The accounts of delphinia dreams, inc. showed the following balances at the beginning of october:

ACCT 221 Quiz 2 – 15 points

I. Multiple Choice (.75 points each):

_____1) Which of the following sections of the statement of cash flows are presented differently between the direct method and indirect method?

A) investing activity

B) financing activity

C) operating activity

D) non-cash activity

_____2) Walker Corp. uses the indirect method to prepare the statement of cash flows. Refer to the following section of the comparative balance sheet:

How will the change in Accounts Receivable be shown on the statement of cash flows?

A) positive cash flow under the operating activities section

B) negative cash flow under the operating activities section

C) positive cash flow under the financing activities section

D) negative cash flow under the investing activities section

_____3) Rodriguez Inc. uses the indirect method to prepare the statement of cash flows. Refer to the following income statement:

Additional information provided by the company includes the following:

Current assets, other than cash, decreased by $5,000

Current liabilities increased by $2,000

How much is the net cash provided by operating activities?

A) $4,700

B) $7,300

C) $10,000

D) $(300)

_____4) Which of the following items is a measure of a company's ability to collect receivables?

A) inventory turnover ratio

B) current ratio

C) day's sales in receivables

D) account receivable balance

_____5) Which of the following accurately describes working capital?

A) Current assets minus merchandise inventory

B) Current assets minus current liabilities

C) Total debt minus stockholders' equity

D) Cost of goods sold divided by average merchandise inventory

_____6) Peartree Inc. provides the following extracts from income statement for the year 2015:

Net sales

$500,000

Cost of Goods Sold

(150,000)

Gross profit

$350,00

Calculate the gross profit percentage.

A) 75%

B) 70%

C) 55%

D) 69%

_____7) Which of the following is true of product costs?

A) They are expensed in the period they are paid.

B) For external reporting, GAAP requires that they be expensed before the products are sold.

C) They are first recorded in an inventory account.

D) For merchandising companies, product costs do not include freight costs.

_____8) In a manufacturing firm, which of the following is an example of a period cost?

A) Advertising expense

B) Depreciation on factory equipment

C) Indirect materials

D) Property taxes for the factory

_____9) Which of the following is a part of manufacturing overhead?

A) Cost of raw materials

B) Wages of assembly line workers

C) Factory insurance

D) Depreciation on office furniture

_____10) Which of the following is an example of direct labor cost in a factory?

A) Wages of assembly line personnel

B) Salary of vice president of production

C) Wages of factory security guard

D) Salary of production manager

_____11) Kyanite Corporation reports costs for 2015 as follows:

Raw Materials

$50,000

Wages to Line Workers

25,000

Office Rent

14,000

Indirect Materials

30,000

How much is the total product costs for 2015?

A) $30,000

B) $105,000

C) $119,000

D) $75,000

_____12) Selected data for Lemon Grass Company for 2015 is provided below:

Factory Utilities

$ 1,500

Indirect Materials Used

37,500

Direct Materials Used

300,000

Property Taxes on Factory Building

6,900

Sales Commissions

85,000

Indirect Labor Incurred

25,000

Direct Labor Incurred

150,000

Depreciation on Factory Equipment

6,500

What is the total factory overhead?

A) $450,000

B) $612,000

C) $77,400

D) $62,400

_____13) The journal entry to issue $500 of direct materials and $30 of indirect materials to production involves debit(s) to the:

A) Work-in-Process Inventory account for $500 and Finished Goods Inventory account for $30.

B) Manufacturing Overhead account for $530.

C) Work-in-Process Inventory account for $500 and Manufacturing Overhead account for $30.

D) Work-in-Process Inventory account for $530.

_____14) The journal entry to record $1,500 of direct labor and $200 of indirect labor incurred will include debit(s) to the:

A) Manufacturing Overhead account for $1,700.

B) Work-in-Process Inventory account for $1,500 and Finished Goods Inventory account for $200.

C) Finished Goods Inventory account for $1,700.

D) Work-in-Process Inventory account for $1,500 and Manufacturing Overhead account for $200.

_____15) The accounts of Delphinia Dreams Inc. showed the following balances at the beginning of October:

Account

Debit

Raw Materials Inventory

$30,000

Work-in-Process Inventory

40,000

Finished Goods Inventory

50,000

Manufacturing Overhead

20,000

During the month, direct materials amounting to $20,000 and indirect materials amounting to $5,000 was issued to production. What is the ending balance in the Work-in-Process Inventory account for the month of October?

A) $40,000

B) $60,000

C) $20,000

D) $25,000

_____16) Aaron Company estimates direct labor costs and manufacturing overhead costs for the coming year to be $800,000 and $500,000, respectively. Aaron allocates overhead costs based on machine hours. The estimated total labor hours and machine hours for the coming year are 16,000 hours and 10,000 hours, respectively. What is the predetermined overhead allocation rate?

A) $80.00 per machine hour

B) $31.25 per labor hour

C) $81.25 per labor hour

D) $50.00 per machine hour

_____17) Jeremy Corporation estimated manufacturing overhead costs for the year to be $500,000. Jeremy also estimated 8,000 machine hours and 2,000 direct labor hours for the year. It bases the predetermined overhead allocation rate on machine hours. On January 31, Job 25 was completed. It required 6 machine hours and 1 direct labor hour. What is the amount of manufacturing overhead allocated to the completed job? (Round your intermediate calculations to one decimal place)

A) $1,500.00

B) $437.50

C) $375.00

D) $350.00

_____18) The journal entry for adjustment of underallocated manufacturing overhead includes a:

A) credit to Finished Goods Inventory.

B) credit to Manufacturing Overhead.

C) debit to Work-in-Process Inventory.

D) credit to Cost of Goods Sold.

II. Short Answer (.75 points each): 1. (a) What is a statement of cash flows? (b) Is the statement of cash flows an optional financial statement? Explain (c) What questions about cash are answered by the statement of cash flows?

2. What do the following classes of ratios measure? (a) Liquidity ratios -

(b) Profitability ratios -

(c) Solvency ratios -

3. Distinguish between managerial and financial accounting as to: (a) primary users of reports (b) types and frequency of reports (c) purpose of reports

4. Distinguish between the two types of cost accounting systems. Can a company use both types of cost accounting systems?