1) The purchases journal is used to record purchases of merchandise on credit.
2) Both financial and managerial accounting rely on accepted principles that are
enforced through an extensive set of rules and guidelines.
3) Product costs can be classified as one of three types: direct materials, direct labor, or
overhead.
4) Process costing systems are commonly used by companies that manufacture
standardized products by passing them through a series of manufacturing steps.
5) Prior to recording adjusting entries at the end of an accounting period, some accounts
may not show correct balances even though all transactions were properly recorded.
6) Clearly establishing responsibilities and assigning all accounting activities to one
person is an important principle of internal control.
7) A copyright gives its owner the exclusive right to publish and sell a musical, literary,
or artistic work during the life of the creator plus 17 years.
8) Each adjusting entry affects one or more income statements account, one or more
balance sheet account, and never cash.
9) Process and job order manufacturing operations both combine materials, labor, and
overhead items in the process of producing products.
10) If actual overhead incurred during a period exceeds applied overhead, the difference
will be a credit balance in the Factory Overhead account at the end of the period.
11) Depreciation is higher in earlier years and income is lower in the later years when
using straight-line versus accelerated methods.
12) An external transaction is an exchange within an entity that may or may not affect
the accounting equation.
13) A materials requisition is a source document used by production managers to
request materials for production and also used to assign materials costs to specific jobs
or to overhead.
14) The concept of total quality management focuses on continuous improvement.
15) The current ratio is calculated as current liabilities divided by current assets.
16) EXP, Inc. had the following activities during its most recent period of operations:
(a) Purchased raw materials on account for $140,000 (both direct and indirect materials
are recorded in the Raw Materials Inventory account).
(b) Issued raw materials to production of $130,000 (80% direct and 20% indirect).
(c) Incurred factory labor costs of $250,000; allocated the factory labor costs to
production (70% direct and 30% indirect).
(d) Incurred factory utilities costs of $20,000; this amount is still payable.
(e) Applied overhead at 80% of direct labor costs.
(f) Recorded factory depreciation, $22,000.
Prepare journal entries to record the above transactions.
17) Costs that flow directly to the income statement as expenses are called:
A.Period costs.
B.Product costs.
C.General costs.
D.Balance sheet costs.
E.Capitalized costs.
18) Fernwood Company is preparing the company’s statement of cash flows for the
fiscal year just ended. The following information is available:
The ending balance in retained earnings is:
A.$343,000.
B.$213,000.
C.$293,000.
D.$297,500.
E.$301,000.
19) Which of the following characteristics does not usually apply to process operations
systems?
A.Each unit of product is separately identifiable.
B.Partially completed products are transferred between processes.
C.Different managers are responsible for different processes.
D.The output of all processes except the final process is an input to the next process.
E.Costs are computed using equivalent units.
20) A bank statement provided by the bank includes:
A.A list of outstanding checks.
B.A list of petty cash amounts.
C.The beginning and the ending balance of the depositor’s account.
D.A listing of deposits in transit.
E.A reconciliation to the depositor cash account.
21) On April 1, Griffith Publishing Company received $1,548 from Santa Fe, Inc. for
36-month subscriptions to several different magazines. The company credited Unearned
Fees for the amount received and the subscriptions started immediately. What is the
adjusting entry that should be recorded by Griffith Publishing Company on December
31 of the second year?
A.debit Unearned Fees, $1,548; credit Fees Earned, $1,548.
B.debit Unearned Fees, $516; credit Fees Earned, $516.
C.debit Unearned Fees, $1,161; credit Fees Earned, $1,161.
D.debit Unearned Fees, $129; credit Fees Earned, $129.
E.debit Unearned Fees, $387; credit Fees Earned, $387.
22) A company purchased a mineral deposit for $800,000. It expects this property to
produce 120,000 tons of minerals and to have a salvage value of $50,000. In the current
year, the company mined and sold 9,000 tons of minerals. Its depletion expense for the
current period equals:
A.$15,000.
B.$60,000.
C.$150,000.
D.$56,250.
E.$139,500.
23) A flexible budget performance report compares the differences between:
A.Actual performance and budgeted performance based on actual sales volume.
B.Actual performance over several periods.
C.Budgeted performance over several periods.
D.Actual performance and budgeted performance based on budgeted sales volume.
E.Actual performance and standard costs at the budgeted sales volume.
24) A bond traded at 102½ means that:
A.The bond pays 2.5% interest.
B.The bond traded at 102.5% of its par value.
C.The market rate of interest is 2.5%.
D.The bonds were retired at $1,025 each.
E.The market rate of interest is 2½% above the contract rate.
25) Using the information below, compute the raw materials inventory turnover:
A.11.02.
B.382.02.
C.10.06.
D.9.94.
E.9.50.
26) The investee company in a long term investment with controlling interest is called
the:
A.Owner.
B.Subsidiary.
C.Parent.
D.Creditor.
E.Senior entity.
27) A company’s transactions with its creditors to borrow money and/or to repay the
principal amounts of both short- and long-term debt are reported as cash flows from:
A.Operating activities.
B.Investing activities.
C.Financing activities.
D.Direct activities.
E.Indirect activities.
28) The F. Mercury, Capital account has a credit balance of $37,000 before closing
entries are made. Total revenues for the period are $55,200, total expenses are $39,800,
and withdrawals are $9,000. What is the correct closing entry for the revenue accounts?
A.Debit Income Summary $55,200; credit Revenue accounts $55,200.
B.Debit Revenue accounts $37,000; credit F. Mercury, Capital $37,000.
C.Debit Revenue accounts $55,200; credit F. Mercury, Capital $37,000.
D.Debit Revenue accounts $55,200; credit Income Summary $55,200.
E.Debit Income Summary $37,000; credit F. Mercury Capital $37,000.
29) Which of the following statements is true?
A.Partners are employees of the partnership.
B.Salaries to partners are expenses on the partnership income statement.
C.Salary allowances usually reflect the relative value of services provided by partners.
D.Salary allowances are expenses.
E.Interest allowances are expenses.
30) If a company is considering the purchase of a parcel of land that was acquired by
the seller for $85,000, is offered for sale at $150,000, is assessed for tax purposes at
$95,000, is recognized by the purchaser as easily being worth $140,000, and is
purchased for $137,000, the land should be recorded in the purchaser’s books at:
A.$95,000.
B.$137,000.
C.$138,500.
D.$140,000.
E.$150,000.
31) Prepare the required general journal entries to record the following transactions for
the Ringer Company.
a. Purchased $40,000 of raw materials on account.
b. Used $12,000 of direct materials in the production department.
c. Used $5,000 of indirect materials.
32) On December 31, Chu Company had performed $3,000 of management services for
clients that had not yet been billed. Prepare Chu’s adjusting entry to record these fees
earned.
33) The following adjusted trial balance is for Carla Co. at year-end December 31. The
credit balance in Carla West, Capital at the beginning of the year, January 1, was
$320,000. The owner, Carla West, invested an additional $100,000 during the current
year. The land held for future expansion was also purchased during the current year.
Required: Prepare a classified balance sheet as of December 31. (Note: A $21,000
installment on the long-term note payable is due within one year.)
34) Capital expenditures that extend an asset’s useful life beyond its original estimate
are called _______________________.
35) Use the following information to prepare the schedule of cost of goods
manufactured for Graffstone Company for the month ended June 30.
36) The Saginaw Company uses special journals for sales, purchases, cash receipts,
cash disbursements, and uses a general journal. They operate with a perpetual inventory
system. Record the following transactions related to sales and cash receipts that
occurred during the month of August:
Record the above transactions into the appropriate journals that follow.
37) A company’s predetermined overhead rate is applied at 150% of direct materials
cost. How much overhead would be allocated to Job No. 325 if the total direct materials
costs was $40,000?
38) _____________________ is a general term that refers to any shares issued to obtain
owner financing in a corporation.