Accounting exam 1 (part1)

Barry's BarBQue incurred the following costs: $1,400 for ribs, 45 hours of labor to cook the ribs at $10 per hour, $50 for seasoning and sauce, $300 for signs to advertise the ribs, $150 to clean the grill after cooking the ribs, and $100 of administrative costs. How much are total product costs?

$2,050 Explanation: Ribs cost = $1,400 Labor cost = 45 hours × $10 per hour = $450 Seasoning and Sauce cost = $50 Grill cost = $150 So product cost = Rib cost + Labor cost + Seasoning and Sauce cost + Grill cost = $1,400 + $450 + $50 + $150 = $2,050

What does manufacturing overhead include?

-indirect materials -indirect labor -depreciation on factory buildings and machines -insurance -taxes -maintenance on factory facilities.

Compute the direct materials used

Add beginning direct materials to direct materials purchases and subtract ending direct materials.

Which of the following statements most accurately describes Activity-Based Costing? A. Costs are accumulated in departments and allocated based on a single driver for each department. B. Costs are accumulated in departments and allocated based a variety of drivers for each department. C. Costs are accumulated in cost pools and allocated based on a single driver for each pool. D. Costs are accumulated in cost pools and allocated based on a variety of drivers for each pool.

C. Costs are accumulated in cost pools and allocated based on a single driver for each pool.

Which of the following would not appear on a job order cost sheet? A. Direct Labor costs incurred B. Direct Materials requisitioned for the job C. General administrative expense D. Total cost of the job

C. General administrative expense

Cash flows from financing activities do not include: A. cash received from issuing preferred stock. B. cash paid for treasury stock. C. declaration of a cash dividend. D. repayment of a bank loan

C. declaration of a cash dividend. Explanation: Declaration of cash dividend does not result in cash outflow. It results in current liability. Hence, it is not included in Financing activities

Free cash flow Operating-cash-flow-to-current-liabilities ratio Operating-cash-flow-to-current-expenditures ratio

Cash flow from operating activities-Capital expenditures Cash flow from operating activities/Average current liabilities Cash flow from operating activities/Capital expenditures

A company purchases a security it considers a cash equivalent. The cash outflow is: A. Reported as an operating activity. B. Reported as an investing activity. C. Reported as a financing activity. D. Not reported on a statement of cash flows

D) Not reported on a statement of cash flows.

Which of the following are not included in the Work in Process Inventory? A. Direct Materials that have been put into production B. Direct Labor incurred in production C. Manufacturing Overhead allocated to units of production D. All of the above are included in Work in Process Inventory

D. All of the above are included in Work in Process Inventory

Which of the following correctly explains what should be done with any under- or over-applied overhead? A. Monthly, any significant amount of under- or over-applied overhead should be closed to Cost of Goods Sold. B. It is not normal for a company to have under- or over-applied overhead, because overhead is allocated based on actual costs incurred. C. At the end of a project, any insignificant under- or over-applied overhead should be closed to Work in Process prior to transferring the costs to Finished Goods. D. At year end, if there is a significant amount of under- or over-applied overhead, it should be allocated proportionally to Work in Process, Finished Goods, and Cost of Goods sold.

D. At year end, if there is a significant amount of under- or over-applied overhead, it should be allocated proportionally to Work in Process, Finished Goods, and Cost of Goods sold.

Which of the following types of firms normally carry inventory? A. Manufacturing firms B. Service firms C. Merchandising firms D. All of the above E. A and C only

E. A and C only

Using a cost accounting system to track product costs is needed for: A. Managerial decision making B. Financial statements C. Setting product prices D. Both A and C E. All of the above

E. All of the above

Financial Accounting consists of:

External users Financial Statements Reported Quarterly and Annually General purpose GAAP Annual audit by CPA

Purchase of Treasury Stock Borrowing money by issuing a short-term note Retirement of preferred shares

Financing Activity

Managerial Accounting consists of:

Internal users Internal reports Reported frequently, as needed Special purpose info for decisions Relevance to decisions No independent audits

Equipment is purchased by signing a 3-year, 10% note payable. Cash dividends on common stock are declared and paid. Land is sold for cash at book value. Bonds payable are converted into common stock.

Noncash actitity Financing activity Investing activity Noncash activity

Property taxes on a manufacturing plant are an element of a

Product Cost (Period cost is cost that happend outside the factory)

Significant financing and investing activities that do not affect cash are not reported in the body of the statement of cash flows. So where are they reported at instead?

Rather, they are reported either in a separate schedule at the bottom of the statement of cash flows or in a separate note or supplementary schedule to the financial statements

What is "balanced" in the balanced scorecard approach?

The emphasis on financial and non-financial performance measurements

What term describes all business processes associated with providing a product or service? a. The manufacturing chain b. The product chain c. The supply chain d. The value chain

The value chain

CoolBreeze Manufacturing produces a single product, a tabletop fan. They reported the following information from their operations last period: Cost of Direct Materials used in production: $50,000 Cost of Direct Labor wages: $37,500 Variable Manufacturing Overhead:$25,000 Fixed Manufacturing Overhead:$125,000 Total units produced:10,000 Under absorption costing what was the per-unit cost of the units produced

Total cost = $50,000+$37,500+$25,000+$125,000 = 2,375,00 Cost per unit = 2,375,00/10,000 = 23.75

Cost of Goods Manufactured is the cost of items transferred from Work in Process Inventory to Finished Goods Inventory.True-False?

True

Predetermined overhead rates are calculated by dividing estimates of total factory overhead cost in the upcoming accounting period (usually a year) by an estimated usage or capacity of some unit of related activity (such as direct labor hours).True/False?

True

Service department costs are considered product costs. They are accumulated in the service departments, and then allocated to the production departments as overhead, where they are then applied to the manufactured goods or provided services. True/False?

True

The beginning balance of the Equipment account was $45,000; the ending balance was $54,000. The beginning balance of the Accumulated Amortization account was $24,000; the ending balance was $33,000. Equipment with a cost of $6,000 and accumulated amortization of $5,000 was sold for $1,200 cash. What was the amount of amortization expense for the year? a. $14,000 b. $9,000 c. $23,000 d. $5,000

a. $14,000 Explanation: The net change in the accumulated amortization account was $9,000 ($33,000 - $24,000). The disposal of the equipment would have resulted in a debit to the accumulated amortization account of $5,000. The amortization expense was $9,000 + $5,000 = $14,000.

Assuming that the direct materials used is $1,400,000, compute the total manufacturing costs using the following information. Raw materials inventory, January 1 $ 20,000 Raw materials inventory, December 31 40,000 Work in process, January 1 18,000 Work in process, December 31 12,000 Finished goods, January 1 40,000 Finished goods, December 31 32,000 Raw materials purchases 1,400,000 Direct labor 560,000 Factory utilities 150,000 Indirect labor 50,000 Factory depreciation 400,000 Operating expenses 420,000 a. $2,560,000. b. $2,554,000. c. $2,360,000. d. $2,980,000

a. $2,560,000 Explanation: Direct cost = $1,400,000 (they assume so) Direct labor = $560,000 MOH = Factory utilities + Indirect labor + Factory depreciation = 150,000+50,000+400,000=600,000 Total manufacturing costs= DC+DL+MOH = 2,560,000

Harden Corporation engaged in the following transaction. Assume that the Harden Corporation uses the indirect method to depict cash flows. Indicate where, if at all, dividends received on securities held would be classified on the statement of cash flows. a. Operating activities section. b. Investing activities section. c. Financing activities section. d. Does not represent a cash flow.

a. Operating activities section.

If the total manufacturing costs are greater than the cost of goods manufactured, which of the following is correct? a. Work in Process Inventory has increased. b. Finished Goods Inventory has increased. c. Work in Process Inventory has decreased. d. Finished Goods Inventory has decreased

a. Work in Process Inventory has increased. (WIP B + TMC - COGM = WIP E --> WIP B - WIP E = COGM - TMC Since TMC > COGM --> WIP B - WIP E < 0 or WIP has increased)

The acquisition of land by issuing common stock is a. a noncash transaction that is not reported in the body of a statement of cash flows. b. a cash transaction and would be reported in the body of a statement of cash flows. c. a noncash transaction and would be reported in the body of a statement of cash flows. d. only reported if the statement of cash flows is prepared using the direct method.

a. a noncash transaction that is not reported in the body of a statement of cash flows.

At the end of the year, any balance in the Manufacturing Overhead account is generally eliminated by adjusting a) Finished Goods Inventory. b) Cost of Goods Sold. c) Work In Process Inventory. d) Raw Materials Inventory.

b) Cost of Goods Sold.

Benson Inc.'s accounting records reflect the following inventories: Dec. 31, 2012 Dec. 31, 2013 Raw materials inventory $ 80,000 $ 64,000 Work in process inventory 104,000 116,000 Finished goods inventory 100,000 92,000 During 2013, Benson purchased $1,060,000 of raw materials, incurred direct labor costs of $200,000, and incurred manufacturing overhead totaling $128,000. How much is total manufacturing costs incurred during 2013 for Benson? a. $1,392,000 b. $1,404,000 c. $1,388,000 d. $1,400,000

b. $1,404,000 Explanation: Calculate material used : 80,000 + 1,060,000 - 64,000 = 1,076,000 Calculate total manufactoring cost incurred: 1,076,00 + 200,000 + 128,000 = 1,404,000 Note: "total manufacturing costs incurred" --> doing as above "cost of goods manufactured" --> add 3 (material purchased, direct labor, manufactoring overhead) together.

Under the indirect method, the net cash provided by operating activities was $92,000. Accounts receivable increased $4,000, merchandise inventory decreased $10,000, accounts payable decreased $8,000, income taxes payable increased $3,000. No other items except amortization were adjustments to reconcile net income of $80,000 to net cash provided by operating activities. What was the amount of the amortization expense? a. $31,000 b. $11,000 c. $17,000 d. $3,000

b. $11,000 $80,000 - $4,000 + $10,000 - $8,000 + $3,000 = $81,000. $92,000 - $81,000 = $11,000, the amount of amortization expense. Amortization expense is added to net income in the determination of net cash provided or used by operating activities.

The cost of goods sold was $190,000. Beginning merchandise inventory was $14,000, and ending merchandise inventory was $22,000. During the year, prepaid expenses decreased by $6,000, accounts receivable increased by $6,200, and accounts payable increased by $3,000. The amount reported for cash paid for merchandise would be: a. $201,000 b. $195,000 c. $198,000 d. $185,000

b. $195,000 Explanation: The cash payments for merchandise are: $190,000 + $8,000 - $3,000 = $195,000. The cash paid for merchandise is the cost of goods sold plus the increase or less the decrease in merchandise inventory, plus the decrease or less the increase in accounts payable.

On the costs of goods manufactured schedule, depreciation on factory equipment a. is not listed because it is included with Depreciation Expense on the income statement. b. appears in the manufacturing overhead section. c. is not listed because it is not a product cost. d. is not an inventoriable cost.finished goods inventory as of December

b. appears in the manufacturing overhead section.

Of the items below, the one that appears first on the statement of cash flows is a. noncash investing and financing activities b. net increase (decrease) in cash c. cash at the end of the period d. cash at the beginning of the period

b. net increase (decrease) in cash

Which of the following activities would be classified as an investing activity? a.Cash received from interest revenue. b.Cash paid (loaned) to a borrower as a loan. c.Cash received from dividend revenue. d.Cash paid to reacquire capital stock.

b.Cash paid (loaned) to a borrower as a loan.

Cash flows from operating activities, as reported on the statement of cash flows under the indirect method, would include a.receipts from the sale of investments. b.net income. c.payments for dividends. d.receipts from the issuance of capital stock.

b.net income.

Cost of raw materials is debited to Raw Materials Inventory when the a) materials are ordered. b) bill for the materials is paid .c) materials are received. d) materials are put into production

c) materials are received.

Which one of the following managerial accounting approaches attempts to allocate manufacturing overhead in a more meaningful fashion? a. Balanced scorecard b. Just-in-time inventory c. Activity-based costing d. Total quality management

c. Activity-based costing

Which one of the following does not appear on the balance sheet of a manufacturing company? a. Finished goods inventory b. Work in process inventory c. Cost of goods manufactured d. Raw materials inventory

c. Cost of goods manufactured

Which of the following activities is an operating activity? a. issuing shares for a building b. redemption of bonds at maturity c. collecting the interest on an investment d. purchasing the common shares of another corporation as an investment

c. collecting the interest on an investment Explanation: issuing shares for a building --> noncash financing activity redemption of bonds at maturity --> financing activity purchasing the common shares of another corporation as an investment --> investing activity

The function that pertains to keeping the activities of the enterprise on track is a. planning. b. directing. c. controlling. d. accounting

c. controlling

Cash receipts from interest and dividends are classified as a. financing activities. b. investing activities. c. operating activities. d. either financing or investing activities.

c. operating activities.

Ogleby Inc.'s accounting records reflect the following inventories: Dec. 31, 2012 Dec. 31, 2013 Raw materials inventory $120,000 $ 96,000 Work in process inventory 156,000 174,000 Finished goods inventory 150,000 138,000 During 2013, Ogleby purchased $840,000 of raw materials, incurred direct labor costs of $150,000, and incurred manufacturing overhead totaling $192,000. How much would Ogleby Manufacturing report as cost of goods manufactured for 2013? a. $1,164,000 b. $1,224,000 c. $1,218,000 d. $1,188,000

d. $1,188,000 Explanation: Calculate material used : 120,000 + 840 - 96,000 = 864,000 total manufacturing: 864,000+150,000+192,000=1,206,000 cost of goods manufactured: 156,000+1,1206,000-174,000=1,188,00

Wasson Company reported the following year-end information: Beginning work in process inventory $ 35,000 Beginning raw materials inventory 18,000 Ending work in process inventory 38,000 Ending raw materials inventory 15,000 Raw materials purchased 560,000 Direct labor 180,000 Manufacturing overhead 120,000 How much is Wasson's total cost of work in process for the year? a. $608,000 b. $863,000 c. $860,000 d. $898,000

d. $898,000 Explanation: Cost of used material: 18,000+560,000-15,000=563,000 Total manufacturing; 563,000+180,000+120,000 = 863,000 Total cost work in process = total manufacturing + Beginning WIP = 863,000+35,000=898,000

Harden Corporation engaged in the following transaction. Assume that the Harden Corporation uses the indirect method to depict cash flows. Indicate where, if at all, a stock dividend declared and issued would be classified on the statement of cash flows. a. Operating activities section. b. Investing activities section. c. Financing activities section. d. Does not represent a cash flow.

d. Does not represent a cash flow.

Harden Corporation engaged in the following transaction. Assume that the Harden Corporation uses the indirect method to depict cash flows. Indicate where, if at all, stock issued to equipment would be classified on the statement of cash flows. a. Operating activities section. b. Investing activities section. c. Financing activities section. d. Does not represent a cash flow.

d. Does not represent a cash flow. (significant noncash activities)

Which of the following activities would not be reported as an investing activity on a statement of cash flows? a. collection of a loan made to an officer of the company b. purchase of a patent from an inventor c. sale of a plant asset at a price equal to its book value d. cash dividends received from an investment made in another company

d. cash dividends received from an investment made in another company Note: Receipts of dividends or interest are not considered to be investing activities. They are operating activities.

Manufacturing overhead, such as the factory managers' salary at a multi-product plant, is a(n) ______ cost of any one product.

indirect

Cash paid as interest on bonds payable Cash received from issuance of preferred stock Cash received as dividends on stock investments Cash paid to acquire a franchise to distribute a product line

operating activity financing activity operating activity investing activity