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)