>> Accounting Basics
1. Darren Corporation had net income of $250,000 and paid dividends of $50,000 to common stockholders and $10,000 to preferred stockholders in 2012. Darren Corporation's common stockholders' equity at the beginning and end of 2012 was $870,000 and $1,130,000, respectively. There are 200,000 weighted-average shares of common stock outstanding. Darren Corporation's earnings per share for 2012 was
2. Ogleby Manufacturing Inc.'s accounting records reflect the following inventories:
During 2012, Ogleby purchased $1,410,000 of raw materials, incurred direct labor costs of $225,000, and incurred manufacturing overhead totaling $288,000.How much is total manufacturing costs incurred during 2012 for Ogleby?
3. In the month of June, a department had 20,000 units in beginning work in process that were 70% complete. During June, 80,000 units were transferred into production from another department. At the end of June there were 10,000 units in ending work in process that were 40% complete. Materials are added at the beginning of the process, while conversion costs are incurred uniformly throughout the process. How many units were transferred out of the process in June?
A) 100,000 units.
B) 90,000 units.
C) 80,000 units.
D) 70,000 units.
4. Stout Corporation had net income of $200,000 and paid dividends to common stockholders of $40,000 in 2012. The weighted average number of shares outstanding in 2012 was 50,000 shares. Stout Corporation's common stock is selling for $75 per share on the New York Stock Exchange. Stout Corporation's price-earnings ratio is
A) 15 times.
B) 12 times.
C) 3.8 times.
D) 18.8 times.
5. Fugate Company planned to use 1 yard of plastic per unit budgeted at $81 a yard. However, the plastic actually cost $80 per yard. The company actually made 3,900 units, although it had planned to make only 3,300 units. Total yards used for production were 3,960. How much is the total materials variance?
A) $4,860 U
B) $900 U
C) $48,600 U
D) $3,960 F
6. A process with 1,600 units of beginning work in process, completed and transferred out 20,000 units during a period. There were 10,000 units in the ending work in process that were 50% complete as to conversion costs. Materials are added 80% at the beginning of the process and 20% when the units are 90% complete. How much is equivalent units of production for the period for material costs?
A) 28,000 equivalent units.
B) 22,000 equivalent units.
C) 24,000 equivalent units.
D) 30,000 equivalent units.
7. The direct materials budget shows:
What are the direct materials per unit? 6000
Total materials required 24,000
Units to be produced 26,400
Total pounds needed for production
A) 4.0 pounds
B) 4.4 pounds
C) .44 pounds
D) Cannot be determined from the data provided.
8. Dolan Manufacturing Company's accounting records reflect the following inventories:
During 2012, $800,000 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 2012 for Dolan Manufacturing Company is
9. West Company had $375,000 of current assets and $150,000 of current liabilities before borrowing $75,000 from the bank with a 3-month note payable. What effect did the borrowing transaction have on West Company's current ratio?
A) The change in the current ratio cannot be determined.
B) The ratio decreased.
C) The ratio increased.
D) The ratio remained unchanged.
10. The standard rate of pay is $20 per direct labor hour. If the actual direct labor payroll was $117,600 for 6,000 direct labor hours worked, the direct labor price (rate) variance is
A) $3,000 unfavorable.
B) $2,400 unfavorable.
C) $3,000 favorable.
D) $2,400 favorable.
11. Lake Company received proceeds of $188,500 on 10-year, 8% bonds issued on January 1, 2011. The bonds had a face value of $200,000, pay interest semi-annually on June 30 and December 31, and have a call price of 101. Lake uses the straight-line method of amortization. What is the amount of interest Lake must pay the bondholders in 2011?
12. Cost of goods manufactured equals $65,000 for 2012. Finished goods inventory is $2,000 at the beginning of the year and $5,500 at the end of the year. Beginning and ending work in process for 2012 are $4,000 and $5,000, respectively. How much is cost of goods sold for the year?
13. Hackett Industries is preparing its direct labor budget for May. Projections for the month are that 33,400 units are to be produced and that direct labor time is three hours per unit. If the labor cost per hour is $12, what is the total budgeted direct labor cost for May?
14. At 18,000 direct labor hours, the flexible budget for indirect materials is $36,000. If $37,400 are incurred at 18,400 direct labor hours, the flexible budget report should show the following difference for indirect materials:
A) $1,400 favorable.
B) $600 favorable.
C) $600 unfavorable.
D) $1,400 unfavorable.
15. Using the indirect method, patent amortization expense for the period
A) causes cash to increase.
B) causes cash to decrease.
C) is added to net income.
D) is deducted from net income.
16. Kessler Company uses flexible budgets. At normal capacity of 16,000 units, budgeted manufacturing overhead is: $64,000 variable and $180,000 fixed. If Kessler had actual overhead costs of $250,000 for 18,000 units produced, what is the difference between actual and budgeted costs?
A) $6,000 unfavorable.
B) $2,000 unfavorable.
C) $8,000 favorable.
D) $2,000 favorable.
17. If $250,000 of bonds are issued during the year but $100,000 of old bonds are retired during the year, the statement of cash flows will show a(n)
A) net decrease in cash of $150,000.
B) net gain on retirement of bonds of $150,000.
C) net increase in cash of $150,000.
D) increase in cash of $250,000 and a decrease in cash of $100,000.
18. Nickel Company owns 30% interest in the stock of Finn Corporation. During the year, Finn pays $25,000 in dividends, and reports $200,000 in net income. Nickel Company's investment in Finn will increase by
19. Marion, Inc. has 5,000 shares of 5%, $100 par value, noncumulative preferred stock and 20,000 shares of $1 par value common stock outstanding at December 31, 2012. There were no dividends declared in 2011. The board of directors declares and pays a $55,000 dividend in 2012. What is the amount of dividends received by the common stockholders in 2012?
20. Parker Hardware Store had net credit sales of $8,000,000 and cost of goods sold of $5,000,000 for the year. The Accounts Receivable balances at the beginning and end of the year were $600,000 and $700,000, respectively. The receivables turnover was
A) 12.3 times.
B) 11.4 times.
C) 7.7 times.
D) 4.6 times.
21. Karl Corporation was organized on January 2, 2010. During 2012, Karl issued 20,000 shares at $24 per share, purchased 3,000 shares of treasury stock at $26 per share, and had net income of $300,000. What is the total amount of stockholders' equity at December 31, 2012?
22. If annual overhead costs are expected to be $800,000 and direct labor costs are expected to be $1,000,000, then if the activity base is direct labor costs:
A) a predetermined overhead rate cannot be determined.
B) $1.25 is the predetermined overhead rate.
C) for every dollar of manufacturing overhead, 80 cents of direct labor will be assigned.
D) for every dollar of direct labor, 80 cents of manufacturing overhead will be assigned.
23. Lawson Co. is considering purchasing a new machine which will cost $350,000, but which will decrease costs each year by $70,000. The useful life of the machine is 10 years. The machine would be depreciated straight-line with no residual value over its useful life at the rate of $20,000/year. The cash payback period is
A) 5.0 years.
B) 7.0 years.
C) 10.0 years.
D) 4.5 years.
24. Cloud Manufacturing declared a 10% stock dividend when it had 350,000 shares of $3 par value common stock outstanding. The market price per common share was $12 per share when the dividend was declared. The entry to record this dividend declaration includes a credit to
A) Common Stock Dividends Distributable for $420,000.
B) Common Stock for $105,000.
C) Stock Dividends for $105,000.
D) Paid-in Capital in Excess of Par for $315,000.
25. If 10% of the common stock of an investee company is purchased as a long-term investment, the appropriate method of accounting for the investment is
A) determined by agreement with whomever owns the remaining 90% of the stock.
B) the cost method.
C) the equity method.
D) the preparation of consolidated financial statements.
26. Haight Company incurred direct materials costs of $1,500,000 during the year. Manu-facturing overhead applied was $270,000 and is applied at the rate of 60% of direct labor costs. Haight Company's total manufacturing costs for the year was
27. A company has contribution margin per unit of $60 and a contribution margin ratio of 40%. What is the unit selling price?
D) Cannot be determined.
28. During 2012, Durham Manufacturing expected Job No. 51 to cost $600,000 of overhead, $1,000,000 of materials, and $400,000 in labor. Durham applied overhead based on direct labor cost. Actual production required an overhead cost of $560,000, $1,100,000 in materials used, and $440,000 in labor. All of the goods were completed.
What amount was transferred to Finished Goods?
29. 15,000 units in a process that are 70% complete are referred to as:
A) 10,500 equivalent units of production.
B) 15,000 equivalent units of production.
C) 4,500 equivalent units of production.
30. If Vickers Company issues 4,000 shares of $5 par value common stock for $140,000,
A) Paid-In Capital in Excess of Par will be credited for $120,000.
B) Common Stock will be credited for $140,000.
C) Cash will be debited for $120,000.
D) Paid-In Capital in Excess of Par will be credited for $20,000.
31. Crain Company issued 2,000 shares of its $5 par value common stock in payment of its attorney's bill of $40,000. The bill was for services performed in helping the company incorporate. Crain should record this transaction by debiting
A) Organization Expense for $40,000.
B) Legal Expense for $10,000.
C) Legal Expense for $40,000.
D) Organization Expense for $10,000.
32. Net sales are $6,000,000, beginning total assets are $2,800,000, and the asset turnover is 3.0 times. What is the ending total asset balance?
33. Ramsey Company is considering buying equipment for $240,000 with a useful life of five years and an estimated salvage value of $12,000. If annual expected income is $21,000, the denominator in computing the annual rate of return is
34. A $1,000 face value bond with a quoted price of 97 is selling for