Quiz 2 Multiple choice (5 pts each) (highlight or clearly mark your answer)*

| June 6, 2016

Question
Quiz 2

Multiple choice (5 pts each) (highlight or clearly mark your answer)

1) In a good internal control system, which of the following documents are required for proper approval of a payment to a supplier?

a) a journal entry, a supplier invoice, and a description of the goods being purchased

b) a receiving report, an invoice, and a purchase order

c) a purchase order, a journal entry, and a price catalog

d) a supplier invoice, a bill of lading, and the supplier’s financial statements

2) In the following situation, which internal control procedure needs strengthening?

The controller’s duties at New Era Inc. include approving bank reconciliations, approving general journal entries, hiring administrative staff, and approving various types of administrative expenses. She needs new computer equipment for the accounting office, but there are no guidelines specifying whether she can approve purchases of office equipment.

a) assignment of responsibilities

b) competent, reliable, and ethical personnel

c) separation of duties

d) documents

3) The objectives of the internal control structure of a company include all of the following except:

a) Compliance with company policies and federal law.

b) Protection of its assets.

c) Increase in accuracy and reliability of accounting data.

d) Guarantee of a certain level of profit.

e) Evaluation of personnel performance to promote efficiency of operations.

4) Which of the following accounting methods is usually used to compute amortization expense?

a) declining-balance

b) units-of-production

c) straight-line

d) first-in, first-out

5) Which of the following statements is true of a corporation?

a) The liabilities of the corporation can be paid by the personal assets of the shareholders.

b) Shares of stock cannot be readily bought and sold by investors on the open market.

c) Shareholders are authorized to sign contracts or make business commitments on behalf of the corporation.

d) Corporations pay income tax on corporate earnings, and shareholders pay personal income tax on corporate dividends and gains from sale of stock.

6) Rick Co. purchases 7,000 shares of its own $2 par value common stock for $160 per share. Which of the following is the correct journal entry to record this transaction?

a) Debit Common Stock—$2 Par Value $2,240,000 and credit Cash $2,240,000.

b) Debit Cash $2,240,000, and credit Paid-In Capital in Excess of Par—Common $2,240,000.

c) Debit Cash $2,240,000 and credit Treasury Stock—Common $2,240,000.

d) Debit Treasury Stock—Common $1,120,000 and credit Cash $1,120,000.

Problems (10 pts each) (please show your work for partial credit)

1. Ronald Company had the following balances and transactions during 2014.

Beginning merchandise inventory

10 units at $95

March 10

Sold 8 units

June 10

Purchased 20 units at $92

October 30

Sold 15 units

What is the amount of the company’s Merchandise Inventory, as disclosed in the December 31, 2014 balance sheet as per the periodic weighted-average costing method?

2. Rubal Inc. earned revenue of $400,000 and incurred cost of goods sold of $320,000. Calculate the gross profit percent.

3. Thomas Company provided the following particulars for year 2015:

Cost of Goods Sold (Cost of sales)

$1,800,000

Beginning Merchandise Inventory

325,000

Ending Merchandise Inventory

650,000

Calculate Thomas’s inventory turnover ratio for the year. (Round your answer to two decimal places.)

4. Caterpillers Inc., a manufacturing company, acquired equipment on January 1, 2012 for $500,000. Estimated useful life of the equipment was 7 years and the estimated residual value was $10,000. On January 1, 2015, after using the equipment for 3 years, the total estimated useful life has been revised to 9 years. Residual value remains unchanged. The company uses the straight-line method of depreciation. Calculate depreciation expense for the year 2015.

5. Overton Company had the following transactions in 2012, its first year of operations.

• Issued 5,000 shares of common stock. Stock has par value of $0.01 per share and was issued at $30.00 per share.

• Earned net income of $200,000.

• Paid dividends of $5.00 per share.

At the end of 2012, how much is the total stockholders’ equity?

6. Partridge Inc. provides the following information for the year 2014:

Net income

180,000

Market price per share of common stock

$20.00/share

Dividends paid

$1.00/share

Common stock outstanding at Jan. 1, 2014

110,000 shares

Common stock outstanding at Dec. 31, 2014

150,000 shares

The company has no preferred stock outstanding. Calculate the Earnings per share.

7. The following information is needed to reconcile the cash balance for Fire Steel Inc.

• A deposit of $5,800 is in transit.

• Outstanding checks total $1,500.

• The book balance is $6,800 at February 28, 2013.

• The bookkeeper recorded a $1,740 check as $17,400 in payment of the current month’s rent.

• The bank balance at February 28, 2013 was $18,000.

• A deposit of $400 was credited by the bank for $4,000.

• A customer’s check for $3,700 was returned for nonsufficient funds.

• The bank service charge is $60.

What was the adjusted book balance?

Week 6 Homework 18-21
Multiple choice (5 pts each) (highlight or clearly mark your answer)

1) Which of the following will be included in manufacturing overhead costs?

a. Indirect labor and indirect materials

b. Salaries of salesmen

c. Direct materials and direct labor

d. Delivery costs to ship goods to customers

2) Product costs are expensed:

a. when the products are consumed or sold.

b. at the end of the accounting period they are incurred in.

c. when the products are transferred to Work-in-Process Inventory account.

d. when the market value of products goes above the recorded value.

3) Which of the following correctly describes the accounting for administrative expenses of a manufacturing company?

a. Administrative expenses are product costs and are expensed as incurred.

b. Administrative expenses are period costs and are expensed as incurred.

c. Administrative expenses are product costs and are expensed when the manufactured product is sold.

d. Administrative expenses are period costs and are expensed when the manufactured product is sold.

4) Alexandra’s Designs, a fashion boutique, incurred the following in the month of September:

Salaries paid to designers

$140,000

Wages paid to tailors

30,000

Indirect wages

10,000

What is the journal entry to record the total labor charges incurred during September?

A)

Work-in-Process Inventory (direct labor)

170,000

Manufacturing Overhead (indirect labor)

10,000

Wages payable

180,000

B)

Work-in-Process Inventory (direct labor)

180,000

Wages Payable

180,000

C)

Wages Payable

180,000

Finished Goods Inventory

150,000

Work-in-Process Inventory (direct labor)

30,000

D)

Manufacturing Overhead (indirect labor)

180,000

Wages Payable

180,000

5) Which of the following is both a prime cost and a conversion cost?

a. Manufacturing overhead

b. Direct materials

c. Direct labor

d. Selling expenses

6) Which of the following will be classified as a conversion cost?

a. Cost of raw materials

b. Depreciation on factory equipment

c. Salary of sales personnel

d. Depreciation on office furniture

Problems (10 pts each) (please show your work for partial credit)

1) Selected data for Lemon Grass Company for 2015 is provided below:

Factory Utilities

$ 1,500

Indirect Materials Used

37,500

Direct Materials Used

300,000

Property Taxes on Factory Building

6,900

Sales Commissions

85,000

Indirect Labor Incurred

25,000

Direct Labor Incurred

150,000

Depreciation on Factory Equipment

6,500

What is the total factory overhead?

2) At the beginning of 2015, Swift Company’s Work-in-Process Inventory account had a balance of $120,000. During 2015, $250,000 of direct materials were used in production, and $75,000 of direct labor costs were incurred. Manufacturing overhead amounted to $850,000. The cost of goods manufactured was $675,000. What is the balance in the Work-in-Process Inventory account on December 31, 2015?

3) AceTravel Services provided the following information:

Cost allocation rate for direct labor: $40 per hour

Cost allocation rate for indirect costs: $22 per hour

If Ace receives $350 for a job requiring 5 hours of direct labor, then how much profit will they make?

4) Reed Production has provided the following information for the year 2015:

Direct Labor

$153,000

Beginning Work-in-Process Inventory

62,500

Direct Materials Used

271,000

Ending Work-in-Process Inventory

53,850

Manufacturing Overhead

135,500

During the year, Reed produced 71,020 units of product. Calculate the per unit product cost.

5) Ruth Company incurred the following costs in July:

Units produced

1,000 units

Direct materials

$ 30 per unit

Direct labor

$25 per unit

Variable manufacturing overhead

$10 per unit

Fixed manufacturing overhead

$7,000 per month

Variable selling and administrative costs

$8 per unit

Fixed selling and administrative costs

$2,000 per month

Calculate the total product cost using absorption costing and variable costing.

6) LDR Manufacturing produces a pesticide chemical and uses process costing. There are three processing departments—Mixing, Refining, and Packaging. On January 1, 2014, the first department, Mixing, had no beginning inventory. During January, 40,000 fl. oz. of chemicals were started in production. Of these, 32,000 fl. oz. were completed and 8,000 fl. oz. remained in process. In the Mixing Department, all direct materials are added at the beginning of the production process and conversion costs are applied evenly through the process.

At the end of the month, LDR calculated equivalent units. The ending inventory in the Mixing Department was 60% complete with respect to conversion costs. With respect to conversion costs, how many equivalent units were calculated for the product that was completed and for ending inventory?

7) Margaret sells hand-knit scarves at a flea market. Each scarf sells for $25. Margaret pays $30 to rent a vending space for one day. The variable costs are $15 per scarf. How many scarves should she sell each day in order to break even?

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