1) MOB Corp. maintains an internet-based general ledger. Overhead is applied on the
basis of direct labor costs. Its bookkeeper accidentally deleted most of the entries that
had been recorded for January. A printout of the general ledger (in T-account form)
showed the following:
DR CR DR CR
m) n) o)
A review of the prior year’s financial statements, the current year’s budget, and
January’s source documents produced the following information:
(1) Accounts Payable is used for raw material purchases only. January purchases were
$49,000.
(2) Factory overhead costs for January were $17,000 none of which is indirect
materials.
(3) The January 1 balance for finished goods inventory was $10,000.
(4) There was a single job in process at January 31 with a cost of $2,000 for direct
materials and $1,500 for direct labor.
(5) Total cost of goods manufactured for January was $90,000.
(6) All direct laborers earn the same rate ($13/hour). During January, 2,500 direct labor
hours were worked.
(7) The predetermined overhead rate is based on direct labor costs. Budgeted (expected)
overhead for the year is $195,000 and budgeted (expected) direct labor is $390,000.
Fill in the missing amounts a through o above in the T-accounts above.
2) Following is a partial process cost summary for Mitchell Manufacturing’s Canning
Department.
The total conversion costs transferred out of the Canning Department should be:
A.$243,040.
B.$242,800.
C.$183,100.
D.$176,150.
E.$196,000.
3) The following selected account balances are taken from a merchandising company’s
records:
(a) Calculate the cash payments made during 2015 for merchandise. Assume all of the
company’s accounts payable balances result from merchandise purchases.
(b) Calculate the cash receipts from customer sales during 2015
(c) Calculate the cash payments for salaries during 2015
4) For product costs associated with a particular product to be reported on the income
statement:
A.The product must be transferred to Finished Goods Inventory.
B.The product must still be in Work in Process Inventory.
C.The product must be sold.
D.The product may be in any of the manufacturer’s inventory accounts.
E.The company must expect to sell the product during the next twelve months.
5) Using the information below for Sundar Company; determine the total
manufacturing costs added during the current year:
A.$98,600.
B.$43,500.
C.$98,000.
D.$42,900.
E.$79,000.
6) Book value per common share is computed by:
A.Multiplying the number of common shares outstanding times the market price per
common share.
B.Dividing total assets by the number of shares outstanding.
C.Dividing stockholders’ equity applicable to common shares by the number of
common shares outstanding.
D.Multiplying the number of common shares outstanding by par value per share.
E.Dividing the number of common shares outstanding by stockholders’ equity
applicable to common shares.
7) A company’s flexible budget for 12,000 units of production showed per unit
contribution margin of $3.00 and fixed costs, $20,000. The operating income expected
if the company produces and sells 18,000 units is:
A.$34,000.
B.$10,000.
C.$18,667.
D.$16,000.
E.$24,000.
8) Southland Company is preparing a cash budget for August. The company has
$17,000 cash at the beginning of August and anticipates $120,800 in cash receipts and
$134,500 in cash disbursements during August. Southland Company wants to maintain
a minimum cash balance of $10,000. To maintain the minimum cash balance of
$10,000, the company must borrow:
A.$0.
B.$10,000.
C.$6,700.
D.$7,000.
E.$27,700.
9) Which of the following accounts showing a balance on the post-closing trial balance
indicate an error?
A.Land.
B.S. Stills, Withdrawal.
C.Accounts Payable.
D.Unearned Revenue.
E.Prepaid Insurance.
10) The amount of federal income taxes withheld from an employee’s paycheck is
determined by:
A.Current earnings for the pay period and number of withholding allowances the
employee claims.
B.The employer’s merit rating.
C.The amount of social security taxes withheld.
D.Multiplying the gross pay by 6.2%.
E.Tax tables provided by the state in which the employee works.
11) Natural resources are:
A.Consumable assets such standing timber, mineral deposits, and oil and gas fields.
B.Tangible assets used in the operations of the business.
C.Current assets because they are depleted.
D.Not subject to allocation to expense over their useful lives.
E.Depleted using a straight-line method.
12) The following data concerns a proposed equipment purchase:
Assuming that net cash flows are received evenly throughout the year, the accounting
rate of return is:
A.62.3%.
B.32.0%.
C.15.0%.
D.7.7%.
E.5.0%.
13) On November 1, Casey’s Snowboards signed a $12,000, 90-day, 5% note payable to
cover a past due account payable.
a. What amount of interest expense on this note should Casey’s Snowboards report on
year-end December 31?
b. Prepare Casey’s journal entry to record the issuance of the note payable.
c. Prepare Casey’s adjusting journal entry at the end of the year.
d. Prepare Casey’s journal entry to record the payment of the note on February 1 of the
following year.
14) Cornish Company had the following results of operations for the past year:
A foreign company (whose sales will not affect Cornish’s market) offers to buy 3,000
units at $17.00 per unit. In addition to variable manufacturing costs, selling these units
would increase fixed overhead by $500 and selling and administrative costs by $1,000.
If Cornish accepts the offer, its profits will:
A.Decrease by $4,500.
B.Increase by $4,500.
C.Decrease by $300.
D.Increase by $13,500.
E.Increase by $15,000.
15) Fragmental Co. leased a portion of its store to another company for eight months
beginning on October 1, at a monthly rate of $800. Fragmental collected the entire
$6,400 cash on October 1 and recorded it as unearned revenue. The journal entry made
by Fragmental Co. at year-end on December 31 would be:
A.A debit to Rent Revenue and a credit to Cash for $2,400.
B.A debit to Rent Revenue and a credit to Unearned Rent for $2,400.
C.A debit to Cash and a credit to Rent Revenue for $6,400.
D.A debit to Unearned Rent and a credit to Rent Earned for $2,400.
E.A debit to Unearned Rent and a credit to Rent Earned for $4,000.
16) At the end of the day, the cash register’s record shows $1,050, but the count of cash
in the cash register is $1,055. The correct entry to record the cash sales is
A.Debit Cash $1,055; credit Sales $1,055.
B.Debit Cash $1,055; credit Cash Over and Short $5; credit Sales $1,050.
C.Debit Cash $1,050; credit Sales $1050.
D.Debit Cash $1,050; debit Cash Over and Short $5; credit Sales $1,055.
E.Debit Cash Over and Short $5, credit Sales $5.
17) Gaston owns equipment that cost $90,500 with accumulated depreciation of
$61,000. Gaston asks $30,000 for the equipment but sells the equipment for $26,000.
Which of the following would not be part of the journal entry to record the disposal of
the equipment?
A.Debit Accumulated Depreciation $61,000.
B.Credit Equipment $90,500.
C.Debit Loss on Disposal of Equipment $3,500.
D.Credit Gain on Disposal of Equipment $3,500.
E.Debit Cash $6,000.
18) A company’s total liabilities divided by its total stockholders’ equity is called the:
A.Equity ratio.
B.Return on total assets ratio.
C.Pledged assets to secured liabilities ratio.
D.Debt-to-equity ratio.
E.Times secured liabilities earned ratio.
19) A company sells its product subject to a warranty that covers the cost of parts for
repairs during the six months after the date of sale. Warranty costs are estimated to be
5% of sales. During the month of July, the company performed warranty work and used
$11,000 of parts to perform the warranty work. Sales for July were $450,000.
1> Record the warranty expense for the month of July.
2> Record the costs of the warranty work completed in June.
3> If the Estimated Warranty Liability account had a credit balance of $10,000 on May
31, what is the account balance at June 30?
20) A company has 90 employees and a weekly payroll of $117,000. The FICA€social
security tax withheld totals $7,254 and the FICA€Medicare tax withheld totals
$1,696.50. The total withholding for federal income tax is $16,500. Prepare the journal
entry to accrue this week’s salaries expense and withholdings.
21) A company charged the following amounts of overhead to jobs during the current
year: $12,000 to jobs still in process, $42,000 to jobs completed but not sold, and
$66,000 to jobs finished and sold. At year-end, the company’s Factory Overhead
account has a credit balance of $9,000, which is not a material amount. What entry (if
any) should the company make at year-end related to this overhead balance?
22) The following data are taken from the comparative balance sheets of Grayling
Company. Compute and interpret its accounts receivable turnover for Year 2.
Competitors average a turnover of 7.5. How is the company doing in relation to its
competitors?
23) National Storage Company had sales of $1,000,000, sales discounts of $2,500, sales
returns and allowances of $15,000, and cost of goods sold of $525,000. Calculate
National’s gross profit.
24) Explain how to account for held-to-maturity debt securities at and after acquisition
and how they are reported in the financial statements.
25) A company paid a cash dividend of $0.88 per share during the current year, and
reported 18,000 shares of common stock issued, and 2,000 common shares in treasury
stock during the current year. The year-end market price per share was $27.50.
Calculate the following: (1) total amount of cash dividends paid to common
shareholders, and (2) dividend yield.
26) A company reported net income of $225,000, net sales of $2,500,000, and average
total assets of $2,100,000 for the current year. Calculate this company’s profit margin,
total asset turnover, and return on total assets.