Multiple choice questions allocated 1% point each. Make your selection by recording the letter in the answer box provided. Use capital letters when you enter your answer on the answer sheet.

Question 8:

The contract interest rate for bonds:

A. must equal the effective interest rate.

B. is greater than the effective interest rate when bonds are issued at a premium.

C. has no relation to the cash flow associated with a particular bond.

D. will fluctuate over the life of a bond.

E. None of these.

Question 9:

Nomad Corporation issued $100,000 of 7%, 15-year bonds on January 1, 2014 at 101. The proper entry to record issuance of the bonds includes a debit to Cash for:

a. $100,000.

b. $101,000.

c. $101,167.

d. $102,167.

e. None of these.

Question 10:

Which of the following statements about treasury stock is true?

a. Excess of the sales price over cost should be credited to retained earnings.

b. Gains are not recorded on treasury stock transactions but losses are.

c. Losses on treasury stock transactions are recorded in income.

d. Reacquiring treasury stock causes stockholders equity to decrease.

e. None of these.

Question 11:

Lomax Company has 100,000 shares of common stock outstanding. On April 15, the board declared a $.30 dividend to be paid to stockholders of record on May 4. The dividend was paid on May 15. The proper journal entry for Frick Company on May 15 does include:

a. a debit to Dividends Payable for $30,000.

b. a debit to Dividends for $30,000.

c. a credit to Cash for $30,000.

d. Both A and C, above.

e. None of these.

Question 12:

Assume the following sales data for a company:

2010 $1,000,000

2009 900,000

2008 750,000

2007 600,000

If 2007 is the base year, what is the percentage increase in sales from 2007 to 2009?

a. 100%

b. 150%

c. 50%

d. 66.7%

Question 13:

Baker Corporation has cumulative preferred stock. If dividends are not declared in a period, then those dividends are

a. considered a liability.

b. called dividends in arrears.

c. distributions of earnings.

d. never paid.

Question 14:

Collins Company's balance sheet included cash ($4,000,000), accounts receivable ($16,000,000), inventories ($10,000,000), prepaid expenses ($2,000,000), accounts payable ($9,000,000), and accrued expenses ($7,000,000). These are the only current items.

a. The quick ratio is 2:1.

b. The quick ratio is 1.25:1.

c. The current ratio is 1.875:1.

d. Both A and C.

e. None of these.

Question 15:

Selected information for 2014 is: cost of goods sold, $5,400,000; average inventory, $1,800,000; net sales, $7,200,000; average receivables, $960,000; and net income, $720,000. Assuming a 360-day year, what was the inventory turnover ratio for 2014?

a. 333

b. 3

c. 7.5

d. 20

e. None of these.

Question 16:

On the schedule of cost of goods manufactured:

a. beginning work-in-process plus direct materials used equals manufacturing costs.

b. cost of goods manufactured is the same thing as total manufacturing costs.

c. work-in-process will necessarily increase if total manufacturing costs increase.

d. factory overhead plus beginning work-in-process equals manufacturing costs.

e. None of these.

Question 17:

Which costing method seems ideally suited to the production of homogenous products in continuous throughput?

a. Activity-based costing.

b. Job order costing.

c. Process costing.

d. Absorption costing.

e. None of these.

Question 18:

Brown Company uses a job order cost system and applies overhead based on estimated rates. The overhead application rate is based on total estimated overhead costs of $200,000 and diret labor hours of 50,000. For job 836, direct labor hours were 800.

a. Factory Overhead should be debited for $3,200.

b. Factory Overhead should be credited for $3,200.

c. Overhead Expense should be debited for $3,200.

d. Overhead Expense should be credited for $3,200.

e. None of these.

Question 19:

For job 1838, there were 1,000 direct labor hours, and actual overhead was $500 for depreciation and $1,400 for indirect labor. Overhead is applied at $2 per direct labor hour. Which account should be debited for $1,900?

a. Work in Process.

b. Cost of Goods Sold.

c. Factory Overhead.

d. Cost of Goods Manufactured.

e. None of these.

Question 20:

7,000 units in a process that are 70% complete are referred to as

a. 7,000 equivalent units of production.

b. 2,100 equivalent units of production.

c. 4,900 equivalent units of production.

d. 2,100 unequivalent units of production

Question 21:

A process cost system would be used for all of the following products except

a. chemicals.

b. computer chips.

c. motion pictures.

d. soft drinks.

Question 22:

Foster Company makes units that each requires 2 pounds of material at $3 per pound. 500 and 700 units will be built in May and June, respectively. Frick keeps material on hand at 20% of the next month's production needs. How much is the material cost for May's output?

a. $2,400

b. $3,000

c. $3,240

d. $4,200

e. None of these.

Question 23:

Anticipated unit sales are January, 5,000; February, 4,000; and March 8,000. Finished goods are consistently maintained at 80% of the following month's sales. If units cost $10 each to produce, how much is February's total cost of production?

a. $0

b. $40,000

c. $72,000

d. $80,000

e. None of these.

Question 24:

Total production of 1,000 units of finished goods required 3,900 actual hours at $12 per hour. The standard is 4 hours per unit of finished goods, at a standard rate of $11 per hour. Which of the following statements is true?

a. The labor rate variance is $3,900 favorable.

b. The labor rate variance is $4,000 unfavorable.

c. The labor efficiency variance is $1,100 favorable.

d. The labor efficiency variance is $1,100 unfavorable.

e. None of these.

Question 25:

If beginning work in process was 600 units, 1,400 additional units were put into production, and ending work in process was 500 units, how many units were completed?

a. 500

b. 900

c. 1,400

d. 2,000

e. None of these.

Question 26:

Cost of goods manufactured is calculated as follows:

a. Beginning WIP + direct materials used + direct labor + manufacturing overhead + ending WIP.

b. Direct materials used + direct labor + manufacturing overhead beginning WIP + ending WIP.

c. Beginning WIP + direct materials used + direct labor + manufacturing overhead ending WIP.

d. Direct materials used + direct labor + manufacturing overhead ending WIP beginning WIP.

Question 27:

Assume that actual overhead consisted of $30,000 for indirect labor, $20,000 for indirect material, and $10,000 for depreciation of factory equipment. Based on the preset rates, $65,000 of overhead was applied to work in process.

a. Overhead is under applied.

b. This is viewed as an unfavorable situation.

c. There will be a $5,000 debit balance in Factory Overhead.

d. All of the above.

e. None of these