AC 21O FINAL REVIEW

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There are various budgets within the master budget. One of these budgets is the production budget. which of the following BEST describes the production budget?

A) it details the required direct labor hours
B) it details the required raw materials purchases
C) it is calculated based on the sales budget and the desired ending inventory
D) it summarizes the costs of producing units for the budget period
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Terms in this set (63)
There are various budgets within the master budget. One of these budgets is the production budget. which of the following BEST describes the production budget?

A) it details the required direct labor hours
B) it details the required raw materials purchases
C) it is calculated based on the sales budget and the desired ending inventory
D) it summarizes the costs of producing units for the budget period
c) it is calculated based on the sales budget and the desired ending inventory
all of Gaylord Corporation's sales are on account. Thirty-five percent of the sales on account are collected in the month of sale, 45% in the month following the sale, and the remainder are collected in the second month following sale. The following are budgeted sales data for the company
January-$50,000
February-$60,000
March-$40,000
April-$30,000
what is the amount of cash that should be collected in March?
a) 24,000
b)37,000
c)41,000
d)51,000
d) 51,000
a favorable labor rate indicates that:
a) actual hours exceed standard hours
b) standard hours exceed actual hours
c) the actual rate exceeds the standard rate
d) the standard rate exceeds the actual rate
d) the standard rate exceeds the actual rate
Magno Cereal Corporation uses a standard cost system for its "crunchy pickle" cereal. The materials standard for each batch of cereal produced is 1.4 pounds of pickles at a standard cost of $3.00 per pound. During the month of August, Magno purchased 78,000 pounds of pickles at a total cost of $253,500. Magno used all of these pickles to produce 60,000 batches of cereal. What is Magno's materials quantity variance for August?

a) $1,500 Unfavorable
b) $18,000 Favorable
c) $19,500 Unfavorable
d) $54,000 Unfavorable
b- 18,000 favorable
Which of the following would most likely be included as part of manufacturing overhead in the production of a wooden table?

a) The cost of the wood used in the table.
b) The commission paid to the salesperson who sold the table.
c) The amount paid to the individual who stains the table.
d) The cost of glue used in the table
d- the cost of glue used in the table
Which of the following would be considered a variable cost for a restaurant?
a) Cost of food inventory.
b) Rent Expense.
c) Property taxes on the restaurant land and building.
d) Salary of the restaurant manager.
a-cost of food inventory
Which of the following statements about capitalizing costs is correct?

a) Capitalizing costs refers to the process of converting assets to expenses.
b) All capitalized assets can be depreciated.
c) Capitalizing a cost means to record it as an asset.
d) Capitalizing costs results in an immediate decrease in net income.
c- capitalizing a cost means to record it as an asset
Which of the following accurately describes the treatment of ordinary and extraordinary repairs?

a) Ordinary repairs are expensed as incurred; extraordinary repairs are expensed as incurred.
b) Ordinary repairs are treated as a capital expenditure; extraordinary repairs are expensed as incurred.
c) Ordinary repairs are expensed as incurred; extraordinary repairs are treated as a capital expenditure.
d) Ordinary repairs are treated as a capital expenditure; extraordinary repairs are treated as a capital expenditure.
c- ordinary repairs are expensed as incurred; extraordinary repairs are treated as a capital expenditure
Avalon Industries buys equipment for $24,000, expects to use it for ten years, and anticipates its residual value to be $3,000. Using the straight-line method, the company should report annual depreciation for the equipment of:

a) $4,200.
b) $2,100.
c) $2,400.
d) $4,800.
b-2,100
Marshall Company purchases a machine for $800,000. The machine has an estimated residual value of $40,000. The company expects the machine to produce 2,000,000 units. The machine is used to make 400,000 units during the current period.
If the units-of-production method is used, the depreciation expense for this period is:
a) $160,000.
b) $800,000.
c) $152,000.
d) $760,000.
c-152,000
Cockroach Company purchased a new van on January 1, 2016. The van cost $32,000. It has an estimated life of five years and the estimated residual value is $4,100. Cockroach uses the double-declining-balance method to compute depreciation. What is the adjusted balance in the Accumulated Depreciation account at the end of 2017, the second year? a) $5,120. b) $20,480. c) $6,400. d) $15,360.b- 20,480ACME Inc., uses straight -line depreciation for all of its depreciable assets. ACME sold a used piece of machinery on December 31 that it had purchased 2 years earlier on January 1 for $10,000. When the asset was first acquired, its estimated life was five years and the estimated residual value was zero. At the time of disposal, accumulated depreciation was $4,000. If the sales price of the used machine was $7,500, the resulting gain or loss on disposal was which of the following amounts? a) Loss of $2,500 b) Gain of $3,500 c) Loss of $1,500 d) Gain of $1,500d-gain of 1,500After recording depreciation for the current year, Media Mania Incorporated decided to discontinue using its printing equipment. The equipment had cost $750,000, accumulated depreciation was $550,000, and its fair value (based on estimated future cash flows from selling the equipment) was $50,000. Determine whether the equipment is impaired and, if it is impaired, show any necessary journal entries.Yes, the equipment is impaired. Journal Entries: debit to (Accumulated Depreciation 550,000) credit to (Equipment 550,000) debit to (Impairment Loss 150,000) credit to (Equipment 150,000)The Ideal Corp. has the following information its payroll records: - Salaries and wages earned by employees $100,000 - Less: income taxes withheld from employees 15,000 - Less: FICA taxes withheld from employees 5,000 - Net pay to employees $80,000 The employer amount of FICA taxes that Ideal is required to pay is equal to the amount that it withholds from its employees. Assume no other payroll taxes are incurred at this time. What is Ideal's total expense with regards to this payroll? a) $80,000 b) $85,000 c) $100,000 d) $105,000d-105,000Disco World began its business on November 1 and sold contracts to twelve students for dance lessons that day. The lessons cost $375 per person for a three-month period and the students are required to pay in advance. Assuming Disco World adjusts its accounts only at its December 31 year end, what entry must Disco World make to account for the services provided through that date? a) Debit Cash and credit Dance Lessons Revenue for $3,000 B) Debit Deferred Revenue and credit Dance Lessons Revenue for $4,500 c) Debit Deferred Revenue and credit Dance Lessons Revenue for $3,000 d) Debit Dance Lessons Revenue and credit Deferred Revenue for $3,000c- debit deferred revenue and credit dance lessons revenue for $3,000On October 1, 2015, Attra Inc. borrows $208,000 on a three-year note that requires the company to pay 6% interest on March 31 and September 30. On December 31, 2015, the adjusting entry to accrue interest on the note should debit: a) Interest Payable and credit Interest Expense for $3,120. b) Interest Expense and credit Cash for $6,240. c) Interest Expense and credit Interest Payable for $6,240. d) Interest Expense and credit Interest Payable for $3,120.d-interest expense and credit interest payable for $3,120Acme Enterprises began the year owing its suppliers $3,000 for merchandise purchased last year. Acme then sold half of this merchandise for $5,000 on account. Two weeks later, Acme paid its suppliers $1,000 and bought another $4,000 of merchandise on account. Acme now has an Accounts Payable balance of: a) $11,000. b) $6,000. c) $1,000. d) $4,500.b-6,000A bond is issued at a price of 103 and retired early at a price of 97. Which of the following is true? a) A gain will be reported on the income statement when the bond is issued. b) A loss will be reported on the income statement when the bond is issued. c) A gain will be reported on the income statement when the bond is retired. d) A loss will be reported on the income statement when the bond is retired.c- a gain will be reported on the income statement when the bond is retiredOn February 16, a company declares a 40ยข dividend to be paid on April 5. There are 2,060,000 shares of common stock issued and outstanding. The entry recorded by the company on February 16 includes a debit to: a) Dividends Payable and a credit to Cash for $781,600. b) Dividends and a credit to Dividends Payable for $824,000. c) Dividends and a credit to Dividends Payable for $781,600. d) Dividends Payable and a credit to Cash for $824,000.b-dividends and a credit to dividends payable for $824,000Contributed capital totals $30,000, Retained Earnings equals $65,000, Treasury Stock equals $18,000, and Common Stock equals $10,000. If the company does not have any accumulated other comprehensive income (loss), what is the total amount of stockholders' equity? a) $77,000 b) $113,000 c) $123,000 d) $87,000a-77,000A company issues 1 million shares of common stock with a par value of $0.02 for $15 a share. The entry to record this transaction includes a debit to Cash for: a) $20,000 and a credit to Common Stock for $20,000. b) $15,000,000 and a credit to Common Stock for $15,000,000. c) $15,000,000, a credit to Common Stock for $20,000, and a credit to Additional Paid-in Capital for $14,980,000. d) $20,000, a debit to Capital Receivable for $14,980,000, a credit to Common Stock for $20,000, and a credit to Additional Paid-in Capital for $14,980,000.c 15,000,000, a credit to common stock for $20,000 and a credit to additional paid-in capital for $14,980,000In what situation does total stockholders' equity decrease? a) When a cash dividend is declared. b) When a stock dividend is declared. c) When a stock split is announced. d) When a previously declared cash dividend is paid.a-when a cash dividend is declaredThe Enterprise Co. has the following information available from its accounting records: - Shares outstanding throughout the year 12,000 - Net income for current year $ 56,000 - Stockholders' equity at beginning of year $115,000 - Stockholders' equity at end of year $140,000 The company has no preferred stock. What is the return on equity? a) 40% b) 44% c) 49% d) 467%b-44%which of the following should be capitalized when a piece of production equipment is acquired for a factory? a) sales tax b) transportation costs c) installation costs d) all of the aboved-all of the abovewhen recording depreciation, which of the following statements is true? a) total assets increase and stockholder's equity increases b) total assets decrease and total liabilities increase c) total assets decrease and stockholders equity increases d) none of the above are trued) none of the above are trueUnder what depreciation method(s) is an asset's book value used to calculate depreciation each year? a) straight-line method b) units-of-production method c) declining- balance method d) weighted-average methodc-double declininga company wishes to report the highest earnings possible according to GAAP. Therefore, when calculating depreciation for financial reporting purposes, a) it will follow the MACRS depreciation rate prescribed by the IRS b) it will estimate the shortest lives possible for its assets. c) it will estimate the longest lives possible for its assets d) it will estimate lower residual values for its assetsc-will estimate the longest lives possible for its assetsBarber, Inc., depreciates its building on a straight-line basis. A building was purchased on January 1 that had an estimated useful life of 20 years and a residual value of $20,000. The company's Depreciation Expense for that year was $20,000 on the building. What was the original cost of the building? a)360,000 b) 380,000 c) 400,000 d) 420,000d- 420,000Thornton Industries purchased a machine on July 1 for $45,000 and is depreciating it with the straight-line method over a life of 10 years, using a residual value of $3,000. Depreciation Expense for the machine for that year ended December 31 is a) 2,100 b) 2,250 c) 4,200 d) 4,500a- 2,100ACME, Inc., uses straight-line depreciation for all of its depreciable assets. ACME sold a used piece of machinery on December 31 that it had purchased two years earlier on January 1 for $10,000. When the asset was first acquired, its estimated life was five years and the estimated residual value was zero. At the time of disposal, Accumulated Depreciation was $4,000. If the sales price of the used machine was $7,500, the resulting gain or loss on disposal was which of the following amounts? a) loss of 2,500 b) gain of 3,500 c) loss of 1,500 d) gain of 1,500d-gain of 1.500what asset should be amortized using the straight-line method? a) land b) intangible assets with limited lives c) intangible assets with unlimited lives d) all of the aboveb-intangible assets with limited liveswhich of the following best describes accrued liabilities? a) long-term liabilities b) current amounts owed to suppliers of inventory c) expenses incurred but not paid at the end of the accounting period d) revenues that have been collected but not earnedc- expenses incurred but not paid at the end of the accounting periodAs of february 29, 2016 corp had 7,000 full time and 20,500 part-time employees. Assume in the last pay period of the year, the company paid $8,000,000 to employees after deducting $2,000,000 for employee income taxes, $612,000 for FICA taxes and $700,000 for other purposes. No payments have been made to the government relating to these taxes. Which of the following statements is true regarding this pay period? a) FICA taxes payable should be $612,000 b) FICA taxes payable should be $1,224,000 c) salaries and wages expense should be $8,000,000 d) none of the above is trueB- fica taxes payable should be $8,000,000Assume PVH, the makers of calvin klein underwear, borrowed $100,000 from the bank to be repaid over the next five years, with the principal payments beginning next month. Which of the following best describes the presentation of this debt in the balance sheet as of today? a) 100,000 in the long term- liability section b) 100,000 plus the interest to be paid over the 5 year period in the long-term liability section c) a portion of the 100,000 in the current liability section and the remainder of the principal of the long-term liability section d) a portion of the 100,000 plus interest in the current liability section and the remainder of the principal plus interest in the long-term liability sectionwhich of the following does not impact the calculation of the cash interest payments to be made to bondholders? a) face value of the bond b) stated interest rate c) market interest rate d) the length of time between paymentsc- market interest ratewhich of the following is false when a bond is issued at a premium? a) the bond will issue for an amount above its face value b) interest expense will exceed the cash interest payments c) the market interest rate is lower than the stated rate d) the issue price will be quoted at a number greater than 100.b-interest expense will exceed the cash interest paymentsto determine if a bond will be issued at a premium, discount or face value, one must know which of the following pairs of information? a) the face value and the stated interest rate on the date the bonds were issued b) the face value and the market interest rate on the date the bonds were issued c) the stated interest rate and the market interest rate on the date the bonds were issued d) you can not tell without having more informationc- the stated interest rate and the market interest rate on the date the bonds were issuedland O'lakes reported (in millions) Income from operations of $206, Net income of $160, Interest Expense of $63, and Income tax Expense of $15. What was this dairy company's times interest earned ratio for the year? a) 1.49 b) 2.53 c) 3.27 d) 3.78d-3.78what are examples of tangible assets?equipment, land, buildings, inventory, carswhat are examples of intangible assets?copy rights, patentscapitalizing what will get that ___ intactassetshigher earnings has a ___ depreciationlow___ life for assets; ___ expense every yearlong; lessamortization is deprecation for ___intangible assets with limited livesgood will is a ___ assetintangibleA/D is a ____contra-assetyou accrued expenses when you___owe themfor interest payable / interest expense problems the journal entry is:a debit to interest expense and a credit to interest payablePremium bonds are ___ than face valuegreater thanDigger Enterprises purchased equipment for $64,000. In addition, shipping charges of $800 were incurred to obtain the equipment. The company paid $5,000 to construct a foundation and install the equipment. The equipment is estimated to have a residual value of $6,000 at the end of its 5-year useful life. Using the straight-line method, what is the book value of the equipment at the end of the third full year of use? a) $22,120 b) $28,400 c) $31,520 d) $25,520c-31,520Zebra Inc. buys new soda machines for $450,000 and pays $50,000 for installation costs. One-half of the total cost or $250,000 is paid in cash; a note in the amount of $250,000 is signed. How should the company record this transaction? a. Debit Cash for $250,000, debit Notes Payable for $250,000, and credit Equipment for $500,000 b. Debit Cash for $250,000, debit Notes Payable for $250,000, credit Equipment for $450,000, and credit Operating Expenses for $50,000 c. Debit Equipment for $450,000, debit Operating Expenses for $50,000, credit cash for $250,000, and credit Notes Payable for $250,000 d. Debit Equipment for $500,000, credit Cash for $250,000, and credit Notes Payable for $250,000dCockroach Company purchased a new van on January 1, 2016. The van cost $32,000. It has an estimated life of five years and the estimated residual value is $4,100. Cockroach uses the double-declining-balance method to compute depreciation. What is the adjusted balance in the Accumulated Depreciation account at the end of 2017, the second year? a) $5,120. b) $20,480. c) $6,400 d) $15,360.B- 20,480Accumulated Depreciation: a) appears on the income statement. b) is a liability on the balance sheet. c) is a contra-stockholders' equity item. d) appears in the asset section of a balance sheet.dA company paid $500,000 to purchase equipment and $15,000 to have the equipment delivered to and installed in the company's production facilities. Commercial use of the equipment began on March 1, 2017. The estimated residual value of the equipment is $5,000. The equipment is expected to be used a total of 28,000 hours throughout its estimated useful life of six years. The company has a December 31, 2017 year-end and had used the equipment a total of 11,200 hours prior to the year-end. Using the units-of-production method, what amount of depreciation expense (to the nearest thousand) would the company report for this equipment in the income statement prepared for the year-ended December 31, 2017? a) $102,000 b) $198,000 c) $204,000 d) $206,000c- 204,000Which of the following statements most appropriately describes the purpose of depreciating a long-lived tangible asset? a) To indicate how the asset has physically deteriorated. b) To record that the asset's market value declines over time. c) To match the cost of the asset to the period in which it generates revenue. d) To reflect the concept of conservatism and enhance earnings per share.cThe journal entry to record depreciation: a) decreases assets and decreases net income. b) decreases assets and increases net income c) increases assets and decreases net income. d) Increases assets and decreases liabilities.ADuring one pay period, your company distributes $132,000 to employees as net pay. The income tax withholdings from employee wages were $19,300 and the FICA withholdings from employee wages were $8,945. Total payroll costs (total payroll expense) to the company for this pay period, excluding any unemployment taxes, was: a) $178,135. b) $151,300. c) $160,245. d) $169,190.d-169,190John Zebu is the only employee of Atlantic Records, Inc. During the first week of January, Zebu earned $1,200.00 and had federal and state income tax withholdings of $60.00 and $22.50, respectively. FICA taxes are 7.65 % on earnings up to $117,000, or $91.80. State and federal unemployment taxes for the period are $75.00 and $12.00, respectively. What would be the amount of Zebu's payroll check for the first week of January? a) $1,200.00 b) $1,108.20 c) $1,025.70 d) $938.70 e) $933.90c-1,025.70Which of the following are payroll taxes that are paid by employees? a) Federal income tax, federal unemployment tax, and FICA tax b) Social security, federal unemployment tax, and state unemployment tax c) Social security, federal income tax, and federal unemployment tax d) Federal income tax withheld, state income tax withheld, and FICA taxDOn January 5, 2017, the Dream Resort books and accepts a cash payment for $32,000 for vacation services to be provided during spring break in March. The journal entry that will be made in March after the services are provided will include a: a) debit to Accounts Payable and a credit to Service Revenue. b) debit to Cash and a credit to Deferred Revenue. c) debit to Cash and a credit to Service Revenue. d) credit to Accounts Receivable and a credit to Service Revenue. e) credit to Service Revenue and a debit to Deferred Revenue.EOn October 1, 2015, Junk Inc. borrows $213,000 on a three-year note that requires the company to pay 8% interest on March 31 and September 30. On December 31, 2015, the adjusting entry to accrue interest on the note should debit: a) Interest Payable and credit Interest Expense for $4,260. b) Interest Expense and credit Interest Payable for $4,260. c) Interest Expense and credit Cash for $8,520. d) Interest Expense and credit Interest Payable for $8,520. e) Interest Expense and credit Interest Payable for $17,040.BWhen a company collects sales tax from a customer at the point of sale, the event is recorded by: a) A debit to Sales Tax Expense and a credit to Sales Tax Payable. b) A debit to Cash and a credit to Sales Tax Payable. c) A debit to Sales Tax Payable and a credit to Sales Tax Expense. d) A debit to Cash and a credit to Sales Tax Revenue. e) A debit to Sales Tax Payable and a credit to Cash.BTrickster Travel, Inc. borrowed $500,000 on November 1, 2017, and signed a twelve-month note bearing interest at 6% per year. Principal and interest are payable in full at maturity on October 31, 2018. No entries have yet been made in 2017 with respect to the note. In connection with this note, Trickster Travel, Inc. should report interest payable at December 31, 2017, in the amount of: a) $8,000. b) $30,000. c) $5,000. d) $25,000.c-5,000