1) The three common types of responsibility centers are referred to as cost centers,
profit centers, and investment centers.
2) The Sarbanes-Oxley Act of 2002 was passed by Congress due to the public outcry
after the financial scandals of the early 2000s.
3) All income statement accounts will be closed at the end of the period.
4) The adjusting entry to record inventory shrinkage would generally include a debit to
Cost of Merchandise Sold.
5) Real accounts are not permanent accounts.
6) Though a piece of equipment is still being used, the equipment should be removed
from the accounts if it has been fully depreciated.
7) One reason not to depend solely on historical records to set standards is that there
may be inefficiencies contained in past costs.
8) Receivables not currently collectible are reported in the investments section of the
balance sheet.
9) Liability accounts are increased by debits.
10) Rarely would the cash flows from operating activities, as reported on the statement
of cash flows, be the same as the net income reported on the income statement.
11) Temporary investments are recorded at their cost which would include brokers
commissions.
12) Those unusual items reported as deductions from income from continuing
operations should be listed net of the related income tax.
13) Cash, as the term is used for the statement of cash flows, could indicate either cash
or cash equivalents.
14) An account has three parts to it; a title, an increase side, and a decrease side.
15) In determining cost of goods sold, two alternate costing concepts can be used: direct
costing and variable costing.
16) Under the total cost concept, manufacturing cost plus desired profit is included in
the total cost per unit.
17) Make or buy decisions should be made only with related parties.
18) Since the controllable variance measures the efficiency of using variable overhead
resources, if budgeted variable overhead exceeds actual results, the variance is
favorable.
19) There is really no benefit in preparing financial statements in any particular order.
20) Estimated cash payments are planned reductions in cash from all of the following
except:
A.manufacturing and operating expenses
B.capital expenditures
C.notes and accounts receivable collections
D.payments for interest or dividends
21) Expected useful life is
A.calculated when the asset is sold
B.estimated at the time that the asset is placed in service
C.determined each year that the depreciation calculation is made
D.none of the answers are correct
22) Mason Corporation had $650,000 in invested assets, sales of $700,000, income
from operations amounting to $99,000, and a desired minimum rate of return of 15%.
The residual income for Mason is:
A.$0
B.$84,150
C.($6,000)
D.$1,500
23) The following information relates to manufacturing overhead for the Chapman
Company:
Standards:
Total fixed factory overhead – $450,000
Estimated production – 25,000 units (100% of capacity)
Overhead rates are based on machine hours.
Standard hours allowed per unit produced – 2
Fixed overhead rate – $9.00 per machine hour
Variable overhead rate – $3.50 per hour
Actual:
Fixed factory overhead – $450,000
Production – 24,000 units
Variable overhead – $170,000
Required:
(a) Compute the volume variance.
(b) Compute the controllable variance.
(c) Compute the total factory overhead cost variance.
24) The Baffin Factory has determined that its budgeted factory overhead budget for the
year is $7,750,000. They plan to produce 1,000,000 units. Budgeted direct labor hours
are 525,000 and budgeted machine hours are 375,000. Using the single plantwide
factory overhead rate based on direct labor hours, calculate the factory overhead rate for
the year.
A.$14.76
B.$20.67
C.$7.75
D.$77.50
25) Which of the following is not an essential part of the accounting records?
A.journal
B.ledger
C.chart of accounts
D.work sheet
26) The authorized stock of a corporation
A.must be recorded in a formal accounting entry
B.only reflects the initial capital needs of the company
C.is indicated in its by-laws
D.is indicated in its charter
27) Prepaid advertising, representing payment for the next quarter, would be reported
on the balance sheet as a(n)
A.asset
B.liability
C.contra asset
D.expense
28) Just-in-time processing is a business philosophy that focuses on reducing time and
cost and eliminating poor quality. This is accomplished in manufacturing and
non-manufacturing processes by:
A.moving a product from process to process as each function is completed
B.combining processing functions into work centers and cross-training workers to
perform more than one function
C.having production supervisors attempt to enter enough materials into manufacturing
to keep all manufacturing departments operating
D.having workers typically perform one function on a continuous basis
29) Cost flow is in the order in which costs were incurred when using
A.average cost
B.last-in, first-out
C.first-in, first-out
D.weighted average
30) Job cost sheets can provide information to managers for all but the following:
A.cost impact of materials changes
B.cost impact of continuous improvement in the manufacturing process
C.cost impact of materials price or direct labor rate changes over time
D.utilities, managerial salaries, and depreciation of computers in the corporate office
31) How does receiving a bill to be paid next month for services received affect the
accounting equation?
A.assets decrease; stockholders equity decreases
B.assets increase; liabilities increase
C.liabilities increase; stockholders equity increases
D.liabilities increase; stockholders equity decreases
32) Bentz Co. has two divisions, A and B. Invested assets and condensed income
statement data for each division for the past year ended December 31 are as follows:
33) A borrower has two alternatives for a loan: (a) issue a $480,000, 60-day, 8% note or
(2) issue a $480,000, 60-day note that the creditor discounts at 8%. (Assume a 360-day
year is used for interest calculations.)
Required:
34) Department S had no work in process at the beginning of the period. 12,000 units of
direct materials were added during the period at a cost of $84,000, 9,000 units were
completed during the period, and 3,000 units were 30% completed as to labor and
overhead at the end of the period. All materials are added at the beginning of the
process. Direct labor was $49,500 and factory overhead was $9,900.
The total conversion costs for the period were:
A.$59,400
B.$49,500
C.$143,400
D.$9,900
35) Cranston Company estimates the following overhead costs for the coming year:
Cranston is also budgeting $600,000 in direct labor costs and 15,000 machine hours for
the coming year.
Required:
a. Calculate the predetermined overhead rate using direct labor costs as the allocation
base.
b. Calculate the predetermined overhead rate using machine hours as the allocation
base.
36) Flagler Company allocates overhead based on machine hours. They estimated
overhead costs for the year to be $420,000. Estimated machine hours were 50,000.
Actual hours and costs for the year were 46,000 machine hours and $380,000 of
overhead.
Required:
a. Calculate the overhead application rate for the year.
b. What is the amount of applied overhead for the year?
c. What is the amount of under or overapplied overhead for the year? Indicate whether
it is over- or underapplied.
37) Which of the following is not included in the computation of the quick ratio?
A.inventory
B.marketable securities
C.accounts receivable
D.cash
38) A check drawn by a company for $340 in payment of a liability was recorded in the
journal as $430. What entry is required in the company’s accounts?
A.debit Accounts Payable; credit Cash
B.debit Cash; credit Accounts Receivable
C.debit Cash; credit Accounts Payable
D.debit Accounts Receivable; credit Cash
39) Department W had 2,400 units, one-third completed at the beginning of the period,
16,000 units were transferred to Department X from Department W during the period,
and 1,800 units were one-half completed at the end of the period. Assume the
completion ratios apply to direct materials and conversion costs.
What are the total gross number of units to be assigned cost on the cost of production
report for Department W?
A.12,000 units
B.13,600 units
C.18,500 units
D.17,800 units
40) The use of standards for nonmanufacturing expenses is:
A.not as common as it is for manufacturing costs
B.as common as it is for manufacturing costs
C.not useful
D.impossible
41) The income statement for Hudson Company reported net income of $345,000 for
the year ended December 31, 2012 before considering the following:
During the year the company purchased trading securities. At year end, the fair value of
the investment portfolio was $23,000 less than cost.
The balance of retained earnings was $823,000 on December 31, 2011. Hudson
Company paid $43,000 in cash dividends in 2012. Calculate the balance of retained
earnings on December 31, 2012.
a.
42) In capital rationing, alternative proposals that survive initial and secondary
screening are normally evaluated in terms of:
A.present value
B.non-financial factors
C.maximum cost
D.net cash flow
43) The net income reported on the income statement is $58,000. However, adjusting
entries have not been made at the end of the period for supplies expense of $2,200 and
accrued salaries of $1,300. Net income, as corrected, is
A.$56,700
B.$58,000
C.$55,800
D.$54,500
44) Jacks Corporation purchases $200,000 bonds plus accrued interest for 2 months of
$2,000 from Kennedy Company on March 1. The bonds have an annual interest rate of
6% payable on June 30 and December 31. The entry to record the purchase of the bonds
would include:
A.Interest Receivable debit $2,000
B.Investment in Bonds debit $202,000
C.Cash debit $200,000
D.Interest Revenue credit $2,000
45) Which of the following taxes would be deducted in determining an employee’s net
pay?
A.FUTA taxes
B.SUTA taxes
C.FICA taxes
D.all of the above
46) Which of the following are included in the employer’s payroll taxes?
A.SUTA taxes
B.FUTA taxes
C.FICA taxes
D.all of the above
47) There are four closing entries. The first one is to close ____, the second one is to
close ____, the third one is to close ____, and the last one is to close ____.
A.revenues, expenses, income summary, dividends
B.expenses, assets, income summary, capital stock
C.retained earnings, dividends, income summary, assets
D.dividends, income summary, expenses, revenues
48) Which of the following is an example of accrued revenue?
A.Swimming pool cleaning that has been paid for three months in advance
B.Swimming pool cleaning that has been provided but has not been billed or paid
C.An agreement has been signed for swimming pool cleaning for the next three months
D.Swimming pool cleaning that has been provided and paid on the same day
49) Beachside Realty rents condominiums and furnishings. Its adjusted trial balance at
December 31, 2011, is as follows:
Prepare the entry required to close the revenue accounts at the end of the period.
50) Vanessa Company is evaluating a project requiring a capital expenditure of
$480,000. The project has an estimated life of 4 years and no salvage value. The
estimated net income and net cash flow from the project are as follows:
51) A company had stock outstanding as follows during each of its first three years of
operations: 2,500 shares of $10, $100 par, cumulative preferred stock and 50,000 shares
of $10 par common stock. The amounts distributed as dividends are presented below.
Determine the total and per share dividends for each class of stock for each year by
completing the schedule.
52) Connally Companys payroll department required that every time card be checked
twice to ensure pay accuracy. The company has 1,000 employees and has determined
that the checks cost the company $8,000 per year. They have decided to change this
policy and only check those names which appear on the exceptions report and a random
check on the entire payroll. Currently only 15% of the payroll is evaluated each payroll.
Determine the inspection activity cost per employee on the 1,000 employees both
before and after the improvement.
53) Maxi Companys perpetual inventory records indicate that $820,300 of merchandise
should be on hand on October 31, 2014. The physical inventory indicates that $781,900
is actually on hand. Journalize the adjusting entry for the inventory shrinkage for Maxi
Company for the year ended October 31, 2014.
54) Under the accrual basis, some accounts in the ledger require updating. Discuss the
three main reasons for this updating and give an example of each.