ACCT 301 Final Examination Answers – UMUC

ACCT 301 Final Examination Answers – UMUC

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(Multiple Choice)

On April 1, 20X6, Ratchford Industries issued $500,000 of 12%, 10-year bonds.  The

bonds, which were issued at 103, pay interest on October 1 and April 1.  The entry to

record issuance of the bonds includes:

A.   a debit to Cash of $500,000.

B.   a credit to Bonds Payable of $503,000.

C.   a debit to Premium on Bonds Payable of $15,000.

D.   All of the above.

E.   None of these.

(Multiple Choice)

When interest income on a bond investment is less than the cash received:

A.   the Investment in Bond account is credited.

B.   the bond was likely purchased at a premium.

C.   Interest Income is credited.

D.   All of these.

E.   None of these.

1.	(Multiple Choice) Stringer Corporation issued 5,000 shares of $2 par value common stock.  The issue price was $7.50 per share.  The entry to record this transaction includes a: A.   debit to Cash for $10,000. B.   debit to Paid-in Capital in Excess of Par for $27,500. C.   debit to Common Stock for $10,000. D.   credit to Gain on Stock $37,500. E.   None of these.
2.
3.

(True or False)

The presence of goodwill in a balance sheet suggests that accounts of the subsidiary have not yet been consolidated with the parent company.

5.  (Multiple Choice)

Which formula “calculates” the return on assets ratio?

1. (Net Income + Interest Expense)/Average Assets.
2. (Net Income + Extraordinary Items)/Average Assets
3. (Net Income + Discontinued Operations)/Average Assets
4. (Net Income + Income Tax Expense)/Average Assets.
5. None of these.
6. (Multiple Choice)

In an effort to concentrate its resources in more profitable areas, Southern Steel Corporation recently sold its family pizza restaurant segment.  The disposal constitutes:

1. an extraodinary item.
2. a discontinued operation which should be treated as a prior period adjustment.
3. a discontinued operation which should be disclosed net-of-tax effects.
4. a portion of income from continuing operations.
5. None of these.

7. (Multiple Choice)

Assuming use of the direct approach for preparing a statement of cash flows, which of the following would be most likely reported as a line item in the “operating activity” section?

1. Dividends paid to shareholders.
2. Cash paid for taxes.
3. Proceeds from issuing capital stock.
4. A reduction in inventory levels.
5. None of these.

8. (Multiple Choice)

Finished goods ending inventory of $10,000 is erroneously determined to be $100,000.  The effect of this error will be to:

1. overstate assets by $90,000.
2. overstate income by $90,000.
3. understate income by $90,000.
4. Both A and B.
5. None of these.

9.  (Essay)

On May 21, Vincent worked 6 hours on Job 657, and 2 hours on general “overhead activities.”  Vincent is paid $15 per hour.  Overhead is applied based on $4 per direct labor hour.  Job 657 also entailed $30 of direct material.  On May 21, Vincent used $7 of indirect material.  Indirect material is included in the overhead application rate.  Of these amounts, how much total cost should be allocated to Job 657 for May 21?

10. (Multiple Choice)

Jose Company uses a job order cost system.  At the end of an accounting period, Jose has a debit balance in the Factory Overhead account.  This would indicate:

1. a loss for the period.
2. underapplied overhead.
3. overapplied overhead.
4. a malfunction in the job order cost system.
5. None of these.

11. (Multiple Choice)

If beginning work in process was 600 units, 1,400 additional units were put into production, and ending work in process was 500 units, how many units were completed?

1. 500
2. 900
3. 1,400
4. 2,000
5. None of these.

12. (Multiple Choice)

Which of these alternatives would decrease contribution per unit margin the most?

1. A 10 percent decrease in selling price.
2. A 10 percent increase in variable expenses.
3. A 10 percent increase in selling price.
4. A 10 percent decrease in variable expenses.
5. None of these.

13.  (Multiple Choice)

Each of the following would affect the breakeven point except a change in the:

1. number of units sold.
2. variable costs per unit.
3. total fixed costs.
4. sales price per unit.
5. None of these.

14. (Multiple Choice)

Anticipated unit sales are January, 5,000; February, 4,000; and March 8,000.  Finished goods are consistently maintained at 80% of the following month’s sales.  If units cost $10 each to produce, how much is February’s total cost of production?

1. $0
2. $40,000
3. $72,000
4. $80,000
5. None of these.

15. (Multiple Choice)

Which of the following is one of the purposes of standard costs?

1. To aid in planning, controlling, and cost-volume-profit analysis.
2. To replace budgets and budgeting.
3. To use them as a basis for external-reporting purposes.
4. To eliminate having to account for underapplied or overapplied factory overhead.
5. None of these.

16. (Multiple Choice)

How is a labor rate variance computed?

1. The difference between standard and actual rate multiplied by actual hours.
2. The difference between standard and actual rate multiplied by standard hours.
3. The difference between standard and actual hours multiplied by actual rate.
4. The difference between standard and actual hours multiplied by standard rate.
5. None of these.

17.  (Multiple Choice)

Which of the following decisions would necessarily result in an increase in profit or decrease in loss?

1. Eliminating the sale of all products that are priced below variable cost.
2. Eliminating the sale of all products that are priced below absorption cost.
3. Eliminating the sale of all products if the firm has a loss.
4. Not eliminating the sale of any products if the firm is profitable overall.
5. None of these.

18. (Multiple Choice)

In calculating the controllable contribution margin, fixed costs should be subtracted from the contribution margin:

1. in every case.
2. if they are controllable by the segment’s management.
3. if they are directly traceable to the segment.
4. Both B and C.
5. None of these.

19. (Multiple Choice)

In considering a special order situation that will enable a company to make use of presently idle capacity, which of the following costs would be irrelevant?

1. Materials
2. Depreciation
3. Direct labor
4. Variable overhead
5. None of these.

20. (Multiple Choice)

The type of costs presented to management for an equipment replacement decision should be limited to:

1. relevant costs.
2. standard costs.
3. sunk costs.
4. controllable costs.
5. None of these.