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Statement of Cash Flows, Bonds, Net Cash, Payment of Dividends, Period Costs, and other Managerial Accounting Questions

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The primary goal of managerial accounting is to provide information to:

a. creditors
b. management
c. investors
d. external auditors

On the statement of cash flows prepared by the indirect method, a $50,000 gain on the sale of investments would be

a. added to dividends declared in converting the dividends declared to the cash flows from financing activities related to dividends
b. deducted from dividends declared in converting the dividends declared to the cash flows from financing activities related to dividends
c. deducted from net income in converting the net income reported on the income statement to cash flows from operating activities
d. added to net income in converting the net income reported on the income statement to cash flows from operating activities

When a corporation issues bonds, it executes a contract with the bondholders, known as a bond debenture.

a. True
b. False

If the bonds are purchased between interest dates, the purchase price includes accrued interest since the last interest payment.

a. True
b. False

Loster Company reported a net loss of $14,089 for the year ended December 31, 2008. During the year, accounts receivable decreased $7,731, merchandise inventory increased $6,803, accounts payable increased by $13,479, and depreciation expense of $4,042 was recorded. What was the net cash used for or provided by operating activities during the year 2008?
Select the correct answer.

a. used net cash of $4,360.
b. used net cash of $14,089.
c. provided net cash of $4,360.
d. provided net cash of $14,089

Job order cost accounting systems can be used only for companies that manufacture a product.

a. True
b. False

Sinking Fund Income is reported in the income statement as

a. extraordinary
b. other income
c. gain on sinking fund transactions
d. income from operations

The payment of dividends is an example of a cost.

a. True
b. False

Period costs are

a. found on the balance sheet.
b. found on the job order cost sheets.
c. not involved in the production process.
d. classified as direct labor, direct material, or factory overhead.

Problem 19-10
The Stamping Department accepted Job 051507A on May 15th to make 1,000 funnels.
To complete the job they requisitioned 1,100 sheets at $1.20 per sheet and 1,150 grommets at $0.15 per set.
The cost driver that the Stamping Department uses is drop-forge strokes which are counted on a machine mounted counter. $2.25 is applied as overhead for each drop-forge stroke. Additionally $375.00 of overhead is applied to each job due to setup and teardown.
Direct labor is applied at $22.50 per hour for the machine operator and $11.10 for the machine loader. The job required 6 1/2 hours of labor by the team.
When the job was complete Job 051507A was transferred to Semi-finished Goods Inventory (SFGI). When the job was transferred, 20 sheets were returned unused to raw material inventory, 75 grommet sets were returned, and there were 1,115 strokes on the counter.

Journalize all events depicted as of May 15th.
(a) Journalize the purchasing of raw materials.
(b) Journalize the application of manufacturing overhead.
(c) Journalize the application of direct labor.
(d) Journalize the transfer to Semi-finished Goods Inventory (SFGI).

For a compound transaction, if an amount box does not require an entry, leave it blank or enter "0". If required, round your answers to two decimal places.

Temporary investments

a. do not include equity securities
b. include cash equivalents
c. are reported as current assets
d. all of these

Conversion costs are

a. direct materials and factory overhead
b. factory overhead and direct labor
c. direct materials and indirect labor
d. direct materials and direct labor

The cost of wages paid to employees directly involved in converting materials to finished product is classified as direct labor cost.

a. True
b. False

The percent of fixed assets to total assets is an example of

a. solvency analysis
b. horizontal analysis
c. profitability analysis
d. vertical analysis

Debtors are interested in the times-interest-earned ratio because they want to

a. know the tax effect of lending to a corporation
b. have adequate protection against a potential drop in earnings jeopardizing their interest payments
c. be sure their debt is backed by collateral
d. know what rate of interest the corporation is paying

An example of a period cost is:

a. property taxes on plant facilities
b. advertising expense
c. depreciation on factory equipment
d. indirect materials

Accounts receivable from sales to customers amounted to $40,000 and $32,000 at the beginning and end of the year, respectively. Income reported on the income statement for the year was $110,000. Exclusive of the effect of other adjustments, the cash flows from operating activities to be reported on the statement of cash flows is

a. $150,000.
b. $102,000.
c. $110,000.
d. $118,000.

When there are material differences between the results of using the straight-line method and using the effective interest method of amortization, the effective interest method should be used.

a. True
b. False

The job order costing system is used by service firms to determine revenues, expenses, and ultimately profit.

a. True
b. False

A company that has 25,000 shares of $5.00 par value common stock issued and outstanding paid a dividend of $.75 per share. The market value of the stock is $20.00 per share. The company's dividend yield is:

a. 400%
b. 25%
c. 3.75%
d. 15%

Cash outflows from financing activities include the payment of cash dividends, the acquisition of treasury stock, and the repayment of amounts borrowed.

a. True
b. False

When a job is completed in a service organization, the job costs are transferred to the

a. finished goods account.
b. work in process account.
c. cost of goods sold account.
d. cost of services account

The vice presidents of production and sales and the controller hold line positions in most large organizations.
a. True
b. False

A staff department has no direct authority over a line department.

a. True
b. False

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Solution Preview

Your tutorial is shown with coaching tips to explain the choice. Excel attached support the work in process journal entries.

--------------

The primary goal of managerial accounting is to provide information to:

a. creditors
*b. management
(coaching tip: decision makers internally)
c. investors
d. external auditors

On the statement of cash flows prepared by the indirect method, a $50,000 gain on the sale of investments would be

a. added to dividends declared in converting the dividends declared to the cash flows from financing activities related to dividends
b. deducted from dividends declared in converting the dividends declared to the cash flows from financing activities related to dividends
*c. deducted from net income in converting the net income reported on the income statement to cash flows from operating activities
(coaching tip: remove gain from Net Income as it will be reported as investing activity)
d. added to net income in converting the net income reported on the income statement to cash flows from operating activities

When a corporation issues bonds, it executes a contract with the bondholders, known as a bond debenture.

*a. True
b. False

If the bonds are purchased between interest dates, the purchase price includes accrued interest since the last interest payment.

*a. True
b. False

Loster Company reported a net loss of $14,089 for the year ended December 31, 2008. During the year, accounts receivable decreased $7,731, merchandise inventory increased $6,803, accounts payable increased by $13,479, and depreciation expense of $4,042 was recorded. What was the net cash used for or provided by operating activities during the year 2008?
Select the correct answer.

Rule:
If assets increase, reduce NI.(and reverse for incr)
If liabilities increase, increase NI (and reverse for decr)
Net Income $ (14,089)
Add: depr $ 4,042
AR decr $ 7,731
Invy incr $ (6,803)
AP incr $ 13,479
Provided cashflow $ 4,360

a. used net cash of $4,360.
b. used net ...

Solution Summary

Your tutorial is shown with coaching tips to explain the choice. Excel attached support the work in process journal entries.

$2.19
See Also This Related BrainMass Solution

Managerial Accounting, part 5. MC questions X 25.

See attached file.

Ref: Fundamental Managerial Accounting Concepts. Fifth Edition. EDMONDS

25 Multiple Choice Questions.

1. During the year Leyland Company completed 1,300 units of product. Ending inventory consisted of 400 units that were 50% complete. The total dollar cost associated with production of inventory was $45,000. The cost per equivalent whole unit would be which of the following? (Round all answers to the nearest whole penny.)
A) $26.00
B) $30.00
C) $34.61
D) $41.91

2. What is the name of the method of analyzing beginning and ending balances on the balance sheet and inferring the period's transactions from the income statement?
A) Cash method
B) Liability method
C) Accrual method
D) T-Account method

3. In a job-order cost system, as goods are produced, product costs (direct material, direct labor, and overhead) are accumulated in the:
A) Materials account.
B) Work in Process account.
C) Finished Goods account.
D) Cost of Goods Sold account.

4. The Work in Process account for Monty's Company contained the following entries: Work in Process Account Debit of $40,000 for direct raw materials Debit of $60,000 for direct labor Debit of $30,000 for manufacturing overhead Ending balance, $42,000, associated with Job #2 The company uses a job-order cost system. Work was only performed on two jobs during the period. What was the cost of Job # 1, which was started and completed during the period?
A) $88,000
B) $74,000
C) $66,000
D) $90,000

5. Congress Manufacturing is currently working on two jobs. The job order cost sheets for Job 101 and Job 102 showed the following information:

If overhead is applied to jobs at $.80 per direct labor dollar, the total manufacturing cost for the two jobs would be:
A) $ 96,000.
B) $151,200.
C) $ 55,200.
D) $162,000.

6. Assume that a statement of cash flows has been prepared. The sum of the three major components (operating activities, investing activities, financing activities) adds up to the:
A) change in the cash account balance between the beginning and end of the period.
B) net income for the period.
C) ending cash balance.
D) amount of cash inflow for the period.

7. A hybrid cost system contains:
A) features of a job-order cost system.
B) features of a process cost system.
C) features of both job-order and process cost systems.
D) none of the above

8. The Ragan Corporation uses a process cost system. The company started March with 2,300 units in Work in Process-Dept. A. During the month 4,000 units were started. At the end of the month there were 3,200 units in ending Work in Process-Dept. A inventory that were 30% complete. The beginning work in process balance was $240,540 and total manufacturing cost for the period was $608,000. Based on this information, the amount of cost transferred from Work in Process-Dept. A to Work in Process-Dept. B was:
A) $200,640.
B) $254,562.
C) $543,233.
D) $647,900.

9. Alton Company experienced an event that affected its financial statements as indicated below:

What type of product costing system is being used by this company?
A) Job-order cost system
B) Process cost system
C) Hybrid cost system
D) None of the above

10. During the 2007 accounting period the XYZ Company earned $55,000 of sales revenue on account and accrued $32,500 of operating expenses. The company also earned $6,400 of service revenue that had previously been recorded as unearned revenue. In addition, a $2,200 stock dividend was issued to the stockholders. What can be said about cash flows considering these transactions?
A) Cash outflows from financing activities are $2,200
B) Cash inflows from operating activities are $28,900.
C) Cash inflows from operating activities are $22,500.
D) There are no cash effects from these transactions.

11. In preparing the statement of cash flows by the indirect method, which of the following is an incorrect statement of one of the general rules to convert net income to a cash-basis equivalent?
A) Increases in current assets are subtracted from net income.
B) Non-cash revenue and gains are added to net income.
C) Decreases in current assets are added to net income.
D) Increases in current liabilities are added to net income.

12. Evelyn Company began the accounting period with $13,500 in accounts receivable. The ending balance in accounts receivable was $5,000. If the credit sales during the period were $22,000, what is the amount of cash received from customers?
A) $13,500
B) $22,000
C) $30,500
D) $40,500

13. Hatcher Company uses a process cost system. The following data applies to January 2007.

The ending work in process inventory is 90% complete. The total number of equivalent units for January was:
A) 51,200
B) 53,000
C) 54,800
D) 55,000

14. In a job-order cost system, the subsidiary accounts for the Work in Process account are the:
A) job cost sheets.
B) standard cost cards.
C) individual accounts payable accounts.
D) cost of production report.

15. On January 1, 2008, the ABC Company purchased equipment for $26,000 cash. On December 31, 2008, depreciation of $8,000 was recorded. Which of the following correctly shows the combined effect of these two events on the income statement and statement of cash flows?

ABC uses the direct method to prepare the statement of cash flows.
A) A Above.
B) B Above.
C) C Above.
D) D Above.

16. Port Corporation reported a $1,800 balance in accounts receivable on January 1, 2006. During the year, $12,400 of sales on account were made. During the year, Port wrote off as uncollectible, accounts receivable of $850. If the ending balance of accounts receivable is $1,000, what is the amount of cash received from customers?
A) $10,600
B) $10,750
C) $12,350
D) $14,200

17. Select the correct formula for computing the cost to be assigned to ending inventory in a process costing system.
A) Ending inventory units x cost per equivalent units
B) Ending inventory equivalent units x cost per equivalent units
C) Beginning inventory cost + Transferred-in costs
D) Beginning inventory units + units transferred in - units transferred out

18. The entry to dispose of underapplied manufacturing overhead will include a:
A) debit to Cost of Goods Sold and a credit to Manufacturing Overhead.
B) debit to Cost of Goods Sold and a credit to Finished Goods.
C) debit to Manufacturing Overhead and a credit to Cost of Goods Sold.
D) debit to Finished Goods and a credit to Manufacturing Overhead.

19. The following income statement was drawn from the annual report of Hurricane Company:

The amount of cash flow from operating activities is:
A) $18,600
B) $18,000
C) $13,000
D) $12,400

20. The Lemmon Corporation reported a beginning balance of $600 in its Prepaid Insurance Account for 2008. During the year, a total of $8,000 was recognized as Insurance Expense and the Prepaid Insurance account had an ending balance of $800. How much cash did Lemmon pay for insurance during 2008?
A) $8,600
B) $8,200
C) $8,000
D) $7,400

21. What effect will recording depreciation expense have on net income and cash flows?

A) A Above
B) B Above
C) C Above
D) D Above

22. Which of the following is not a component of process cost systems?
A) Job cost sheet
B) Cost of production report
C) Multiple Work in Process accounts
D) All of the above are components of process cost systems.

23. Which of the following cash flows would be included under the operating activities section of the cash flow statement? Assume the direct method.
A) Cash receipts from dividends.
B) Cash paid to purchase equipment.
C) Cash received from issuing bonds payable.
D) Gains and losses from the sale of operational assets.

24. Which of the following transactions is a use of cash?
A) Short-term borrowing of cash
B) Acquisition of land by issuing a short-term note payable.
C) Issuance of a stock dividend.
D) Purchase of treasury stock

25. Which of the following would NOT be represented in the financing activities section of the statement of cash flows?
A) Purchased a new office building.
B) Purchased treasury stock.
C) Made installment payment on long-term note payable.
D) Issued preferred stock.

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