1) What is interest?
2) A company’s ending inventory of finished goods has a cost of $35,000 and consists
of 750 units. If the overhead applicable to these goods is $8,400, and overhead is
applied at the rate of 60% of direct labor, what is the cost of the direct materials used to
produce these units?
3) __________________________ refer to costs incurred in a period that are both
unpaid and unrecorded. ______________________ refer to revenues earned in a period
that are both unrecorded and not yet received in cash (or other assets).
4) List the steps of the operating cycle for a merchandiser with credit sales.
5) On April 1 of the current year, a company traded an old machine that originally cost
$32,000 and that had accumulated depreciation of $24,000 for a similar new machine
that had a cash price of $40,000.
1> Prepare the entry to record the exchange under the assumption that a $5,000 trade-in
allowance was received and the balance of $35,000 was paid in cash. Assume the
exchange transaction had commercial substance.
2> Prepare the entry to record the exchange under the assumption that instead of a
$5,000 trade-in allowance, a $12,500 trade-in allowance was received and the balance
of $27,500 was paid in cash. Assume the exchange transaction lacked commercial
substance.
6) _______________________ are responsible for and have final authority for
managing a corporation’s activities.
7) Eaton Company had the following long-term available-for-sale securities in its
portfolio at December 31, Year 1. Eaton had several long-term investment transactions
during the next year. After analyzing the effects of each transaction, (1) determine the
amount Eaton should report on its December 31, Year 1 balance sheet for its long-term
investments in available-for-sale securities, (2) determine the amount Eaton should
report on its December 31, Year 2 balance sheet for its long-term investments in
available-for-sale securities, (3) prepare the necessary adjusting entry to record the fair
value adjustment at December 31, Year 2.
8) On August 1, a company issues bonds with a par value of $600,000. The bonds
mature in 10 years, and pay 6% annual interest, payable each February 1 and August 1.
The bonds sold at $632,000. The company uses the straight-line method of amortizing
bond premiums. The company’s year-end is December 31. Prepare the general journal
entry to record the interest accrued at December 31
9) Describe the purpose of a job cost sheet, and explain what information is found on
the job cost sheet.
10) Reed’s net income was $180,000; its total assets were $1,050,000; and its net sales
were $3,500,000. Calculate the company’s profit margin ratio.