1) Greenwond Inc. can make 1,000 units of a necessary component with the following
costs:
Direct Materials$72,000
Direct Labor18,000
Variable Overhead9,000
Fixed Overhead?
The company can purchase the 1,000 units externally for $117,000. The avoidable fixed
costs are $6,000 if the units are purchased externally. An analysis shows that at this
external price, the company is indifferent between making or buying the part. What are
the fixed overhead costs of making the component?
a.$24,000
b.$18,000
c.$12,000
d.Cannot be determined
2) In the month of June, a department had 30,000 units in beginning work in process
that were 70% complete. During June, 80,000 units were transferred into production
from another department. At the end of June there were 10,000 units in ending work in
process that were 40% complete. Materials are added at the beginning of the process,
while conversion costs are incurred uniformly throughout the process. The equivalent
units of production for conversion costs for June were
a.80,000 equivalent units
b.90,000 equivalent units
c.104,000 equivalent units
d.110,000 equivalent units
3) Sweet Baking Company sells professional grade mixers for home use. The machines
carry a 2-year warranty. Past experience indicates that 6% of the units sold will be
returned during the warranty period for repairs. The average cost of repairs under
warranty is $70 for labor and $90 for parts per unit. During 2014, 2,500 mixers were
sold at an average price of $800. During the year, 60 of the machines that were sold
were repaired at the average price per unit.
Instructions
(a)Prepare the journal entry to record the repairs made under warranty.
(b)Prepare the journal entry to record the warranty expense for the year.
4) Top management can control
a.only controllable costs
b.only noncontrollable costs
c.all costs
d.some noncontrollable costs and all controllable costs
5) Abbies Organics Corporation began business in 2014 by issuing 50,000 shares of $3
par common stock for $8 per share and 20,000 shares of 6%, $10 par preferred stock for
par. At year end, the common stock had a market value of $12. On its December 31,
2014 balance sheet, Carson Packaging would report
a.Common Stock of $600,000
b.Common Stock of $150,000
c.Common Stock of $400,000
d.Paid-In Capital of $150,000
6) Lean Foods produces a variety of snack products, including fried pork rinds. The cost
of one batch of pork rinds is below:
Direct materials$12.00
Direct labor10.00
Variable overhead7.00
Fixed overhead9.00
An outside supplier has offered to produce the pork rinds for $25 per batch. How much
will Lean save if it accepts the offer?
a.$3.00 per batch
b.$4.00 per batch
c.$18.00 per batch
d.$13.00 per batch
7) In Henkel Company, 50,000 units are produced and 40,000 units are sold. Variable
manufacturing costs per unit are $8 and fixed manufacturing costs are $120,000. The
cost of the ending finished goods inventory under each costing approach is:
Absorption Variable
Costing Costing
a.$104,000$ 80,000
b. 104,000100,000
c. 112,00080,000
d.1,120,000100,000
8) A corporation issued $500,000 of 8%, 5-year bonds on January 1, at 98 . Interest is
paid semiannually on January 1 and July 1 . If the corporation uses the straight-line
method of amortization, the amount of bond interest expense to be recognized on July 1
is:
a.$19,000
b.$20,000
c.$21,000
d.$38,000
9) At September 1, 2014, Promise Ring Co. reported owners equity of $156,000.
During the month, Promise Ring generated revenues of $38,000, incurred expenses of
$21,000, purchased equipment for $5,000 and withdrew cash of $2,000. What is the
amount of owners equity at September 30, 2014?
a.$166,000
b.$171,000
c.$173,000
d.$176,000
10) An unrealistic budget is more likely to result when it
a.has been developed in a top down fashion
b.has been developed in a bottom up fashion
c.has been developed by all levels of management
d.is developed with performance appraisal usages in mind
11) Managerial accounting is applicable to
a.service entities
b.manufacturing entities
c.not-for-profit entities
d.all of these answer choices
12) After closing entries are posted, the balance in the owner’s capital account in the
ledger will be equal to
a.the beginning owner’s capital reported on the owner’s equity statement
b.the amount of the owner’s capital reported on the balance sheet
c.zero
d.the net income for the period
13) The collection of a $6,000 account within the 2 percent discount period will result
in a
a.debit to Sales Discounts for $120
b.debit to Accounts Receivable for $5,880
c.credit to Cash for $5,880
d.credit to Accounts Receivable for $5,880
14) Which of the following statements concerning financial statement presentation is
not a true statement?
a.Intangibles are reported separately under Intangible Assets
b.The balances of major classes of assets may be disclosed in the footnotes
c.The balances of the accumulated depreciation of major classes of assets may be
disclosed in the footnotes
d.The balances of all individual assets, as they appear in the subsidiary plant ledger,
should be disclosed in the footnotes
15) The Modified Accelerated Cost Recovery System (MACRS) is a depreciation
method which
a.is used for tax purposes
b.must be used for financial statement purposes
c.is required by the SEC
d.expenses an asset over a single year because capital acquisitions must be expensed in
the year purchased
16) Legal capital per share cannot be equal to the
a.par value per share of par value stock
b.total proceeds from the sale of par value stock above par value
c.stated value per share of no-par value stock
d.total proceeds from the sale of no-par value stock
17) Title Products inventory records show the following inventory purchases for its first
year of operations:
UnitsUnit Cost
January 13,000$7.00
May 144,1006.00
October 303,9005.00
A physical inventory on December 31 shows 2,000 units on hand. Under the FIFO
method, how much is the December 31 inventory balance?
a.$12,000
b.$14,000
c.$11,840
d.$10,000
18) The assumption that assumes a company will continue in operation long enough to
carry out its existing objectives is the:
a.economic entity assumption
b.monetary unit assumption
c.time period assumption
d.going concern assumption
19) Which of the following steps in the management decision-making process does not
generally involve the managerial accountant?
a.Determine possible courses of action
b.Make the appropriate decision based on relevant data
c.Prepare internal reports that review the impact of decisions
d.None of these answer choices are correct
20) Saira, Inc. has the following income statement (in millions):
SAIRA, INC.
Income Statement
For the Year Ended December 31, 2014
Net Sales$300
Cost of Goods Sold 180
Gross Profit 120
Operating Expenses 45
Net Income$75
Using vertical analysis, what percentage is assigned to Cost of Goods Sold?
a.40%
b.60%
c.100%
d.None of these answer choices are correct
21) A budget is most likely to be effective if
a.it is used to assess blame when things do not occur according to plans
b.it is not used to evaluate a manager’s performance
c.employees and managers at the lower levels do not get involved in the budgeting
process
d.it has top management support
22) Harvey, Inc. sells a product with a contribution margin of $12 per unit, fixed costs
of $150,000, and sales for the current year of $200,000. How much is Harvey
break-even point?
a.9,200 units
b.$50,000
c.12,500 units
d.4,167 units
23) Each of the following is a disadvantage of buying rather than making a component
of a company’s product except that
a.quality control specifications may not be met
b.the outside supplier could increase prices significantly in the future
c.profitable product lines may be dropped
d.the supplier may not deliver on time
24) Kraust Inc.s direct materials budget shows total cost of direct materials purchases
for April $480,000, May $400,000 and June $560,000. Cash payments are 60% in the
month of purchase and 40% in the following month. The budgeted cash payments for
June are
a.$480,000
b.$464,000
c.$496,000
d.$336,000
25) If a contingent liability is reasonably estimable and it is reasonably possible that the
contingency will occur, the contingent liability
a.should be recorded in the accounts
b.should be disclosed in the notes accompanying the financial statements
c.should not be recorded or disclosed in the notes until the contingency actually
happens
d.must be paid for the amount estimated
26) On July 1, 2014, Jenks Company purchased the copyright to Jackson Computer
tutorials for $324,000. It is estimated that the copyright will have a useful life of 5 years
with an estimated salvage value of $24,000. The amount of Amortization Expense
recognized for the year 2014 would be
a.$64,800
b.$30,000
c.$60,000
d.$32,400
27) When calculating interest on a promissory note with the maturity date stated in
terms of days, the
a.maker pays more interest if 365 days are used instead of 360
b.maker pays the same interest regardless if 365 or 360 days are used
c.payee receives more interest if 360 days are used instead of 365
d.payee receives less interest if 360 days are used instead of 365
28) Delta72 Company received a cash advance of $700 from a customer. As a result of
this event,
a.assets increased by $700
b.owners equity increased by $700
c.liabilities decreased by $700
d.assets and owner’s equity both increased by $700
29) At the beginning of the year, Hunt Company had an inventory of $750,000. During
the year, the company purchased goods costing $2,400,000. If Hunt Company reported
ending inventory of $900,000 and sales of $3,750,000, the companys cost of goods sold
and gross profit rate must be
a.$1,500,000 and 66.7%
b.$2,250,000 and 40%
c.$1,500,000 and 40%
d.$2,250,000 and 60%
30) Which one of the following is correct?
a.Cash flows are used to calculate the internal rate of return
b.Accrual income is used to calculate the payback period
c.Cash flows are used to calculate the annual rate of return
d.Accrual income is used to calculate the net present value
31) The ______________ function is concerned with setting goals and objectives for
the entity.
32) Casa Development, Inc. has budgeted sales revenues as follows:
Budgeted Sales Revenues
January$55,000
February75,000
March90,000
April80,000
May60,000
June35,000
Past experience has indicated that 80% of sales each month are on credit and that
collection of credit sales occurs as follows: 60% in the month of sale, 30% in the month
following the sale, and 5% in the second month following the sale. The other 5% is
uncollectible.
Instructions
Prepare a schedule which shows expected cash receipts from sales for the months of
April, May, and June.
33) On January 1, 2014, Muddle Inc. entered into an agreement to lease equipment
from Albert Corporation. The lease agreement requires five annual rental payments of
$90,000 beginning December 31, 2014 . The present value of the rental payments is
$342,117. The lease transfers substantially all the benefits and risks of ownership to
Muddle.
Instructions
Prepare the entry to record the lease agreement on the books of Malcolm Inc. on
January 1, 2014 .
34) A plant asset originally cost $64,000 and was estimated to have a $4,000 salvage
value at the end of its 5-year useful life. If at the end of three years, the asset was sold
for $12,000, and had accumulated depreciation recorded of $36,000, the company
should recognize a ______________ on disposal in the amount of $____________.
35) Sales resulting from the use of Visa and MasterCard are considered
______________ by the retailer.
36) Identify which of the following accounts would appear in a post-closing trial
balance.
Accumulated DepreciationEquipmentOwners Drawings
Depreciation ExpenseService Revenue
Interest PayableEquipment
37) The accounting profession provides many career opportunities for individuals.
Identify the major fields that exist in accounting and comment on the major functions
performed by individuals in each of these areas.