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ACC II Study Guide Part I

Assume that social security taxes are payable at a 6% rate on the first $100,000 of earnings and Medicare taxes are payable at a 1.5% rate with no maximum earnings, and that federal and state unemployment compensation taxes total 4.6% on the first $7,000 of earnings. If an employee, George Jones, earns $2,500 for the current week and Jones’ year-to-date earnings before this week were $6,800, what is the total payroll taxes related to the current week?
$196.70
The cost of a product warranty should be included as an expense in the
period of the sale of the product
Assuming a 360-day year, when a $30,000, 90-day, 5% interest-bearing note payable matures, total payment will amount to:
$30,375
Use the following information to answer the following questions.

The following totals for the month of April were taken from the payroll register of Magnum Company.
Salaries
$12,000
FICA taxes withheld
550
Income taxes withheld
2,500
Medical insurance deductions
450
Federal Unemployment Taxes
32
State Unemployment Taxes
216

debit to Payroll Tax Expense for $798
The journal entry a company uses to record pension rights that have not been funded for its salaried employees, at the end of the year is
debit Pension Expense; credit Unfunded Pension Liability
Xavier and Yolanda have original investments of $50,000 and $100,000 respectively in a partnership. The articles of partnership include the following provisions regarding the division of net income: interest on original investment at 10%, salary allowances of $38,000 and $28,000 respectively, and the remainder equally. How much of the net income of $75,000 is allocated to Xavier?
$40,000
If there is no written agreement as to the way income will be divided among partners
they will share income and losses equally
The characteristic of a partnership that gives the authority to any partner to legally bind the partnership and all other partners to business contracts is called
mutual agency
Franco and Jason share income and losses in a 2:1 ratio after allowing for salaries to Franco of $15,000 and $30,000 to Jason. If the partnership suffers a $15,000 loss, by how much would Jason’s capital account increase?
$10,000
The capital accounts of Harrison and Marti have balances of $180,000 and $130,000, respectively, on January 1, 2010, the beginning of the current fiscal year. On April 10, Harrison invested an additional $20,000. During the year, Harrison and Marti withdrew $96,000 and $78,000, respectively, and net income for the year was $248,000. The articles of partnership make no reference to the division of net income.

Based on this information, the statement of partners’ equity for 2010 would show what amount as total capital for the partnership on December 31, 2010?

$404,000
The entry to record the issuance of common stock at a price above par includes a debit to
Cash
Retained earnings
changes are summarized in the retained earnings statement
When a corporation completes a 3-for-1 stock split
the market price per share of the stock is decreased
the par value per share is decreased
b and c
A restriction/appropriation of retained earnings
has no effect on total retained earnings
When Bayou Corporation was formed on January 1, 20xx, the corporate charter provided for 100,000 share of $10 par value common stock. The following transaction was among those engaged in by the corporation during its first month of operation: The corporation issued 9,000 shares of stock at a price of $23 per share.

The entry to record the above transaction would include a

credit to Paid in Capital in Excess of Par for $117,000
The journal entry a company records for the issuance of bonds when the contract rate is less than the market rate would be
debit Cash and Discount on Bonds Payable, credit Bonds Payable
On January 1, 2011, $1,000,000, 5-year, 10% bonds, were issued for $960,000. Interest is paid semiannually on January 1 and July 1. If the issuing corporation uses the straight-line method to amortize discount on bonds payable, the semiannual amortization amount is
$4,000
Bonds Payable has a balance of $900,000 and Premium on Bonds Payable has a balance of $10,000. If the issuing corporation redeems the bonds at 103, what is the amount of gain or loss on redemption?
$17,000 loss
A bond indenture is
a contract between the corporation issuing the bonds and the bond trustee, who is acting on behalf of the bondholders.
On the first day of the fiscal year, Hawthorne Company obtained a $ 88,000, seven-year, 5% installment note from Sea Side Bank. The note requires annual payments of $15,208, with the first payment occurring on the last day of the fiscal year. The first payment consists of interest of $4,400 and principal repayment of $10,808. The journal entry Hawthorne would record to make the first annual payment due on the note would include:
a debit to Interest Expense for $4,400
Jacks Corporation purchases $200,000 bonds plus accrued interest for 2 months of $2,000 from Kennedy Company on March 1. The bonds have an annual interest rate of 6% payable on June 30 and December 31. The entry to record the purchase of the bonds would include:
Interest Receivable debit $2,000
Investment is certificates of deposit and other securities that do not change in value are reported in the balance sheet as:
cash and cash equivalents
Edison Corporation paid a dividend of $10 per share on its $100 par preferred stock and $2 per share on its $10 par common stock. The market value of the common stock is $80 per share. Edison’s dividend yield is:
2.5%
Which of the following stock investments should be accounted for using the cost method?
investments of less than 20%
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:
3.75%
Which of the following is a noncash investing and financing activity?
issuance of common stock to acquire land
The following selected account balances appeared on the financial statements of the Washington Company:

Accounts Receivable, Jan. 1
$13,000
Accounts Receivable, Dec. 31
9,000
Accounts Payable, Jan 1
4,000
Accounts payable Dec. 31
7,000
Merchandise Inventory, Jan 1
10,000
Merchandise Inventory, Dec 31
15,000
Sales
56,000
Cost of Goods Sold
31,000

The Washington Company uses the direct method to calculate net cash flow from operating activities.

Cash paid to suppliers is

$33,000
On the statement of cash flows prepared by the indirect method, the cash flows from operating activities section would include
amortization of premium on bonds payable
Accounts receivable from sales transactions were $44,000 at the beginning of the year and $53,000 at the end of the year. Net income reported on the income statement for the year was $105,000. Exclusive of the effect of other adjustments, the cash flows from operating activities to be reported on the statement of cash flows prepared by the indirect method is
$96,000
On the statement of cash flows, the cash flows from financing activities section would include all of the following except
payments of interest on bonds payable
Which of the following are basic phases of the management process?
Planning and controlling
Which of the following is not a prime cost?
Supervisor’s wages
Cost of goods sold for a manufacturer equals cost of goods manufactured plus:
beginning finished goods inventory less ending finished goods inventory
Costs other than direct materials cost and direct labor cost incurred in the manufacturing process are classified as:
factory overhead cost
Each account in the cost ledger is called a:
job cost sheet
Which of the following is the correct flow of manufacturing costs?
Raw materials, work in process, finished goods, cost of goods sold
Selected accounts with some debits and credits omitted are presented as follows:

Work in Process
Aug. 1 Balance
275,000
Aug. 31 Goods finished
1,030,000
31 Direct materials
X

31 Direct labor
450,000

31 Factory overhead
X

Factory Overhead
Aug. 1-31 Costs incurred
145,000
Aug. 1 Balance
15,000
31 Applied
(30% of direct
labor cost)
X

If the balance of Work in Process at August 31 is $220,000, what was the amount debited to Work in Process for direct materials in August?

$390,000
Materials purchased on account during the month amounted to $195,000. Materials requisitioned and placed in production totaled $168,000. From the following, select the entry to record the transaction on the day the materials were bought.
Materials 195,000
Accounts Payable 195,000
When a job is completed in a service organization, the job costs are transferred to the
cost of services account.
The debits to Work in Process–Assembly Department for April, together with data concerning production, are as follows:

April 1, work in process:
Materials cost, 3,000 units
$ 8,000
Conversion costs, 3,000 units,
66.7% completed
6,000
Materials added during April, 10,000 units
30,000
Conversion costs during April
31,000
Goods finished during April, 11,500 units

April 30 work in process, 1,500 units,
50% completed

All direct materials are placed in process at the beginning of the process and the first-in, first-out method is used to cost inventories. The materials cost per equivalent unit for April is:

$3.00
Mocha Company manufactures a single product by a continuous process, involving three production departments. The records indicate that direct materials, direct labor, and applied factory overhead for Department 1 were $100,000, $125,000, and $150,000, respectively. The records further indicate that direct materials, direct labor, and applied factory overhead for Department 2 were $50,000, $60,000, and $70,000, respectively. In addition, work in process at the beginning of the period for Department 1 totaled $75,000, and work in process at the end of the period totaled $60,000.

The journal entry to record the flow of costs into Department 2 during the period for applied overhead is:

Work in Process–Department 2 70,000
Factory Overhead–Department 2 70,000
The debits to Work in Process–Assembly Department for April, together with data concerning production, are as follows:

April 1, work in process:
Materials cost, 3,000 units
$ 7,200
Conversion costs, 3,000 units,
40% completed
6,000
Materials added during April, 10,000 units
25,000
Conversion costs during April
30,800
Goods finished during April, 12,000 units

April 30 work in process, 1,000 units,
40% completed

All direct materials are placed in process at the beginning of the process and the first-in, first-out method is used to cost inventories. The conversion cost per equivalent unit for April is:

$2.75
A form prepared periodically for each processing department summarizing (1) the units for which the department is accountable and the units to be assigned costs and (2) the costs charged to the department and the allocation of these costs is termed a:
cost of production report
Which of the following measures would not help managers to control and improve operations?
Commissions paid per time period
Land acquired so it can be resold in the future is listed in the balance sheet as a(n)
investment
The exclusive right to use a certain name or symbol is called a
trademark
All leases are classified as either
capital leases or operating leases
A machine with a cost of $80,000 has an estimated residual value of $5,000 and an estimated life of 5 years or 15,000 hours. It is to be depreciated by the units-of-production method. What is the amount of depreciation for the second full year, during which the machine was used 5,000 hours?
$25,000
Equipment with a cost of $160,000, an estimated residual value of $40,000, and an estimated life of 15 years was depreciated by the straight-line method for 4 years. Due to obsolescence, it was determined that the useful life should be shortened by 3 years and the residual value changed to zero. The depreciation expense for the current and future years is
$16,000
Accounting designed to meet the needs of decision-makers inside the business is referred to as:
managerial accounting

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