1) For a construction contractor, the wages of carpenters would be classified as factory
overhead cost.
2) The anticipated purchase of a fixed asset for $400,000, with a useful life of 5 years
and no residual value, is expected to yield total net income of $300,000 for the 5 years.
The expected average rate of return is 37.5%.
3) Managers in service firms do not find contribution margin analysis reports useful
because their firms do not sell inventory.
4) A setup is the time required to prepare an operation for a new production run.
5) The amount of interest paid when buying a bond as an investment should be credited
to Interest Revenue.
6) Purchased goods in transit should be included in the ending inventory of the buyer if
the goods were shipped FOB shipping point.
7) When a merchandising business is compared to a service business, the financial
statement that is not affected by that change is the Statement of Owner’s Equity.
8) Cost of Merchandise Sold is often the largest expense on a merchandising company
income statement.
9) At year-end, the balance in the prepaid insurance account, prior to any adjustments,
is $6,000. The amount of the journal entry required to record insurance expense will be
$4,000 if the amount of unexpired insurance applicable to future periods is $2,000.
10) Even if a business sells six products, it is possible to estimate the break-even point.
11) Comparable financial statements are designed to compare the financial statements
of two or more corporations.
12) Under the direct method of preparing a Statement of Cash Flows, the gain on the
sale of land is not adjusted or reported as part of cash flows from operating activities.
13) Journalizing eliminates fraud.
14) The chart of accounts should be the same for each business.
15) Using a perpetual inventory system, the entry to record the sale of merchandise on
account includes a
A.debit to Sales
B.debit to Merchandise Inventory
C.credit to Merchandise Inventory
D.credit to Accounts Receivable
16) In a common size balance sheet, the 100% figure is:
A.total property, plant and equipment
B.total current assets
C.total liabilities
D.total assets
17) Which of the following expressions is termed the profit margin factor as used in
determining the rate of return on investment?
A.Sales/Income From Operations
B.Income From Operations/Sales
C.Invested Assets/Sales
D.Sales/Invested Assets
18) Notes receivable due in 350 days appear on the
A.balance sheet in the current assets section
B.balance sheet in the fixed assets section
C.balance sheet in the current liabilities section
D.income statement as an expense
19) The Kwanika Co. operates in a just-in-time (JIT) manufacturing environment.
During 2011, its first year of operations, Kwanika budgeted for 40,000 hours in the
production of 100,000 units in its cell X-22. Material costs were $7 per unit. Cell X-22
conversion costs were budgeted for the year as follows:
During January, material for 8,400 units was purchased on account. There were 8,200
units manufactured and 8,000 were sold shipped to customers for $35 each. Journalize:
(a) the material purchases; (b) the application of conversion costs; (c) the transfer from
work in process to finished goods; and (d) the sales and associated cost of goods sold
for the month of January.
20) If sales are $914,000, variable costs are $498,130, and operating income is
$260,000, what is the contribution margin ratio?
A.52.2%
B.28.4%
C.54.5%
D.45.5%
21) Costs that can be influenced by management at a specific level of management are
called:
A.direct costs
B.indirect costs
C.noncontrollable costs
D.controllable costs
22) Division A of Mocha Company has sales of $155,000, cost of goods sold of
$83,000, operating expenses of $43,000, and invested assets of $150,000.
What is the profit margin for Division A?
A.19.3%
B.48.0%
C.18.7%
D.5.47%
23) For each of the following scenarios, indicate the amount of the adjusting journal
entry for Bad Debt Expense to be recorded in 2014, the balance in Allowance for
Doubtful Accounts after adjustment at December 31, 2014, and the net realizable value
of Accounts Receivable at December 31, 2014:
a) Based on an analysis of Simmons Companys $380,000 balance in Accounts
Receivable at December 31, 2014, is was estimated that $15,500 will be uncollectible.
There is a credit balance of $1,200 in Allowance for Doubtful Accounts before
adjustment.
b) Blake Company had net credit sales of $900,000 during 2014, and has an Accounts
Receivable balance of $425,000 at December 31, 2014, and an Allowance for Doubtful
Accounts credit balance of $11,000 before adjustment. Blake estimates Bad Debt
Expense as 3/4 of 1% of net credit sales.
c) Hidgon Inc. has a balance of $812,000 in Accounts Receivable at December 31,
2014. An analysis of those receivables shows $24,000 will probably not be collected.
Before adjusting entries are prepared, the Allowance for Doubtful Accounts has a debit
balance of $750.
24) The following are all product costs except:
A.Direct materials
B.Sales and administrative expenses
C.Direct labor
D.Factory overhead
25) The Valhalla Company manufactures small lamps and desk lamps. The following
shows the activities per product:
Using the following information prepared by the Valhalla Company, determine (a) the
activity rates for each activity and (b) the activity-based factory overhead per unit for
each product.
26) EFT
A.means Efficient Funds Transfer
B.can process certain cash transactions at less cost than by using the mail
C.makes it easier to document purchase and sale transactions
D.means Effective Funds Transfer
27) Ruby Company produces a chair that requires 5 yds. of material per unit. The
standard price of one yard of material is $7.50. During the month, 8,500 chairs were
manufactured, using 43,600 yards at a cost of $7.55 per yard. Determine the (a) price
variance, (b) quantity variance, and (c) cost variance.
28) Purchased $400,000 of ABC Co. 5% bonds at 100 plus accrued interest of $4,500.
Sold $250,000 of bonds at 97. The journal entry for the purchase would include:
A.a credit to Interest Receivable for $4,500
B.a credit to Interest Revenue for $4,500
C.a debit to Interest Receivable for $4,500
D.a debit to Interest Revenue for $4,500
29) When a firm adopts a just-in-time operating environment,
A.new, more efficient machinery and equipment must be purchased and installed in the
original layout
B.machinery and equipment are moved into small autonomous production lines called
manufacturing cells
C.new machinery and equipment must be purchased from franchised JIT dealers
D.employees are retrained on different equipment but the plant layout generally stays
unchanged
30) Which of the following is not considered to be a liability?
A.Wages Payable
B.Accounts Receivable
C.Unearned Revenues
D.Accounts Payable
31) Which of the following will decrease retained earnings?
A.Supplies are purchased on account
B.Dividends are declared and paid
C.Cash is received from customers
D.Payment is made on an accounts payable
32) The sales, income from operations, and invested assets for each division of
Grosbeak Company are as follows:
33) In the manufacture of 15,000 units of a product, direct materials cost incurred was
$165,000, direct labor cost incurred was $105,000, and applied factory overhead was
$53,500. What is the total conversion cost?
A.$270,000
B.$158,500
C.$323,500
D.$53,500
34) The supplies account has a balance of $2,100 at the beginning of the year and was
debited during the year for $2,300, representing the total of supplies purchased during
the year. If $400 of supplies are on hand at the end of the year, the supplies expense to
be reported on the income statement for the year is
A.$400
B.$200
C.$4,800
D.$4,000
35) The following account balances appear on the balance sheet of Osgood Industries:
Common Stock (300,000 shares authorized, $100 par): $10,000,000
Paid-in Capital in Excess of Par Common Stock: $2,000,000;
Retained earnings: $45,000,000.
The board of directors declared a 2% stock dividend when the market price of the stock
was $135 a share. Osgood reported no income or loss for the current year.
Required:
(1) Journalize the entries to record
a. the declaration of the dividend, capitalizing an amount equal to market value; and
b. the issuance of the stock certificates.
(2) Determine the following amounts before the stock dividend was declared:
a. Total paid-in capital;
b. Total retained earnings; and
c. Total stockholders equity.
(3) Determine the following amounts after the stock dividend was declared and closing
entries were recorded at the end of the year:
a. Total paid-in capital;
b. Total retained earnings; and
c. Total stockholders equity.
36) Knowing how costs behave is useful to management for all the following reasons
except for
A.predicting customer demand
B.predicting profits as sales and production volumes change
C.estimating costs
D.changing an existing product production
37) As of January 1 of the current year, the Grackle Company had accounts receivables
of $50,000. The sales for January, February, and March of 2012 were as follows:
$120,000, $140,000 and $150,000. 20% of each months sales are for cash. Of the
remaining 80% (the credit sales), 60% are collected in the month of sale, with
remaining 40% collected in the following month. What is the accounts receivable
balance as of March 31?
A.$72,000
B.$48,000
C.$58,720
D.$$60,000
38) When units manufactured exceed units sold:
A.variable costing income equals absorption costing income
B.variable costing income is less than absorption costing income
C.variable costing income is greater than absorption costing income
D.variable costing income is greater by the number of units produced multiplied by the
variable cost ratio
39) Which of the following entries would probably not be found on the books of a
service provider?
A.Debit Work in Process; credit Materials
B.Debit Work in Process; credit Wages Payable
C.Debit Work in Process; credit Overhead
D.Debit Cost of Services; credit Work in Process
40) 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 conversion if the
average cost method is used to cost inventories was:
A.15,650
B.14,850
C.18,000
D.17,250
41) Which of the following would be subtracted from the balance per bank on a bank
reconciliation?
A.Outstanding checks
B.Deposits in transit
C.Notes collected by the bank
D.Service charges
42) Which of the following measures would not help managers to control and improve
operations?
A.Units produced per time period
B.Cost trends of a product
C.Yield trends
D.Commissions paid per time period
43) Which of the following would record the labor costs to an individual job?
A.Clock card
B.In-and-out cards
C.Time tickets
D.Payroll register
44) When preparing the cash budget, all the following should be considered except:
A.Cash receipts from customers
B.Depreciation expense
C.Cash payments to suppliers
D.Cash payments for equipment
45) On August 31, the end of the first year of operations, during which 18,000 units
were manufactured and 13,500 units were sold, Olympic Inc. prepared the following
income statement based on the variable costing concept:
Determine the unit cost of goods manufactured, based on (a) the variable costing
concept and (b) the absorption costing concept.
46) Sinking Fund Cash would be classified on the balance sheet as
A.a current asset
B.a fixed asset
C.an intangible asset
D.an investment
47) Tracy Roberts, the sole stockholder of Surfer Dude Supplies, is requesting a
$75,000 loan from the bank where you work as a loan officer. He brings to you the
following trial balance (or statement of accounts) as of the end of his first year of
operations.
What adjustments might be necessary before an accurate set of financial statements
could be prepared?
48) Explain the differences between a nonclassified balance sheet and a classified
balance sheet.
49) Prepare the December 31 adjusting entries for the following transactions. Omit
explanations.
1> Fees accrued but unbilled total $6,300.
2> The supplies account balance on December 31 is $4,750. Supplies on hand are $960.
3> Wages accrued but not paid are $2,700.
4> Depreciation of office equipment is $1,650.
5> Rent expired during year, $10,800.
50) Snipe Company has been purchasing a component, Part Q, for $19.20 a unit. Snipe
is currently operating at 70% of capacity and no significant increase in production is
anticipated in the near future. The cost of manufacturing a unit of Part Q, determined by
the absorption costing method, is estimated as follows:
Prepare a differential analysis report, dated March 12 of the current year, on the
decision to make or buy Part Q.
51) Trumpet Company produced 8,700 units of product that required 3.25 standard
hours per unit. The standard variable overhead cost per unit is $4.00 per hour. The
actual variance factory overhead was $111,000. Determine the variable factory
overhead controllable variance.
52) Journalize the following transactions:
53) Roper Electronics received its bank statement for the month of August with an
ending balance of $11,740.00. Roper determined that check #613 for $155.00 and check
#601 for $420.00 were both outstanding. Also, a $6,900.00 deposit for August 30th was
in transit as of the end of the month. Northern Regional Bank also collected a $5,000.00
notes receivable on August 1st that was issued March 1st at 12% annual interest. No
interest revenue has been accrued on this note and Northern Regional Bank charged a
$35.00 fee for the collection service.The bank statement reveals a bank service charge
of $20.00. A customer check for $68.00 was returned with the bank statement marked
NSF. The ending balance of the Roper cash account is $12,938.00.
Complete a bank/account reconciliation and prepare any necessary journal entries for
the reconciliation.
