1) Activity cost pools are not a necessary part of the allocation of overhead costs using
activity-based costing.
2) If a U.S. company’s credit sale to an international customer allows payment to be
made in a foreign currency, the sale transaction is recorded using the exchange rate on
the date of sale.
3) An advantage of online processing is that databases are updated in batches.
4) Horizontal analysis is used to reveal patterns in data covering successive periods.
5) A bond is an issuer’s written promise to pay an amount identified as the par value of
the bond along with interest.
6) During the closing process, Owner’s Capital is closed to the Owner’s Withdrawals
account.
7) When a job is finished, its job cost sheet is completed and moved from the file of
jobs in process to the file of finished jobs that are yet to be delivered to customers.
8) Multinational corporations can be U.S. companies with operations in other countries.
9) When posting from special journals each individual debit and credit entry of similar
transactions is entered in the general ledger.
10) When the contract rate on a bond issue is less than the market rate, the bonds will
generally sell at a discount.
11) Juniper Company uses a perpetual inventory system. The company purchased
$9,750 of merchandise on August 7 with terms 1/10, n/30. On August 11, it returned
$1,500 worth of merchandise. On August 26, it paid the full amount due. The correct
journal entry to record the merchandise return on August 11 is:
A.Debit Accounts Payable $1,500; credit Cash $1,500.
B.Debit Accounts Payable $1,500; credit Merchandise Inventory $1,500.
C.Debit Merchandise Inventory $1,500; credit Sales Returns $1,500.
D.Debit Merchandise Inventory $1,500; credit Cash $1,500.
E.Debit Accounts Payable $1,500; credit Purchase Returns $1,500.
12) A company normally sells its product for $20 per unit. However, the selling price
has fallen to $15 per unit. This company’s current inventory consists of 200 units
purchased at $16 per unit. Replacement cost has now fallen to $13 per unit. What is the
amount of the lower cost of market adjustment the company must make as a result of
this decline in value?
A.$1,000.
B.$1,400.
C.$400.
D.$600.
E.$800.
13) Based on a predicted level of production and sales of 12,000 units, a company
anticipates reporting operating income of $26,000 after deducting variable costs of
$72,000 and fixed costs of $10,000. Based on this information, the budgeted amounts of
fixed and variable costs for 15,000 units would be:
A.$10,000 of fixed costs and $72,000 of variable costs.
B.$10,000 of fixed costs and $90,000 of variable costs.
C.$12,500 of fixed costs and $90,000 of variable costs.
D.$12,500 of fixed costs and $72,000 of variable costs.
E.$10,000 of fixed costs and $81,000 of variable costs.
14) A company has two departments, Y and Z that incur wage expenses. An analysis of
the total wage expense of $19,000 indicates that Dept. Y had a direct wage expense of
$2,000 and Dept. Z had a direct wage expense of $3,500. The remaining expenses are
indirect and analysis indicates they should be allocated evenly between the two
departments. Departmental wage expenses for Dept. Y and Dept. Z, respectively, are:
A.$8,750; $10,250.
B.$10,250; $8,750.
C.$9,500; $9,500.
D.$2,000; $3,500.
E.$6,750; $6,750.
15) The rate established prior to the beginning of a period that uses estimated overhead
and an allocation factor such as estimated direct labor, and that is used to assign
overhead cost to jobs, is the:
A.Predetermined overhead rate.
B.Overhead variance rate.
C.Estimated labor cost rate.
D.Chargeable overhead rate.
E. Miscellaneous overhead rate.
16) Fortune Company’s direct materials budget shows the following cost of materials to
be purchased for the coming three months:
Payments for purchases are expected to be made 50% in the month of purchase and
50% in the month following purchase. The December Accounts Payable balance is
$6,500. The budgeted cash payments for materials in January are:
A.$6,500.
B.$9,270.
C.$12,520.
D.$13,095.
E.$18,540.
17) In preparing financial budgets:
A.The budgeted balance sheet is usually prepared last.
B.The cash budget is usually not prepared.
C.The budgeted income statement is usually not prepared.
D.The capital expenditures budget is usually prepared last.
E.The budgeted income statement is usually prepared last.
18) Santa Barbara Express has 4 sales employees, each of whom earns $5,000 per
month and is paid on the last working day of the month. Each employee’s wages are
subject to FICA social security taxes of 6.2% and Medicare taxes of 1.45% on all
wages. Withholding for each employee also includes federal income tax of 16% and
monthly medical insurance premiums of $110 for each employee.
a. Prepare the general journal entry to accrue the monthly sales salaries expense at
January 31.
b. The employer payroll taxes for Santa Barbara Express include FICA taxes, federal
unemployment taxes of 0.6% of the first $7,000 paid each employee, and state
unemployment taxes of 4.0% of the first $7,000 paid to each employee. Prepare the
journal entry to record the employer’s payroll taxes at January 31 for Santa Barbara
Express. (Assume that none of the employees has reached the unemployment limit of
$7,000.)
19) Johanna Corporation issued $3,000,000 of 8%, 20-year bonds payable at par value
on January 1. Interest is payable each June 30 and December 31.
(a) Prepare the general journal entry to record the issuance of the bonds on January 1.
(b) Prepare the general journal entry to record the first interest payment on June 30.
20) Ready Company has two operating (production) departments: Assembly and
Painting. Assembly has 150 employees and occupies 44,000 square feet; Painting has
100 employees and occupies 36,000 square feet. Indirect factory expenses for the
current period are as follows:
Administration is allocated based on workers in each department; maintenance is
allocated based on square footage. The total amount of administration expense that
should be allocated to the Assembly Department for the current period is:
A.$48,000.
B.$55,000.
C.$103,000.
D.$104,000.
E.$110,000.
21) Job A3B was ordered by a customer on September 25. During the month of
September, Jaycee Corporation requisitioned $2,500 of direct materials and used $4,000
of direct labor. The job was not finished by the end of the month, but needed an
additional $3,000 of direct materials and additional direct labor of $6,500 to finish the
job in October. The company applies overhead at the end of each month at a rate of
200% of the direct labor cost incurred. What is the total cost of the job when it is
completed in October?
A.$16,000
B.$22,500
C.$37,000
D.$26,500
E.$32,000
22) All of the following statements regarding accounting for noninfluential securities
under U.S. GAAP and IFRS are true except:
A.Trading securities are accounted for using fair values with unrealized gains and losses
reported in other comprehensive income.
B.Trading securities are accounted for using fair values with unrealized gains and losses
reported in net income.
C.Available-for-sale securities are accounted for using fair values with unrealized gains
and losses reported in other comprehensive income.
D.Held-to-maturity securities are accounted for using amortized cost.
E.Both systems examine held-to-maturity securities for impairment.
23) An organizational unit of a factory that has the responsibility for partially
manufacturing or producing a product is called a:
A.Production department.
B.Service department.
C.Primary department.
D.Responsibility department.
E.Control department.
24) A company’s inventory records report the following in November of the current
year:
On November 8, it sold 18 units for $54 each. Using the LIFO perpetual inventory
method, what amount of gross profit was earned from the 18 units sold?
A.$577
B.$452
C.$522
D.$462
E.$562
25) Founder Consulting Corporation has its headquarters in Memphis and operates from
three branch offices in Nashville, Atlanta, and Louisville. Two of the company’s activity
cost pools are Administrative Service and Development Service. These costs are
allocated to the three branch offices using an activity-based costing system. Information
for next year follows:
Estimated branch data for next year is as follows:
How much of the headquarters cost allocation should Nashville expect to receive next
year?
A.$280,000
B.$409,500
C.$472,500
D.$504,000
E.$560,000
26) A ________________ company’s operating cycle begins with the purchase of
merchandise and ends with the collection of cash from merchandise sales.
27) What specific costs and deductions are used to determine the final cost of
merchandise inventory? Identify all costs including the incidental costs.
28) The following information describes production activities of the Midtown Corp.:
30,000 units were completed during the year
Budgeted standards for each unit produced:
1/2 lb. of raw material at $4.15 per lb.
10 minutes of direct labor at $12.50 per hour
Compute the direct materials price and quantity and the direct labor rate and efficiency
variances. Indicate whether each variance is favorable or unfavorable.
29) Flax had net sales of $7,875 and its average accounts receivables is $1,250.
Calculate Flax’s accounts receivable turnover:
30) The FASB requires a reconciliation of net income to net cash provided or used by
operating activities when the ______________ method is used.
31) What is comprehensive income and how is it usually reported in the financial
statements?
32) A company sold a machine that originally cost $90,000 for $28,000 cash. The
accumulated depreciation on this machine was $47,000 at the time of the sale. What
was the company’s gain or loss on this sale?
33) Engineworks Co. provides the following fixed budget data for the year:
Required:
Prepare a flexible budget performance report for the year using the contribution margin
format.
34) At its fiscal year-end of June 30, Kendall Wholesale’s general ledger shows the
following selected account balances. Kendall Wholesale uses the perpetual inventory
system.
A physical count of its June 30 year-end inventory discloses that the cost of the
merchandise inventory still available is $58,160. Prepare the entry to record any
inventory shrinkage.
35) A company’s property records revealed the following information about one of its
plant assets:
Calculate the depreciation expense for the asset in Year 1 and Year 2 for the year ended
December 31.
Year 1 ______________________ Year 2 _______________________