1) The just-in-time (JIT) philosophy views inventory as a necessary buffer to protect
against process problems.
2) In a push manufacturing system, raw materials are released to production based on
forecasted demand.
3) The T account got its name because it resembles the letter T.
4) Use of a plantwide factory overhead rate does not distort product costs only when
products require different ratios of allocation-base usage in each production department.
5) Callable bonds are redeemable by the issuing corporation within the period of time
and at the price stated in the bond indenture.
6) In preparing a bank reconciliation, the amount of an error indicating the recording of
a check in the journal for an amount larger than the amount of the check is added to the
balance per company’s records.
7) Electricity purchased to operate factory machinery would be included as part of the
cost of products manufactured under the absorption costing concept.
8) The controller’s staff consists of management accountants responsible for systems
and procedures, general accounting, budgets, taxes, and cost accounting.
9) Since the adjustments are entered on the work sheet, it is not necessary to record
them in the journal or post them to the ledger.
10) Companies recognizing the need to simultaneously produce products with high
quality, low cost, and instant availability have adopted a just-in-time processing
philosophy.
11) In variable costing, fixed costs do not become part of the cost of goods
manufactured, but are considered an expense of the period.
12) If the costs for direct materials, direct labor, and factory overhead were $60,000,
$35,000, and $25,000, respectively, for 20,000 equivalent units of production, the
conversion cost per equivalent unit was $6.
13) If the underapplied factory overhead amount is material, it is transferred to Cost of
Goods Sold at the end of the fiscal year.
14) Under the equity method, a stock purchase is recorded at its original cost and is not
adjusted to fair market value each accounting period.
15) The number of days’ sales in inventory is one means of expressing the relationship
between the cost of goods sold and inventory.
16) If a fixed asset with a book value of $10,000 is traded for a similar fixed asset, and
a trade-in allowance of $15,000 is granted by the seller, if the transaction is deemed to
have commercial substance, the buyer would report a gain on disposal of fixed assets of
$5,000.
17) The par value per share of common stock represents
A.the minimum selling price of the stock established by the articles of incorporation
B.the minimum amount the stockholder will receive when the corporation is liquidated
C.an arbitrary amount established in the articles of incorporation
D.the amount of dividends per share to be received each year
18) The cost method of accounting for stock
A.recognizes dividends as income
B.is only appropriate as part of a consolidation
C.requires the investment be increased by the reported net income of the investee
D.requires the investment be decreased by the reported net income of the investee
19) Merchandise with a list price of $4,200 and costing $2,300 is sold on account,
subject to the following terms: FOB destination, 2/10, n/30. The seller prepays the
freight costs of $85 (debit Freight Out for the freight costs). Prior to payment for the
goods, the seller issues a credit memo for $750 to the customer for merchandise costing
$425 that is returned. The correct amount is received within the discount period. The
company uses a perpetual inventory system.
Record the foregoing transactions of the seller in the sequence indicated below.
(a) Sold the merchandise, recognizing the sale and cost of merchandise sold.
(b) Paid the freight charges.
(c) Issued the credit memo.
(d) Received payment from the customer.
20) Liabilities are reported on the
A.income statement
B.retained earnings statement
C.statement of cash flows
D.balance sheet
21) Inventory shortage is recorded when
A.merchandise is returned by a buyer
B.merchandise purchased from a seller is incomplete or short
C.merchandise is returned to a seller
D.there is a difference between a physical count of inventory and inventory records
22) Which of the following is required to be withheld from employee’s gross pay?
A.both federal and state unemployment compensation
B.only federal unemployment compensation tax
C.only federal income tax
D.only state unemployment compensation tax
23) For which of the following taxes is there no ceiling on the amount of employee
annual earnings subject to the tax?
A.only Social Security tax
B.only Medicare tax
C.only unemployment compensation tax
D.none of the above
24) Which of the following is NOT a cost concept commonly used in applying the
cost-plus approach to product pricing?
A.Total cost concept
B.Product cost concept
C.Variable cost concept
D.Fixed cost concept
25) Office supplies were sold by Aris Alarm Service at cost to another repair shop, with
cash received. Which of the following entries for Aris Alarm Service records this
transaction?
A.Office Supplies, debit; Cash, credit
B.Office Supplies, debit; Accounts Payable, credit
C.Cash, debit; Office Supplies, credit
D.Accounts Payable, debit; Office Supplies, credit
26) At the end of its accounting period, December 31, 2010, Millers Arcade has assets
of $450,000 and liabilities of $125,000. Using the accounting equation, determine the
following amounts:
27) The Swan Company produces their product at a total cost of $43 per unit. Of this
amount $8 per unit is selling and administrative costs. The total variable cost is $30 per
unit The desired profit is $20 per unit.
Determine the mark up percentage on total cost.
A.100%
B.110%
C.80%
D.46.5%
28) When a firm uses internal auditors, it is adhering to which one of the following
internal control elements?
A.risk assessment
B.monitoring
C.proofs and security measures
D.separating responsibilities for related operations
29) A company reports the following:
Determine the (a) inventory turnover, and (b) number of days sales in inventory. Round
your answer to one decimal place.
30) Under the corporate form of business organization
A.ownership rights are easily transferred
B.a stockholder is personally liable for the debts of the corporation
C.stockholders acts can bind the corporation even though the stockholders have not
been appointed as agents of the corporation
D.stockholders wishing to sell their corporation shares must get the approval of other
stockholders
31) On July 8, Alton Co. issued an $80,000, 6%, 120-day note payable to Seller Co.
Assume that the fiscal year of Alton Co. ends July 31. Using the 360-day year in your
calculations, what is the amount of interest expense recognized by Alton in the current
fiscal year?
A.$1,200.00
B.$106.67
C.$306.67
D.$400.00
32) The numerator used to calculate accounts receivable turnover is
A.total sales
B.net sales
C.accounts receivable at year-end
D.average accounts receivable
33) In a process cost system, the cost of completed production in Department A is
transferred to Department B by which of the following entries?
A.Debit Work in Process–Dept. B; credit Work in Process–Dept. A
B.Debit Work in Process–Dept. B; credit Finished Goods–Dept. A
C.Debit Work in Process–Dept. B; credit Cost of Goods Sold–Dept. A
D.Debit Finished Goods; credit Work in Process–Dept. B
34) A company used $35,000 of direct materials, incurred $73,000 in direct labor cost,
and $114,000 in factory overhead costs during the period. If beginning and ending work
in process inventories were $28,000 and $32,000 respectively, the cost of goods
manufactured was:
A.$218,000
B.$226,000
C.$190,000
D.$222,000
35) If common stock is issued for an amount greater than par value, the excess should
be credited to
A.Retained Earnings
B.Cash
C.Legal Capital
D.Paid-in Capital in Excess of Par Value
36) Gross profit is equal to:
A.sales plus (sales discounts and sales returns and allowances) plus cost of merchandise
sold
B.sales plus sales returns and allowances less sales discounts less cost of merchandise
sold
C.sales plus sales discounts less sales returns and allowances less cost of merchandise
sold
D.sales less (sales discounts and sales returns and allowances) less cost of merchandise
sold
37) The objectives of internal control are to
A.control the internal organization of the accounting department personnel and
equipment
B.provide reasonable assurance that operations are managed to achieve goals, financial
reports are accurate, and laws and regulations are complied with
C.prevent fraud, and promote the social interest of the company
D.provide control over “internal-use only” reports and employee internal conduct
38) Temporary investments such as in trading securities are
A.recorded at cost but reported at fair market value
B.recorded at cost and reported at cost
C.recorded at cost but reported at lower of cost or fair market value
D.recorded at fair market value and reported at fair market value
39) The controllable variance measures:
A.operating results at less than normal capacity
B.the efficiency of using variable overhead resources
C.operating results at more than normal capacity
D.control over fixed overhead costs
40) A corporation issues $100,000, 10%, 5-year bonds on January 1, 2011, for
$104,200. Interest is paid semiannually on January 1 and July 1. If the corporation uses
the straight-line method of amortization of bond premium, the amount of bond interest
expense to be recognized on July 1, 2011, is
A.$10,420
B.$5,420
C.$5,000
D.$4,580
41) Earnings per share
A.is the net income per common share
B.must be reported by publicly traded companies
C.helps compare companies of different sizes
D.all of the above
42) Fast-Flow Paints produces mixer base paint through a two stage process, Mixing
and Packaging. The following events depict the movement of value into and out of
production. Journalize each event if appropriate, if not, provide a short narrative reason
as to why you choose not to journalize that action. Bob, the Production Manager,
accepts an order to continue processing the current run of mixer base paint.
(a) $27,000.00 worth of materials are withdrawn from Raw Materials inventory. Of this
amount, $25,500.00 will be issued to the Mixing Department and the balance will be
issued to the Maintenance Department to be used on production line machines.
(b) Bob calculates that labor for the period is $12,500.00. Of this value $1,750.00 is for
maintenance and indirect labor. The remainder is directly associated with mixing.
(c) Bob, who is paid a salary but earns about $35.00 / hour, spends 1 hour inspecting the
production line.
(d) The manufacturing overhead drivers for Mixing are (1) hours of mixer time at
$575.00 per hour, and material movements from Raw Materials at $125.00 per
movement. An inspection of the machine timers reveals that a total of 8 hours has been
consumed in making this product. An inspection of Stocking Orders indicates that only
one material movement was utilized to load the raw materials. (Note: All values have
been journalized to Factory Overhead, you need only apply it to the production run.)
(e) Within Fast-Flow items are transferred between departments at a standard cost or
value. This production run has created 4,015 gallons of mixer base paint. This paint is
transferred to Packaging at a standard cost of $10.05 per gallon.
(f) Packaging draws $755.00 in raw materials for packaging of this production run.
(g) Packaging documents that 12 hours of direct labor at $10.25 per hour were
consumed in the packaging of this production run.
(h) Packaging uses a driver of direct labor hours to allocate manufacturing overhead at
the rate of $25.00 per hour.
(i) Packaging transfers these 4,015 gallons of packaged goods to Finished Goods
Inventory at a standard cost of $10.34 per gallon.
Round total cost to nearest dollar value.
43) Which of the following accounts will be found on the income statement?
A.inventory
B.work in process
C.finished goods
D.cost of goods sold
44) The following is a measure of a managers performance working in a profit center.
A.balance sheet
B.rate of return and residual income measures
C.budget performance report
D.divisional income statements
45) In the contribution margin analysis, the effect of a change in the number of units
sold, assuming no change in unit sales price or unit cost, is referred to as the:
A.sales factor
B.cost of goods sold factor
C.quantity factor
D.price factor
46) When using the allowance method to estimate uncollectible accounts receivable
based on an analysis of receivables shows that $640 of accounts receivables are
uncollectible. The Allowance for Doubtful Accounts has a debit balance of $110. The
adjusting entry at the end of the year will include a credit to Allowance for Doubtful
Accounts in the amount of:
A.$110
B.$640
C.$530
D.$750
47) Cash paid to purchase long-term investments would be reported in the statement of
cash flows in
A.the cash flows from operating activities section
B.the cash flows from financing activities section
C.the cash flows from investing activities section
D.a separate schedule
48) Identify the formula for the rate of return on investment.
A.Invested Assets/Income From Operations
B.Sales/Invested Assets
C.Income From Operations/Sales
D.Income From Operations/Invested Assets
49) If at the end of the fiscal year the variances from standard are significant, the
variances should be transferred to the:
A.work in process account only
B.cost of goods sold account only
C.finished goods account only
D.work in process, cost of goods sold, and finished goods accounts
50) Department E had 4,000 units in Work in Process that were 40% completed at the
beginning of the period at a cost of $12,500. 14,000 units of direct materials were added
during the period at a cost of $28,700. 15,000 units were completed during the period,
and 3,000 units were 75% completed at the end of the period. All materials are added at
the beginning of the process. Direct labor was $32,450 and factory overhead was
$18,710.
The number of equivalent units of production for the period for materials if the average
cost method is used to cost inventories was:
A.15,650
B.18,000
C.17,250
D.17,700
51) Carmen Company a publicly traded company with preferred and common stock
issued. As of January 1st, it had 50,000 shares of $100 par, 2% preferred stock
outstanding and 250,000 shares of $10 par common stock outstanding.
(a) On January 31st, the Board of Directors issues a requirement to purchase 5,000
shares of its common stock at market price. The shares are purchased at a market price
of $22 per share. Journalize the purchase utilizing the cost concept.
(b) On March 15th, Carmen declares a dividend on preferred stock of $2.75 per share.
The date of record is March 25th and the date of payment is March 31st. Journalize
these events.
(c) On December 1st, Carmen declares a cash dividend on common stock of $0.12 per
share. The date of record is December 15th and the date of payment is December 21st.
Journalize these events.
(d) On December 27th the board orders that 2,500 shares of treasury stock be sold. The
sale price is $25 per share. Journalize this event.
52) One of the weaknesses of the direct write-off method is that it
A.understates accounts receivable on the balance sheet
B.violates the matching principle
C.is too difficult to use for many companies
D.is based on estimates
53) If fixed costs are $400,000, the unit selling price is $25, and the unit variable costs
are $15, what is the break-even sales (units) if the variable costs are increased by $2?
A.50,000 units
B.30,770 units
C.40,000 units
D.26,667 units
54) Which of the following accounts will not be closed to Income Summary at the end
of the fiscal year?
A.Salaries Expense
B.Fees Earned
C.Unearned Rent
D.Depreciation Expense
55) Current assets are usually listed in order
A.of the due date
B.of the size
C.alphabetically
D.of liquidity
56) The process of transferring the debits and credits from the journal entries to the
ledger accounts is called
A.sliding
B.transposing
C.journalizing
D.posting
57) After the accounts were adjusted at January 31, 2014, the end of the fiscal year, the
following balances were taken from the ledger of Taylor Pool Service Company:
Journalize the four entries required to close the accounts
58) Describe three inventory cost flow assumptions and how they impact the financial
statements.
59) Reconstruct the adjusting and closing entries from the following T accounts.
60) Solar Company has 600,000 shares of $75 par common stock outstanding. On
February 13, Solar declared a 3% stock dividend to be issued on April 30 to
stockholders of record on March 14. The market price of the stock was $90 per share on
February 13.
Required: Journalize the entries required on February 13, March 14, and April 30.
61) Why would you compare or not compare Coca-Cola and Pepsi-Cola (PepsiCo) as
companies to each other?
62) Explain why it is imperative that proper factory overhead be allocated in factories
that produce multiple products.
63) Journalize the entries to record the following:
Journal
64) Prior to adjustment at the end of the year, the balance in Trucks is $300,900 and the
balance in Accumulated Depreciation-Trucks is $88,200. Details of the subsidiary
ledger are as follows:
Required:
65) Use the following tables to calculate the present value of a $25,000 7%, 5 year bond
that pays $1,750 ($25,000 7%) interest annually, if the market rate of interest is 7%
Present Value of $1 at Compound Interest
Present Value of Annuity of $1 at Compound Interest