ACC 200 Exam #1

Jackson Electric Services incurred $800 as a repair expense and paid for it in cash. This transaction will ________. A) decrease the stockholders' equity B) increase the assets of the business C) increase the liabilities of the business D) decrease the liabilities of the business

A

What term is used to refer to the cost of changing direct materials into a finished manufactured product? a. Conversion cost b. Period cost c. Factory overhead cost d. Direct labor cost

A

Which of the following best describes horizontal analysis? A) comparing financial statement line items from year to year for the same company B) expressing each financial statement amount as a percentage of a budgeted amount C) comparing a company's financial statements with other companies D) calculating key ratios to evaluate performance

A

Which of the following is an example of direct labor cost in a factory? A) wages of assembly line personnel B) salary of vice president of production C) wages of factory security guard D) salary of production manager

A

Iglesias, Inc. completed Job 12 on November 30. The details of Job 12 are given below: Direct labor cost $850 Direct materials cost $1000 Machine hours 8 hours Direct labor hours 24 hours Predetermined overhead allocation rate $70 per machine hour What is the total cost of Job 12? A) $2410 B) $1850 C) $1410 D) $1560

A Explanation: Direct labor cost $850 Direct material cost 1000 Manufacturing overhead ($70 × 8 machine hours) 560 Total cost of Job 12 $2410

Following is a list of account balances of Lincoln Lawn Services as of December 31, after the first year of operations. Accounts Receivable $6,000 Accounts Payable 5,000 Salaries Expense 7,000 Repairs Expense 900 Truck 11,000 Equipment 12,000 Notes Payable 26,100 Cash 20,000 Supplies Expense 200 Service Revenue 32,000 Gasoline Expense 7,200 Salaries Payable 1,200 Calculate the net income. A) $16,700 B) $31,100 C) $17,900 D) $49,000

A Explanation: Service Revenue $32,000 Salaries Expense (7,000) Repairs Expense (900) Supplies Expense (200) Gasoline Expense (7,200) Net income $16,700

Compute conversion costs given the following data: Direct Materials, $301,700; Direct Labor, $86,000; Factory Overhead, $252,300; and Selling Expenses, $45,290. a. $338,300 b. $175,600 c. $816,600 d. $361,900

A (Conversion costs = Direct Labor + Factory Overhead)

For each of the following accounts, indicate what event causes the account to increase and to decrease. Account Is increased by: Is decreased by: Raw Materials Inventory ??? ??? Work-in-Process Inventory ??? ??? Finished Goods Inventory ??? ??? Cost of Goods Sold ??? ???

Account Is increased by: / Is decreased by: Raw Materials Inventory Materials purchased / Material used Work-in-Process Inventory Direct materials used Direct labor incurred Manufacturing overhead allocated / Completion of jobs Finished Goods Inventory Completion of jobs / Shipping of sold units Cost of Goods Sold Shipping of sold units / ----

Adventures Unlimited Company distributes cash dividends. How does this transaction affect the accounting equation? A) The assets, liabilities, and equity remain the same. B) The assets decrease and equity decreases. C) The assets increase and liabilities decrease. D) The assets decrease and equity increases.

B

Jason Repair Corporation incurred $1,500 as advertising expense and promised to pay the advertising agency within 30 days. Which of the following will decrease as a result of this transaction? A) Assets B) Stockholders' equity C) Liabilities D) Revenues

B

Mars Electronic Company receives cash from a stockholder, John Tilden, and issues common stock to him. The two accounts involved in this transaction are ________. A) Accounts Payable and Cash B) Cash and Common Stock C) Common Stock and Accounts Payable D) Common Stock and Accounts Receivable

B

Mitchell Company receives a bill from one of its suppliers for advertising services received and will pay the supplier next month. How does the receipt of the bill from the supplier affect the accounting equation of Mitchell? A) Assets and equity decrease. B) Liabilities increase and equity decreases. C) Assets and liabilities increase. D) Liabilities and equity increase.

B

Saturn, Inc. paid $13,000 on accounts payable. How does this transaction affect the accounting equation of Saturn? A) Assets decrease by $13,000 and equity increases by $13,000. B) Assets decrease by $13,000 and liabilities decrease by $13,000. C) Assets increase by $13,000 and equity decreases by $13,000. D) Assets increase by $13,000 and liabilities increase by $13,000.

B

When performing vertical analysis of an income statement, the base amount is ________. A) total expenses B) sales revenue C) sales revenue D) gross profit

B

Which one of the following will not be found on the balance sheet of a manufacturing company? a. Raw materials inventory b. cost of goods sold c. work in process inventory d. finished goods inventory

B

Following is an extract of account balances of Aztec Moving Services as of December 31, after the first year of operation. Accounts Receivable $6,000 Accounts Payable 4,000 Salaries Expense 5,000 Repairs Expense 500 Truck 11,000 Equipment 11,000 Notes Payable 8,500 Cash 7,300 Supplies Expense 1,500 Service Revenue 29,000 Gasoline Expense 2,900 Salaries Payable 200 What is the amount of total assets at the end of the year? A) $17,000 B) $35,300 C) $22,000 D) $29,300

B Explanation: Accounts Receivable $6,000 Truck 11,000 Equipment 11,000 Cash 7,300 Total assets $35,300

Danby, Inc. provides the following data from its income statement for 2018: Net Sales $520,000 Cost of Goods Sold (190,000) Gross Profit $330,000 Calculate the gross profit percentage. (Round your answer to two decimal places.) A) 17.37% B) 63.46% C) 100.00% D) 36.54%

B Explanation: B) Gross profit percentage = Gross profit / Net sales × 100 = $330,000 / $520,000 × 100 = 63.46%

Regarding the profit margin ratio, which of the following statements is incorrect? A) The higher the profit margin ratio, the more sales dollars end up as profit. B) The profit margin ratio is computed by dividing net sales by net income. C) The profit margin ratio shows how much net income a business earns on every $1.00 of sales. D) The profit margin ratio focuses on the profitability of a company and is often reported in the business press.

B Explanation: B) The profit margin ratio is computed by dividing net income by net sales.

Blanco Company is a manufacturing company that has worked on several production jobs during the 3rd quarter of the year. Below is a list of job cost records of all the jobs for the quarter: Balance Job 556 $ 450 Job 557 1,235 Job 558 378 Job 559 689 Job 560 456 Job 556, 557, 558, & 559 were completed. Jobs 556 & 557 were sold at a profit of $500 on each job. What is Sales for Blanco Company for the 3rd quarter? a. $1,685 b. $2,685 c. $1,000 d. $685

B ($1,685 + 2 ´ $500; there is a profit of $500 on each job sold.) Or: Job 556 was sold at a price of $450 + $500 = $950; Job 557 was sold at a price of $1,235 + $500 = $1,735. Total sales would be $950 + $1,735

Blanco Company is a manufacturing company that has worked on several production jobs during the 3rd quarter of the year. Below is a list of job cost records of all the jobs for the quarter: Balance Job 556 $ 450 Job 557 1,235 Job 558 378 Job 559 689 Job 560 456 Job 556, 557, 558, & 559 were completed. Jobs 556 & 557 were sold at a profit of $500 on each job. What is the ending balance of Finished Goods for Blanco Company as of the end of the 3rd quarter? a. $456 b. $1,067 c. $1,685 d. $2,752

B ($378 + $689). There are two jobs that are finished (and transferred to the FG inventory) but not sold yet.

Blanco Company is a manufacturing company that has worked on several production jobs during the 3rd quarter of the year. Below is a list of job cost records of all the jobs for the quarter: Balance Job 556 $ 450 Job 557 1,235 Job 558 378 Job 559 689 Job 560 456 Job 556, 557, 558, & 559 were completed. Jobs 556 & 557 were sold at a profit of $500 on each job. What is the ending balance of Work in Process for Blanco Company as of the end of the 3rd quarter? a. $0 b. $456 c. $3,208 d. $2,752

B (only Job 560 is left in ending WIP. It was unfinished at the end of the quarter.)

A company sells goods for $420,000 that cost $140,000 to manufacture. Which statement(s) are true? a. The company will recognize sales on the balance sheet of $420,000. b. The company will recognize $280,000 gross profit on the balance sheet. c. The company will decrease finished goods by $140,000. d. All of the above are true.

C

Materials must have which two qualities in order to be classified as direct materials? a. They must be classified as both prime costs and conversion costs. b. They must be introduced into the process in both work-in-process inventories and finished goods inventories. c. They must be an integral part of the finished product and be a significant portion of the total product cost. d. They must be an integral part of the finished product, but can be an insignificant portion of the total product cost.

C

________ is the equity earned by profitable operations that is not distributed to stockholders. A) Assets B) Dividend C) Retained earnings D) Common stock

C

28. Assume Metro Corporation had a net income of $2,500 for the year ending December 2018. Its beginning and ending total assets were $32,500 and $19,500, respectively. Calculate Metro's return on assets (ROA). (Round your percentage answer to two decimal places.) A) 7.69% B) 12.82% C) 9.62% D) 4.81%

C Explanation: Retern on Asset (ROA) : $2,500 / {($32,500 + $19,500) /2 } = 9.62 %

A manufacturing company applies factory overhead based on direct labor hours. At the beginning of the year, it estimated that factory overhead costs would be $360,000 and direct labor hours would be 45,000. Actual factory overhead costs incurred were $379,200, and actual direct labor hours were 47,000. What is the amount of overapplied or underapplied manufacturing overhead at the end of the year? a. $16,000 overapplied. b. $16,000 underapplied. c. $3,200 underapplied. d. $3,200 overapplied.

C Predetermined OH rate = $360,000/45,000 = $8 per direct labor hour Applied overhead = $8 ´ 47,000 = $376,000

Blanco Company is a manufacturing company that has worked on several production jobs during the 3rd quarter of the year. Below is a list of job cost records of all the jobs for the quarter: Balance Job 556 $ 450 Job 557 1,235 Job 558 378 Job 559 689 Job 560 456 Job 556, 557, 558, & 559 were completed. Jobs 556 & 557 were sold at a profit of $500 on each job. What is Gross Profit for Blanco Company for the 3rd quarter? a. $1,685 b. $2,685 c. $1,000 d. $685

C (= 2 ´ $500) Job 556 made $500 gross profit, so did Job 557.

Blanco Company is a manufacturing company that has worked on several production jobs during the 3rd quarter of the year. Below is a list of job cost records of all the jobs for the quarter: Balance Job 556 $ 450 Job 557 1,235 Job 558 378 Job 559 689 Job 560 456 Job 556, 557, 558, & 559 were completed. Jobs 556 & 557 were sold at a profit of $500 on each job. What is the Cost of Goods sold for Blanco Company for the 3rd quarter? a. $456 b. $2,685 c. $1,685 d. $685

C ($450 + $1,235). Two jobs are sold and becomes Cost of Goods Sold.

Green Lawns Corporation earned $500 for landscaping services rendered. The customer promised to pay at a later time. Which of the following accounts increased as a result of this transaction? A) Accounts Payable B) Supplies C) Cash D) Accounts Receivable

D

Shelcal, Inc. provides the following data for the year 2019: Net Sales Revenue 437,960 Cost of Goods Sold 257,000 The cost of goods sold as a percentage of net sales revenue is ________. (Round your answer to two decimal places.) A) 58.84% B) 58.96% C) 58.41% D) 58.68%

D

The following budget data are available for Glencoe Company: Estimated direct labor hours 24,000 Estimated direct materials $90,000 Estimated factory overhead costs $358,000 If factory overhead is to be applied based on direct labor hours, the predetermined overhead rate is a. $2.57 b. $.51 c. $.067 d. $14.92

D

Westwood Supply Services received $1,000 cash from a customer; the amount was owed to the business from the previous month. Which of the following accounts will decrease as a result of this transaction? A) Cash B) Revenue C) Accounts Payable D) Accounts Receivable

D

Which of the following is false in regards to direct materials for an automobile manufacturer? a. Steel would probably be a direct material. b. Upholstery fabric would probably be a direct material c. Oil to lubricate factory machines would not be a direct material. d. Small plastic clips to hold on door panels, that become part of the auto, must be accounted for as direct materials.

D

Which of the following statements is true of an income statement? A) There is net income when total expenses are greater than total revenues. B) There is a net loss when total expenses are less than total revenue. C) There is a net loss when total expenses are greater than total liabilities. D) There is net income when total revenues are greater than total expenses.

D

Which of the following users would rely on managerial accounting information for decision-making purposes? A) potential investors B) creditors C) customers D) company managers

D

Baptiste Accounting Services expects its accountants to work a total of 31,000 direct labor hours per year. The company's estimated total indirect costs are $150,000. The direct labor rate is $104 per hour. The company uses direct labor hours as the allocation base for indirect costs. If Baptiste performs a job requiring 48 hours of direct labor and bills the client using a standard markup of 40% of costs, calculate the amount of the client's bill. (Round any intermediate calculations to the nearest cent, and your final answer to the nearest dollar.) A) $4992 B) $199,680 C) $2090 D) $7314

D Expected indirect costs $150,000 Expected direct labor hours / 31,000 Predetermined overhead allocation rate per direct labor hour = $4.84 Direct labor (48 hours × $104/ hour) $4992 Indirect labor (48 hours × $4.84/ hour) $232.32 Total job cost (A) $5224.32 Times : Mark up percentage × 40% Mark up on totak job cost (B) $2089.73 Total amount of clients's bill (A + B) $7314

The following is a summary of information presented on the financial statements of a company on December 31, 2019. Account 2019 2018 Net Sales Revenue $600,000 $504,000 Cost of Goods Sold 456,000 405,000 Gross Profit $144,000 $99,000 Selling Expenses 51,000 54,000 Net Income Before Income Tax Expense $93,000 $45,000 Income Tax Expense 39,000 23,000 Net Income $54,000 $22,000 With respect to net income, a horizontal analysis reveals ________. (Round your answer to two decimal places.) A) that net income is 14.55% of net sales revenue B) a $22,000 increase in net income C) a 145.45% decrease in net income D) a 145.45% increase in net income

D Explanation: Increase (Decrease) 2019 2018 Amount Percentage Net income $54,000 $22,000 $32,000 145.45

The equity of Alliance Company is $170,000 and the total liabilities are $30,000. The total assets are ________. A) $340,000 B) $60,000 C) $140,000 D) $200,000

D Explanation: Assets = Liabilities + Equity Assets = 170,000 + 30,000 = 200,000

Regent Plumbing Corporation provides plumbing services. Selected transactions of Regent Plumbing Corporation are described as follows: a) Received $8,000 cash and issued common stock to Sharon Regent. b) Paid $5,000 cash for equipment to be used for plumbing repairs. c) Borrowed $11,000 from a local bank and deposited the money in the checking account. d) Paid $900 rent for the year. e) Paid $200 cash for plumbing supplies to be used next year. f) Completed a plumbing repair project for a local lawyer and received $3,000 cash. Calculate the net income. Assume plumbing supplies of $200 are left at the end of the accounting period. A) $700 B) $2,800 C) $3,000 D) $2,100

D Explanation: D) Net income = Revenues - Expenses Net income = $3,000 - $900 = $2,100

Compute prime costs given the following data: Direct Materials, $301,700; Direct Labor, $86,000; Factory Overhead, $252,300; and Selling Expenses, $45,290. a. $338,300 b $175,600 c. $816,600 d. $387,700

D (Prime costs = Direct materials + Direct labor)

Williams Company reports production costs for 2017 as follows: Direct materials used $675,000 Direct labor incurred 155,000 Factory overhead incurred 400,000 Selling and administrative expenses 225,000 Williams Company's product costs for 2017 amount to: a. $925,000 b. $975,000 c. $605,000 d. $1,230,000

D (Product cost = DM + DL + OH)

Which of the following statements is true regarding the Certified Public Accountant (CPA) certificate? A) To advance one's career in accounting, a CPA certificate is necessary because information technology has made traditional bookkeeping no longer a skill. B) The rigorous 4-section uniform CPA exam ensures that the certificate holder is professionally competent. C) A candidate can take any section of the CPA exam at any time but needs to pass all four sections within an 18-month time window. D) The CPA pass rate of UH Manoa accounting graduates is around 40 percent in recent years. E) The candidate is preferable to pursue a master's degree in accounting to fulfill the 150-credit hour requirement. F) All of the above.

F

The left side of the accounting equation measures the amount that the business owes to creditors and to the stockholders. TRUE/FALSE?

FALSE Explanation: Assets appear on the left side of the accounting equation

A consulting firm collected cash on account. As a result of this transaction, assets and revenues of the consulting firm increase. TRUE/FALSE?

FALSE Explanation: The asset Cash increases and the asset Accounts Receivable decreases.

The most that the owner of a sole proprietorship can lose, as a result of business debts or lawsuits, is the amount he/she has invested in the business. TRUE/FALSE?

FALSE Explanation: The owner of a sole proprietorship is personally liable for the debts of a business.

In a manufacturing plant, indirect materials costs from lubricants and cleaning fluids are NOT product costs. TRUE/FALSE?

FALSE - They are part of overhead costs.

1. Managerial accounting focuses on providing information for external decision makers. TRUE/FALSE?

False

Dezire Travel Services provided the following information: Direct labor rate: $86 per hour Predetermined allocation rate for indirect costs: $15 per direct labor hour If Dezire records revenue of $1,800 for a job requiring 10 hours of direct labor, then Dezire will make a profit of $940. TRUE/FALSE?

False Explanation : Revenue $1,800 Less cost : Direct labor ($86 × 10 hours) (860) Indirect labor ($15 × 10 hours) (150) Profit $790

Dividends are the expenses of a business. TRUE/FALSE?

False Explanation: Dividends are a distribution of a corporation's earnings to stockholders.

The heading of a balance sheet will show the same information for the date line as the heading for a statement of retained earnings. TRUE/FALSE?

False Explanation: The heading of a balance sheet will show the date as a specific date, not a period of time. The heading of a statement of retained earnings will show a period of time.

1. A creditor is a person who owes money to the business. TRUE/FALSE?

False Explanation: A creditor is a person to whom a business owes money.

Manufacturing overhead includes indirect manufacturing costs, such as insurance and depreciation on the factory building. TRUE/FALSE?

TRUE

The salary of a manufacturing plant manager will be included in manufacturing overhead. TRUE/FALSE?

TRUE

1. Accounting is referred to as the language of business because it is the method of communicating business information to decision makers. TRUE/FALSE?

True

A law firm provides legal services for clients who do not pay immediately. As a result of this transaction, assets and revenues of the law firm increase. TRUE/FALSE?

True

A vertical analysis of a financial statement reveals the relationship of each statement item to its base amount, which is the 100% figure. TRUE/FALSE?

True

Assets are something of value that the business owns or has control of. TRUE/FALSE?

True

The balance sheet reports on the assets, liabilities, and stockholders' equity of the business as of a specific date. TRUE/FALSE?

True

The formula used in calculating the vertical analysis is: Vertical analysis % = (Specific item / Base amount) × 100 True / False

True

When direct materials are received on the production floor, they are recorded on the job cost record. TRUE/FALSE?

True

Martin Company's cost of goods sold is 40% of sales revenue. This means that for every $1 of sales revenue, Martin has $0.60 of gross profit. TRUE/FALSE?

True Explanation: gross profit = sales revenues - cost of goods sold. It would equal 100% - 40% = 60% of sales revenue.