ACCT208 chapter 3 practice questions
The journal entry to record the purchase of materials credits
Accounts Payable
Accounts included when the allocation method is used to close out the underapplied or overapplied balance remaining in MO are
COGS finished goods WIP
What accounts are debited when goods are sold on account?
COGS and Accounts Receivable
Milton Corp. sold goods costing $50,000 for $75,000. Journal entries to be made could include entries debiting both:
COGS for $50,000 & Accounts Receivable for $75,000
Which of the statements regarding closing out over or under applied overhead is correct?
Closing to COGS is simpler, and allocating is more accurate
T/F: Period costs flow from Finished Goods to COGS
False
When a job is completed, which account is debited?
Finished goods
Net operating income =
Gross margin - Selling & Admin Expenses
If a company incurs $2,000 of factory rent, $1,000 of factory utilities, and $5,000 of misc. factory costs, the journal entry to record these transactions would be to debit ___ $8000 and credit ___ $8000.
MO, Accounts Payable
What happens when the period ends
Manufacturing Overhead is closed
What happens when Overhead is applied to WIP
Manufacturing Overhead is credited
What happens when actual overhead is incurred?
Manufacturing Overhead is debited
The journal entry to record labor costs credits
Salaries & wages payable
T/F: The transfer of costs from one inventory account to the next parallels the physical transfer of goods from one inventory to the next
True
Units of product that are only partially complete are contained in the ____ inventory
Work in Process
Applied manufacturing overhead is entered on what side of the Manufacturing Overhead account?
always the credit side
When preparing financial statements in a job-order costing system, finished goods flow first to the ___ and then to the ___
balance sheet, income statement
The cost of jobs still unfinished at the end of a period are included in
ending WIP inventory
A journal entry that debits Manufacturing Overhead and credits Prepaid Insurance records the
expiration of prepaid factory insurance
Completed units that have not yet been sold are found in ___ inventory
finished goods
Labor costs charged to MO represent
indirect labor costs
Raw materials is an ___ account
inventory
Gross margin minus selling & admin expenses equals
net operating income
Which of the following would NOT be charged to the Manufacturing Overhead account? factory rent depreciation on factory equipment non-manufacturing costs supervisor's salary
non manufacturing costs
Applied manufacturing overhead will most likely ___ (equal/not equal) actual manufacturing overhead
not equal
The difference between overhead applied to WIP and actual overhead is
over applied or under applied overhead
Any purchased materials that will go into the finished product are first recorded in the ___ inventory account
raw materials
A journal entry that debits Advertising Expense and credits Cash would record the incurrence of a ___ cost
selling
The schedule of cost of goods ___ summarizes costs that remain in Finished Goods inventory and that have been transferred to COGS
sold
The value of work in process is equal to
the cost of all unfinished jobs
Cost of goods manufactured includes
the manufacturing costs of goods finished during the period
A debit balance in MO means overhead was ____-applied
under
When only a portion of the units involved in a job are sold, the
unit product cost is used to calculate the amount transferred from finished goods to COGS
When calculating the cost of goods manufactured, adjust for
work in process (aka use applied instead of actual MO)
Job #4620 consisted of 1,000 units at a total cost of $200,000. The cost transferred to COGS for the sale of 600 units is:
$120,000 (200,000 / 1,000 x 600 = 120,000)
Manufacturing overhead is applied with a debit to
WIP
The journal entry to record both direct and indirect materials into production debits
WIP & MO
The cost of goods ___ is the sum of all amounts transferred from WIP to Finished Goods during a period
manufactured
What 2 accounts are involved when under or over applied overhead is closed out using the simpler method?
COGS & MO
Cost of goods available for sale =
COGS + Beg. Inventory
Gross margin is calculated by subtracting ___ from ___
COGS, sales
The ___ (debit/credit) side of the manufacturing overhead account is always used to record MO applied to production and the ___ (debit/credit) side is always used to record the actual manufacturing costs incurred
credit, debit
A credit balance in the MO account means overhead was ___
overapplied
Overhead is underapplied if
actual overhead is more than applied overhead
Overapplied or underapplied overhead is the difference between
actual total overhead and total overhead applied
Total manufacturing costs =
direct materials + direct albor + MO applied
Work in Process consists of
-actual direct materials cost -actual direct labor cost -applied manufacturing overhead
What methods can be used to dispose of underapplied or overapplied manufacturing overhead?
-allocating it among WIP, Finished Goods, and COGS -closing it out to COGS
What is used to calculate Cost of Goods Available for Sale on the schedule of COGS?
-cost of goods manufactured -beginning finished goods inventory
Actual overhead costs may not be proportional to the actual amount of the allocation base used because
-many actual overhead costs are fixed -overhead spending may not be under control
A journal entry that debits MO and credits Accounts Payable could be made to record
-rent expense on factory equipment -factory utilities expense
What is true about raw materials?
-when materials are purchased they are recorded in the Raw materials inventory account -raw materials traced to specific jobs are transferred to WIP as direct materials
Martin Industries had unadjusted COGS of $450,000. Overhead was under applied by $30,000. Adjusted COGS is
480,000 (450,000 + 30,000 = 480,000)
T/F: Actual overhead costs appear in the WIP account but not on the job sheet
False
Frank Inc. recognized $20,000 in depreciation on factory equipment. The journal entry would debit ___ and credit ___, both for $20,000
MO, Accumulated Dep
George Corp. recognized $1,000 of accrued property taxes on its manufacturing facility. The journal entry to record this would debit ___ $1000 and credit ___ $1000.
MO, property taxes payable
Actual manufacturing overhead costs are recorded in the Manufacturing Overhead account
as they are incurred
A journal entry that debits Depreciation Expense and credits Accumulated Depreciation records:
depreciation on office equipment
To calculate direct materials on the schedule of Cost of Goods Manufactured, add purchases to beginning raw materials inventory and subtract ____
ending raw materials inventory and indirect materials used
To calculate a predetermined overhead rate, divide estimated manufacturing overhead by
estimated allocation base
A predetermined overhead rate is calculated by dividing the ___ total manufacturing overhead by the ___ total amount of the allocation base
estimated; estimated
Manufacturing overhead costs include: direct materials the CEO's salary factory insurance office equipment depreciation the factory supervisor's salary
factory insurance the factory supervisor's salary
What costs would be classified as manufacturing overhead?
factory rent factory utilities factory maintenance wages
Meep Industries had unadjusted COGS of $300,000. Overhead was over applied by $20,000. Adjusted COGS is
280,000
Given: Cost of goods manufactured of $410,000; beginning finished goods inventory of $110,000 and ending finished goods inventory of $125,000, unadjusted COGS is
395,000 (110,000 + 410,000 - 125,000)