1) Differences between a job order cost system and a process cost system include all of
the following except the
a.documents used to track costs
b.point at which costs are totaled
c.unit cost computations
d.flow of costs
2) Henson Company incurred $600,000 of research and development costs in its
laboratory to develop a new product. It spent $90,000 in legal fees for a patent granted
on January 2, 2014 . On July 31, 2014, Henson paid $60,000 for legal fees in a
successful defense of the patent. What is the total amount that should be debited to
Patents through July 31, 2014?
a.$600,000
b.$150,000
c.$750,000
d.Some other amount
3) Under IFRS, the statement of comprehensive income can be prepared under
a.the one-statement approach only
b.the two-statement approach only
c.either the one-statement approach or the two-statement approach
d.either the two-statement approach or the stockholders’ equity statement approach
4) On Friday of each week, Spoon Company pays its factory personnel weekly wages
amounting to $45,000 for a five-day work week.
Instructions
(a)Prepare the necessary adjusting entry at year end, assuming December 31 falls on
Wednesday.
(b)Prepare the journal entry for payment of the week’s wages on the payday which is
Friday, January 2 of the next year.
5) The cumulative effect of the declaration and payment of a cash dividend on a
company’s financial statements is to
a.decrease total liabilities and stockholders’ equity
b.increase total expenses and total liabilities
c.increase total assets and stockholders’ equity
d.decrease total assets and stockholders’ equity
6) All of the following are property, plant, and equipment except
a.supplies
b.machinery
c.land
d.buildings
7) Notes or accounts receivables that result from sales transactions are often called
a.sales receivables
b.non-trade receivables
c.trade receivables
d.merchandise receivables
8) The maintenance department of a manufacturing company is a(n)
a.segment
b.profit center
c.cost center
d.investment center
9) Perry Company has beginning work in process inventory of $216,000 and total
manufacturing costs of $954,000. If cost of goods manufactured is $960,000, what is
the cost of the ending work in process inventory?
a.$208,000
b.$210,000
c.$216,000
d.$204,000
10) The balance sheet presentation of an unrealized loss on an available-for-sale
security is similar to the statement presentation of
a.treasury stock
b.discount on bonds payable
c.allowance for doubtful accounts
d.prepaid expenses
11) Which of the following employees would likely receive a salary instead of wages?
a.Store clerk
b.Factory employee
c.Sales manager
d.Manual laborer
12) Able Towing Company purchased a tow truck for $180,000 on January 1, 2014 . It
was originally depreciated on a straight-line basis over 10 years with an assumed
salvage value of $36,000. On December 31, 2016, before adjusting entries had been
made, the company decided to change the remaining estimated life to 4 years (including
2016) and the salvage value to $5,000. What was the depreciation expense for 2016?
a.$18,000
b.$14,400
c.$45,000
d.$36,550
13) Presented below are the basic assumptions and principles underlying financial
statements.
a.Historical cost principled.Going concern assumption
b.Economic entity assumptione.Monetary unit assumption
c.Full disclosure principlef.Periodicity assumption
Identify the basic assumption or principle that is described below.
_____1>The economic life of a business can be divided into artificial time periods.
_____2>The business will continue in operation long enough to carry out its existing
objectives.
_____3>Assets should be recorded at their cost.
_____4>Economic events can be identified with a particular unit of accountability.
_____5>Circumstances and events that make a difference to financial statement users
should be disclosed.
_____6>Only transaction data that can be expressed in terms of money should be
included in the accounting records.
14) Carter Company estimates its sales at 30,000 units in the first quarter and that sales
will increase by 6,000 units each quarter over the year. It has, and desires, a 25% ending
inventory of finished goods. Each unit sells for $25. 40% of the sales are for cash. 70%
of the credit customers pay within the quarter. The remainder is received in the quarter
following sale. Production in units for the third quarter should be budgeted at:
a.34,500
b.36,000
c.43,500
d.45,750
15) Which one of the following is not a part of an account?
a.Credit side
b.Trial balance
c.Debit side
d.Title
16) The balance of a control account in the general ledger:
a.must always be zero
b.must equal the composite balance of individual accounts in a related subsidiary ledger
c.must equal the amount of total assets
d.is always greater than the composite balance of individual accounts in a related
subsidiary ledger
17) Kill Corporations unadjusted trial balance includes the following balances (assume
normal balances):
Accounts Receivable$850,000
Allowance for Doubtful Accounts15,000
Bad debts are estimated to be 6% of outstanding receivables. What amount of bad debt
expense will the company record?
a.$15,000
b.$36,000
c.$50,100
d.$51,000
18) Given the following costs for Harper Company, classify each cost as variable, fixed,
or mixed.
Total Cost at
4,000 Units6,000 Units
Cost A$12,300$16,650
Cost B17,20025,800
Cost C13,00013,000
a.Cost A and Cost B are variable; Cost C is fixed
b.Cost A is variable; Cost B is mixed; Cost C is fixed
c.Cost A and Cost B are mixed; Cost C is fixed
d.Cost A is mixed; Cost B is variable; Cost C is fixed
19) The Fair Value Adjustment account
a.is set up for each security in the company’s portfolio
b.relates to the entire portfolio of securities held by the company
c.is closed at the end of each accounting period
d.appears on the income statement as Other Expenses and Losses
20) At December 1, 2014, Cursive Companys accounts receivable balance was $1,800.
During December, Cursive had credit sales of $7,200 and collected accounts receivable
of $6,000. At December 31, 2012, the accounts receivable balance is
a.$600 debit
b.$3,000 debit
c.$600 credit
d.$3,000 credit
21) Landon Company has two production departments, Fabricating and Assembling. At
a department managers’ meeting, the controller uses flexible budget graphs to explain
total budgeted costs. Separate graphs based on direct labor hours are used for each
department. The graphs show the following.
1>At zero direct labor hours, the total budgeted cost line and the fixed cost line
intersect the vertical axis at $100,000 in the Fabricating Department, and $80,000 in the
Assembling Department.
2>At normal capacity of 100,000 direct labor hours, the line drawn from the total
budgeted cost line intersects the vertical axis at $360,000 in the Fabricating
Department, and $290,000 in the Assembling Department.
Instructions
(a)State the total budgeted cost formula for each department.
(b)Compute the total budgeted cost for each department, assuming actual direct labor
hours worked were 104,000 and 94,000, in the Fabricating and Assembling
Departments, respectively.
22) On a bank reconciliation, deposits in transit are
a.added to the bank balance
b.deducted from the bank balance
c.added to the book balance
d.deducted from the book balance
23) If a company has an acid-test ratio of 1.2:1, what respective effects will the
borrowing of cash by short-term debt and collection of accounts receivable have on the
ratio?
Short-term BorrowingCollection of Receivable
a.IncreaseNo effect
b.IncreaseIncrease
c.DecreaseNo effect
d.DecreaseDecrease
24) On July 7, 2014, Hidden Comera Enterprises performed cash services of $1,700.
The entry to record this transaction would include
a.a debit to Service Revenue of $1,700
b.a credit to Accounts Receivable of $1,700
c.a debit to Cash of $1,700
d.a credit to Accounts Payable of $1,700
25) Which of the following are the same under both GAAP and IFRS?
a.The account
b.Debit and credit rules
c.Steps in the recording process
d.All of these answer choices are correct
26) The relationship between current liabilities and current assets is
a.useful in determining income
b.useful in evaluating a company’s liquidity
c.called the matching principle
d.useful in determining the amount of a company’s long-term debt
27) A journal provides
a.the balances for each account
b.information about a transaction in several different places
c.a list of all accounts used in the business
d.a chronological record of transactions
28) A $600,000 bond was retired at 98 when the carrying value of the bond was
$590,000. The entry to record the retirement would include a
a.gain on bond redemption of $10,000
b.loss on bond redemption of $10,000
c.loss on bond redemption of $2,000
d.gain on bond redemption of $2,000
29) If a company must expand capacity to accept a special order, it is likely that there
will be
a.an increase in unit variable costs
b.no increase in fixed costs
c.an increase in variable and fixed costs per unit
d.an increase in fixed costs
30) Use the following table,
Present Value of an Annuity of 1
Period 8% 9% 10%
1.926.917.909
21.7831.7591.736
32.5772.5312.487
A company has a minimum required rate of return of 8% and is considering investing in
a project that costs $68,337 and is expected to generate cash inflows of $27,000 each
year for three years. The approximate internal rate of return on this project is
a.8%
b.9%
c.10%
d.less than the required 8%
31) Depreciation is the process of allocating the cost of a plant asset over its service life
in
a.an equal and equitable manner
b.an accelerated and accurate manner
c.a systematic and rational manner
d.a conservative market-based manner
32) The time period assumption is also referred to as the
a.calendar assumption
b.cyclicity assumption
c.periodicity assumption
d.fiscal assumption
33) Reconciling the bank statement monthly is an example of
a.segregation of duties
b.independent internal verification
c.establishment of responsibility
d.documentation procedures
34) Hogan Company uses the direct method in determining net cash provided by
operating activities, During the year, operating expenses were $295,000, prepaid
expenses increased $23,000, and accrued expenses payable increased $33,000. Cash
payments for operating expenses were
a.$39,000
b.$51,000
c.$305,000
d.$285,000
35) Information in a companys first IFRS statements must include each of the following
except
a.be transparent
b.provide a suitable starting point
c.have a cost that does not exceed the benefits
d.explain differences between IFRS and GAAP statements
36) Adjusting entries are prepared from
a.source documents
b.the adjustments columns of the worksheet
c.the general ledger
d.last year’s worksheet
37) Ron’s Quik Shop bought machinery for $75,000 on January 1, 2014 . Ron estimated
the useful life to be 5 years with no salvage value, and the straight-line method of
depreciation will be used. On January 1, 2015, Ron decides that the business will use
the machinery for a total of 6 years. What is the revised depreciation expense for 2015?
a.$12,000
b.$ 6,000
c.$10,000
d$15,000
38) Eneri Company’s inventory records show the following data:
UnitsUnit Cost
Inventory, January 110,000$9.20
Purchases:June 189,0008.00
November 86,0007.00
A physical inventory on December 31 shows 4,000 units on hand. Eneri sells the units
for $13 each. The company has an effective tax rate of 20%. Eneri uses the periodic
inventory method. What is the cost of goods available for sale?
a.$169,200
b.$178,000
c.$206,000
d.$325,000
39) The basic accounting entries for merchandising are
a.the same under GAAP and under IFRS
b.required under GAAP but not under IFRS
c.required under IFRS but not under GAAP
d.required under IFRS with some differences as compared to GAAP
40) The important end-product of the operating budgets is the
a.budgeted income statement
b.cash budget
c.production budget
d.budgeted balance sheet
41) Sun Company computes variances as a basis for evaluating the performance of
managers responsible for controlling costs. For several months, the labor quantity
variance has been unfavorable. Briefly explain what could be causing the unfavorable
labor quantity variance and indicate what type of corrective action, if any, might be
taken.
42) On May 1, Southern Oil Corporation purchased 2,000 shares of its $10 par value
common stock at a cash price of $17/share. On July 15, 900 shares of the treasury stock
were sold for cash at $17/share.
Instructions
Journalize the two transactions.
43) What is a contingent liability? Give an example of a contingent liability that is
usually recorded in the accounts.
44) Your roommate is curious about the features of process cost accounting. Identify
and explain the distinctive features for your roommate.
45) From the account balances listed below, prepare a schedule of cost of goods
manufactured for Eileen Manufacturing Company for the month ended December 31,
2014 .
Account Balances
Finished Goods Inventory, December 31$42,000
Factory Supervisory Salaries14,000
Income Tax Expense18,000
Raw Materials Inventory, December 113,000
Work In Process Inventory, December 3113,000
Sales Salaries Expense14,000
Factory Depreciation Expense6,000
Finished Goods Inventory, December 135,000
Raw Materials Purchases97,000
Work In Process Inventory, December 125,000
Factory Utilities Expense8,000
Direct Labor75,000
Raw Materials Inventory, December 3118,000
Sales Returns and Allowances5,000
Indirect Labor22,000
46) Banks that issue credit cards generally charge retailers a fee of 2 to 4% of the
amount of sale. List reasons why companies are willing to pay these fees.
47) Gaston Company began business on October 1 . The partial sales journal, as it
appeared at the end of the month, follows:
SALES JOURNALPage 1
InvoicePost.
DateAccount DebitedNumberRef.Amount
Oct.5Robin Pryor1001375
11Ted Haag1002335
16Robin Pryor1003718
19Betty Frye1004147
26Nancy Sloan10051,184
2,759
1>Open general ledger T-accounts for Accounts Receivable (No. 112) and Sales
Revenue (No. 401) and an accounts receivable subsidiary T-account ledger with an
account for each customer. Make the appropriate postings from the sales journal. Fill in
the appropriate posting references in the sales journal above.
2>Prove the accounts receivable subsidiary ledger by preparing a schedule of accounts
receivable.