1) Four factors come together in production activity: beginning work in process
inventory, raw materials, direct labor, and factory overhead.
2) Cost accounting information is helpful to management for pricing decisions but has
no effect on controlling costs.
3) The raw materials inventory turnover is raw materials purchased divided by the
average raw materials inventory.
4) An advantage of lease financing is the lack of an immediate large cash payment for
the leased asset.
5) Mutual agency means each partner can commit or bind the partnership to any
contract within the scope of the partnership business.
6) A time ticket is a source document used by an employee to record the number of
hours worked on a particular job during the work day.
7) The work sheet is a required report made available to external decision makers.
8) The purchase of a property that included land, building, and related improvements is
called a lump-sum or basket purchase.
9) A merchandising company’s operating cycle begins with the purchase of merchandise
and ends with the collection of cash from the sale.
10) An accounting information system communicates data to help users make better
decisions.
11) Growth stocks generally pay large dividends on a regular basis.
12) Accounting for the exchange of assets depends on whether the transaction has
commercial substance; commercial substance implies that it alters the company’s future
cash flows.
13) An investor purchased $50,000 of 10 year bonds it intends to holdto maturity. The
investor’s journal entry to record the purchase should include a debit to Long-Term
Investments for $50,000 and a credit to Cash for $50,000.
14) Vacation benefits is an example of a known liability.
15) Rockaway Company produces two types of product, flat and round, on the same
production line. For the current period, the company reports the following data.
Rockaway’s controller wishes to apply activity-based costing (ABC) to allocate the
$60,000 of overhead costs incurred by the two product lines to see whether cost per unit
would change markedly from that reported above. She has collected the following
information.
She has also collected the following information about the cost drivers for each
category (cost pool) and the amount of each driver used by the two product lines.
Assign these three overhead cost pools to flat using ABC and determine average cost
per unit for the product. (Round your answer to 2 decimal places.)
16) An activity-based cost allocation system:
A.Is one form of a direct or variable costing system.
B.Does not provide total unit cost data.
C.Traces costs to products on the basis of activities performed on them.
D.Does not provide for the allocation of any cost to products that cannot be directly
traced to those products.
E.Does not involve the level of detail and the number of allocations that companies
make with traditional allocation methods.
17) On January 1 of Year 1, Congo Express Airways issued $3,500,000 of 7%, bonds
that pay interest semiannually on January 1 and July 1. The bond issue price is
$3,197,389 and the market rate of interest for similar bonds is 8%. The bond premium
or discount is being amortized using the straight-line method at a rate of $10,087 every
six months. The life of these bonds is:
A.15 years.
B.30 years.
C.26.5 years.
D.32 years
E.35 years.
18) Fletcher Company collected the following data regarding production of one of its
products. Compute the direct labor efficiency variance.
A.$19,125 favorable.
B.$80,250 favorable.
C.$61,125 favorable.
D.$19,125 unfavorable.
E.$80,250 unfavorable.
19) A company paid $0.85 in cash dividends per share. Its earnings per share is $3.50,
and its market price per share is $35.50. Its dividend yield equals:
A.2.0%.
B.2.4%.
C.9.9%.
D.21.4%.
E.24.2%.
20) If the partners agree on a formula to share income and say nothing about losses,
then the losses are shared using the same formula.
21) Gideon Company uses the allowance method of accounting for uncollectible
accounts. On May 3, the Gideon Company wrote off the $2,000 uncollectible account
of its customer, A. Hopkins. On July 10, Gideon received a check for the full amount of
$2,000 from Hopkins. On July 10, the entry or entries Gideon makes to record the
recovery of the bad debt is:
22) External users of financial information:
A.Are those individuals involved in managing and operating the company.
B.Include internal auditors and consultants.
C.Are not directly involved in operating the company.
D.Make strategic decisions for a company.
E.Make operating decisions for a company.
23) The following information relates to the manufacturing operations of the Abbra
Publishing Company for the year:
The raw materials used in manufacturing during the year totaled $1,018,000. Raw
materials purchased during the year amount to:
A.$955,000.
B.$892,000.
C.$1,565,000.
D.$408,000.
E.$1,081,000.
24) Easton Co. deposits all cash receipts on the day they are received and makes all
cash payments by check. At the close of business on June 30, its Cash account shows a
debit balance of $60,209. Easton’s June bank statement shows $58,349 on deposit in the
bank. Determine the adjusted cash balance using the following information:
The adjusted cash balance should be:
A.$60,194
B.$60,239
C.$62,149
D.$56,424
E.$60,224
25) Determine the net income of a company for which the following information is
available for the month of September.
A.$263,800.
B.$432,200.
C.$171,000.
D.$167,800.
E.$252,000.
26) Identify the account below that is classified as an assetaccount:
A.Unearned Revenue
B.Accounts Payable
C.Supplies
D.J. Jackson, Capital
E.Service Revenue
27) The following is a list of selected users of accounting information. Match the
appropriate user to the following decisions they make with accounting information.
28) The debt ratio of Company A is .31 and the debt ratio of Company B is .21. Based
on this information, an investor can conclude:
A.Company B has more debt than Company A.
B.Company B has a lower risk from its financial leverage.
C.Company A has a lower risk from its financial leverage.
D.Company A has 10% more assets than Company B.
E.Both companies have too much debt.
29) From the information provided, calculate Giuseppe’s profit margin ratio for each of
the three years. Comment on the results, assuming that the industry average for the
profit margin ratio is 6% for each of the three years.
30) In a process costing accounting system, factory wages are debited to ___________,
when direct labor is used. When indirect labor is used, the ____________ account is
debited. In both cases the _____________ is credited.
31) A sporting goods store budgeted August purchases of ski jackets at $140,000. The
store had ski jackets costing $12,000 in its inventory at the beginning of August; and to
cover part of anticipated September sales, they expect to have $25,000 of ski jackets in
inventory at the end of the month of August. What is the budgeted cost of goods sold
for August?
32) Bangor Company manufactures two products, Product F and Product G. The
company expects to produce and sell 1,400 units of Product F and 1,800 units of
Product G during the current year. The company uses activity-based costing to compute
unit product costs for external reports. Data relating to the company’s three activity cost
pools are given below for the current year:
Required:
Using the activity-based costing approach, determine the overhead cost per unit for
each product.
33) At the end of the accounting period, immaterial variances are closed to
_____________.
34) When preparing the operating section of the statement of cash flows using the
indirect method, noncash expenses are _____________ net income.