Estimated manufacturing overhead costs were $60,000 and the number of estimated
machine hours was 20,000. Actual overhead costs were $61,000 and the actual number
of machine hours used was 20,500. Based on machine hours, the overhead application
rate per hour is:
A) $3.00.
B) $2.93.
C) $3.10.
D) $3.13.
Hard Candy has a beginning inventory of $2,000. June purchases were $6,000, and
retail sales were $3,000. The store has a normal gross profit of 50%. What is the June
30 estimated ending inventory at cost under the gross profit method?
A) $6,100
B) $6,500
C) $6,700
D) $6,000
Calculate the cost of goods sold under each of the following methods given the
information below about purchases and sales during the year. Assume a periodic
inventory system. Round to four decimal places.
May 1 Beginning inventory 70 @ $25
10 Purchases 90 @ $28
19 Purchases 50 @ $30
May 1-31 Sales 130 units
a) ________ FIFO
b) ________ LIFO
c) ________ Weighted-average
Which of the following, under the indirect method, is not a proper adjustment to net
income to arrive at net cash flow from operations?
A) Adding a decrease in inventory
B) Adding an increase in salaries payable
C) Adding an increase in prepaid expense
D) All are proper adjustments to net income.
Bad Debts Expense is:
A) included in Cost of Goods Sold.
B) considered an expense matched with revenues.
C) listed on the balance sheet.
D) not an operating expense.
Toy Trains Company bought $8,000 of merchandise, terms 2/10, n/30. The company
uses the periodic inventory system and the voucher system. The journal entry to record
the transaction under the net method would be to:
A) debit Purchases $7,840; credit Accounts Payable $7,840.
B) debit Purchases $8,000; credit Vouchers Payable $8,000.
C) debit Purchases $8,000; credit Vouchers Payable $7,840; credit Discounts Lost $160.
D) debit Purchases $7,840; credit Vouchers Payable $7,840.
Julie, a new employee, is not sure of the effect the following unrelated situations would
have on the accuracy of the financial statements. Identify the account(s) that are
affected and if the trial balance would balance.
a. Equipment was purchased for $1,000 cash. The debit was recorded properly, but the
credit was omitted.
b. A debit to Cash for $250 was posted as $2,500; the credit was posted correctly.
c. A purchase of supplies on account for $50 was posted as a debit to Supplies and a
credit to Cash.
When the term F.O.B. shipping point is used, title passes:
A) when goods reach the halfway point.
B) when goods reach the destination.
C) when goods are shipped.
D) when the buyer signs for the product.
A $5,500, 10% note dated May 20 for 78 days was discounted on June 23 at 12%. The
number of days in the discount period is:
A) 78 days.
B) 39 days.
C) 44 days.
D) some other number.
When a company sells stock at an amount less then par value, the amount is referred to
as:
A) a discount.
B) a premium.
C) a bonus.
D) Companies cannot sell stock for more than par value.
When a company tracks gross profit by department, the sales journal will:
A) not differ from a company that does not track gross profit by department.
B) have a separate column for accounts receivable for each department.
C) have a separate column for sales for each department.
D) have a column for purchases for each department.
The depreciation method in which an even amount of depreciation expense is taken
each year is called:
A) straight-line method.
B) double declining-balance method.
C) units-of-production method.
D) All of the above are correct.
Assuming no investments were made during the period, the balance of Capital shown
on the worksheet is:
A) beginning capital.
B) ending capital.
C) net income.
D) equal to owner’s withdrawals.
The business bought supplies with cash. To record this:
A) an expense is debited and a liability is credited.
B) an asset is debited and an asset is credited.
C) an asset is debited and a liability is credited.
D) None of these is correct.
An $1,000 check written for supplies was journalized and posted as $200. The entry to
correct this error is:
A) debit Supplies, $800; credit Cash, $800.
B) debit Cash, $800; credit Supplies, $800.
C) debit Supplies, $200; credit Cash, $200.
D) debit Cash, $200; credit Cash, $200.
Home Restoration reports net sales of $60,000. If sales returns and allowances are
$10,000 and sales discounts are $1,500, what are gross sales?
A) $60,000
B) $71,500
C) $68,500
D) $38,500
Of the following accounts, which might appear in the adjusted trial balance, but not in
the post-closing trial balance?
A) Salary Expense
B) Owner’s Capital
C) Accounts Payable
D) Income Summary
Adams Manufacturing has estimated manufacturing overhead at $125,000 and has
estimated direct labor of 10,000 direct labor hours at $10.00 per hour. The overhead rate
per direct labor dollar would be:
A) $0.80.
B) $8.00.
C) $1.25.
D) $7.20.
A cash discount of $24 taken under the net method is recorded in:
A) the check register.
B) the voucher register.
C) the general journal.
D) None of these answers is correct.
What is a proper entry to show the owner making an investment in the company?
A) A credit to Cash and a debit to Capital
B) A debit to Cash and a credit to Capital
C) A debit to Cash and a credit to Revenue
D) A credit to Cash and a debit to Revenue
Sylvan Manufacturing applies overhead based on direct labor hours. At the beginning of
the year, it estimated that overhead costs would be $150,000 and direct labor hours
would be 15,000. The applied overhead rate per direct labor hour is:
A) $7.50.
B) $15.00.
C) $10.00
D) None of the above
Sue’s Jewelry sold 30 necklaces for $25 each to a credit customer. The invoice included
a 6% sales tax and payment terms of 2/10, n/30. In addition, 5 necklaces were returned
prior to payment. The entry to record the return would include:
A) a debit to Sales Returns and Allowances for $132.50.
B) a debit to Sales Returns and Allowances for $125.00.
C) a credit to Sales Tax Payable for $7.50.
D) a debit to Accounts Receivable for $132.50.
A credit to an asset account was posted to an expense account. This would cause:
A) assets to be overstated.
B) liabilities to be understated.
C) capital to be understated.
D) expenses to be understated.
Equipment with a cost of $150,000 has an accumulated depreciation of $50,000. What
is the historical cost of the equipment?
A) $150,000
B) $50,000
C) $200,000
D) $100,000
When comparing net cash provided by operating activities using the indirect versus
direct methods:
A) net cash is higher using the indirect method.
B) net cash is lower using indirect method.
C) there is no difference between the two methods.
D) depreciation expense is used in the direct method.
Information to calculate the adjusted cash balance for Sue’s Company is as follows:
A) $2,330
B) $2,430
C) $2,630
D) $2,230
Which of the statements of the rules of debit and credit is true?
A) Decrease Accounts Receivable with a credit and the normal balance is a credit.
B) Increase Accounts Payable with a credit and the normal balance is a credit.
C) Increase Revenue with a debit and the normal balance is a debit.
D) Decrease Cash with a debit and the normal balance is a debit.
Grammy’s Bakery had the following information before the pay period ending June 30:
Assume:
FICA-OASDI applied to the first $117,000 at a rate of 6.2%.
FICA-Medicare applied at a rate of 1.45%.
FUTA applied to the first $7,000 at a rate of 0.8%.
SUTA applied to the first $7,000 at a rate of 5.6%.
State income tax is 3.8%.
Given the above information, what would be the amount applied to Kitchen Salaries
Expense?
A) Debit $12,000
B) Credit $12,000
C) Debit $3,000
D) Credit $3,000
The journal entry debiting Cash and crediting Capital would be a result of a(n):
A) customer payment.
B) expense.
C) investment.
D) revenue.
Administrative Expenses include:
A) Sales – Salaries Expense.
B) Delivery Expense.
C) Advertising Expense.
D) None of the above is correct.