PROBLEMS
1. The following information is available for Hutton Company:
Receipts from customers
Dividends from stock investments
Proceeds from sale of equipment
Proceeds from issuance of stock
Payments for inventory
Payments for operating expenses
Interest paid
Taxes paid
Dividends paid
$215,000
3,000
18,000
90,000
100,000
78,000
6,000
4,000
20,000
Instructions
Based on the preceding information, compute the net cash provided by operating activities.
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2.
Selected financial information for Zheng Corporation is presented below.
Current assets
Long-term liabilities
Retained earnings
December 31, 2015
$ 55,000
90,000
125,000
December 31, 2014
$ 40,000
80,000
100,000
Instructions
Prepare a schedule showing a horizontal analysis for 2015 using 2014 as the base year.
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3. Demich Company reports the following costs and expenses in June.
Factory utilities
$ 13,300
Depreciation on factory
equipment
12,250
Depreciation on delivery trucks
3,500
Indirect factory labor
49,800
Indirect materials
70,100
Direct materials used
154,300
Factory manager's salary
9,000
Direct labor
Sales salaries
Property taxes on factory
building
Repairs to office equipment
Factory repairs
Advertising
Office supplies used
$71,900
44,800
2,600
1,500
2,300
21,000
2,460
Instructions
From the information, determine the total amount of:
(a) Manufacturing overhead.
(b) Product costs.
(c) Period costs.
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4. Lowes Manufacturing uses a job order cost accounting system. On April 1, the
company has Work in Process Inventory of $7,400 and two jobs in process: Job No.
221, $3,400, and Job No. 222, $4,000. During April, a summary of source
documents reveals the following:
For
Job No. 221
222
223
224
General use
Totals
Materials Requisition Slips
$1,300
1,800
2,500
2,600
800
$9,000
Labor Time Tickets
$ 1,700
2,000
2,600
3,000
400
$9,700
Lowes applies manufacturing overhead to jobs at an overhead rate of 65% of direct labor cost.
Job No. 221 is completed during the month.
Instructions
(a) Prepare summary journal entries to record the raw materials requisitioned, factory labor
used, the assignment of manufacturing overhead to jobs, and the completion of Job No.
221.
(b) Calculate the balance of the Work in Process Inventory account at April 30.
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MULTIPLE CHOICE
1. 1.
1. Sean’s Vegetable Market had the following transactions during 2014:
1.
2.
3.
4.
5.
6.
a.
b.
c.
d.
Issued $50,000 of par value common stock for cash.
Repaid a 6 year note payable in the amount of $22,000.
Acquired land by issuing common stock of par value $50,000.
Declared and paid a cash dividend of $7,000.
Sold a long-term investment (cost $3,000) for cash of $6,000.
Acquired an investment in IBM stock for cash of $10,000.
What is the net cash provided by financing activities?
$21,000
$67,000
$28,000
$0
2. Ford Corporation purchased treasury stock with a cost of $16,000 during 2014.
During the year, the company paid dividends of $20,000 and issued bonds payable for
proceeds of $860,000. Cash flows from financing activities for 2014 total
a. $840,000 net cash inflow.
b. $856,000 net cash inflow.
c. $860,000 net cash outflow.
d. $824,000 net cash inflow.
3. Moore Company issued common stock for proceeds of $386,000 during 2014. The
company paid dividends of $80,000 and issued a long-term note payable for $95,000 in
exchange for equipment during the year. The company also purchased treasury stock
that had a cost of $15,000. The financing section of the statement of cash flows will
report net cash inflows of
a. $291,000.
b. $481,000.
c. $306,000.
d. $371,000.
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4. . Lewis Company reported a net loss of $6,000 for the year ended December 31,
2014. During the year, accounts receivable increased $15,000, merchandise inventory
decreased $12,000, accounts payable decreased by $20,000, and depreciation expense
of $12,000 was recorded. During 2014, operating activities
a. used net cash of $17,000.
b. used net cash of $29,000.
c. provided net cash of $24,000.
d. provided net cash of $21,000.
5. The third (final) step in preparing the statement of cash flows is to
a. analyze changes in noncurrent asset and liability accounts.
b. compare the net change in cash with the change in the cash account reported on the
balance sheet.
c. determine net cash provided by operating activities.
d. list the noncash activities.
6. Which one of the following items is not necessary in preparing a statement of cash
flows?
a. Determine the change in cash
b. Determine the cash provided by operations
c. Determine cash from financing and investing activities
d. Determine the cash in all bank accounts
7.
a.
b.
c.
d.
If accounts receivable have increased during the period,
revenues on an accrual basis are less than revenues on a cash basis.
revenues on an accrual basis are greater than revenues on a cash basis.
revenues on an accrual basis are the same as revenues on a cash basis.
expenses on an accrual basis are greater than expenses on a cash basis.
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8. Which of the following adjustments to convert net income to net cash provided by
operating activities is correct?
Add to Net Income
increase
increase
decrease
decrease
Deduct from Net Income
decrease
decrease
increase
increase
a.
b.
c.
d.
Accounts Receivable
Prepaid Expenses
Inventory
Taxes Payable
9.
a.
b.
c.
d.
Land acquired from the issuance of common stock is reported
as a financing activity.
as an investing activity.
as an operating activity.
in a separate schedule at the bottom of the statement of cash flows.
10. Assume the following sales data for a company:
2014
2013
2012
2011
$1,050,000
950,000
800,000
650,000
If 2011 is the base year, what is the percentage increase in sales from 2011 to 2013?
a. 100%
b. 61.5%
c. 46.2%
d. 68.4%
11. Comparative balance sheets are usually prepared for
a. one year.
b. two years.
c. three years.
d. four years.
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12. Horizontal analysis is appropriately performed
a. only on the income statement.
b. only on the balance sheet.
c. only on the statement of retained earnings.
d. on all three of these statements.
13. Carlock, Inc. has the following income statement (in millions):
CARLOCK, INC.
Income Statement
For the Year Ended December 31, 2014
Net Sales
Cost of Goods Sold
Gross Profit
Operating Expenses
Net Income
$300
180
120
45
$75
Using vertical analysis, what percentage is assigned to Cost of Goods Sold?
a. 40%
b. 60%
c. 100%
d. None of these answer choices are correct.
14. A liquidity ratio measures the
a. income or operating success of an enterprise over a period of time.
b. ability of the enterprise to survive over a long period of time.
c. short-term ability of the enterprise to pay its maturing obligations and to meet
unexpected needs for cash.
d. number of times interest is earned.
15. The current ratio is
a. calculated by dividing current liabilities by current assets.
b. used to evaluate a company's liquidity and short-term debt paying ability.
c. used to evaluate a company's solvency and long-term debt paying ability.
d. calculated by subtracting current liabilities from current assets.
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16. The acid-test (quick) ratio
a. is used to quickly determine a company's solvency and long-term debt paying
ability.
b. relates cash, short-term investments, and net receivables to current liabilities.
c. is calculated by taking one item from the income statement and one item from the
balance sheet.
d. is the same as the current ratio except it is rounded to the nearest whole percent.
17. Whiteside Apparel Store had a balance in the Accounts Receivable account of
$437,500 at the beginning of the year and a balance of $500,000 at the end of the year.
Net credit sales during the year amounted to $3,000,000. The average collection period
of the receivables in terms of days was
a. 53.2 days.
b. 365 days.
c. 60.1 days.
d. 57 days.
18. As inventoriable costs expire, they become
a. selling expenses.
b. gross profit.
c. cost of goods sold.
d. sales revenue.
19. A manufacturing company calculates cost of goods sold as follows:
a. Beginning FG inventory + cost of goods purchased – ending FG inventory.
b. Ending FG inventory – cost of goods manufactured + beginning FG inventory.
c. Beginning FG inventory – cost of goods manufactured – ending FG inventory.
d. Beginning FG inventory + cost of goods manufactured – ending FG inventory.
20. The subtotal, "Cost of goods manufactured" appears on
a. a merchandising company's income statement.
b. a manufacturing company's income statement.
c. both a manufacturing and a merchandising company's income statement.
d. neither a merchandising nor a manufacturing company's income statement.
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21. Blanche Combines, Inc. has $40,000 of ending finished goods inventory as of
December 31, 2014. If beginning finished goods inventory was $25,000 and cost of
goods sold was $75,000, how much would Blanche report for cost of goods
manufactured?
a. $90,000
b. $15,000
c. $115,000
d. $65,000
22. Starr Manufacturing Company's accounting records reflect the following
inventories:
Dec. 31, 2014
Dec. 31, 2013
Raw materials inventory
$620,000
$520,000
Work in process inventory
600,000
320,000
Finished goods inventory
380,000
300,000
During 2014, $900,000 of raw materials were purchased, direct labor costs amounted to
$1,000,000, and manufacturing overhead incurred was $960,000.
The total raw materials available for use during 2014 for Starr’s Manufacturing
Company is
a. $1,420,000.
b. $620,000.
c. $800,000.
d. $1,520,000.
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23. Using the following information, compute the direct materials used.
Raw materials inventory, January 1
Raw materials inventory, December 31
Work in process, January 1
Work in process, December 31
Finished goods, January 1
Finished goods, December 31
Raw materials purchases
Direct labor
Factory utilities
Indirect labor
Factory depreciation
Operating expenses
a.
b.
c.
d.
$
40,000
20,000
18,000
12,000
40,000
32,000
1,200,000
560,000
150,000
50,000
400,000
420,000
$1,240,000.
$1,220,000.
$1,200,000.
$1,180,000.
24. Assuming that the direct materials used is $1,100,000, compute the total
manufacturing costs using the following information.
Raw materials inventory, January 1
Raw materials inventory, December 31
Work in process, January 1
Work in process, December 31
Finished goods, January 1
Finished goods, December 31
Raw materials purchases
Direct labor
Factory utilities
Indirect labor
Factory depreciation
Operating expenses
a.
b.
c.
d.
$
20,000
40,000
22,000
28,000
42,000
30,000
1,200,000
560,000
160,000
90,000
400,000
420,000
$2,316,000.
$2,310,000.
$2,736,000.
$2,730,000.
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25. Lafferty Company reported total manufacturing costs of $305,000, manufacturing
overhead totaling $58,000, and direct materials totaling $62,000. How much is direct
labor cost?
a. Cannot be determined from the information provided.
b. $425,000
c. $185,000
d. $120,000
26. The reporting standard for external financial reports is
a. industry-specific.
b. company-specific.
c. generally accepted accounting principles.
d. department-specific.
27. Which of the following is one of the components of cost accounting?
a. It involves measuring product costs.
b. It involves the determination of company profits.
c. It requires GAAP to be applied.
d. It requires cost minimizing principles.
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28. Daley, Inc. completed Job No. C04 during 2014. The job cost sheet listed the
following:
Direct materials
Direct labor
Manufacturing overhead applied
Units produced
Units sold
$55,000
$30,000
$27,000
4,000 units
1,500 units
How much is the cost of the finished goods on hand from this job?
a. $112,000
b. $70,000
c. $42,000
d. $112,000
29. As of December 31, 2014, Parker Industries had $3,500 of raw materials
inventory. At the beginning of 2014, there was $2,000 of materials on hand. During the
year, the company purchased $314,500 of materials; however, it paid for only
$302,500. How much inventory was requisitioned for use on jobs during 2014?
a. $301,000
b. $304,000
c. $316,000
d. $313,000
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30. When a job is completed and all costs have been accumulated on a job cost sheet,
the journal entry that should be made is
a. Finished Goods Inventory
Direct Materials
Direct Labor
Manufacturing Overhead
b. Work In Process Inventory
Direct Materials
Direct Labor
Manufacturing Overhead
c. Raw Materials Inventory
Work In Process Inventory
d. Finished Goods Inventory
Work In Process Inventory
31. Walker’s Manufacturing has the following labor costs:
Factory—Gross wages
Factory—Net wages
Employer Payroll Taxes Payable
$450,000
420,000
40,000
The entry to record the cost of factory labor and the associated payroll tax expense will
include a debit to Factory Labor for
a. $450,000.
b. $490,000.
c. $460,000.
d. $420,000.
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32. A materials requisition slip showed that direct materials requested were $65,000
and indirect materials requested were $8,000. The entry to record the transfer of
materials from the storeroom is
a. Work In Process Inventory ....................................................
65,000
Raw Materials Inventory...............................................
65,000
b. Direct Materials .....................................................................
65,000
Indirect Materials ...................................................................
8,000
Work in Process Inventory............................................
73,000
c. Manufacturing Overhead .......................................................
73,000
Raw Materials Inventory...............................................
73,000
d. Work In Process Inventory ....................................................
65,000
Manufacturing Overhead .......................................................
8,000
Raw Materials Inventory...............................................
73,000
33. The following information is available for completed Job No. 767: Direct materials,
$60,000; direct labor, $90,000; manufacturing overhead applied, $120,000; units
produced, 6,000 units; units sold, 5,000 units. The cost of the finished goods on hand
from this job is
a. $45,000.
b. $270,000.
c. $54,000.
d. $225,000.
34. Grant Inc. uses job order costing for its brand new line of sewing machines. The
cost incurred for production during 2014 totaled $20,000 of materials, $8,000 of direct
labor costs, and $8,000 of manufacturing overhead applied. The company ships all
goods as soon as they are completed which results in no finished goods inventory on
hand at the end of any year. Beginning work in process totaled $9,000, and the ending
balance is $15,000. During the year, the company completed 20 machines. How much
is the cost per machine?
a.
b.
c.
d.
$1,500
$1,880
$1,320
$1,760
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