ACCOUNTING 2 FINAL EXAM

An installment note payable for a principal amount of $94,000 at 6% interest requires Lawson Company to repay the principal and interest in equal annual payments of $22,315 beginning December 31, 2014, for each of the next five years. After the final payment, the carrying amount on the note will be

$0

Zennia Company provides its employees with varying amount of vacation per year, depending on the length of employment. The estimated amount of the current year's vacation cost is $135,000. The journal entry to record the adjusting entry required on December 31, the end of the current year, to record the current month's accrued vacation pay is

$11,250

Tomas and Saturn are partners who share income in the ratio of 3:1. Their capital balances are $80,000 and $120,000 respectively. Income Summary has a credit balance of $30,000. What is Saturn's capital balance after closing Income Summary to Capital?

$127,500

If the balance of Work in Process at August 31 is $220,000, what was the amount debited to Work in Process for factory overhead in August, assuming a factory overhead rate of 30% of direct labor costs?

$135,000

On January 1, 2011, Zero Company obtained a $52,000, four-year, 6.5% installment note from Regional Bank. The note requires annual payments of $15,179, beginning on December 31, 2011. The December 31, 2013 carrying amount in the amortization table for this installment note will be equal to:

$14,252

Equipment with a cost of $220,000 has an estimated residual value of $30,000 and an estimated life of 10 years or 19,000 hours. It is to be depreciated by the straight-line method. What is the amount of depreciation for the first full year, during which the equipment was used 2,100 hours?

$19,000

Antonio and Barbara are partners who share income in the ratio of 1:2 and have capital balances of $40,000 and $70,000 at the time they decide to terminate the partnership. After all noncash assets are sold and all liabilities are paid, there is a cash balance of $80,000. What amount of loss on realization should be allocated to Barbara?

$20,000

At the beginning of 2011, the Gilbert Company's work in process inventory account had a balance of $30,000. During 2011, $68,000 of direct materials were used in production, and $66,000 of direct labor costs were incurred. Factory overhead in 2011 amounted to $90,000. Cost of goods manufactured is $230,000 in 2011. The balance in work in process inventory on December 31, 2011, is:

$24,000

On January 1, 2011, Zero Company obtained a $52,000, four-year, 6.5% installment note from Regional Bank. The note requires annual payments of $15,179, beginning on December 31, 2011. The December 31, 2012 carrying amount in the amortization table for this installment note will be equal to:

$27,635

A corporation has 60,000 shares of $25 par value stock outstanding that has a current market value of $120. If the corporation issues a 5-for-1 stock split, the number of shares outstanding will be:

$300,000

On June 1, $50,000 of treasury bonds were purchased between interest dates. The broker commission was $500. The bonds pay interest at 12%, which is paid semiannually on January 1 and July 1. What is the total cost to be debited to the Investment - Treasury Bonds account?

$50,500

Benton and Orton are partners who share income in the ratio of 1:3 and have capital balances of $70,000 and $30,000 respectively. Ramsey is admitted to the partnership and is given a 40% interest by investing $20,000. What is Benton's capital balance after admitting Ramsey?

$63,000

Jackson and Campbell have capital balances of $100,000 and $300,000 respectively. Jackson devotes full time and Campbell one-half time to the business. Determine the division of $150,000 of net income when there is no reference to division in partership agreement.

$75,000 and $75,000

A company with 100,000 authorized shares of $4 par common stock issued 40,000 shares at $8. Subsequently, the company declared a 2% stock dividend on a date when the market price was $11 a share. What is the amount transferred from the retained earnings account to paid-in capital accounts as a result of the stock dividend?

$8,800

The account Unrealized Gain (Loss) on Available-For-Sale Securities should be included in the

Balance sheet as an adjustment to Stockholders' Equity

The account Valuation Allowance for Trading Securities is found on the:

Balance sheet as an adjustment to the asset account

The entry to record the issuance of 150 shares of $5 par common stock at par to an attorney in payment of legal fees for organizing the corporation includes a credit to

Common stock

For which of the following businesses would the job order cost system be appropriate?

Construction contractor

A corporation issues for cash $2,000,000 of 8%, 15-year bonds, interest payable annually, at a time when the market rate of interest is 7%. The straight-line method is adopted for the amortization of bond discount or premium. Which of the following statements is true?

The carrying amount decreases from its amount at issuance date to $2,000,000 at maturity.

Which of the following forms is typically given to employees at the end of the calendar year so that employees can file their individual income tax forms?

Wage and Tax Statement (Form W-2

Which of the following should be included in the acquisition cost of a piece of equipment?

all are correct

The term applied to the amount of cost to transfer to expense resulting from a decline in the utility of intangible assets is

amortization

The par value per share of common stock represents

an arbitrary amount established in the articles of incorporation

Interest revenue on bonds is reported

as part of other income

Cash receipts received from the issuance of a mortgage notes payable would be classified as

financing activities

Cash receipts received from the issuance of a mortgage notes payable would be classified as

financing activities.

A $300,000 bond was redeemed at 104 when the carrying value of the bond was $315,000. The entry to record the redemption would include a

gain on bond redemption of $3,000.

The cash and securities comprising a sinking fund established to redeem bonds at maturity in 2015 should be classified on the balance sheet as

investments

Accumulated Depreciation

is a contra asset account

The authorized stock of a corporation

is indicated in its charter

Managerial accounting

is prepared according to management needs.

Which of the following is a noncash investing and financing activity?

issuance of common stock to acquire land

Treasury stock shares are

issued shares that have been reacquired by a corporation

In a lease contract, the party who legally owns the asset is the

lessor

Accounting designed to meet the needs of decision-makers inside the business is referred to as:

managerial accounting

For which of the following taxes is there no ceiling on the amount of employee annual earnings subject to the tax?

only Medicare tax

The following are true regarding product costs except

product costs include sales and administrative expenses.

Which of the following types of transactions would be reported as a cash flow from investing activity on the statement of cash flows?

purchase of noncurrent assets

Characteristics of a corporation include

shareholders who have limited liability

The most widely used depreciation method is

straight line

Proper payroll accounting methods are important for a business for all the reasons below except

to help a business with cash flow problems by delayed payments of payroll taxes to federal and state agencies.

Which of the following would be considered an "Other Comprehensive Income" item?

unrealized loss on available-for-sale securities.

A summary of the materials requisitions completed during a period serves as the basis for transferring the cost of the materials from the controlling account in the general ledger to the controlling accounts for:

work in process and factory overhead

Which of the following statements is false?

There is no overlap between financial and managerial accounting.

Department B had 3,000 units in Work in Process that were 25% completed at the beginning of the period at a cost of $12,500. 13,700 units of direct materials were added during the period at a cost of $28,700. 15,000 units were completed during the period, and 1,700 units were 95% completed at the end of the period. All materials are added at the beginning of the process. Direct labor was $32,450 and factory overhead was $18,710. The number of equivalent units of production for the period for materials if the first-in, first-out method is used to cost inventories was:

13,700

Assume that social security taxes are payable at a 6% rate on the first $100,000 of earnings and Medicare taxes are payable at a 1.5% rate with no maximum earnings, and that federal and state unemployment compensation taxes total 4.6% on the first $7,000 of earnings. If an employee, George Jones, earns $2,500 for the current week and Jones' year-to-date earnings before this week were $6,800, what is the total payroll taxes related to the current week?

196.70

A company that has 25,000 shares of $5.00 par value common stock issued and outstanding paid a dividend of $0.40 per share. The market value of the stock is $16 per share. The company's dividend yield is:

2.5%

At the beginning of the period, there were 500 units in process that were 60 percent complete as to conversion costs and 100 percent complete as to direct materials costs. During the period 4,500 units were started and completed. Ending inventory contained 340 units that were 30 percent complete as to conversion costs and 100 percent complete as to materials costs. (Assume that the company uses the FIFO process cost method.) The equivalent units of production for direct materials and conversion costs, respectively, were

4,840 for direct materials and 4,802 for conversion costs

If Department H had 600 units, 60% completed, in process at the beginning of the period, 6,000 units were completed during the period, and 700 units were 30% completed at the end of the period, what was the number of equivalent units of production for conversion costs for the period, if the first-in, first-out method is used to cost inventories?

5,640

Which types of inventories does a manufacturing business report on the balance sheet?

Direct materials inventory, work in process inventory, and finished goods inventory

Which of the following costs incurred by a paper manufacturer would be included in the group of costs referred to as conversion costs?

Machine operator's wages (direct labor)

The account Unrealized Gain (Loss) on Trading Securities should be included in the

Income statement as Other Revenue (Expenses)

On December 31, Strike Company has decided to sell one of its batting cages. The initial cost of the equipment was $310,000 with an accumulated depreciation of $260,000. Depreciation has been taken up to the end of the year. The company found a company that is willing to buy the equipment for $20,000. What is the amount of the gain or loss on this transaction?

Loss of $30,000

What is the primary criterion for the preparation of managerial accounting reports?

Meet the manager needs

If common stock is issued for an amount greater than par value, the excess should be credited to

Paid-in Capital in Excess of Par Value.

Which of the following is the correct flow of manufacturing costs?

Raw materials, work in process, finished goods, cost of goods sold

Which of the following is a disadvantage of a partnership when compared to a corporation?

The partnership has limited life.

Which of the following best describes the effect on direct labor when management adopts a just-in-time environment?

Workers are often cross-trained to perform more than one function.

Costs which are reported on the income statement as part of cost of goods sold are referred to as:

cost of goods manufactured

The statement of cash flows is not useful for:

calculating the net worth of a company

All leases are classified as either

capital leases or operating leases

On the statement of cash flows, the cash flows from operating activities section would include

cash receipts from sales activities

The journal entry a company uses to record the issuance of an interest-bearing note for the purpose of borrowing funds for the business is

debit Cash; credit Notes Payable

The journal entry a company uses to record the payment of an interest-bearing note is

debit Notes Payable and Interest Expense; credit Cash

The entry to record the flow of direct labor costs into production in a job order cost accounting system is:

debit Work in Process, credit Wages Payable

A pension plan which requires the employer to make annual pension contributions, with no promise to employees regarding future pension payments, is termed

defined contribution

The cost of wages paid to employees directly involved in the manufacturing process in converting materials into finished product is classified as:

direct labor cost

If accounts payable have increased during a period

expenses on an accrual basis are greater than expenses on a cash basis.

Another term often used to refer to factory overhead is:

factory burden

When a partnership is formed, assets contributed by the partners should be recorded on the partnership books at their

fair market value at the time of the contribution