Spring 2021 Mini-Exam 3
Disclaimer: This is only a selection of possible exam problems. Individual
exams may differ due to the pooled nature of exams.
As always, assume U.S. GAAP and accrual basis unless told otherwise. Questions are
equally weighted.
Question 1
Elegant Hair Salon opened during August 2019, and reported the following during
the first month of operations:
1. On August 1, the salon owner contributed $5,000 cash and $15,000 of
salon chairs in exchange for common stock. Elegant uses the straight-line
method for depreciation and anticipates that the salon chairs will be used in
operations for 6 years and will be worth $2,400 on the used market at the
end of the 6 years.
2. On August 1 the company borrowed $50,000 for 8 months. The bank
charged 6% interest with all principal and interest due at maturity
(4/1/2020).
3. During August, Elegant collected $9,200 of cash comprised of: $8,000 of
cash received for August salon services rendered and $1,200 in cash
representing an advance payment for salon services to be rendered for 10
bridesmaids at a wedding party scheduled for an October 2019 wedding.
4. During August, Elegant performed $800 of services creating custom period
specific wigs for a local theater production. All wig services are performed on
account and Elegant has not yet billed the theater company.
5. In early September 2019, Elegant paid the salon employee's $2,250 in
wages, 60% of the time paid relates to services performed in August and
40% relates to services performed in September.
What value will Elegant report as total expenses for the month of August?
A. $1,775
B. $1,900
C. $2,800
D. $1,933
E. $1,525
F. None of the answer choices provided are correct
Question 2
Courageous Company is a manufacturer that uses a job-order-costing system.
Courageous purchases 100% of its raw materials on account from vendor Valor
Company and the company disposes of any over/under applied overhead using the
method covered in class. 75% of the company's building square footage relates to
manufacturing activities while 25% is used for non-factory purposes.
Courageous provides the following account balances from the company's official
financial statements:
Additionally, the company provides the following information regarding 2020
activity:
Assume for purposes of this question that Courageous applies overhead using
direct labor dollars as the cost driver. At the end of 2020 Courageous had only a
single factory job in process (job 286) which was started during 2020. Job #286
has been assigned a total of $12,000 of direct materials. True or False job 286
would have $16,700 of manufacturing overhead included on its job cost record at
the end of 2020.
A. True
B. False
Question 3
Courageous Company is a manufacturer that uses a job-order-costing system.
Courageous purchases 100% of its raw materials on account from vendor Valor
Company and the company disposes of any over/under applied overhead using the
method covered in class. 75% of the company's building square footage relates to
manufacturing activities while 25% is used for non-factory purposes.
Courageous provides the following account balances from the company's official
financial statements:
Additionally, the company provides the following information regarding 2020
activity:
Select the journal entry below that would be correctly recorded by Courageous in
2020 as part of the company's accounting for materials.
Debit
A. Work In Process
172,600
Cash
B. Accounts Payable
Cash
C.
D.
Manufacturing
Overhead
Raw Materials
Work in Process
Raw Materials
Credit
172,600
Debit
175,800
Credit
175,800
Debit
175,000
Credit
175,000
Debit
175,000
Credit
175,000
E.
F.
Work In Process
Accounts Payable
Work In Process
Accounts Payable
Debit
175,000
Credit
175,000
Debit
Credit
172,600
172,600
G. None of the answer choices provided are correct.
Question 4
Courageous Company is a manufacturer that uses a job-order-costing system.
Courageous purchases 100% of its raw materials on account from vendor Valor
Company and the company disposes of any over/under applied overhead using the
method covered in class. 75% of the company's building square footage relates to
manufacturing activities while 25% is used for non-factory purposes.
Courageous provides the following account balances from the company's official
financial statements:
Additionally, the company provides the following information regarding 2020
activity:
Assume for purposes of this question that Courageous applies overhead using
direct labor hours as a cost driver. Select the answer below that shows the over or
under applied overhead.
A. $7,000 overapplied
B. None of the answers provided are correct
C. $9,200 underapplied
D.
E.
F.
G.
$3,800 underapplied
$16,200 overapplied
$10,800 overapplied
$10,800 underapplied
Question 5
Consider a manufacturer who uses job-order costing and incurs labor cost for a
team of individuals who randomly perform quality control tests on customer orders
during the manufacturing process. True or False: the cost of this labor would be
expensed in the period incurred under the normal accrual accounting rules.
A. True
B. False
Question 6
Consider the following accounts introduced in Accy 201 and reintroduced in Accy
202.
(i) Accounts Receivable (ii) Accumulated Depreciation (iii) Sales Revenue (iv)
Prepaid Insurance Expense (v) Retained Earnings
How many of these accounts would be reported on the income statement?
A. 0
B. 1
C. 2
D. 3
E. 4
F. 5
Question 7
A manufacturer purchased $165,000 of raw materials on account during the
month of June. The beginning Raw Materials account balance was $32,000 and
during June $171,000 of materials were requisitioned for production ($12,000 of
which were not traceable to specific jobs). True or False: the entry to record the
goods requisitioned will include a debit to work in process for $159,000.
A. True
B. False
Question 8
With COVID-19 restrictions finally lifting, Alex and Blake are pooling their
substantial financial resources & have purchased the Wickwood Inn, a historic
bed & breakfast located in Vermont near popular ski resorts and tourist
attractions. The Inn is situated on 10 acres and Alex and Blake were able to also
purchase the attached maple syrup operation comprised of 400 acres of mature
maple trees used to produce the Wickwood ‘s popular maple syrup which is sold
in high end specialty gift shops across the country.
In late 2019 Alex and Blake had the entire property appraised (see below) but
given the tourist industry decline in the last 12 months they were ultimately able
to negotiate a much better price paying only $2,600,000 in total for all assets
listed in the appraisal. Even so, the appraisal report provided the following
values for the properties purchased:
True or False: Assuming Alex & Blake use the straight-line depreciation
method for the business assets and assign a 15% salvage value for all depreciable
assets then the depreciable base for asset #1 (the 6-bedroom Inn) will be
$287,300.
A. True
B. False
Question 9
Mike and Ike are highly skilled factory machinist that work at a job shop in central
Illinois. Mike and Ike each earn $35 per hour and get time and a half for hours
worked above 40.
The company provides you with the following time summary for the most recent
pay period:
Select the entry below that correctly shows the entry to record the payroll.
A. Work in Process
Manufacturing Overhead
Wage Expense
Wages Payable
Debit
2,555
595
525
3,675
B. Work in Process
Manufacturing Overhead
Wages Payable
2,730
595
C. Work in Process
Manufacturing Overhead
Wages Payable
2,555
770
D. Wage Expense
Wages Payable
3,325
E. Work in Process
Manufacturing Overhead
Wages Payable
2,555
1,120
F. None of the answer choices
G. Work in Process
Manufacturing Overhead
Wage Expense
Wages Payable
Credit
3,325
3,325
3,325
3,675
provided are correct
2,555
595
175
3,325
Question 10
Throughout the accounting period, the debit side of the Manufacturing Overhead
account is used to accumulate:
A. The predetermined overhead
B. The budgeted overhead
C. The actual overhead
D. The applied overhead
E. Variances in overhead
F. None of the answer choices provided are correct
Question 11
With COVID-19 restrictions finally lifting, Alex and Blake are pooling their
substantial financial resources & have purchased the Wickwood Inn, a historic
bed & breakfast located in Vermont near popular ski resorts and tourist
attractions. The Inn is situated on 10 acres and Alex and Blake were able to also
purchase the attached maple syrup operation comprised of 400 acres of mature
maple trees used to produce the Wickwood ‘s popular maple syrup which is sold
in high end specialty gift shops across the country.
In late 2019 Alex and Blake had the entire property appraised (see below) but
given the tourist industry decline in the last 12 months they were ultimately able
to negotiate a much better price paying only $2,600,000 in total for all assets
listed in the appraisal. Even so, the appraisal report provided the following
values for the properties purchased:
Within the first 30 days of operating the Wickwood Inn, Alex and Blake
purchased a new ice machine to place in the hall by the guest suites. They
negotiated a purchase price of $4,400 with payment terms of 2/10, n/30, and
paid $220 in sales tax. They spent $800 to rewire the hall surrounding the
machine's location in order to meet the manufacturer's specifications. Alex and
Blake paid within the discount period and avoided all shipping cost by picking up
the machine themselves, unfortunately they needed more help as when carrying
the new machine up the stairs they dropped it resulting in $500 of additional cost
to repair the damage.
Select the entry below that Alex & Blake will make to record this asset acquisition
on the company's books:
A. Ice Machine
Tax Expense
Building
Repair Expense
Cash
Debit
4,312
220
800
500
5,832
B. Ice Machine
Building
Repair Expense
Cash
4,532
800
500
C. Ice Machine
Tax Expense
Repair Expense
Cash
5,112
220
500
D. Ice machine
Cash
5,832
E. None of the answer choices
F. Ice Machine
Repair Expense
Cash
Credit
5,832
5,832
5,832
provided are correct
5,332
500
5,832
Question 12
Armour, Inc., applies overhead to jobs on the basis of direct professional labor
hours. Overhead was estimated to be $150,000, direct professional labor hours were
estimated to be 15,000, and direct professional labor cost was projected to be
$225,000. During the year, Armour incurred actual overhead costs of $144,000,
actual direct professional labor hours of 14,500, and actual direct labor cost of
$222,000. Select the entry below that Armour would make as part of the company's
overhead accounting (do not round intermediate calculations but do round your
final answer to the nearest $1):
Debit
Credit
A. Work in Process
144,000
Manufacturing Overhead
144,000
B. Manufacturing Overhead
Cost of Goods Sold
C. Work in Process
Manufacturing Overhead
D. Manufacturing Overhead
Cost of Goods Sold
E. None of the answer choices
F. Cost of Goods Sold
Manufacturing Overhead
1,000
1,000
150,000
150,000
6,000
6,000
provided are correct
145,000
145,000
Question 13
Elegant Hair Salon opened during August 2019, and reported the following
during the first month of operations:
1. On August 1, the salon owner contributed $5,000 cash and $15,000 of
salon chairs in exchange for common stock. Elegant uses the straight line
method for depreciation and anticipates that the salon chairs will be used
in operations for 6 years and will be worth $2,400 on the used market at
the end of the 6 years.
2. On August 1 the company borrowed $50,000 for 8 months. The bank
charged 6% interest with all principal and interest due at maturity
(4/1/2020).
3. During August, Elegant collected $9,200 of cash comprised of: $8,000
of cash received for August salon services rendered and $1,200 in cash
representing an advance payment for salon services to be rendered for 10
bridesmaids at a wedding party scheduled for an October 2019 wedding.
4. During August, Elegant performed $800 of services creating custom
period specific wigs for a local theater production. All wig services are
performed on account and Elegant has not yet billed the theater company.
5. In early September 2019, Elegant paid the salon employee's $2,250 in
wages, 60% of the time paid relates to services performed in August and
40% relates to services performed in September.
Select the entry below that Elegant will make at maturity of the 8 month loan.
A. Note Payable
Cash
B. Note Payable
Interest Expense
Cash
Debit
50,000
Credit
50,000
50,000
2,000
52,000
C. Note Payable
Interest Expense
Interest Payable
Cash
50,000
750
1,250
D. Note Payable
Interest Expense
Interest Payable
Cash
50,000
1,125
1,875
E. Note Payable
Interest Expense
Interest Payable
50,000
1,125
Cash
F. None of the answer choices
52,000
53,000
1,125
50,000
provided are correct
Question 14
Consider the following businesses and select the answer below that shows how
many of those listed would use a jorb order costing system:
1. Duracell, Inc for the manufacture of standard sized batteries (AAA, AA, C, D
and 9V) which are produced and sold to retail chains across the world.
2. Covert Solutions in Wilmington North Carolina builds custom hidden doors
and secret residential spaces that keep the homeowners valuables and family
safe and secure. Covert Solutions work with each homeowner individually to
build a custom design that fits the space and the customer's particular needs.
3. LensCrafters retail chain for the cost of prescription eye wear sold to
customers. LensCrafters hosts independent optometrists on-site who
perform eye exams. The customer selects empty eye glass frames from the
LensCrafters retail showroom and then LensCrafters creates the finished
product for the customer using their unique eye prescription.
4. Calligraphy Art Studio in Dallas Texas has specially trained artists in
residence that use the customer's own mailing list to hand write addresses
on envelopes that are used for special event mailings such as wedding
invitations or baby announcements.
A. 0
B. 1
C. 2
D. 3
E. 4
Question 15
Elegant Hair Salon opened during August 2019, and reported the following during
the first month of operations:
1. On August 1, the salon owner contributed $5,000 cash and $15,000 of
salon chairs in exchange for common stock. Elegant uses the straight line
method for depreciation and anticipates that the salon chairs will be used in
operations for 6 years and will be worth $2,400 on the used market at the
end of the 6 years.
2. On August 1 the company borrowed $50,000 for 8 months. The bank
charged 6% interest with all principal and interest due at maturity
(4/1/2020).
3. During August, Elegant collected $9,200 of cash comprised of: $8,000 of
cash received for August salon services rendered and $1,200 in cash
representing an advance payment for salon services to be rendered for 10
bridesmaids at a wedding party scheduled for an October 2019 wedding.
4. During August, Elegant performed $800 of services creating custom period
specific wigs for a local theater production. All wig services are performed on
account and Elegant has not yet billed the theater company.
5. In early September 2019, Elegant paid the salon employee's $2,250 in
wages, 60% of the time paid relates to services performed in August and
40% relates to services performed in September.
What value will Elegant report as revenue for the month of August?
A. $9,200
B. $10,000
C. $8,800
D. $8,000
E. $2,000
F. None of the answer choices provided are correct
Question 16
Elegant Hair Salon opened during August 2019, and reported the following
during the first month of operations:
1. On August 1, the salon owner contributed $5,000 cash and $15,000 of salon
chairs in exchange for common stock. Elegant uses the straight line method for
depreciation and anticipates that the salon chairs will be used in operations for 6
years and will be worth $2,400 on the used market at the end of the 6 years.
2. On August 1 the company borrowed $50,000 for 8 months. The bank charged
6% interest with all principal and interest due at maturity (4/1/2020).
3. During August, Elegant collected $9,200 of cash comprised of: $8,000 of cash
received for August salon services rendered and $1,200 in cash representing an
advance payment for salon services to be rendered for 10 bridesmaids at a
wedding party scheduled for an October 2019 wedding.
4. During August, Elegant performed $800 of services creating custom period
specific wigs for a local theater production. All wig services are performed on
account and Elegant has not yet billed the theater company.
5. In early September 2019, Elegant paid the salon employee's $2,250 in wages,
60% of the time paid relates to services performed in August and 40% relates to
services performed in September.
Consider for purposes of this question only that on March 1, 2022 Elegant sells
100% of the equipment contributed in transaction #1 for $8,000. Select the entry
shown below that correctly shows the entry to record this disposal.
A. Cash
Loss on Equipment Disposal
Accumulated Depreciation
Equipment
Debit
8,000
350
6,650
15,000
B. Cash
Loss on Equipment Disposal
Accumulated Depreciation
Equipment
8,000
1,575
5,425
C. Cash
Accumulated Depreciation
Equipment
Gain on Equipment Disposal
8,000
7,175
D. Cash
Accumulated Depreciation
Equipment
Gain on Equipment Disposal
8,000
6,459
E. Cash
Loss on Equipment Disposal
Accumulated Depreciation
8,000
541
6,459
15,000
175
15,000
12,600
1,859
Equipment
F. None of the answer choices
Credit
15,000
provided
are correct
Question 17
With COVID-19 restrictions finally lifting, Alex and Blake are pooling their
substantial financial resources & have purchased the Wickwood Inn, a historic
bed & breakfast located in Vermont near popular ski resorts and tourist
attractions. The Inn is situated on 10 acres and Alex and Blake were able to also
purchase the attached maple syrup operation comprised of 400 acres of mature
maple trees used to produce the Wickwood ‘s popular maple syrup which is sold
in high end specialty gift shops across the country.
In late 2019 Alex and Blake had the entire property appraised (see below) but
given the tourist industry decline in the last 12 months they were ultimately able
to negotiate a much better price paying only $2,600,000 in total for all assets
listed in the appraisal. Even so, the appraisal report provided the following
values for the properties purchased:
After just one maple syrup season, Alex and Blake realized the syruping
operations needed to be brought into the modern age with the construction of a
new syruping facility. 8 acres of the 400 purchased were set aside for the new
facility with the following expenditures made prior to construction of the new
building:
(i) $22,000 to remove trees and stumps at the new building location
($19,000) and adjacent parking lot ($3,000).
(ii) $35,000 for pouring concrete parking lot, painting parking spots and
lighting.
(iii) $26,000 at the end of the season to clean excess sap from within the
syruping equipment filtering systems. This annual task allows the syruping
equipment to start next year at normal production levels without delays
caused by sap clogs having developed during the off season.
Select the entry below that would be recorded as a result of the above
expenditures.
A.
B.
C.
New Syruping Building
Land Improvement
Cash
Debit
19,000
3,000
22,000
Land
Cash
35,000
Syruping Equipment Maintenance Expense
Cash
26,000
D.
None of the answers provided are correct
E.
Syruping Equipment
Cash
Credit
35,000
26,000
26,000
26,000
Answer Key
1. A
2. B (False)
3. B
4. E
5. B (False)
6. B
7. A (True)
8. A (True)
9. C
10. C
11. F
12. B
13. C
14. D
15. C
16. B
17. C