1) According to the cost principle, it is necessary for managers to report an
approximation of an asset’s market value upon purchase.
2) A budget performance report shows budgeted amounts, actual amounts, and
differences between budgeted and actual amounts.
3) Cash flow amounts and their timing should be considered when planning and
analyzing operating activities.
4) Cost accounting systems accumulate costs and then assigns them to products or
services.
5) A department’s direct expenses are usually considered uncontrollable costs.
6) In the absence of a partnership agreement, the law says that income of a partnership
will be shared equally by the partners.
7) The balance in the Work In Process Inventory at any point in time is equal to:
A.The costs for jobs finished during the period but not yet sold.
B.The cost of jobs ordered but not yet started into production.
C.The sum of the costs for all jobs in process but not yet completed.
D.The costs of all jobs started during the period, completed or not.
E.The sum of the materials, labor and overhead costs paid during the period.
8) Which of the following statements is correct concerning the elements of cycle time?
A.Move time is the time spent moving (1) raw materials from storage to production and
(2) goods in process from one factory location to another factory location.
B.Inspection time is the time spent producing the product.
C.Process time is considered non-value-added time.
D.Wait time is considered value-added time.
E.Cycle efficiency is the ratio of non-value-added time to total cycle time.
9) The reporting of net cash provided or used by operating activities that lists the major
items of operating cash receipts, such as receipts from customers, and subtracts the
major items of operating cash disbursements, such as cash paid for merchandise, is
referred to as the:
A.Direct method of reporting net cash provided or used by operating activities.
B.Cash basis of accounting.
C.Classified statement of cash flows.
D.Indirect method of reporting net cash provided or used by operating activities.
E.Net method of reporting cash flows from operating activities.
10) When a corporation has only one class of stock, the stock is called
A.Preferred stock.
B.Common stock.
C.Par value stock.
D.Stated value stock.
E.No-par value stock.
11) Pitt Enterprises manufactures jeans. All materials are introduced at the beginning of
the manufacturing process in the Cutting Department. Conversion costs are incurred
uniformly throughout the manufacturing process. As the cutting of material is
completed, the pieces are immediately transferred to the Sewing Department.
Information for the Cutting Department for the month of May follows.
Work in Process, May 1 (50,000 units, 100% complete for direct materials, 40%
complete with respect to direct labor and overhead; includes $70,500 of direct material
cost; $34,050 of conversion costs).
Work in Process, May 31 (75,000 units, 100% complete for direct materials; 20%
complete for conversion costs).
If Pitt Enterprises uses the FIFO method of process costing, compute the equivalent
units for materials and conversion costs respectively for May.
A.225,000; 225,000
B.200,000; 195,000
C.275,000; 200,000
D.225,000; 195,000
E.200,000; 200,000
12) Responsibility accounting performance reports:
A.Become more detailed at higher levels of management.
B.Are usually summarized at higher levels of management.
C.Are equally detailed at all levels of management.
D.Are useful in any format.
E.Are irrelevant at the highest level of management.
13) Kayak Company uses a job order costing system and allocates its overhead on the
basis of direct labor costs. Kayak Company’s production costs for the year were: direct
labor, $30,000; direct materials, $50,000; and factory overhead applied $6,000. The
overhead application rate was:
A.5.0%.
B.12.0%.
C.20.0%.
D.500.0%.
E.16.7%.
14) Which of the following is true of a stock dividend?
A.It is a liability on the balance sheet.
B.The decision to declare a stock dividend resides with the shareholders.
C.Transfers a portion of equity from retained earnings to a cash reserve account.
D.Does not affect total equity, but transfer amounts between the components of equity.
E.Reduces a corporation’s assets and stockholders’ equity.
15) Gary Marks is paid on a monthly basis. For the month of January of the current
year, he earned a total of $8,288. FICA tax for Social Security is 6.2% and the FICA tax
for Medicare is 1.45%. The FUTA tax rate is 0.6%, and the SUTA tax rate is 5.4%. Both
unemployment taxes are applied to the first $7,000 of an employee’s pay. The amount of
Federal Income Tax withheld from his earnings was $1,375.17. What is the amount of
the employer’s payroll taxes expenses for this employee?
A.$2,009.21
B.$1,131.31
C.$2,506.48
D.$420.00
E.$1,054.04
16) A corporation issued 5,000 shares of its no par common stock that was assigned a
$1 stated value per share. The issue price was $10 per share. The entry to record this
transaction would be:
A.Debit Cash $50,000; credit Paid-in Capital in Excess of Par Value, Common Stock
$45,000; credit Common Stock $5,000.
B.Debit Cash $50,000; credit Common Stock $50,000.
C.Debit Common Stock $50,000; credit Cash $50,000.
D.Debit Treasury Stock $50,000; credit Cash $50,000.
E.Debit Common Stock $25,000; debit Paid-in Capital in Excess of Par Value,
Common Stock $5,000; credit Common Stock $45,000.
17) Parallel Enterprises has collected the following data on one of its products. During
the period the company produced 25,000 units. The direct materials quantity variance
is:
A.$27,500 unfavorable.
B.$50,000 unfavorable.
C.$50,000 favorable.
D.$22,500 unfavorable.
E.$22,500 favorable.
18) Which of the following accounts would appear on a budgeted balance sheet?
A.Income tax expense.
B.Accounts receivable.
C.Sales commissions.
D.Depreciation expense.
E.All of the choices are correct.
19) In a responsibility accounting system:
A.Managers are responsible for their departments’ controllable costs.
B.Each accounting report contains all items allocated to a responsibility center.
C.Organized and clear lines of authority and responsibility are only incidental.
D.All managers at a given level have equal authority and responsibility.
E.Outputs of the departments are not part of the evaluation process.
20) Determine the net income of a company for which the following information is
available for the month of July.
A.$190,000.
B.$210,000.
C.$230,000.
D.$400,000.
E.$610,000.
21) Data pertaining to a company’s joint production for the current period follows:
Compute the cost to be allocated to Product M for this period’s $660 of joint costs if the
value basis is used.
A.$264.
B.$396.
C.$330.
D.$1,364.
E.$796.
22) Describe the flow of labor costs in a job order costing system, and identify the
documents used in the system.
23) ___________________ is an activity that provides financial and nonfinancial
information to an organization’s managers and other internal decision makers.
24) When the actual overhead incurred during an accounting period is more than the
overhead applied to jobs, the overhead is said to be ___________________________.
25) The model whose goal is to eliminate waste while satisfying the customer and
providing a positive return to the company is the _____________________.
26) General-purpose financial statements include the (1) ______________, (2)
_____________, (3) _______________, (4) ______________, and (5)
________________.
27) On January 2, Froxel Company purchased 10,000 shares of Sandia Corp. common
stock at $19 per share plus a $3,000 commission. This represents 30% of Sandia Corp.’s
outstanding stock. On August 6, Sandia Corp. declared and paid cash dividends of
$1.75 per share, and on December 31 it reported net income of $150,000. Prepare the
necessary entries for Froxel to account for these transactions and events.
28) What are the ways that a new partner can be admitted to an existing partnership?
Explain how to account for the admission of the new partner under each of these
circumstances.
29) Match the following terms with the appropriate definition.