1) In general, adjusting entries are required each time financial statements are prepared.
2) A cost item is considered to be controllable if there is not a large difference between
actual cost and budgeted cost for that item.
3) The Sarbanes-Oxley Act replaces generally accepted accounting principles in a
manufacturing company.
4) Internal control is mainly concerned with the amount of authority a supervisor
exercises over a subordinate.
5) Adjusting entries are not necessary if the trial balance debit and credit column
balances are equal.
6) The present value of a bond is a function of two variables: (1) the payment amounts
and (2) the interest (discount) rate.
7) Cost accounting is primarily concerned with accumulating information about product
costs.
8) Depletion expense for a period is only recognized on natural resources that have
been extracted and sold during the period.
9) Consolidated financial statements should be prepared only when a subsidiary
company has a controlling interest in the parent company.
10) Interest expense is reported under Other Expenses and Losses in the income
statement.
11) Which of the following is true with regard to budgetary planning?
a.Generally accepted accounting principles require the budgets be prepared at least
annually
b.The likelihood of a realistic budget is greater when the budget is developed from top
management down to lower management
c.The human behavior aspects of budgeting, while they should not be ignored, are
generally of little real significance
d.The cash budget is often considered to be the most important output in preparing
financial budgets
12) A problem with the monetary unit assumption is that
a.the dollar has not been stable over time
b.the dollar has been stable over time
c.the dollar is a common medium of exchange
d.it is impossible to account for international transactions
13) Selected transactions for the Ecker Company are listed below.
1>Collected accounts receivable.
2>Declared and paid dividends on common stock.
3>Sold long-term investments for cash.
4>Issued stock for equipment.
5>Repaid five year note payable.
6>Paid employee wages.
7>Converted bonds payable to common stock.
8>Acquired long-term investment with cash.
9>Sold buildings and equipment for cash.
10>Sold merchandise to customers.
Instructions
Classify each transaction as either (a) an operating activity, (b) an investing activity, (c)
a financing activity, or (d) a noncash investing and financing activity.
14) The journal entry to record the payroll for a period will include a credit to Salaries
and Wages Payable for the gross
a.amount less all payroll deductions
b.amount of all paychecks issued
c.pay less taxes payable
d.pay less voluntary deductions
15) The direct materials budget contains both quantity and cost data.
16) Ale Corporation had net income of $240,000 and paid dividends to common
stockholders of $40,000 in 2014 . The weighted average number of shares outstanding
in 2014 was 60,000 shares. Ale Corporation’s common stock is selling for $76 per share
on the New York Stock Exchange. Ale Corporation’s price-earnings ratio is
a.3.2 times
b.22.8 times
c.19 times
d.12.7 times
17) A company purchased land for $90,000 cash. Real estate brokers’ commission was
$5,000 and $7,000 was spent for demolishing an old building on the land before
construction of a new building could start. Under the historical cost principle, the cost
of land would be recorded at
a.$107,000
b.$90,000
c.$90,000
d.$102,000
18) Which of the following would not appear as a fixed expense on a selling and
admini-strative expense budget?
a.Freight-out
b.Office salaries
c.Property taxes
d.Depreciation
19) At May 31, 2014, the accounts of Karmann Manufacturing Company show the
following.
1>May 1 inventoriesfinished goods $12,800, work in process $13,500, and raw
materials $8,200.
2>May 31 inventoriesfinished goods $7,300, work in process $21,700, and raw
materials $7,100.
3>Debit postings to work in process were: direct materials $67,600, direct labor
$50,000, and manufacturing overhead applied $43,000.
4>Sales totaled $222,000.
Instructions
(a)Prepare a condensed cost of goods manufactured schedule.
(b)Prepare an income statement for May through gross profit.
20) If 120,000 units are transferred out of a department and there are 10,000 units still
in process at the end of a period, the number of units that were started into production
during the period is
a.130,000
b.120,000
c.110,000
d.10,000
21) A company uses 40,000 gallons of materials for which they paid $7 a gallon. The
materials price variance was $80,000 favorable. What is the standard price per gallon?
a.$2
b.$9
c.$7
d.$5
22) Silver Mt. Zion pays its employees twice a month, on the 7th and the 21st. On June
21, Silver Mt. Zion paid employee salaries of $5,000. This transaction would
a.increase owners equity by $5,000
b.decrease the balance in Salaries and Wages Expense by $5,000
c.decrease net income for the month by $5,000
d.be recorded by a $5,000 debit to Salaries and Wages Payable and a $5,000 credit to
Salaries and Wages Expense
23) From an accounting standpoint, the acquisition of productive facilities can be
thought of as a long-term
a.accrual of expense
b.accrual of revenue
c.accrual of unearned revenue
d.prepayment for services
24) The cash records of Jasmin Company show the following four situations.
1>The June 30 bank reconciliation indicated that deposits in transit total $2,110. During
July the general ledger account Cash shows deposits of $23,620, but the bank statement
indicates that only $23,400 in deposits were received during the month.
2>The June 30 bank reconciliation also reported outstanding checks of $1,250. During
the month of July, Jasmin Company books show that $25,800 of checks were issued.
The bank statement showed that $24,600 of checks cleared the bank in July.
3>In September, deposits per the bank statement totaled $40,100, deposits per books
were $38,100, and deposits in transit at September 30 were $2,900.
4>In September, cash disbursements per books were $36,550, checks clearing the bank
were $37,500, and outstanding checks at September 30 were $3,200.
There were no bank debit or credit memoranda. No errors were made by either the bank
or Jasmin Company.
Instructions
Answer the following questions.
(a) In situation (1), what were the deposits in transit at July 31?
(b) In situation (2), what were the outstanding checks at July 31?
(c) In situation (3), what were the deposits in transit at August 31?
(d) In situation (4), what were the outstanding checks at August 31?
25) In the month of April, a department had 500 units in the beginning work in process
inventory that were 60% complete. These units had $40,000 of materials costs and
$30,000 of conversion costs. Materials are added at the beginning of the process and
conversion costs are added uniformly throughout the process. During April, 10,000
units were completed and transferred to the finished goods inventory and there were
2,000 units that were 25% complete in the ending work in process inventory on April
30 . During April, manufacturing costs charged to the department were: Materials
$1,040,000; Conversion costs $1,020,000.
The cost assigned to the units in the ending work in process inventory on April 30 was
a.$260,000
b.$230,000
c.$180,000
d.$310,000
26) Once a company decides to convert to IFRS, the reporting date is the
a.closing balance sheet date for the first IFRS financial statements
b.beginning of the earliest period for which full comparative IFRS information is
presented
c.end of the period for which full comparative IFRS information is presented
d.beginning of the first IFRS reporting date
27) From a liquidity standpoint, it is more desirable for a company to have current:
a.assets exceed current liabilities
b.liabilities exceed long-term liabilities
c. assets equal current liabilities
d.liabilities exceed current assets
28) The following information is taken from the production budget for the first quarter:
Beginning inventory in units1,200
Sales budgeted for the quarter472,000
Production capacity in units 456,000
How many finished goods units should be produced during the quarter if the company
desires 3,200 units available to start the next quarter?
a.458,000
b.470,000
c.474,000
d.475,200
29) Dawsons Fashions sold merchandise for $40,000 cash during the month of July.
Returns that month totaled $1,000. If the companys gross profit rate is 40%, Murrays
will report monthly net sales revenue and cost of goods sold of
a.$39,000 and $23,400
b.$39,000 and $24,000
c.$40,000 and $23,400
d.$40,000 and $24,000
30) If a company plans to sell 48,000 units of product but sells 55,000, the most
appropriate comparison of the cost data associated with the sales will be by a budget
based on
a.the original planned level of activity
b.54,000 units of activity
c.55,000 units of activity
d.48,000 units of activity
31) The chief accounting officer in a company is known as the
a.controller
b.treasurer
c.vice-president
d.president
32) If Manufacturing Overhead has a credit balance at the end of the period, then
a.overhead has been underapplied
b.the overhead assigned to Work in Process Inventory is less than the overhead incurred
c.overhead has been overapplied
d.management must take corrective action
33) A credit balance in retained earnings represents
a.the amount of cash retained in the business
b.a claim on specific assets of the corporation
c.a claim on the aggregate assets of the corporation
d.the amount of stockholders’ equity exempted from the stockholders’ claim on total
assets
34) Which of the following statements about under- or overapplied manufacturing
overhead is correct?
a.After the entry to transfer over- or underapplied overhead to Cost of Goods Sold is
posted, Manufacturing Overhead will have a zero balance
b.When Manufacturing Overhead has a credit balance, overhead is said to be
under-applied
c.At the end of the year, under- or overapplied overhead is eliminated by a closing entry
d.When annual financial statements are prepared, overapplied overhead is reported in
current liabilities
35) When an account is written off using the allowance method, the
a.cash realizable value of total accounts receivable will increase
b.cash realizable value of total accounts receivable will decrease
c.allowance account will increase
d.cash realizable value of total accounts receivable will stay the same
36) Controllable margin is most useful for
a.external financial reporting
b.preparing the master budget
c.performance evaluation of profit centers
d.break-even analysis
37) On the costs of goods manufactured schedule, depreciation on factory equipment
a.is not listed because it is included with Depreciation Expense on the income statement
b.appears in the manufacturing overhead section
c.is not listed because it is not a product cost
d.is not an inventoriable cost
38) When a partnership terminates business, the sale of noncash assets is called
a.liquidation
b.realization
c.recognition
d.disposition
39) Peyton Manufacturing Co. reported the following information for 2014:
OctoberNovemberDecember
Budgeted sales $1,440,000$1,160,000$1,240,000
All sales are on credit.
Customer amounts on account are collected 50% in the month of sale and 50% in the
following month.
How much cash will Peyton receive in November?
a.$580,000
b.$1,300,000
c.$1,200,000
d.$1,160,000
40) All of the column totals in the cash receipts journal are posted to general ledger
accounts except the
a.Accounts Receivable column total
b.Cash column total
c.Sales column total
d.Other Accounts column total
41) The following information is for Sunny Day Real Estate:
Sunny Day Real Estate
Balance Sheet
December 31, 2014
Cash$ 25,000Accounts Payable$ 60,000
Prepaid Insurance30,000Salaries and Wages Payable15,000
Accounts Receivable50,000Mortgage Payable 85,000
Inventory70,000Total Liabilities160,000
Land Held for Investment85,000
Land120,000
Building$100,000
Less AccumulatedOwners Capital 370,000
Depreciation(20,000)80,000
Trademark 70,000Total Liabilities and
Total Assets$530,000Owners Equity$530,000
The total dollar amount of assets to be classified as current assets is
a.$105,000
b.$175,000
c.$190,000
d.$260,000
42) The expense recognition principle matches
a.customers with businesses
b.expenses with revenues
c.assets with liabilities
d.creditors with businesses
43) At January 1, 2014, the trading securities portfolio held by the Darren Corporation
consisted of the following investments:
1>2,000 shares of Temper common stock purchased for $42 per share.
2>1,500 shares of Logan common stock purchased for $50 per share.
At December 31, 2014, the fair values per share were Temper $38 and Logan $54.
Instructions
(a)Prepare a schedule showing the cost and fair value of the portfolio at December 31,
2014 .
(b)Prepare the adjusting entry to report the portfolio at fair value at December 31,
2014 .
44) The following information is available for Yancey Company:
Beginning inventory600 units at $4
First purchase900 units at $6
Second purchase500 units at $7.20
Assume that Waldrip uses a periodic inventory system and that there are 700 units left
at the end of the month.
Instructions
Compute each of the following under the average-cost method:
(a)Cost of ending inventory.
(b)Cost of goods sold.
45) Timber Ridge Corporation was organized on January 1, 2013 . During its first year,
the corporation issued 40,000 shares of $5 par value preferred stock and 400,000 shares
of $1 par value common stock. At December 31, the company declared the following
cash dividends:
2013$ 8,000
2014$30,000
2015$70,000
Instructions
(a)Show the allocation of dividends to each class of stock, assuming the preferred stock
dividend is 5% and not cumulative.
(b)Show the allocation of dividends to each class of stock, assuming the preferred stock
dividend is 6% and cumulative.
(c)Journalize the declaration of the cash dividend at December 31, 2015 using the
assumption of part (b).
46) A list of accounts and their balances at a given time is called a(n)
a. journal
b. posting
c. trial balance
d.income statement
47) Record the following transactions in general journal form for Karen Heller
Company.
July1Received a $20,000, 8%, 3-month note, dated July 1, from Nancy Freeman in
payment of her open account.
Oct.1Received notification from Nancy Freeman that she was unable to honor her note
at this time. It is expected that Freeman will pay at a later date.
Nov.15Received full payment from Nancy Freeman for her note receivable previously
dishonored.
48) An employee’s net pay consists of gross pay less mandatory and voluntary payroll
deductions. Identify the mandatory payroll deductions and give two or three examples
of common voluntary deductions. Are these deductions recognized as payroll expenses
by the employer? What type of payroll expenses does the employer incur related to
having a payroll?
49) The following amounts were reported by Inuit Company before adjusting its
immaterial overapplied manufacturing overhead of $9,000.
Raw Materials Inventory$ 43,000
Finished Goods Inventory64,000
Work in Process Inventory100,000
Cost of Goods Sold785,000
Instructions
Compute what amount Inuit will report as cost of goods sold after it disposes of its
overapplied overhead.
50) Weller Company purchased a truck for $66,000. The company expected the truck to
last four years or 100,000 miles, with an estimated residual value of $6,000 at the end
of that time. During the second year the truck was driven 27,000 miles. Compute the
depreciation for the second year under each of the methods below and place your
answers in the blanks provided.
Units-of-activity$
Double-declining-balance$
51) 196 .______________, _______________, and _______________ have debit
normal account balances whereas _______________, ________________, and
________________ have credit normal account balances.