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1) Equivalent units of production must be calculated before the unit production costs
can be computed.
2) The process of determining the present value is referred to as discounting the future
amount.
3) The amounts appearing in the Inventory column of the cash payments journal are
posted individually to the accounts in the accounts payable subsidiary ledger.
4) From a creditor's point of view, the higher the total debt to total assets ratio, the
lower the risk that the company may be unable to pay its obligations.
5) Inventory is classified as a current asset in a classified balance sheet.
6) Intracompany comparisons of the same financial statement items can often detect
changes in financial relationships and significant trends.
7) Indirect materials and indirect labor are both inventoriable costs.
8) At the end of the year, the accountant credits the amount of the overapplied overhead
to Cost of Goods Sold.
9) Raw materials inventories are the goods that a manufacturer has completed and are
ready to be sold to customers.
10) The materials price variance is normally caused by the production department.
11) Variations among companies in the application of generally accepted accounting
principles may reduce quality of earnings.
12) Once assets have been invested in the partnership, they are owned jointly by all
partners.
13) An activity index identifies the activity that has a causal relationship with a
particular cost.
14) The use of a worksheet to prepare a statement of cash flows is optional.
15) The effective-interest method of amortization results in varying amounts of
amortization and interest expense per period but a constant interest rate.
16) In a sell or process further decision, management should process further as long as
the incremental revenues from additional processing exceed the incremental variable
costs.
17) The specific identification method of inventory valuation is desirable when a
company sells a large number of low-unit cost items.
18) Control accounts are always located in the general ledger.
19) Which of the following is not a manufacturing cost category?
a.Cost of goods sold
b.Direct materials
c.Direct labor
d.Manufacturing overhead
20) Belle Manufacturing Company employs a job order cost accounting system and
keeps perpetual inventory records. The following transactions occurred in the first
month of operations:
1>Direct materials requisitioned during the month:
Job 101$22,000
Job 10216,000
Job 103 25,000
$63,000
2>Direct labor incurred and charged to jobs during the month was:
Job 101$30,000
Job 10225,000
Job 103 27,000
$82,000
3>Manufacturing overhead was applied to jobs worked on using a predetermined
overhead rate based on 80% of direct labor costs.
4>Actual manufacturing overhead costs incurred during the month amounted to
$64,000.
5>Job 101 consisting of 1,000 units and Job 103 consisting of 200 units were completed
during the month.
Instructions
(a)Prepare journal entries to record the above transactions.
(b)Answer the following questions:
1>How much manufacturing overhead was applied to Job 103 during the month?
2>Compute the unit cost of Jobs 101 and 103 .
3>What is the balance in Work In Process Inventory at the end of the month?
4>Determine if manufacturing overhead was under- or overapplied during the month.
How much?
21) Michelle receives $210,000 and Stephanie receives $140,000 in a split of $350,000
net income. Which expression does not reflect the income splitting arrangement?
a.3:2
b.3/5 & 2/5
c.6:4
d.2:1
22) A one column purchases journal indicates that
a.only purchases of merchandise on account can be recorded
b.all purchases of merchandise can be recorded
c.all acquisitions on account can be recorded
d.another column must be added so that debits and credits can be recorded
23) Media Unlimited makes custom office desks. It can sell semi-finished desks for
$800. Costs incurred to this point total $500. It can finish the desks at an additional cost
of $200 and increase the selling price to $1,100. Media Unlimited should:
a.finish the desks since it will increase profits $100 per desk
b.finish the desks since it will increase profits $300 per desk
c.finish the desks since it will increase profits $600 per desk
d.sell the desks unfinished since finishing the desks will reduce profits
24) If a company uses a multi-column purchases journal, which of the following
possible headings for debit columns of the journal would not be appropriate?
a.Accounts Payable
b.Inventory
c.Supplies
d.Other Accounts
25) Writing off an uncollectible account under the allowance method requires a debit to
a.Accounts Receivable
b.Allowance for Doubtful Accounts
c.Bad Debt Expense
d.Uncollectible Accounts Expense
26) Carver's Pharmacy has collected $900 in sales taxes during March. If sales taxes
must be remitted to the state government monthly, what entry will Carver's Pharmacy
make to show the March remittance?
a.Sales Tax Expense900
Cash900
b.Sales Taxes Payable900
Cash900
c.Sales Tax Expense900
Sales Taxes Payable900
d.No entry required.
27) The standard rate of pay is $11.90 per direct labor hour. If the actual direct labor
payroll was $47,040 for 4,000 direct labor hours worked, the direct labor price (rate)
variance is
a.$540 unfavorable
b.$560 favorable
c.1,190 unfavorable
d.$1,190 favorable
28) Bentley Manufacturings required production for June is 132,000 units. To make one
unit of finished product, three pounds of direct material NG are required. Actual
beginning and desired ending inventories of direct material NG are 300,000 and
320,000 pounds, respectively. How many pounds of direct material NG must be
purchased?
a.376,000
b.396,000
c.456,000
d.416,000
29) Selected accounts of Burns Manufacturing Company at year end appear below:
RAW MATERIALS INVENTORYWORK IN PROCESS INVENTORY
(a)45,000(d)27,000(d)27,000(g)160,000
(e)80,000
(f)105,000
FINISHED GOODS INVENTORYCOST OF GOODS SOLD
(g)160,000(h)135,000(h)135,000
FACTORY LABORMANUFACTURING OVERHEAD
(b)112,000(e)112,000(c)76,000(f)105,000
(e)32,000
Instructions
Explain the probable transaction that took place for each of the items identified by letters
in the accounts. For example:
(a)Raw materials costing $45,000 were purchased.
30) On March 1, 2014, Dick Miles purchased a suit at Kenny's Fine Apparel Store. The
suit cost $600 and Dick used his Kenny credit card. Kenny charges 2% per month
interest if payment on credit charges is not made within 30 days. On April 30, 2014,
Dick had not yet made his payment. What entry should Kenny make on April 30th?
a.Uncollectible Account600
Accounts Receivable600
b.Bad Debt Expense588
Interest Expense12
Accounts Receivable600
c.Accounts Receivable612
Interest Revenue12
Sales Revenue600
d.Accounts Receivable12
Interest Revenue12
31) Stahl Consulting started the year with total assets of $60,000 and total liabilities of
$15,000. During the year, the business recorded $48,000 in catering revenues and
$30,000 in expenses. Stahl made an additional investment of $9,000 and withdrew cash
of $15,000 during the year. The net income reported by Stahl Consulting for the year
was:
a.$3,000
b.$12,000
c.$18,000
d.$27,000
32) If a plant asset is sold before it is fully depreciated,
a.only a gain on disposal can occur
b.only a loss on disposal can occur
c.either a gain or a loss can occur
d.neither a gain nor a loss can occur
33) Listed below are two independent situations involving the disposition of
receivables.
1>Morales Company sells $320,000 of its receivables to Instant Factors, Inc. Instant
Factors assesses a finance charge of 3% of the amount of receivables sold.
Instructions
Prepare the journal entry to record the sale of the receivables on Morales Company's
books.
2>A restaurant is the site for a large company party. The bill totals $3,400 and is
charged by the patron on a Visa credit card.
Instructions
Assume a 3% service fee is charged by Visa. Record the entry for the transaction on the
restaurant's books.
34) The most useful measure for evaluating a manager's performance in controlling
revenues and costs in a profit center is:
a.controllable margin
b.contribution net income
c.contribution gross profit
d.contribution margin
35) The entry to record the issuance of an interest-bearing note credits Notes Payable
for the note's
a.maturity value
b.market value
c.face value
d.cash realizable value
36) Journal entries are required by the depositor for all of the following except
a.collection of a note receivable
b.bank errors
c.bank service charges
d.an NSF check
37) A 90-day note receivable dated May 31 has a maturity date of:
a.August 26
b.August 27
c.August 29
d.August 28
38) Failure to prepare an adjusting entry at the end of the period to record an accrued
expense would cause
a.net income to be understated
b.an overstatement of assets and an overstatement of liabilities
c.an understatement of expenses and an understatement of liabilities
d.an overstatement of expenses and an overstatement of liabilities
39) A variable cost is a cost that
a.varies per unit at every level of activity
b.occurs at various times during the year
c.varies in total in proportion to changes in the level of activity
d.may or may not be incurred, depending on management's discretion
40) The operating cycle of a merchandiser is
a.always one year in length
b.generally longer than it is for a service company
c.about the same as for a service company
d.generally shorter than it is for a service company
41) Kettler Company uses flexible budgets. At normal capacity of 16,000 units,
budgeted manufacturing overhead is: $64,000 variable and $180,000 fixed. If Kettler
had actual overhead costs of $246,000 for 18,000 units produced, what is the difference
between actual and budgeted costs?
a.$4,000 unfavorable
b.$4,000 favorable
c.$6,000 unfavorable
d.$6,000 favorable
42) The following data are available for Two-off Company.
Increase in accounts payable$120,000
Increase in bonds payable300,000
Sale of investments150,000
Issuance of common stock160,000
Payment of cash dividends90,000
Net cash provided by financing activities is:
a.$180,000
b.$370,000
c.$360,000
d.$420,000
43) In Jude Company, land decreased $150,000 because of a cash sale for $150,000, the
equipment account increased $60,000 as a result of a cash purchase, and Bonds Payable
increased $120,000 from issuance for cash at face value. The net cash provided by
investing activities is
a.$150,000
b.$210,000
c.$90,000
d.$270,000
44) Vision Company purchased treasury stock with a cost of $16,000 during 2014 .
During the year, the company paid dividends of $20,000 and issued bonds payable for
proceeds of $860,000. Cash flows from financing activities for 2014 total
a.$840,000 net cash inflow
b.$856,000 net cash inflow
c.$860,000 net cash outflow
d.$824,000 net cash inflow
45) On January 1, a machine with a useful life of five years and a residual value of
$30,000 was purchased for $90,000. What is the depreciation expense for year 2 under
the double-declining-balance method of depreciation?
a.$21,600
b.$36,000
c.$28,800
d.$17,280
46) In using the net present value approach, a project is acceptable if the project's net
present value is ____________ or _______________.
47) The following information relates to Bonnie Billy Co. for the year 2014 .
Owners Capital, January 1, 2014 $ 67,000 Advertising expense $6,500
Drawings during 2014 6,000 Rent expense 9,500
Service revenue 65,500 Utilities expense 1,400
Salaries and wages expense 29,000
Instructions
After analyzing the data, prepare an income statement and an owners equity statement
for the year ending December 31, 2014
48) The lower the ______________ to ______________ ratio, the more equity "buffer"
there is available to the creditors.
49) Identify which of the following accounts would have balances on a post-closing
trial balance.
(1)Service Revenue
(2)Income Summary
(3)Notes Payable
(4)Interest Expense
(5)Cash
50) Dominica Corporation is authorized to issue 1,000,000 shares of $1 par value
common stock. During 2012, the company has the following stock transactions.
Jan.15Issued 400,000 shares of stock at $7 per share.
Sept.5Purchased 30,000 shares of common stock for the treasury at $9 per share.
Instructions
Journalize the transactions for Dominica Corporation.
51) The budget components for Krane Industries for the quarter ended June 30 appear
below. Krane sells coffee makers for $12 each. Budgeted production for the next three
months is:
April52,000 units
May92,000 units
June58,000 units
Krane desires to have coffee makers on hand at the end of each month equal to 20
percent of the following months budgeted sales in units. On March 31, Krane had 8,000
completed units on hand. Six pounds of plastic are required for each coffee maker. At
the end of each month, Krane desires to have 10 percent of the following months
production material needs on hand. At March 31, Krane had 36,400 pounds of plastic
on hand. The materials used in production costs $0.60 per pound. Each coffee maker
produced requires 0.10 hours of direct labor.
Instructions
Compute the cost of the plastic inventory at the end of May.
52) Chik Chik Company showed the following balances at the end of its first year:
Cash$ 6,000
Prepaid insurance9,400
Accounts receivable7000
Accounts payable5,600
Notes payable8,400
Owners Capital2,800
Owners Drawings1,400
Revenues44,000
Expenses35,000
What did Chik Chik Company show as total credits on its trial balance?
$51,400
$60,800
$62,200
$70,200
