Using the following information for questions 1 & 2: (in $ Millions) Xu Company Lin Company Ng Company Chen Company Cash provided by operating activities for 2010 140 195 110 200 Current liabilities for 2009 230 335 205 300 Current liabilities for 2010 280 375 240 360 Total liabilities for 2009 600 440 275 500 Total liabilities for 2010 520 530 325 540 1. Which company appears to be the most liquid ? a. Xu Company b. Lin Company c. Ng Company d. Chen Company 2. Which company appears to have the most solvent? a. Xu Company b. Lin Company c. Ng Company d. Chen Company 3. Hunt Company had $250,000 of current assets and $90,000 of current liabilities before using cash to pay off a 3-month note payable to the bank for $60,000. What effect would the payment have on Hunt Company's current ratio? a. The ratio remained unchanged. b. The change in the current ratio cannot be determined. c. The ratio decreased. d. The ratio increased. 4. Reporting investments at fair value is a. applicable to equity securities only. b. applicable to debt securities only. c. applicable to both debt and equity securities. d. a conservative approach because only losses are recognized. 5. A manufacturing process requires small amounts of glue which costs $0.50 per pound. The glue used in the production process is best classified as a(n) a. period cost. b. indirect material. c. direct material. d. miscellaneous expense. Use the following information for questions 6-8 Curry Manufacturing Company's accounting records reflect the following inventories: Dec. 31, 2012 Dec. 31, 2011 Raw materials inventory $210,000 $160,000 Work in process inventory 300,000 160,000 Finished goods inventory 190,000 150,000 During 2012, $550,000 of raw materials were purchased, direct labor costs amounted to $600,000, and manufacturing overhead applied was $480,000. 6. The total cost of raw materials available for use during 2012 for Curry Manufacturing Company is a. $710,000. b. $260,000. c. $450,000. d. $760,000. 7. Curry's total manufacturing costs incurred in 2012 amounted to a. $1,530,000. b. $1,490,000. c. $1,390,000. d. $1,580,000. 8. If Curry Manufacturing Company's cost of goods manufactured for 2012 amounted to $1,290,000, its cost of goods sold for the year is a. $1,500,000. b. $1,250,000. c. $1,350,000. d. $1,430,000. 9. Cosmic Company reported the following year-end information: Beginning work in process inventory $ 46,000 Ending work in process inventory 50,000 Direct Materials 692,000 Direct labor 240,000 Manufacturing overhead applied 100,000 How much is Cosmic?s cost of goods manufactured for the year? a. $1,032,000 b. $1,024,000 c. $1,020,000 d. $1,028,000 10. Reed Company acquires 50 Holmes 10%, 5 year, $1,000 face value bonds on January 1, 2014 for $51,250. This includes a brokerage commission of $1,250. If Reed sells all of its Holmes Bonds for $52,000 and pays $1,500 in brokerage commissions, what gain or loss is recognized? a. Gain of $2,000 b. Loss of $750 c. Gain of $750 d. Gain of $3,000 11. Hagen Company had these transactions pertaining to stock investments Feb. 1 Purchased 2,000 shares of Farley Company (10%) for $33,200 cash plus brokerage fees of $800. June 1 Received cash dividends of $2 per share on Farley stock. Oct. 1 Sold 800 shares of Farley stock for $16,000 less brokerage fees of $400. Dec. 1 Received cash dividends of $2 per share on Farley stock. The entry to record the receipt of the dividends Dec. 1 would include a a. debit to Stock Investments of $2,400. b. credit to Dividend Revenue of $2,400 c. debit to Dividend Revenue of $2,400. d. credit to the Stock Investments of $2,400. 12. Which of the following is the best definition of sustainable income? a. Sustainable income is a measure of solvency that does not include capital expenditure. b. Sustainable income is the same as net income. c. Sustainable income is income that is unusual in nature and infrequent in occurrence. d. Sustainable income is the most likely level of income to be obtained in the future. 13. Bob?s Office Supplies has regular income before taxes of $225,000 and an extraordinary loss of $85,000. Bob?s income tax rate is 20% on all items. The income statement should show income before irregular items and an extraordinary loss, respectively, of a. $225,000 and ($85,000). b. $180,000 and ($68,000). c. $180,000 and ($17,000). d. $112,000 and ($0). 14. Which of the following items should be classified as an extraordinary item on an income statement of Mooch Manufacturing? a. A $500,000 loss when a hurricane destroyed a plant on the east coast of Florida. b. A $300,000 loss when a meteorite hit and destroyed company property in Anchorage. c. Excess of the selling price over the cost of treasury stock . d. The items in both A and B would be extraordinary. Presented below is a list of costs and expenses incurred in the factory by Nu-Way Corporation, a manufacturer of recreational vehicles. 15. Property taxes on the factory land 16. Depreciation on Sales Showroom 17. Assembly line worker wages 18. Factory cleaning crew wages 19. Metal used in manufacturing the vehicle bumpers 20. Depreciation on factory machines Instructions Classify each of the above items into one of the following categories: a) Direct Materials b) Direct Labor c) Manufacturing Overhead d) Period Costs

Using the following information for questions 1 & 2: Xu Lin (in $ Millions) Company Company Cash provided by operating activities 140 195 for 2010 Current liabilities for 2009 230 335 Current liabilities for 2010 280 375 Total liabilities for 2009 600 440 Total liabilities for 2010 520 530 1. Which company appears to be the most liquid ? a. Xu Company b. Lin Company c. Ng Company d. Chen Company Ng Chen Company Company 110 200 205 240 275 325 300 360 500 540 2. Which company appears to have the most solvent? a. Xu Company b. Lin Company c. Ng Company d. Chen Company 3. Hunt Company had $250,000 of current assets and $90,000 of current liabilities before using cash to pay off a 3-month note payable to the bank for $60,000. What effect would the payment have on Hunt Company's current ratio? a. The ratio remained unchanged. b. The change in the current ratio cannot be determined. c. The ratio decreased. d. The ratio increased. 4. Reporting investments at fair value is a. applicable to equity securities only. b. applicable to debt securities only. c. applicable to both debt and equity securities. d. a conservative approach because only losses are recognized. 5. A manufacturing process requires small amounts of glue which costs $0 .50 per pound. The glue used in the production process is best classified as a(n) a. period cost. b. indirect material. c. direct material. d. miscellaneous expense. Use the following information for questions 6-8 Curry Manufacturing Company's accounting records reflect the following inventories: Dec. 31, 2012 Dec. 31, 2011 Raw materials inventory $210,000 $160,000 Work in process inventory 300,000 160,000 Finished goods inventory 190,000 150,000 During 2012, $550,000 of raw materials were purchased, direct labor costs amounted to $600,000, and manufacturing overhead applied was $480,000. 6. The total cost of raw materials available for use during 2012 for Curry Manufacturing Company is a. $710,000. b. $260,000. c. $450,000. d. $760,000. 7. Curry's total manufacturing costs incurred in 2012 amounted to a. $1,530,000. b. $1,490,000. c. $1,390,000. d. $1,580,000. 8. If Curry Manufacturing Company's cost of goods manufactured for 2012 amounted to $1,290,000, its cost of goods sold for the year is a. $1,500,000. b. $1,250,000. c. $1,350,000. d. $1,430,000. 9. Cosmic Company reported the following year-end information: Beginning work in process inventory $ 46,000 Ending work in process inventory Direct Materials Direct labor Manufacturing overhead applied 50,000 692,000 240,000 100,000 How much is Cosmic's cost of goods manufactured for the year? a. $1,032,000 b. $1,024,000 c. $1,020,000 d. $1,028,000 10. 11. Reed Company acquires 50 Holmes 10%, 5 year, $1,000 face value bonds on January 1, 2014 for $51,250. This includes a brokerage commission of $1,250. If Reed sells all of its Holmes Bonds for $52,000 and pays $1,500 in brokerage commissions, what gain or loss is recognized? a. Gain of $2,000 b. Loss of $750 c. Gain of $750 d. Gain of $3,000 Hagen Company had these transactions pertaining to stock investments Feb. 1 Purchased 2,000 shares of Farley Company (10%) for $33,200 cash plus brokerage fees of $800. June 1 Received cash dividends of $2 per share on Farley stock. Oct. 1 Sold 800 shares of Farley stock for $16,000 less brokerage fees of $400. Dec. 1 Received cash dividends of $2 per share on Farley stock. The entry to record the receipt of the dividends Dec. 1 would include a a. debit to Stock Investments of $2,400. b. credit to Dividend Revenue of $2,400 c. debit to Dividend Revenue of $2,400. d. credit to the Stock Investments of $2,400. 12. Which of the following is the best definition of sustainable income? a. Sustainable income is a measure of solvency that does not include capital expenditure. b. Sustainable income is the same as net income. c. Sustainable income is income that is unusual in nature and infrequent in occurrence. d. Sustainable income is the most likely level of income to be obtained in the future. 13. Bob's Office Supplies has regular income before taxes of $225,000 and an extraordinary loss of $85,000. Bob's income tax rate is 20% on all items. The income statement should show income before irregular items and an extraordinary loss, respectively, of a. $225,000 and ($85,000). b. $180,000 and ($68,000). c. $180,000 and ($17,000). d. $112,000 and ($0). 14. Which of the following items should be classified as an extraordinary item on an income statement of Mooch Manufacturing? a. A $500,000 loss when a hurricane destroyed a plant on the east coast of Florida. b. A $300,000 loss when a meteorite hit and destroyed company property in Anchorage. c. Excess of the selling price over the cost of treasury stock . d. The items in both A and B would be extraordinary. Presented below is a list of costs and expenses incurred in the factory by Nu-Way Corporation, a manufacturer of recreational vehicles. 15. Property taxes on the factory land 16. Depreciation on Sales Showroom 17. Assembly line worker wages 18. Factory cleaning crew wages 19. Metal used in manufacturing the vehicle bumpers 20. Depreciation on factory machines Instructions Classify each of the above items into one of the following categories: a) b) c) d) Direct Materials Direct Labor Manufacturing Overhead Period Costs