Chapter 1 - Introduction to Accounting
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1.
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The group that focuses on the trend in net earnings and makes capital structure decisions is:
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  The Securities and Exchange Commission.
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The Internal Revenue Service.
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Creditors.
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Management.
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2.
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The area of accounting that is concerned with providing information for external users is referred to as:
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Financial accounting.
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Governmental accounting.
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Management accounting.
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Nonprofit accounting.
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3.
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Which of the following is NOT one of the three primary financial statements?
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Statement of cash flows.
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Income statement.
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Retained earnings statement.
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Balance sheet
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4.
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A governmental body created by the Sarbanes-Oxley Act is the:
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Financial accounting standards board (FASB).
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Securities and exchange commission (SEC).
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Public Company Accounting Oversight Board (PCAOB).
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American accounting association (AAA).
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5.
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The global focus in financial reporting does NOT include:
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Non-financial data.
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External drivers favored.
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Narrative information
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Less emphasis on accounting conventions.
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6.
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The basic accounting equation is:
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Assets = liabilities + owners' equity.
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Assets + liabilities = owners' equity.
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Assets + owners' equity = liabilities.
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Liabilities - owners' equity = assets.
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7.
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The three major types of business entities are:
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Profit, nonprofit, and corporate organizations.
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Corporations, associations, and nonprofit organizations.
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Corporations, partnerships, and proprietorships.
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Institutions, partnerships, and corporations.
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Chapter 2 - Understanding the Financial Statements
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8.
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Which of the following is true of the balance sheet?
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It includes revenue and expense accounts.
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It identifies a company's assets and liabilities as of a specific date
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It shows the results of operations for an accounting period.
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It discloses the amount of dividends paid.
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9.
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Which of the following is the correct way to date an income statement?
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For the year ended December 31, 20x7.
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At December 31, 20x7.
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As of December 31, 20x7
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During the period 20x6 -20x7.
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10.
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Which of the following financial statements shows an entity's operating performance?
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The statement of financial position.
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The statement of cash flows.
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The statement of earnings.
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The statement of changes in owners' equity.
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Chapter 3 - Recording Financial Information and Accounting Convention
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11.
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The idea that an increase or decrease on one side of the accounting equation must be offset exactly by an increase or decrease on the other side of the accounting equation is:
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The additive concept.
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The going concern assumption.
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The monetary measurement concept.
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Double-entry accounting.
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12.
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Which of the following statement is false regarding the basic accounting equation?
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Assets + liabilities + owners' equity.
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The basis for double entry accounting
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Each transaction has a duel effect.
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A transaction affects either both sides of the equation by the same amount or one side of the equation only.
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13.
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The basic accounting equation:
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Is out of balance after each journal entry.
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Should always balance.
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Is balanced only at the end of the period with closing entries.
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Is balanced only at the end of the period with adjusting entries.
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14.
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Which of the following would usually NOT happen in a single transaction?
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Increase assets, decrease liabilities.
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Increase assets, increase liabilities.
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Increase liabilities, decrease owners' equity.
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Decrease assets, decrease owners' equity.
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15.
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The declining-balance method of depreciation produces a(n):
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Decreasing depreciation expense each period.
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Increasing depreciation expense each period.
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Declining percentage rate each period.
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Constant amount of depreciation expense each period.
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16.
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A truck was purchased for $15,000 and it was estimated to have a $3,000 salvage value at the end of its useful life. Annual depreciation expense of $2,400 was recorded using the straight-line method. The annual depreciation rate is:
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Chapter 4 - Analysis of the Financial Statements
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17.
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In assessing the financial prospects for a firm, financial analysts use various techniques. An example of vertical, common-size analysis is
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Advertising expense for the current year is 2% of sales.
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An assessment of the relative stability of a firm's level of vertical integration.
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A comparison in financial ratio form between two or more firms in the same industry.
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Advertising expense is 2% greater compared with the previous year.
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18.
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_____________________ indicates in which direction a company is headed.
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Vertical common-size analysis.
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Horizontal common-size analysis.
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Trend analysis.
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Ratio analysis.
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19.
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A measure of long-term debt-paying ability is a company’s
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Length of the operating cycle.
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Times interest earned.
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Return on assets.
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Inventory turnover.
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20.
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If a company is profitable and is effectively using leverage, which one of the following ratios is likely to be the largest?
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Return on total assets.
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Return on operating assets.
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Return on common stockholders' equity.
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Return on total shareholders' equity.
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21.
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What ratio is used to measure a firm's solvency?
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Debt ratio.
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Current ratio.
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Asset turnover.
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Return on equity.
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22.
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What ratio is used to measure a firm's liquidity?
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Debt ratio.
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Asset turnover.
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Current ratio.
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Return on equity.
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23.
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What ratio is used to measure a firm's efficiency at managing its inventory?
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Current ratio.
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Inventory turnover.
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Return on sales.
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Return on equity.
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24.
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What ratio is used to measure the profit earned on stockholders’ investment in the company?
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Current ratio.
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Asset turnover.
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Return on net sales.
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Return on equity.
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25.
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What ratio represents an indication of investors' expectations concerning a firm's growth potential?
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Earnings per share.
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Return on equity.
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Price-earnings ratio.
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Asset turnover.
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Chapter 5 - What is Management Accounting?
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26.
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In JIT production, each operation buys or produces:
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In very small quantities just in time for use.
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All that it can to offset fixed costs.
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A fixed percentage in excess of orders to insure adequate quality stock.
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All that it can in order to build inventories.
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27.
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Depreciation of the factory building would be classified as:
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Direct materials.
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Direct labor.
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Manufacturing overhead.
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Selling and administrative.
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28.
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Total quality management (TQM) focuses attention on all of the following EXCEPT the
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Production process.
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Customer.
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Service process.
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Bottleneck management.
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29.
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Management accounting is important because it helps
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Investors evaluate the stock of the company.
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Creditors decide on the credit worthiness of the firm.
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Managers conduct their managerial functions.
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Stockholders to assess how well managers performed during the period.
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Chapter 6 - Product Costing Methods: Job Order Costing, Process Costing, and Activity-Based Costing
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30.
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The predetermined overhead rate is calculated as
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Actual overhead costs divided by actual units produced.
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Actual units produced divided by actual overhead costs.
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Estimated level of volume or activity divided by estimated overhead costs.
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Estimated overhead costs divided by estimated level of volume or activity.
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31.
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Activity-based costing (ABC) does NOT include
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Continuous improvement efforts.
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Business process reengineering.
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Flexible budgeting.
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Cost driver analysis.
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32.
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A basic assumption of activity-based costing (ABC) is that
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A. All manufacturing costs vary directly with units of production.
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Products or services require the performance of activities, and activities consume resources.
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Only costs that respond to unit-level drivers are product costs.
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Only variable costs are included in activity cost pools.
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Chapter 7 - Cost Behavior and Cost-Volume-Profit Analysis
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33.
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Which of the following questions would NOT be answered by cost-volume-profit (CVP) analysis?
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What sales volume is necessary to earn a desired profit?
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How would changes in selling price, variable costs, fixed costs, and output affect profits?
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How can mixed costs separated into a variable and fixed component.
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How would a change in the mix of products sold affect the break even and target income volume and profit potential?
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34.
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The following information pertains to the Lurkins Company: Sales price per unit = $300; Variable cost per unit = $220; Total fixed costs = $500,000; Net income = $100,000. Unit sales for the company must have been:
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7,500.00
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2,727.00
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2,000.00
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1,667.00
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35.
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Use the following information: Sales = $360,000; Variable costs = $270,000; Fixed costs = $50,000; Expected sales volume = 10,000 units. The breakeven point in sales dollars is
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$66,667
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$56,250
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$200,000
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$450,000
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36.
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Baker Company sells its product for $60. In addition, it has a variable cost IS $24 and total fixed costs of $9,000. What is the break-even point in units for Baker Company?
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375 units.
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3,600 units.
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250 units.
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2,400 units.
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37.
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Baker Company sells its product for $60. In addition, it has a variable cost ratio of 40 percent and total fixed costs of $9,000. How many units must be sold in order to obtain a before-tax profit of $12,000?
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350 units.
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584 units.
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875 units.
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333 units.
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38.
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A company with $280,000 of fixed costs has the following data: For Product A, Sales price per unit = $5 and Variable costs per unit = $3. For Product B, Sales price per unit = $6 and Variable costs per unit = $5. Assume three units of A are sold for each unit of B sold. Sales for product B at the breakeven point will equal
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160,000 units
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40,000 units
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100,000 units
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120,000 units
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Chapter 8 - Budgeting and Standard Cost Systems
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39.
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The last step in the budgeting process is the preparation of the:
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Production budget.
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Cash budget.
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Sales budget.
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Sales forecast.
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40.
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Financial budgeting refers to:
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All budgets of the firm.
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Cash budget and pro forma balance sheet.
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Budgets for sales.
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Budgets for production.
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41.
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Which of the following is NOT considered an operating budget?
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Selling and administrative expenses budget.
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Direct labor budget.
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Cash budget.
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Sales budget.
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42.
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A budget is NOT
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A planning tool.
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A control tool.
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An external financial report.
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A set of pro forma (projected or planned) financial statements..
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43.
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A standard cost is a(an)
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Product cost developed using values set forth in the Manual of Standards for Weights and Measures published by the U.S. Bureau of Standards.
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Product cost, developed by using the average estimated component costs established for the industry within which the company operates.
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Estimated cost to manufacture a single unit of product.
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Estimate of the cost of an equivalent product produced by a company's lowest-cost competitor.
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44.
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Use the following for information: Projected sales for Tony, Inc. for next year and beginning and ending inventory data are as follows: Sales = 20,000 units; Beginning inventory = 1,000 units; Desired ending inventory = 5,000 units. According to the production budget, how many units should be produced?
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16,000
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20,000
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24,000
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21,000
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45.
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Under a standard cost system, the materials price variances are usually the responsibility of the
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Production manager.
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Purchasing manager.
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Cost accounting manager.
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Sales manager.
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46.
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How is labor rate variance computed?
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The difference between standard and actual rates, times standard hours.
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The difference between standard and actual hours, times actual rate.
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The difference between standard and actual rates, times actual hours.
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The difference between standard and actual hours, times the difference between standard and actual rates.
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Chapter 9 - Responsibility Accounting
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47.
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______________________ is most likely the measure of performance for a profit center.
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Price variance.
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Contribution margin.
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Return on investment.
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Efficiency measure.
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48.
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Return on investment may be calculated by multiplying asset turnover by
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Average collection period.
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Debt ratio.
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Margin.
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Fixed-charge coverage.
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49.
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Which of the following responsibility centers may be evaluated on the basis of residual income (RI)?
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Cost center.
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Profit center.
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Investment center.
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Revenue center.
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50.
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If a division generates a positive residual income then the division's
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Performance was above expectations.
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Operating income exceeds the division's minimum return.
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Profitability was greater than that of other divisions in the company.
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Asset turnover was very high.
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51.
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ABC Co. had the following 20x9 financial statement relationships: Asset turnover = 5; Profit margin = 2%. What was Select's 20x9 percentage return on investment?
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Chapter 10 - Relevant Costs and Short-Term Decisions
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52.
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A joint product should be processed beyond split-off if:
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Additional revenue from further processing exceeds joint costs
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Additional revenue from further processing exceeds allocated Joint costs
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Additional revenue from further processing exceeds allocated joint costs and additional costs of further processing
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Additional revenue from further processing exceeds additional costs of further processing
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53.
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With regard to impact on decision making, accountants classify costs as
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Relevant, opportunity, and sunk.
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Variable, fixed, and mixed.
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Expired, unexpired, and period.
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Historical, replacement, and budgeted.
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54.
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Jago Co. has two products that use the same manufacturing facilities and cannot be subcontracted. Each product has sufficient orders to utilize the entire manufacturing capacity. For short-run profit maximization, Jago should manufacture the product with the
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Lower total manufacturing costs for the manufacturing capacity.
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Lower total variable manufacturing costs for the manufacturing capacity.
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Greater gross profit per hour of manufacturing capacity.
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Greater contribution margin per hour of manufacturing capacity.
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55.
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The solution of the product mix problem with multiple constraints is considerably more complex and requires a technique known as ____________.
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Linear programming.
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Segment profitability analysis.
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Theory of constraints.
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Contribution margin analysis.
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56.
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Common mistakes you make in decision making are to include:
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Expected future costs.
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Unitized fixed costs.
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Total costs.
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Relevant cost.
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57.
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In joint-product costing and analysis, which one of the following costs is relevant when deciding the point at which a product should be sold to maximize profits?
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Separable costs after the split-off point.
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Joint costs to the split-off point.
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Sales salaries for the period when the units were produced.
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Purchase costs of the materials required for the joint products.
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Chapter 11 - Capital Budgeting Decisions
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58.
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Which of the following methods uses income instead of cash flows?
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Payback.
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Accounting rate of return.
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Internal rate of return.
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Net present value.
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59.
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Russell Corp. is considering the purchase of a new machine for $76,000. The machine would generate an annual cash flow of $23,214 for five years. At the end of five years, the machine would have no salvage value. What is the payback period in years for the machine approximated to two decimal points?
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60.
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Which of the following capital investment models would be preferred when choosing among mutually exclusive alternatives?
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Payback period.
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Accounting rate of return.
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IRR.
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NPV.
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