Accounting Basics Paper 2

1

A company provides fertilization, insect control, and disease control services for a variety of trees, plants, and shrubs on a contract basis. For $50 per month, the company will visit the subscriber’s premises and apply appropriate mixtures. If the subscriber has any problems between the regularly scheduled application dates, the company’s personnel will promptly make additional service calls to correct the situation. Some subscribers elect to pay for an entire year because the company offers an annual price of $540 if paid in advance. For a subscriber who pays the annual fee in advance, the company should recognize the related revenue






2

A department store sells gift certificates that may be redeemed for merchandise. Each certificate expires 3 years after issuance. The revenue from the gift certificates should be recognized






3

In a process-costing system, the cost of abnormal spoilage should be






4

Fact Pattern:
Levittown Company employs a process cost system for its manufacturing operations. All direct materials are added at the beginning of the process and conversion costs are added proportionately. Levittown’s production quantity schedule for November is reproduced in thenext column.
Work-in-process November 1
(60% complete as to conversion costs)1000
Units started during November5000
Total units to account for6,000
Units completed and transferred out from beginning inventory1000
Units started and completed during November3000
Work-in-process on November 30
(20% complete as to conversion costs)2000
Total units accounted for6000
Using the FIFO method, Levittown’s equivalent units for direct materials for November are






5

Fact Pattern:
" Levittown Company employs a process cost system for its manufacturing operations. All direct materials are added at the beginning of the process and conversion costs are added proportionately. Levittown’s production quantity schedule for November is reproduced in the next column."
Work-in-process November 1
(60% complete as to conversion costs) 1000
Units started during November 5000
Total units to account for 6000
Units completed and transferred out from beginning inventory 1000
Units started and completed during November 3000
Work-in-process on November 30(20% complete as to conversion costs) 2000
Total units accounted for 6000
Using the FIFO method, Levittown’s equivalent units for conversion costs for November are






6

Management accounting differs from financial accounting in that financial accounting is






Result

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