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MOCK TEST 2
ARMAGHAN AHMED
education4all
150,000
315,000
1,000,000
$1,517,000
$ 175,000
900,000
442,000
$1,517,000
430,000
235,000
134,000
251,000
124,000
The following additional manufacturing data were available for the month of January:
Direct materials purchased
$189,000
Purchase returns and allowances
1,000
Transportation-in
3,000
Direct labor
300,000
Actual factory overhead
175,000
Alex Company applies factory overhead at a rate of 60% of direct labor cost, and any overapplied or underapplied
factory overhead is deferred until the end of the year, December 31.
Alex Company's cost of goods manufactured for January was:
A. $681,000.
B. $673,000.
C. $665,000.
D. $657,000.
$ 700,000
617,500
$1,317,500
60,000 units
20,000 units
All materials are introduced at the start of the manufacturing process, and conversion cost is incurred uniformly
throughout production. Conversations with plant personnel reveal that, on average, month-end in-process inventory is
25% complete. Assuming no spoilage, how should Oster's October manufacturing cost be assigned?
A. $1,283,077 to completed production; $106,923 to work-in-process.
B. $1,155,000 to completed production; $235,000 to work-in-process.
(c) HOCK international, page 8
Question 42 - CMA 1293 2.3 - Investments, PP&E (Fixed Assets), and Intangible and Other Assets
An investment in trading securities is valued on the Statement of Financial Position at the
A. Lower of cost or market.
B. Fair value.
C. Cost to acquire the asset.
D. Accumulated income minus accumulated dividends since acquisition.
Question 45 - CMA 1293 2.4 - Investments, PP&E (Fixed Assets), and Intangible and Other Assets
An investment in available-for-sale securities is valued on the Statement of Financial Position at the
A. Par or stated value of the securities.
B. Fair value.
C. Cost to acquire the asset.
D. Accumulated income less accumulated dividends since acquisition.
Question 47 - CIA 1190 IV.32 - Investments, PP&E (Fixed Assets), and Intangible and Other Assets
MKT Corporation's assets on December 31, Year 1, include the following:
I. U.S. Treasury Bills, acquired on October 15, Year 1, which mature on April 15, Year 2. MKT plans to hold the
Treasury Bills until they mature because the company has no need for the cash earlier than the maturity date.
II. Shares of PF Company. PF has been very profitable and MKT Corporation plans to increase its ownership in PF as
(c) HOCK international, page 15
$49,000,000
The common shareholders of Smith Corporation have preemptive rights. If Smith Corporation issues 400,000
additional shares of common stock at $6 per share, a current holder of 20,000 shares of Smith Corporation's common
stock must be given the option to buy
A. 4,000 additional shares.
B. 3,333 additional shares.
C. 3,774 additional shares.
D. 1,000 additional shares.
The units in BWIP were received last period, and the work done on them when received was 100% complete.
Therefore, completion of BWIP for transferred-in units is zero.
180,000 units transferred in minus 25,000 units in EWIP minus 5,000 spoiled units. The units started and
completed were 100% complete as to the work done on them in the previous departments.
The 25,000 transferred-in physical units in EWIP at the end of the period were 100% complete as to the work
done on them in the previous departments.
The normally spoiled transferred-in units were 100% complete as to the work done on them in the previous
departments. 87% of the spoilage is allocated to the good units, or 5,000 0.87 = 4,350.
Direct materials are added when the units are 70% complete as to conversion costs. The units in BWIP were
only 60% complete. Therefore, 100% of the direct materials were added to those units during the current
(c) HOCK international, page 29
180,000 units transferred in minus 25,000 units in EWIP minus 5,000 spoiled units. The units started and
completed were 100% complete as to the materials added to them in this department in the current period.
The 25,000 units remaining in EWIP at the end of the period were 80% complete as to conversion activities.
Direct materials are added when the units are 70% complete. Therefore, 100% of the direct materials had been
added to the units in ending WIP inventory.
Inspection takes place immediately before the direct materials are added. Therefore, there can be no spoiled
direct materials in the units in ending WIP inventory.
The 20,000 units in BWIP were 60% complete as to conversion costs. Therefore, 40% of the conversion costs
needed to be added to those units during the current period. 20,000 0.40 = 8,000 EUP.
10
180,000 units transferred in minus 25,000 units in EWIP minus 5,000 spoiled units. The units started and
completed were 100% complete as to conversion costs added to them in this department in the current period.
11
The 25,000 units remaining in EWIP at the end of the period were 80% complete as to conversion costs.
25,000 0.80 = 20,000 EUP.
12
Units are inspected when they are 70% complete with respect to conversion. 5,000 units were found to be
defective, and at that point, they had had 70% of their conversion costs added. 5,000 0.70 = 3,500 EUP of
normally spoiled conversion costs. This 3,500 is pro-rated between completed units and EWIP: 87% to
completed units and 13% to EWIP. 3,500 0.87 = 3,045 and 3,500 0.13 = 455.
13
14
15
16
17
18
9,600
98,400
The conversion costs added during the period were $182,880 in direct labor costs and $391,160 in overhead
costs, for a total of $574,040. The conversion costs of $574,040 divided by the equivalent units of production
for conversion costs of 98,400 equals the equivalent unit conversion cost of $5.83.
D. This is the total conversion costs in both beginning work-in-process inventory and those incurred during the period,
divided by the number of equivalent units under FIFO. When FIFO costing is used, the costs in beginning WIP
inventory are allocated 100% to completed units, so those costs are not included in the calculation of the cost per
equivalent unit that is used to allocate the costs incurred during the period between completed units and units in
ending WIP inventory.
Question 42 - CMA 1293 2.3 - Investments, PP&E (Fixed Assets), and Intangible and Other Assets
A. Investments in trading securities are not reported at the lower of cost or market. See the correct answer for a
complete explanation.
B. Investments in trading securities are reported at their fair value.
C. Investments in trading securities are not reported at their historical cost. See the correct answer for a complete
explanation.
D. Investments in trading securities are not reported at a value equal to their accumulated income minus accumulated
dividends since acquisition. See the correct answer for a complete explanation.
Question 45 - CMA 1293 2.4 - Investments, PP&E (Fixed Assets), and Intangible and Other Assets
A. Investments in available-for-sale securities are not reported at their par or stated value. See the correct answer for
a complete explanation.
B. Investments in available-for-sale securities are reported at their fair value.
C. Investments in available-for-sale securities are not reported at their historical cost. See the correct answer for a
complete explanation.
D. Investments in available-for-sale securities are not reported at a value equal to their accumulated income minus
accumulated dividends since acquisition. See the correct answer for a complete explanation.
Question 47 - CIA 1190 IV.32 - Investments, PP&E (Fixed Assets), and Intangible and Other Assets
A. Since the bonds of ABC Corporation will be sold as needed to meet MKT's current financing needs, those bonds
are classified as available-for-sale. However, those are not the only securities that should be classified as
available-for-sale.
B. Common shares are classified as either available-for-sale or trading securities. Since PF has plans to
increase its ownership in PF, the shares of PF Company should be classified as available-for-sale. Since the
bonds of ABC Corporation will be sold as needed to meet MKT's current financing needs, those bonds are
also classified as available-for-sale. The U.S. Treasury Bills should be classified as held-to-maturity
securities, because MKT has both the positive intent and the ability to hold them to their maturity.
C. The U.S. Treasury Bills should not be classified as available-for-sale because MKT has both the positive intent and
the ability to hold them to their maturity.
D. The U.S. Treasury Bills should not be classified as available-for-sale because MKT has both the positive intent and
the ability to hold them to their maturity.