1) In process costing, direct labor includes only the labor that is applied directly to
individual units of product.
2) If a production department has 100 equivalent units of production with respect to
direct materials in a given reporting period, the equivalent units of production with
respect to direct labor also must be 100.
3) The Factory Overhead account will have a credit balance at the end of a period if
overhead applied during the period is greater than the overhead incurred.
4) Another name for relevant cost is unavoidable cost.
5) The concepts of direct expenses and controllable costs are essentially the same; also,
indirect expenses and uncontrollable costs are essentially the same.
6) Vouchers should be used for purchases of inventory and all other expenditures made
within a company.
7) A cash equivalent must be readily convertible to a known amount of cash, and must
be sufficiently close to its maturity so its market value is unaffected by interest rate
changes.
8) Callable bonds have an option exercisable by the issuer to retire them at a stated
dollar amount prior to maturity.
9) Which internal control principle prescribes the use of pre-numbered printed checks?
A.Technological controls.
B.Maintain adequate records.
C.Perform regular and independent reviews.
D.Establish responsibilities.
E.Divide responsibility for related transactions.
10) Use the following data to compute total factory overhead costs for the month.
A.$141,100.
B.$125,300.
C.$45,200.
D.$84,800.
E.$58,300.
11) Which of the following accounts are permanent (real) accounts?
A.Fees earned.
B.Office supplies expense.
C.Interest revenue.
D.Accounts payable.
E.Salaries expense.
12) On May 1, Anders Company purchased merchandise in the amount of $5,800 from
Shilling, with credit terms of 2/10, n/30. Anders uses the perpetual inventory system.
The journal entry or entries that Anders will make on May 1 is:
13) On June 1, Jasper Company signed a $25,000, 120-day, 6% note payable to cover a
past due account payable.
a. What is the total amount of interest to be paid on this note?
b. Prepare Jasper Company’s general journal entry to record the issuance of the note
payable.
c. Prepare Jasper Company’s general journal entry to record the payment of the note on
September 29.
14) In a process operation, the direct labor of a production department includes:
A.All labor used exclusively by that department, even if the labor is not applied to the
product itself.
B.All labor used exclusively by that department, but only if the labor is applied to the
product itself.
C.All labor for that department, including labor for services that help more than one
production department, such as clerical, repair, and computer technicians.
D.Only labor that helps more than one production department, such as clerical, repair,
and computer technicians.
E.Only labor that relates to goods finished during the period.
15) Using the information below for Laurels Company; determine the cost of goods
manufactured during the current year:
A.$12,000.
B.$16,100.
C.$17,100.
D.$18,100.
E.$13,600.
16) Which of the following assets is not depreciated?
A.Store fixtures.
B.Computers.
C.Land.
D.Buildings.
E.Equipment.
17) A company’s old machine that cost $40,000 and had accumulated depreciation of
$22,000 was traded in on a new machine having an estimated 20-year life with an
invoice price of $45,000. The company also paid $33,000 cash, along with its old
machine to acquire the new machine. If this transaction has commercial substance, the
new machine should be recorded at:
A.$40,000.
B.$33,000.
C.$45,000.
D.$18,000.
E.$51,000.
18) For each of the following independent transactions a through d, prepare the
necessary journal entry:
(a) Declared a $0.40 per share cash dividend on 300,000 shares of preferred stock
outstanding.
(b) Declared and distributed an 8% stock dividend on 800,000 shares of $5 par value
common stock outstanding. Market price per common share on this date was $25.
(c) Declared and distributed a 2-for-1 stock split on 400,000 shares of $10 par value
common stock outstanding.
(d) Declared and distributed a 35% stock dividend on 700,000 common shares of $1 par
value common stock outstanding. Market price per common share on this date was $20.
19) Winkler Company borrows $85,000 and pledges its receivables as security. The
journal entry to record this transaction would be:
A.Debit Cash of $85,000 and credit Accounts Receivable $85,000.
B.Debit Cash of $85,000 and credit Accounts Payable $85,000.
C.Debit Note Receivable $85,000 and credit Accounts Receivable $85,000.
D.Debit Cash $85,000 and credit Notes Payable $85,000.
E.Debit Accounts Receivable $85,000 and credit Notes Payable $85,000.
20) Juarez Builders incurred $285,000 of labor costs for construction jobs completed
during the month of August, of which $212,000 was direct and $73,000 was indirect
supervisory costs. The correct journal entry to record the direct labor for the month is:
A.Debit Payroll Expense $212,000; credit Cash $212,000.
B.Debit Factory Wages Payable $285,000; credit Work in Process Inventory $212,000.
C.Debit Work in Process Inventory $212,000; credit Cash $285,000.
D.Debit Factory Wages $285,000; credit Factory Wages Payable $285,000.
E.Debit Work in Process Inventory $212,000; credit Factory Wages Payable $212,000.
21) Victory Company purchases office equipment at the beginning of the year at a cost
of $15,000. The machine’s useful life is estimated to be 7 years with a $1,000 salvage
value. The book value at the end of 7 years is:
A.$2,143.
B.$1,000.
C.$2,000.
D.$14,000.
E.$0.
22) Portside Watercraft uses a job order costing system. During one month Portside
purchased $153,000 of raw materials on credit; issued materials to production of
$164,000 of which $24,000 were indirect. Portside incurred a factory payroll of
$95,000, paid in cash, of which $25,000 was indirect labor. Portside uses a
predetermined overhead rate of 170% of direct labor cost. The journal entry to record
the allocation of factory payroll to production is:
A.Debit Work in Process Inventory $95,000; credit Factory Payroll $95,000.
B.Debit Work in Process Inventory $95,000; credit Cash $95,000.
C.Debit Factory Payroll $95,000; credit Cash $95,000.
D.Debit Work in Process Inventory $70,000; debit Factory Overhead $25,000; credit
Factory Payroll $95,000.
E.Debit Work in Process Inventory $70,000; debit Factory Overhead $25,000; credit
Cash $95,000.
23) Pat and Nicole formed Here & There as a limited liability company. Unless the
member owners elect to be treated otherwise, the Internal Revenue Service will tax the
LLC as:
A.An S corporation.
B.A C corporation.
C.A non-taxable entity.
D.A joint venture.
E.A partnership.
24) The conceptual framework that the Financial Accounting Standards Board (FASB)
and the International Accounting Standards Board (IASB) are attempting to converge
and enhance includes the following broad areas to guide standard setting except:
A.Objectives
B.Qualitative characteristics
C.Uniformity
D.Elements
E.Recognition and measurement
25) If the exchange rate for Canadian and U.S. dollars is 0.82777 to 1, this implies that
3 Canadian dollars will buy ____ worth of U.S. dollars.
A.$0.2759
B.$0.82777
C.$1.82777
D.$2.48
E.$1.00
26) The ability to meet short-term obligations and to efficiently generate revenues is
called:
A.Liquidity and efficiency.
B.Solvency.
C.Profitability.
D.Market prospects.
E.Creditworthiness.
27) Quantum Corporation has provided the following data from its activity-based
costing system:
The company makes 430 units of product R32E a year, requiring a total of 1,120
machine-hours, 40 orders, and 30 inspection-hours per year. The product’s direct
materials cost is $49.81 per unit and its direct labor cost is $12.34 per unit. The product
sells for $129.90 per unit.According to the activity-based costing system, the product
margin for product R32E is:
A.$4,116.50
B.$29,132.50
C.$6,180.50
D.$5,161.30
E.$4,981.00
28) The owner’s claim on assets, also known as net assets, is called
__________________.
29) Ratios may be expressed as (1) ________________, (2) __________________, or
(3) __________________.
30) Deposits made and recorded by the depositor but not yet recorded on the bank
statement are called _______________________.
31) Use the information provided to calculate the missing cash paid for merchandise for
the period.
32) On April 1, Year 5 a company discarded a machine that had cost $10,000 and had
accumulated depreciation of $8,000 as of December 31, Year 4. The asset had a 5-year
life and no salvage value. Prepare the journal entries to record the updating of the
depreciation expense and discarding of this asset in Year 5.