occurred in processing data. Identify the one
irregularity from each list that would be discovered or prevented by the feature of
internal control described.
26) Costs which are reported on the income statement as part of cost of goods sold are
referred to as:
A.administrative expenses
B.period costs
C.cost of goods manufactured
D.operating expenses
27) Which of the following statements is true regarding fixed and variable costs?
A.Both costs are constant when considered on a per unit basis
B.Both costs are constant when considered on a total basis
C.Fixed costs are constant in total, and variable costs are constant per unit
D.Variable costs are constant in total, and fixed costs vary in total
28) Baxter Company reported a net loss of $13,000 for the year ended December 31,
2010. During the year, accounts receivable decreased by $5,000, merchandise inventory
increased by $8,000, accounts payable increased by $10,000, and depreciation expense
of $4,000 was recorded. During 2010, operating activities
A.provided net cash of $8,000
B.provided net cash of $2,000
C.used net cash of $8,000
D.used net cash of $2,000
29) On December 31, Strike Company has decided to discard 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 following will be
included in the entry to record the disposal.
A.Accumulated Depreciation Dr. $310,000
B.Loss on Disposal of Asset Dr. $260,000
C.Equipment Cr. $310,000
D.Gain on Disposal of Asset Cr. $50,000
30) When the amount of use of a fixed asset varies from year to year, the method of
determining depreciation expense that best matches allocation of cost with revenue is
A.declining-balance
B.straight-line
C.units-of-production
D.MACRS
31) Which one of the following would not cause a bank to debit a company’s account?
A.Bank service charge
B.Collection of a note receivable
C.Checks marked NSF
D.Wiring of funds to other locations
32) Merchandise is sold for cash. The selling price of the merchandise is $5,000 and the
sale is subject to a 7% state sales tax. The journal entry to record the sale would include
A.A credit to Cash for $5,000
B.A credit to Sales for $5,350
C.A credit to Sales Tax Payable for $350
D.None of these answers are correct
33) Which of the following entries records the cash sale of capital stock to
stockholders?
A.debit Capital Stock; credit Cash
B.debit Cash; credit Capital Stock
C.debit Cash; credit Revenue
D.debit Revenue; credit Cash
34) Kristins Boutiques has identified the following items for possible inclusion in its
December 31, 2010 inventory. Which of the following would not be included in the
year end inventory?
A.Merchandise purchased FOB shipping point was picked up by the freight company
but had still not arrived at Kristins Boutique as of December 31, 2010
B.Kristin has in its warehouse merchandise on consignment from Abby Co
C.Kristin has sent merchandise to various retailers on a consignment basis
D.Kristin has merchandise on hand which has been returned by customers because of
wrong size
35) 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
f) materials inventory on January 1, 2012
g) materials inventory on December 31, 2012
Note to students: The answers are not necessarily calculated in alphabetical order.
36) The process of initially recording a business transaction is called
A.closing
B.posting
C.journalizing
D.balancing
37) Under variable costing, which of the following costs would not be included in
finished goods inventory?
A.direct labor cost
B.direct materials cost
C.variable factory overhead cost
D.fixed factory overhead cost
38) A bank statement
A.is a credit reference letter written by the company’s bank
B.lets a company know the financial position of the bank as of a certain date
C.is a bill from the bank for services rendered
D.shows the activity that increased or decreased the company’s account balance
39) Gilberts expects its September sales to be 20% higher than its August sales of
$150,000. Purchases were $100,000 in August and are expected to be $120,000 in
September. All sales are on credit and are collected as follows: 30% in the month of the
sale and 70% in the following month. Merchandise purchases are paid as follows: 25%
in the month of purchase and 75% in the following month. The beginning cash balance
on September 1 is $7,500. The ending balance on September 30 would be:
A.$61,500
B.$75,000
C.$72,300
D.$71,500
40) Notes or accounts receivables that result from sales transactions are often called
A.non-trade receivables
B.trade receivables
C.merchandise receivables
D.sales receivables
41) A corporation has 50,000 shares of $25 par value stock outstanding that has a
current market value of $120. If the corporation issues a 5-for-1 stock split, the par
value of the stock after the split will be:
A.$5
B.$60
C.$25
D.$24
42) Mocha Company manufactures a single product by a continuous process, involving
three production departments. The records indicate that direct materials, direct labor,
and applied factory overhead for Department 1 were $100,000, $125,000, and
$150,000, respectively. The records further indicate that direct materials, direct labor,
and applied factory overhead for Department 2 were $50,000, $60,000, and $70,000,
respectively. Department 2 has transferred-in costs of $390,000 for the current period.
In addition, work in process at the beginning of the period for Department 2 totaled
$75,000, and work in process at the end of the period totaled $90,000. The journal entry
to record the flow of costs into Department 3 during the period is:
A.Work in Process–Department 3375,000
Work in Process–Department 2375,000
B.Work in Process–Department 3570,000
Work in Process–Department 2570,000
C.Work in Process–Department 3490,000
Work in Process–Department 2490,000
D.Work in Process–Department 3555,000
Work in Process–Department 2555,000
43) Match each of the following terms with the correct definition below.
1>Shipping terms where the ownership of merchandise passes to the buyer when the
buyer receives the merchandise. A. FOB Destination
2>Statement that includes subtotals for net sales, gross profit and net operating income
in determining net income. B. Inventory Shrinkage
3>Payment arrangements determined by the seller as to when invoices are due and
whether early payment discount is offered. C. Single-Step Income Statement
4>Statement where net income is determined by deducting all expenses from all
revenues. D. Credit terms
5>Losses of inventory due to theft, damage, spoilage, etc. that cause the actual
inventory on hand to be less than that on record. E. Perpetual Inventory system
6>Inventory system that updates the Merchandise Inventory account for every purchase
and sale transaction. F. Periodic Inventory system
7>Shipping terms where the ownership of merchandise passes to the buyer when the
seller delivers the merchandise to the freight carrier. G. Multiple-Step Income
Statement
8>Inventory system that updates the Merchandise Inventory account only at the end of
the accounting period based on a physical count of merchandise on hand. H. FOB
Shipping Point
44) For the current year ending January 31, Harp Company expects fixed costs of
$188,500 and a unit variable cost of $51.50. For the coming year, a new wage contract
will increase the unit variable cost to $55.50. The selling price of $70.00 per unit is
expected to remain the same.
Round your answer to the nearest whole number.
45) Treasury stock should be reported in the financial statements of a corporation as
a(n)
A.investment
B.liability
C.current asset
D.deduction from stockholderss equity
46) The Klamath Corp. produces two products, saws and drills. Three activities are used
in their manufacture. These activities and their associated costs and bases are as
follows:
Requirements:
a) Determine the activity rate for each activity.
b) Determine the overhead cost per unit for each product.
47) A business is considering a cash outlay of $400,000 for the purchase of land, which
it could lease for $40,000 per year. If alternative investments are available which yield a
21% return, the opportunity cost of the purchase of the land is:
A.$84,000
B.$40,000
C.$44,000
D.$8,400
48) On August 1, Kim Company accepted a 90-day note receivable as payment for
services provided to Hsu Company. The terms of the note were $20,000 face value and
6% interest. On October 30, the journal entry to record the collection of the note should
include a
A.credit to Notes Receivable for $20,300
B.debit to Interest Receivable for $300
C.credit to Interest Revenue for $300
D.debit to Notes Receivable for $20,000
49) The assets and liabilities of the company are $128,000 and $84,000, respectively.
Stockholders equity should equal
A.$212,000
B.$44,000
C.$128,000
D.$84,000
50) Which of the following is not a prevention cost?
A.preventive maintenance
B.operator training
C.design engineering
D.testing finished products
51) If sales totaled $800,000 for the year (80,000 units at $10.00 each) and the planned
sales totaled $799,500 (78,000 units at $10.25 each), the effect of the quantity factor on
the change in sales is:
A.$20,500 increase
B.$20,000 decrease
C.$20,500 decrease
D.$20,000 increase
52) The amount of time spent by an employee in the factory is usually recorded on:
A.time tickets
B.job order cost sheets
C.employees’ earnings records
D.statement of owners equity
53) If fixed costs are $46,800, the unit selling price is $42, and the unit variable costs
are $24, what is the break-even sales (unit ) if the variable costs are decreased by $2?
A.2,127
B.1,114
C.2,340
D.1,950
54) On October 17th, Nikle Company purchased a building and a plot of land for
$750,000. The building was valued at $500,000 while the land carried a value of
$250,000. Nikle paid $300,000 down in cash and signed a note payable for the balance.
Prepare the journal entry to record this transaction.
55) On the first day of the fiscal year, a company issues a $800,000, 6%, 5 year bond
that pays semi-annual interest of $24,000 ($800,000 6% 1/2), receiving cash of
$690,960. Journalize the entry to record the first interest payment and the amortization
of the related bond discount using the straight-line method.
56) 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.
Required:
57) Given the following data, prepare an amortization table (use the effective method)
1/1/10 – issue $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 a slight rounding
difference);
58) A double-declining balance rate for calculating depreciation expense is determined
by doubling the straight-line rate. Assuming that an asset has a useful life of 25 years,
determine the rate to be used if using the double-declining balance method.
59) Journalize the six entries to adjust the accounts at December 31. (Hint: One of the
accounts was affected by two different adjusting entries).
60) Bob Johnson is the sole stockholder of Johnsons Carpet Cleaning Service. Bob
purchased a personal automobile for $10,000 cash plus he took loan for $20,000 in his
name. Describe how this transaction is related to the business entity concept.
61) On June 5, Belen Corporation reacquired 3,300 shares of its common stock at $45
per share. On July 15, Belen sold 2,000 of the reacquired shares at $48 per share. On
August 30, Belen sold the remaining shares at $42 per share.
Journalize the transactions of June 5, July 15, and August 30.
