Accounting 102 - Chapter 3 Practice Questions

Which of the following is a clearing account?

Manufacturing Overhead The Manufacturing Overhead account operates as a clearing account.

The journal entry to record $1,000 in expired prepaid insurance on factory equipment is debit:

Manufacturing Overhead $1,000 and credit Prepaid Insurance $1,000

The journal entry to record depreciation on factory equipment debits:

Manufacturing Overhead and credits Accumulated Depreciation

What two accounts are involved when underapplied or overapplied overhead is closed out using the simpler method?

Cost of Goods Sold and Manufacturing Overhead

Milton Corporation sold goods costing $50,000 for $75,000. Journal entries to be made could include entries debiting:

Cost of Goods Sold for $50,000 and Accounts Receivable for $75,000

True or false: Underapplied or overapplied overhead occurs because overhead is applied to jobs using a predetermined rate based on estimates of costs and activity levels.

True

True or false: The transfer of costs from one inventory account to the next parallels the physical transfer of goods from one inventory to the next.

True A transfer of costs is made within the costing system that parallels the physical transfer of goods to the finished goods warehouse. The costs of the completed job are transferred out of the Work in Process account and into the Finished Goods account. The sum of all amounts transferred between these two accounts represents the cost of goods manufactured for the period.

True or false: Actual overhead costs appear in the Work in Process account but not on the job cost sheet.

False Actual overhead costs are not charged to jobs; actual overhead costs do not appear on the job cost sheet nor do they appear in the Work in Process account. Only the applied overhead cost, based on the predetermined overhead rate, appears on the job cost sheet and in the Work in Process account.

True or false: Period costs flow from Finished Goods to Cost of Goods Sold.

False As jobs are sold, their costs are transferred from Finished Goods to Cost of Goods Sold

Himber, Inc. just completed a job that cost $14,000 in direct materials, $12,000 in direct labor, and $8,000 in applied manufacturing overhead. The journal entry to record completion of the job debits:

Finished Goods $34,000 and credits Work in Process $34,000

When goods are sold on account, what accounts are credited?

Finished Goods and Sales

Completed units that have not yet been sold are found in _____ _____ inventory.

Finished; Goods

Manufacturing overhead is applied with a debit to _____.

Work in Process

A company incurred $10,000 in direct labor costs and $8,000 in indirect labor costs. The journal entry to record this transaction debits:

Work in Process $10,000 and Manufacturing Overhead $8,000 and credits Salaries and Wages Payable $18,000

The journal entry to record issuing both direct and indirect materials into production debts _____.

Work in Process and Manufacturing Overhead

When the allocation method is used to close out the underapplied or overapplied balance remaining in Manufacturing Overhead, which accounts are affected?

Work in process Finished Goods Cost of Goods Sold

The Manufacturing Overhead account is debited when ______.

actual overhead costs are incurred

Overhead is overapplied if:

actual overhead is less than applied overhead

Overhead is underapplied if:

actual overhead is more than applied overhead

What methods can be used to dispose of underapplied or overapplied manufacturing overhead?

allocate it to work in process, finished goods, and cost of goods sold close it to cost of goods sold

What side of the Manufacturing Overhead account is actual manufacturing overhead entered on?

always the debit side

The journal entry to record general selling and administrative costs debits:

an expense account and credit Cash or a Liability

Actual manufacturing overhead costs are recorded in Manufacturing Overhead account:

as they are incurred

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 simpler method of closing out the balance of Manufacturing Overhead is:

closing it out to Cost of Goods Sold

A journal entry that debits Finished Goods and credits Work in Process records the _____.

completion of a job

The amount transferred from Work in Process to Finished Goods is:

cost of goods manufactured

Gross margin is calculated by subtracting _____ from ______.

cost of goods sold; sales

A journal entry that debits Depreciation Expense and credits Accumulated Depreciation records _____.

depreciation on office equipment

A journal entry that debits Manufacturing Overhead and credits Accounts Payable would NOT be used to record _____.

direct labor costs The incurrence of direct labor costs should be recorded by debiting Work in Process account

The cost of jobs still unfinished at the end of a period are included in:

ending Work in Process inventory

To calculate a predetermined overhead rate, divide estimated manufacturing overhead by the ______.

estimated allocation base

Manufacturing overhead costs include:

factory insurance the factory supervisor's salary

Cost of goods manufactured _____.

includes the manufacturing costs of goods finished during the period

Labor costs charged to Manufacturing Overhead represent:

indirect labor costs

Raw Materials is an ______ account.

inventory Raw materials is an inventory account which is an asset

The schedule of cost of goods _____ summarizes costs that remain in Work in Process inventory and that have been transferred from Work in Process to Finished Goods inventory.

manufactured

In a normal costing system, Work in Process is debited for:

manufacturing overhead applied direct materials

A debit balance in Manufacturing Overhead means Overhead was _____.

underapplied

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 Cost of Goods Sold

Raw materials inventory was $5,000 at the beginning of the year and $12,000 at the end of the year. During the year, a total of $27,000 in raw materials were purchased, including $4,000 of indirect materials that were put into manufacturing overhead during the period. Calculate the cost of direct materials used during the period.

$16,000 Beginning Inventory + Purchases - Indirect Materials - Ending Inventory = Cost of Direct Materials $5,000 + $27,000 - $4,000 - $12,000 = $16,000

Given the following, calculate total manufacturing costs: Direct materials cost: $62,000 Direct labor cost: $78,000 Manufacturing overhead applied: $46,000 Actual manufacturing overhead: $51,000 Beginning Work in Process inventory: $32,000 Ending Work in Process inventory: $35,000

$186,000 Direct Materials + Direct Labor + Manufacturing Overhead applied to Work in Process = Total Manufacturing Costs $62,000 + $78,000 + $46,000 = $186,000 Adjust for work in process when calculating the cost of goods manufactured

Estimated manufacturing overhead $500,000 Estimated direct labor hours $200,00 Actual manufacturing overhead $625,000 Actual direct labor hours $260,000 The company applied overhead using direct labor hours as the cost driver. Calculate the amount that overhead was overapplied or underapplied.

$25,000 overapplied ($500,000 / 200,000) = $2.5 x 260,000 = $650,000 applied. Actual overhead = $625,000, so overhead is $25,000 overapplied.

Given the following, calculate the cost of goods available for sale Cost of goods manufactured of $234,000 Beginning Finished goods inventory of $18,000 Ending Finished goods inventory of $24,000

$252,000 Cost of goods manufactured + Beginning Finished goods inventory = Goods available for sale $234,000 + $18,000 = $252,000

Given: Cost of goods manufactured of $410,000; beginning finished goods inventory of $110,000 and ending finished goods inventory of $125,000, calculate unadjusted cost of goods sold.

$395,000 $110,000 + $410,000 - $125,000 = $395,000

Martin Industries had unadjusted Cost of Goods Sold of $450,000. Overhead was underapplied by $30,000. Adjusted Cost of Goods Sold in _____.

$480,000 $450,000 + $30,000 = $480,000

Given the following, calculate the cost of goods available for sale Cost of goods manufactured of $410,000 Beginning Finished Goods inventory of $110,000 Ending Finished Goods inventory of $125,000

$520,000 Cost of goods manufactured + Beginning Finished goods inventory = Goods available for sale $410,000 + $110,000 = $520,000

Luver's Corporation's Gross Margin is $100,000, Cost of Goods Sold equals $70,000, and Selling and Administrative Expenses total $45,000. Net Operating income is _____.

$55,000 $100,000 - $45,000 = $55,000

Fillia, Inc. worked on three jobs this period: Job 14C, which cost $15,000; Job 23A, which cost $28,000, and Job 45B, which cost $23,000. At the end of the period, only Job 14C was still in process (unfinished). The cost of goods manufactured this period is $______________.

51,000 The cost of goods manufactured is the cost of jobs completed during the period = Jobs 23A and 45B

George Corporation recognized $1,000 of accrued property taxes on its manufacturing facility. The journal entry to record this debits:

Manufacturing overhead $1,000 and credits Property taxes payable $1,000

Applied manufacturing overhead will most likely _____ actual manufacturing overhead.

NOT equal

Which of the following would NOT be charged to the Manufacturing Overhead account?

Nonmanufacturing costs

The journal entry to record the purchase of materials debits _____.

raw materials

Any purchased materials that will go into the finished product are first recorded in _______ ________ inventory account.

raw; materials

A journal entry that debits Manufacturing Overhead and credits Property Taxes Payable records the:

recognition of accrued property taxes

The schedule of cost of goods _____ summarizes costs that remain in Finished Goods inventory and that have been transferred to Cost of Goods Sold.

sold Cost of goods manufactured summarizes costs that remain in Work in Process inventory and that have been transferred from Work in Process to Finished Goods inventory

Costs of goods manufactured is the:

sum of all jobs transferred from Work in Process to Finished Goods

The value of work in process is equal to _____.

the cost of all unfinished jobs

The difference between overhead applied to work in process and actual overhead is ______.

overapplied or underapplied overhead

Units of product that are only partially complete are contained in the ______ _____ _____ inventory.

work; in; process