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ACC2052t2

Multiple Choice
Identify the letter of the choice that best completes the statement or answers the question.
 

1. 

The recording of the jobs completed would include a debit to:
a.
Factory Overhead
b.
Work in Process
c.
Finished Goods
d.
Cost of Goods Sold
 

2. 

Which of the following items would not be classified as part of factory overhead?
a.
Production supervisors' salaries
b.
Factory supplies used
c.
Amortization of manufacturing patents
d.
Direct labor used
 

3. 

Based on the following data, what is the amount of working capital?

Accounts payable
$ 32,000
Accounts receivable
64,000
Accrued liabilities
7,000
Cash
20,000
Intangible assets
40,000
Inventory
72,000
Long-term investments
100,000
Long-term liabilities
75,000
Marketable securities
35,000
Notes payable (short-term)
20,000
Property, plant, and equipment
625,000
Prepaid expenses
2,000
a.
$62,000
b.
$162,000
c.
$193,000
d.
$134,000
 

4. 

The debits to Work in Process--Assembly Department for April, together with data concerning production, are as follows:

April 1, work in process:
 
  Materials cost, 3,000 units
$ 7,500
  Conversion costs, 3,000 units,
 
    2/3 completed
6,000
Materials added during April, 10,000 units
26,000
Conversion costs during April
31,000
Goods finished during April, 11,500 units
---
April 30 work in process, 1,500 units,
 
  1/2 completed
---

All direct materials are placed in process at the beginning of the process and the first-in, first-out method is used to cost inventories.  The materials cost per equivalent unit for April is:
a.
$2.50
b.
$2.26
c.
$5.50
d.
$2.60
 

5. 

The balance sheets at the end of each of the first two years of operations indicate the following:

 
2004  
2003  
Total current assets
$600,000
$560,000
Total investments
60,000
40,000
Total property, plant,  and equipment
900,000
700,000
Total current liabilities
150,000
80,000
Total long-term liabilities
350,000
250,000
Preferred 9% stock, $100 par
100,000
100,000
Common stock, $10 par
600,000
600,000
Paid-in capital in excess of par-common stock
60,000
60,000
Retained earnings
325,000
210,000

If net income is $130,000 and interest expense is $40,000 for 2004, what are the earnings per share on common stock for 2004, (round to two decimal places)?
a.
$2.02
b.
$2.17
c.
$1.50
d.
$2.83
 

6. 

If the amount of factory overhead cost incurred exceeds the amount applied, the factory overhead account will have a:
a.
credit balance and be overapplied
b.
debit balance and be overabsorbed
c.
debit balance and be underapplied
d.
debit balance and be overapplied
 

7. 

The recording of the jobs completed would include a credit to:
a.
Cost of Goods Sold
b.
Work in Process
c.
Factory Overhead
d.
Finished Goods
 

8. 

The balance sheets at the end of each of the first two years of operations indicate the following:

 
2004  
2003  
Total current assets
$600,000
$560,000
Total investments
60,000
40,000
Total property, plant,  and equipment
900,000
700,000
Total current liabilities
150,000
80,000
Total long-term liabilities
350,000
250,000
Preferred 9% stock, $100 par
100,000
100,000
Common stock, $10 par
600,000
600,000
Paid-in capital in excess of par-common stock
60,000
60,000
Retained earnings
325,000
210,000

If net income is $130,000 and interest expense is $40,000 for 2004, what is the rate earned on common stockholders' equity for 2004 (round percent to one decimal point)?
a.
15.9%
b.
14.5%
c.
12.3%
d.
13.0%
 

9. 

In most business organizations, the chief management accountant is called the:
a.
controller
b.
chief accounting officer
c.
chief executive officer
d.
chairman of the board
 

10. 

Lombardi Company manufactures a single product by a continuous process, involving three production departments. The records indicate that direct materials, direct labor, and applied factory overhead for Department 1 were $100,000, $125,000, and $150,000, respectively.  The records further indicate that direct materials, direct labor, and applied factory overhead for Department 2 were $50,000, $60,000, and $70,000, respectively.  In addition, work in process at the beginning of the period for Department 1 totaled $75,000, and work in process at the end of the period totaled $60,000. The journal entry to record the flow of costs from Department 1 into Department 2 during the period is:
a.
Work in Process--Department 2         330,000
      Work in Process--Department 1                   330,000
b.
Work in Process--Department 2         255,000
      Work in Process--Department 1                   255,000
c.
Work in Process--Department 2         375,000
      Work in Process--Department 1                   375,000
d.
Work in Process--Department 2         390,000
      Work in Process--Department 1                   390,000
 

11. 

The balance sheets at the end of each of the first two years of operations indicate the following:

 
2004  
2003  
Total current assets
$600,000
$560,000
Total investments
60,000
40,000
Total property, plant,  and equipment
900,000
700,000
Total current liabilities
150,000
80,000
Total long-term liabilities
350,000
250,000
Preferred 9% stock, $100 par
100,000
100,000
Common stock, $10 par
600,000
600,000
Paid-in capital in excess of par-common stock
60,000
60,000
Retained earnings
325,000
210,000

If net income is $130,000 and interest expense is $40,000 for 2004, what is the rate earned on stockholders' equity for 2004 (round percent to one decimal point)?
a.
12.0%
b.
17.1%
c.
12.7%
d.
14.0%
 

12. 

Based on the following data for the current year, what is the accounts receivable turnover?

Net sales on account during year
$ 500,000
Cost of merchandise sold during year
300,000
Accounts receivable, beginning of year
45,000
Accounts receivable, end of year
35,000
Inventory, beginning of year
90,000
Inventory, end of year
110,000
a.
5.0
b.
14.3
c.
11.1
d.
12.5
 

13. 

Which of the following costs incurred by a paper manufacturer would NOT be included in the group of costs referred to as conversion costs?
a.
Factory supervisor's salary
b.
Factory maintenance personnel supplies
c.
Machine operator's wages (direct labor)
d.
Raw lumber (direct materials)
 

14. 

The recording of the factory labor incurred for general factory use would include a debit to:
a.
Wages Expense
b.
Cost of Goods Sold
c.
Wages Payable
d.
Factory Overhead
 

15. 

If Department K had 2,000 units, 45% completed, in process at the beginning of the period, 12,000 units were completed during the period, and 1,200 units were 40% completed at the end of the period, what was the number of equivalent units of production for the period if the first-in, first-out method is used to cost inventories?
a.
11,580
b.
11,280
c.
10,000
d.
13,680
 

16. 

Based on the following data for the current year, what is the number of days' sales in inventory?

Net sales on account during year
$1,204,500
Cost of merchandise sold during year
620,500
Accounts receivable, beginning of year
75,000
Accounts receivable, end of year
85,000
Inventory, beginning of year
81,600
Inventory, end of year
98,600
a.
48
b.
25
c.
30
d.
58
 

17. 

The particular analytical measures chosen to analyze a company may be influenced by all but one of the following.  Which one?
a.
diversity of business operations
b.
capital structure
c.
product quality or service effectiveness
d.
industry type
 

18. 

The following information is available for Willing Corp.:

 
2003
Market price per share of common stock
$25.00
Earnings per share on common stock
  1.25

Which of the following statements is correct?
a.
The price-earnings ratio is 20 and a share of common stock was selling for 20 times the amount of earnings per share at the end of 2003.
b.
The market price per share and the earnings per share are not statistically related to each other.
c.
The price-earnings ratio is 5.0% and a share of common stock was selling for 5.0% more than the amount of earnings per share at the end of 2003.
d.
The price-earnings ratio is 10 and a share of common stock was selling for 125 times the amount of earnings per share at the end of 2003.
 

19. 

In a job order cost accounting system, the entry to record the flow of direct materials into production is:
a.
debit Work in Process, credit Materials
b.
debit Factory Overhead, credit Materials
c.
debit Materials, credit Work in Process
d.
debit Work in Process, credit Supplies
 

20. 

Lombardi Company manufactures a single product by a continuous process, involving three production departments. The records indicate that direct materials, direct labor, and applied factory overhead for Department 2 were $100,000, $125,000, and $150,000, respectively.  The records further indicate that direct materials, direct labor, and applied factory overhead for Department 3 were $50,000, $60,000, and $70,000, respectively.  In addition, work in process at the beginning of the period for Department 3 totaled $75,000, and work in process at the end of the period totaled $60,000. The journal entry to record the flow of costs into Department 3 during the period for direct materials is:
a.
Work in Process--Department 3          70,000
      Materials                                        70,000
b.
Work in Process--Department 3         125,000
      Materials                                       125,000
c.
Work in Process--Department 3          50,000
      Materials                                        50,000
d.
Work in Process--Department 3         100,000
      Materials                                       100,000
 

21. 

Based on the following data, what is the amount of quick assets?

Accounts payable
$ 32,000
Accounts receivable
64,000
Accrued liabilities
7,000
Cash
20,000
Intangible assets
40,000
Inventory
72,000
Long-term investments
100,000
Long-term liabilities
75,000
Marketable securities
35,000
Notes payable (short-term)
20,000
Property, plant, and equipment
625,000
Prepaid expenses
2,000
a.
$119,000
b.
$161,000
c.
$193,000
d.
$55,000
 

22. 

In process cost accounting, the costs of direct materials and direct labor are charged directly to:
a.
processing departments
b.
service departments
c.
customer accounts receivable
d.
job orders
 

23. 

The balance sheets at the end of each of the first two years of operations indicate the following:

 
2004  
2003  
Total current assets
$600,000
$560,000
Total investments
60,000
40,000
Total property, plant,  and equipment
900,000
700,000
Total current liabilities
150,000
80,000
Total long-term liabilities
350,000
250,000
Preferred 9% stock, $100 par
100,000
100,000
Common stock, $10 par
600,000
600,000
Paid-in capital in excess of par-common stock
60,000
60,000
Retained earnings
325,000
210,000

If net income is $130,000 and interest expense is $40,000 for 2004, and the market price is $30, What is the price-earnings ratio on common stock (round to one decimal point)?
a.
10.6
b.
13.8
c.
20.0
d.
14.9
 

24. 

At the end of July, the first month of the current fiscal year, the factory overhead account had a debit balance.  Which of the following describes the nature of this balance and how it would be reported on the interim balance sheet?
a.
Overapplied, deferred debit
b.
Overapplied, deferred credit
c.
Underapplied, deferred debit
d.
Underapplied, deferred credit
 

25. 

Department R had 5,000 units in work in process that were 75% completed as to labor and overhead at the beginning of the period, 30,000 units of direct materials were added during the period, 32,000 units were completed during the period, and 3,000 units were 40% completed as to labor and overhead at the end of the period.  All materials are added at the beginning of the process. The first-in, first-out method is used to cost inventories.  The number of equivalent units of production for conversion costs for the period was:
a.
26,000
b.
31,950
c.
29,450
d.
32,450
 

26. 

Which of the following is not an analysis used in assessing solvency?
a.
accounts receivable analysis
b.
number of times interest charges are earned
c.
asset turnover
d.
inventory analysis
 

27. 

Which of the following is an example of a factory overhead cost?
a.
Factory heating and lighting cost
b.
President's salary
c.
Repair and maintenance cost on the administrative building
d.
Insurance premiums on salespersons' automobiles
 

28. 

For which of the following businesses would a process cost system be appropriate?
a.
Specialty printer
b.
Custom furniture manufacturer
c.
Paint manufacturer
d.
Auto repair service
 

29. 

Lombardi Company manufactures a single product by a continuous process, involving three production departments. The records indicate that direct materials, direct labor, and applied factory overhead for Department 1 were $100,000, $125,000, and $150,000, respectively.  The records further indicate that direct materials, direct labor, and applied factory overhead for Department 2 were $50,000, $60,000, and $70,000, respectively.  In addition, work in process at the beginning of the period for Department 1 totaled $75,000, and work in process at the end of the period totaled $60,000. The journal entry to record the flow of costs into Department 2 during the period for applied overhead is:
a.
Factory Overhead--Department 2          70,000
      Work in Process--Department 2                    70,000
b.
Work in Process--Department 2          220,000
      Factory Overhead--Department 2                  220,000
c.
Work in Process--Department 2          150,000
      Factory Overhead--Department 2                  150,000
d.
Work in Process--Department 2           70,000
      Factory Overhead--Department 2                   70,000
 

30. 

Based on the following data for the current year, what is the number of days' sales in accounts receivable?

Net sales on account during year
$ 730,000
Cost of merchandise sold during year
300,000
Accounts receivable, beginning of year
45,000
Accounts receivable, end of year
35,000
Inventory, beginning of year
90,000
Inventory, end of year
110,000
a.
7.5
b.
18.25
c.
12.5
d.
17.5
 

31. 

Balance sheet and income statement data indicate the following:

Bonds payable, 10% (issued 1988 due 2012)
$1,000,000
Preferred 5% stock, $100 par (no change during year)
300,000
Common stock, $50 par (no change during year)
2,000,000
Income before income tax for year
300,000
Income tax for year
80,000
Common dividends paid
50,000
Preferred dividends paid
15,000

Based on the data presented above, what is the number of times bond interest charges were earned (round to one decimal point)?
a.
2.6
b.
3.3
c.
4.0
d.
2.2
 

32. 

The balance sheets at the end of each of the first two years of operations indicate the following:

 
2004  
2003  
Total current assets
$600,000
$560,000
Total investments
60,000
40,000
Total property, plant,  and equipment
900,000
700,000
Total current liabilities
150,000
80,000
Total long-term liabilities
350,000
250,000
Preferred 9% stock, $100 par
100,000
100,000
Common stock, $10 par
600,000
600,000
Paid-in capital in excess of par-common stock
60,000
60,000
Retained earnings
325,000
210,000

If net income is $130,000 and interest expense is $40,000 for 2004 what is the rate earned on total assets for 2004 (round percent to one decimal point)?
a.
9.1%
b.
10.9%
c.
11.9%
d.
8.3%
 

33. 

Based on the following data, what is the acid-test ratio, rounded to one decimal point?

Accounts payable
$ 32,000
Accounts receivable
64,000
Accrued liabilities
7,000
Cash
20,000
Intangible assets
40,000
Inventory
72,000
Long-term investments
100,000
Long-term liabilities
75,000
Marketable securities
35,000
Notes payable (short-term)
20,000
Property, plant, and equipment
625,000
Prepaid expenses
2,000
a.
1.4
b.
3.3
c.
3.2
d.
2.0
 

34. 

Which of the following ratios provides a solvency measure that shows the margin of safety of noteholders or bondholders and also gives an indication of the potential ability of the business to borrow additional funds on a long-term basis?
a.
rate earned on stockholders' equity
b.
ratio of net sales to assets
c.
ratio of fixed assets to long-term liabilities
d.
number of days' sales in receivables
 

35. 

Which of the following is NOT a way in which process and job order cost systems are similar?
a.
Both accumulate product costs--direct materials, direct labor, and factory overhead
b.
Both allocate product cost to units produced
c.
Both use job order cost cards
d.
Both maintain perpetual inventories
 

36. 

The percent of fixed assets to total assets is an example of:
a.
horizontal analysis
b.
profitability analysis
c.
vertical analysis
d.
solvency analysis
 

37. 

In order to be useful to managers, management accounting reports should possess all of the following characteristics except:
a.
be provided at any time management needs information
b.
provide objective measures of past operations and subjective estimates about future decisions
c.
be prepared in accordance with generally accepted accounting principles
d.
be prepared to report information for any unit of the business to support decision making
 

38. 

Which of the following is included in the computation of the acid-test ratio?
a.
accounts receivable
b.
inventory
c.
prepaid rent
d.
supplies
 

39. 

The following information is available for Dirks Co.:

 
2000
Dividends per share of common stock
$ 1.40
Market price per share of common stock
17.50

Which of the following statements is correct?
a.
The dividend yield is 12.5%, which is of interest to bondholders.
b.
The dividend yield is 8.0%, which is of special interest to investors seeking current returns on their investments.
c.
The dividend yield is 8.0 times the market price, which is important in solvency analysis.
d.
The dividend yield is 8.0%, which is of interest to investors seeking an increase in market price of their stocks.
 

40. 

Based on the following data for the current year, what is the inventory turnover?

Net sales on account during year
$ 500,000
Cost of merchandise sold during year
300,000
Accounts receivable, beginning of year
45,000
Accounts receivable, end of year
35,000
Inventory, beginning of year
90,000
Inventory, end of year
110,000
a.
4.0
b.
8.0
c.
3.0
d.
3.8
 

41. 

The recording of the jobs shipped and customers billed would include a debit to:
a.
Cash
b.
Finished Goods
c.
Cost of Goods Sold
d.
Accounts Payable
 

42. 

The ability of a business to earn a reasonable amount of income is referred to as the factor of:
a.
profitability
b.
wealth
c.
solvency
d.
leverage
 

43. 

The percentage analysis of increases and decreases in individual items in comparative financial statements is called:
a.
profitability analysis
b.
horizontal analysis
c.
vertical analysis
d.
solvency analysis
 

44. 

For most profitable companies, the rate earned on stockholders' equity will be less than:
a.
the rate earned on sales
b.
the rate earned on common stockholders' equity
c.
the rate earned on total liabilities and stockholders' equity
d.
the rate earned on total assets
 

45. 

Department G had 3,600 units, one-third completed at the beginning of the period, 12,000 units were completed during the period, 2,000 units were one-fifth completed at the end of the period, and the following manufacturing costs were debited to the departmental work in process account during the period:

Work in process, beginning of period
$30,000
Costs added during period:
 
  Direct materials (10,400 at $8)
83,200
  Direct labor
62,000
  Factory overhead
24,800

Assuming that all direct materials are placed in process at the beginning of production and that the first-in, first-out method of inventory costing is used, what is the total cost of 3,600 units of beginning inventory which were completed during the period?
a.
$48,600
b.
$61,200
c.
$38,400
d.
$45,600
 

46. 

The cost of materials entering directly into the manufacturing process is classified as:
a.
direct labor cost
b.
factory overhead cost
c.
direct materials cost
d.
burden cost
 

47. 

Which of the following is not an analysis used in assessing solvency?
a.
current position analysis
b.
ratio of net sales to assets
c.
number of times interest charges are earned
d.
inventory analysis
 

48. 

Department J had no work in process at the beginning of the period, 18,000 units were completed during the period, 2,000 units were 30% completed at the end of the period, and the following manufacturing costs were debited to the departmental work in process account during the period:

Direct materials (20,000 at $4)
$ 80,000
Direct labor
102,300
Factory overhead
37,200

Assuming that all direct materials are placed in process at the beginning of production, what is the total cost of the 18,000 units completed during the period?
a.
$139,500
b.
$80,000
c.
$219,500
d.
$207,000
 

49. 

The ability of a business to pay its debts as they come due and to earn a reasonable amount of income is referred to as:
a.
solvency and liquidity
b.
solvency and profitability
c.
solvency and equity
d.
solvency and leverage
 

50. 

Which of the following costs incurred by a paper manufacturer would be included in the group of costs referred to as conversion costs?
a.
Raw lumber (direct materials)
b.
Advertising costs
c.
Machine operator's wages (direct labor)
d.
Sales salaries
 



 
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