Set e

Advanced Financial Accounting and Reporting
SET E
For questions 1-4:

Stefan Ceramics is in the business of selling ceramic vases. It has two departments – molding and
finishing. Molding department purchases tungsten carbide and produces ceramic vases out of it. Ceramic
Vases are then transferred to finishing department, which designs it as per the requirement of the
customers.
During the month of July, molding department purchased 500 kgs of tungsten carbide at $60 per kg. It
started manufacture of 4,000 vases and completed and transferred 3,200 vases during the month. It has
800 vases in the process at the end of the month. It incurred direct labor charges of $1,000 and other
manufacturing costs of $500, which included electricity costs of $200. Stefan had no inventory of
tungsten carbide at the end of the month. It also had no beginning inventory of vases. The ending
inventory was 50% complete in respect of conversion costs.
1. The journal entry to record tungsten carbide purchased and used in production during July is
________.
A) Work in Process—Molding $2,400
Accounts Payable Control $2,400
B) Work in Process—Molding $3,000
C) Accounts Payable Control $2,400
Work in Process—Molding $2,400
D) Accounts Payable Control $3,000
Work in Process—Molding $3,000
2. The journal entry to record direct labor for July is ________.

A) Work in Process—Molding $3,000
B) Work in Process—Molding $1,000
Overhead Control $1,000
C) Work in Process—Molding $1,000
Wages Payable Control $1,000
D) Work in Process—Molding $1,000
Work in Process—Finishing $1,000
3. What is the total conversion costs for the month of July?

A) $1,700
B) $1,500
C) $1,300
D) $1,000
4. What is the cost of tungsten carbide that will be assigned to vases finished and transferred to the
finishing department for the month of July?
A) $30,000
B) $28,000
C) $26,000
D) $24,000
5. When combining activities in an activity-based costing system, activities should be grouped together at the same
level. For example, batch-level activities should not be combined with unit-level activities.
a. False
b. True
6. Unit-level activities arise as a result of the total volume of production and are performed each time a unit is produced.
a. False
b. True
7. Unit-level production activities are performed each time a unit is made.

a. False
b. True
8. Organization-sustaining activities are carried out regardless of how many units are made, how many batches are run,
or how many different products are made.
a. False
b. True
9. Activity-based costing uses a number of activity cost pools, each of which is allocated to products on the basis of
direct labor-hours.
a. False
b. True
10. The first-stage allocation in activity-based costing is the process by which overhead costs are assigned to products
before they are assigned to customers.
a. False
b. True
Questions 11 and 12 are based on the following information:
Kulas Corporation has one branch operation located 500 miles away from the home office. The branch
office sales merchandise which is shipped to it from the home office. The merchandise is transferred at
cost but the branch pays reasonable freight charges. The branch office makes sales and incurs and pays
operating expenses. At the end of the current accounting period the true adjusted balance for the home
office account on the branch’s books and the branch office account on the home office’s books is
P500,000.
The following items may or may not be reconciling items. The current year is 2012.
1) The home office has shipped merchandise to the branch office which cost P10,000 and which
incurs P500 freight charges paid by the home office but charged to the branch. This merchandise
is received by the branch on January 5, 2012.
2) The branch has transmitted P17,000 in cash back to the home office as a partial payment on
such purchased merchandise. This cash is received by the home office on January 6, 2012.
3) The branch office returns some defective merchandise to the home office. The cost of the
returned merchandise is P750. The branch office pays P25 of freight costs which will be charged
back to the home office.
4) On December 1, 2012, the home office sends a check for P25,000 to replenish the branch’s
charged back to the home office.
5) The branch pays an advertising expense of P800 that should have been paid by the home office
since it applied to advertising fees incurred by the home office of its own benefit.
6) The home office allocated P12,000 of general and administrative expenses to the branch. The
branch had not entered the allocation as of the end of the year.
7) The home office pays insurance premiums on the branch store. The amount paid by the home
office is P1,000 but the branch erroneously records it as P776.00
11. What is the unadjusted balance of the Home Office account?

a. P481, 425 c. P500, 000
b. P452, 276 d. P518, 575
12. What is the unadjusted balance of the Branch account?

a. P433, 701 c. P518, 575
b. P500, 000 d. P452, 276
Use the following data to answer questions 13-18:
On July 1, Woolard Corporation had $20,000 of raw materials on hand. During the month, the company
purchased an additional $53,000 of raw materials. During July, $49,000 of raw materials were
requisitioned from the storeroom for use in production. These raw materials included both direct and
indirect materials. The indirect materials totaled $5,000.
Prepare journal entries to record these events. Use those journal entries to answer the following questions:
13. The debits to the Raw Materials account for the month of July total:
A. $53,000
B. $20,000
C. $73,000
D. $49,000
14. The credits to the Raw Materials account for the month of July total:
A. $53,000
B. $49,000
C. $20,000
D. $73,000
15. The debits to the Work in Process account as a consequence of the raw materials transactions in
July total:
A. $53,000
B. $44,000
C. $0
D. $49,000
16. The credits to the Work in Process account as a consequence of the raw materials transactions in
July total:
A. $49,000
B. $53,000
C. $0
D. $44,000
17. The debits to the Manufacturing Overhead account as a consequence of the raw materials
transactions in July total:
A. $44,000
B. $5,000
C. $0
D. $49,000
18. The credits to the Manufacturing Overhead account as a consequence of the raw materials
transactions in July total:
A. $0
B. $5,000
C. $49,000
D. $44,000
19. In a FIFO process costing system, which of the following are assumed to be completed first in the
current period?
a. units started this period
b. units started last period
c. units transferred out
d. units still in process
20. Process costing should be used to assign costs to products when ________.
A) the units produced are similar
B) cost reduction is the top most priority
C) the units produced are dissimilar
D) cost reduction is not the primary objective

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Advanced Financial Accounting and Reporting

For questions 1-4:

2. The journal entry to record direct labor for July is ________.

3. What is the total conversion costs for the month of July?

7. Unit-level production activities are performed each time a unit is made.

Questions 11 and 12 are based on the following information:

11. What is the unadjusted balance of the Home Office account?

12. What is the unadjusted balance of the Branch account?

Use the following data to answer questions 13-18:

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