1) Prime costs are the combination of direct materials and direct labor costs.
2) The accounting for defined benefit plans is usually very easy and straight forward.
3) Separating the responsibilities for purchasing, receiving, and paying for equipment is
an example of the control procedure: separating operations, custody of assets, and
accounting.
4) Use of a plantwide factory overhead rate distorts product costs when there are
differences in the factory overhead rates across different production departments and
when products require different ratios of allocation-base usage in each production
department.
5) Direct labor hours is not a cost pool that is regularly used in the activity-based
costing method.
6) Conversion costs are usually incurred evenly throughout a process.
7) If a proposed expenditure of $70,000 for a fixed asset with a 4-year life has an
annual expected net cash flow and net income of $32,000 and $12,000, respectively, the
cash payback period is 2.5 years.
8) If the bonds are purchased between interest dates, the purchase price includes
accrued interest since the last interest payment.
9) A company is considering purchasing a machine for $21,000. The machine will
generate income from operations of $2,000; annual cash flows from the machine will be
$3,500. The payback period for the new machine is 10.5 years.
10) Most companies invest excess cash in bonds as investments in order to profit
long-term from the growth of the investment.
11) The primary accounting tool for controlling and reporting for cost centers is a
budget.
12) If the totals of the Income Statement debit and credit columns of a work sheet are
$27,000 and $29,000, respectively, after all account balances have been extended, the
amount of the net loss is $2,000.
13) It is beneficial for divisions in a company to negotiate a transfer price when the
supplying division has unused capacity in its plant.
14) The flexible budget is, in effect, a series of static budgets for different levels of
activity.
15) If the straight-line method of amortization of discount on bonds payable is used, the
amount of yearly interest expense will increase as the bonds approach maturity.
16) The balance of the Allowance for Doubtful Accounts is added to Accounts
Receivable on the balance sheet.
17) When no-par stock is issued, the Common Stock account is credited for the selling
price of the stock issued.
18) Unsold consigned merchandise should be included in the consignee’s inventory.
19) A process whereby the effect of fluctuations in the level of activity is built into the
budgeting system is referred to as flexible budgeting.
20) 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 $200,000 for the 5 years.
The expected average rate of return on investment is 25.0%.
21) The amount of a promissory note is called the
A.realizable value
B.maturity value
C.face value
D.proceeds
22) The expected average rate of return for a proposed investment of $4,800,000 in a
fixed asset, using straight line depreciation, with a useful life of 20 years, no residual
value, and an expected total net income of $10,560,000 is:
A.24%
B.22%
C.45%
D.10%
23) Scoresby Co. uses 3 machine hours and 1 direct labor hour to produce Product X. It
uses 4 machine hours and 8 direct labor hours to produce Product Y. Scoresby’s
Assembly and Finishing Departments have factory overhead rates of $240 per machine
hour and $160 per direct labor hour, respectively. How much overhead cost will be
charged to the two products?
A.Product X = $1,600; Product Y = $4,800
B.Product X = $400; Product Y = $400
C.Product X = $880; Product Y = $2,240
D.Product X = $720; Product Y = $1,280
24) The aspects of the management process are listed below. Match each phase to the
appropriate description.
Planning
Directing
Controlling
Improving
Decision making
a) Used by managers for continuous improvement
b) Managers must decide how to respond to unfavorable performances
c) Used by management to develop the organizations objectives and goals
d) Monitoring the operating results of implemented plans and comparing actual results
e) Managers run their day to day activities
25) A disadvantage of the corporate form of business entity is
A.mutual agency for stockholders
B.unlimited liability for stockholders
C.corporations are subject to more governmental regulations
D.the ease of transfer of ownership
26) In contribution margin analysis, the increase or decrease in unit sales price or unit
cost on the number of units sold is referred to as the:
A.sales factor
B.cost of goods sold factor
C.quantity factor
D.unit price or unit cost factor
27) Identify which of the following accounts should be closed with a debit or a credit to
Income Summary at the end of the fiscal year. If it is not closed to Income Summary,
mark as n/a.
1> Utilities Payable
2> Utilities Expense
3> Supplies
4> Supplies Expense
5> Fees Earned
6> Unearned Fees
7> Accounts Receivable
8> Dividends
9> Capital Stock
10> Accumulated Depreciation – Equipment
11> Depreciation Expense – Equipment
12> Equipment
13> Prepaid Insurance
14> Insurance Expense
15> Retained Earnings
28) The recording of the jobs completed would include a debit to:
A.Factory Overhead
B.Finished Goods
C.Work in Process
D.Cost of Goods Sold
29) All of the following can be used as an allocation base for calculating factory
overhead rates except:
A.direct labor dollars
B.direct labor hours
C.machine hours
D.total overhead costs
30) Which one of the accounts below would likely be included in an accrual adjusting
entry?
A.Insurance Expense
B.Prepaid Rent
C.Interest Expense
D.Unearned Rent
31) The following information was taken from Slater Companys balance sheet:
Determine the companys (a) Ratio of fixed assets to long-term liabilities, and (b) ratio
of liabilities to stockholders equity. Round your answer to one decimal place.
32) Which one of the following is not a characteristic generally evaluated in ratio
analysis?
A.liquidity
B.profitability
C.solvency
D.marketability
33) When goods are shipped FOB destination and the seller pays the freight charges, the
buyer
A.journalizes a reduction for the cost of the merchandise
B.journalizes a reimbursement to the seller
C.does not take a discount
D.makes no journal entry for the freight
34) Goshawks Co. produces an automotive product and incurs total manufacturing costs
of $2,600,000 in the production of 80,000 units. The company desires to earn a profit
equal to a 12% rate of return on assets of $960,000. Total selling and administrative
expenses are $105,000.
Round your markup percentage to one decimal place, and other intermediate
calculations and final answer to two decimal places.
35) Of the following, which istrue about assets?
A.Assets include physical items and intangibles that have value
B.Assets include only physical items of value
C.Assets are owned solely by the stockholders of the company
D.Assets are the result of selling products or services to customers
36) a) The aging of Torme Designs shown below. Calculate the amount of each
periodicity range that is deemed to be uncollectible.
b) If the Allowance for Doubtful Accounts has a credit balance of $1,135.00, record the
adjusting entry for the bad debt expense for the year.
37) Which of the following is the most desirable quick ratio?
A.2.20
B.1.80
C.1.95
D.1.50
38) When a company uses the allowance method of accounting for uncollectible
receivables, which entry would not be found in the general journal?
A.Bad Debt Expense 500
Allowance for Doubtful Accounts 500
B.Bad Debt Expense 500
Accounts Receivable – Bob Smith 500
C.Cash 300
Allowance for Doubtful Accounts 200
Accounts Receivable – Bob Smith 500
D.Cash 500 Accounts Receivable – Bob Smith 500
39) Merchandise with a list price of $4,700 is purchased on account, terms FOB
shipping point, 1/10, n/30. The seller prepaid freight costs of $100. Prior to payment,
$1,400 of the merchandise is returned. The correct amount is paid within the discount
period.
Record the foregoing transactions of the buyer in the sequence indicated below,
assuming a perpetual inventory system is used.
(a) Purchased the merchandise.
(b) Recorded receipt of the credit memo for merchandise returned.
(c) Paid the amount owed.
40) Hakik Enterprises offers rug cleaning services to business clients. Below is the
work sheet containing the trial balance for the month ended July 31, 2012.
Enter the adjustments in the work sheet based on the data provided below. Then enter
the adjusted account balances in the Adjusted Trial Balance columns.
a) The equipment is estimated to last for 5 years with no salvage value. The asset will
be depreciated evenly over its useful life. Record one months depreciation.
b) Accrued wages, $2.
c) Unused supplies on hand, $8.
d) Of the unearned revenue, 75% has been earned.
e) Unexpired insurance remaining at the end of the month, $9.
41) The post-closing trial balance differs from the adjusted trial balance in that it
A.does not take into account closing entries
B.does not take into account adjusting entries
C.does not include balance sheet accounts
D.does not include income statement accounts
42) Which of the following accounts would be included in the chart of accounts of a
merchandising company using the: (a) periodic inventory system, (b) perpetual
inventory system, or (c) both systems?
(1) Sales Discounts
(2) Merchandise Inventory
(3) Sales
(4) Purchases Discounts
(5) Cost of Merchandise Sold
(6) Freight In
(7) Delivery Expense
(8) Sales Returns and Allowances
43) Adjusting entries always include
A.only income statement accounts
B.only balance sheet accounts
C.the cash account
D.at least one income statement account and one balance sheet account
44) The following data were taken from the annual reports of Jong Inc., a manufacturer
of fireworks, and Hobson Inc., a manufacturer of computers.
(a) Determine the (1) inventory turnover and (2) number of days sales in inventory for
Jong and Hobson. Round your answer to two decimal places.
(b) How would you expect these measures to compare between the companies? Why?
45) Decisions to install new equipment, replace old equipment, and purchase or
construct a new building are examples of
A.sales mix analysis.
B.variable cost analysis.
C.capital investment analysis.
D.variable cost analysis.
46) Which of the following products probably would be manufactured using a job order
costing system?
A.Number 2 pencils
B.Computer monitors
C.Wedding invitations
D.Paper
47) The number of times interest expense is earned is computed as
A.net income plus interest expense, divided by interest expense
B.income before income tax plus interest expense, divided by interest expense
C.net income divided by interest expense
D.income before income tax divided by interest expense
48) Ruben Company purchased $100,000 of Evans Company bonds at 100 plus $1,500
in accrued interest. The bond interest rate is 8% and interest is paid semi-annually. The
journal entry to record the receipt of interest on the next interest payment date would
be:
A.Debit: Cash $4,000; Credit: Interest Revenue $4,000
B.Debit: Cash $4,000; Credit: Interest Receivable $4,000
C.Debit: Cash $4,000; Credit: Interest Receivable $1,500 and Interest Revenue $2,500
D.Debit: Cash $2,500; Credit: Interest Revenue $2,500
49) Which of the following are the two main types of cost accounting systems for
manufacturing operations?
A.Process cost and general accounting systems
B.Job order cost and process cost systems
C.Job order and general accounting systems
D.Process cost and replacement cost systems
50) Which of the following entries records the receipt of cash for two months’ rent? The
cash was received in advance of providing the service.
A.Prepaid Rent, debit; Rent Revenue, credit
B.Cash, debit; Unearned Rent, credit
C.Cash, debit; Prepaid Rent, credit
D.Cash, debit; Rent Expense credit
51) The payroll register of Seaside Architecture Company indicates $870 of Social
Security and $217 of Medicare tax withheld on total salaries of $14,500 for the period.
Assume earnings subject to state and federal unemployment compensation taxes are
$5,250. at the federal rate of 0.8% and state rate of 5.4%. Provide the journal entry to
record the payroll tax expense for the period.
52) Discuss how job order cost information is used in decision making. What are some
possible reasons that actual cost of materials would exceed expected costs for a job?
53) The end-of-period spreadsheet (work sheet) for the current year for Jamal Company
shows Balance Sheet columns with a debit total of $630,430 and a credit total of
$614,210. This is before the amount for net income or net loss has been included. In
preparing the income statement from work sheet, what is the amount of net income or
net loss?
54) On March 25, 2014, Patton Company sold merchandise on account,$10,000. The
applicable sales tax percentage is 8.5%. Record the transaction.
55) Accompanying a bank statement for Marsh Land Properties is a credit memo for
payment on a $15,000 note receivable that had been collected by the bank. The rate of
interest on the note is 6%. Marsh Land Properties had been notified by the bank at the
time of collection, but had made no entries. Journalize the entry that should be made by
Marsh Land to bring the accounting records up to date.