FM116- Ch. 8 Quiz

In the context of financial statements, which of the following statements is true of large corporations? A. Large corporations with publicly traded stock must provide an annual report containing financial statements to all stockholders. B. They must file quarterly and annual reports with the Financial Accounting Standards Board. C. They must file reports with the Securities and Exchange Commission every five years. D. Large corporations with privately traded stock must provide an annual report containing details of incoming and outgoing cash.

A. Large corporations with publicly traded stock must provide an annual report containing financial statements to all stockholders.

Rolette Clemens is a financial institution that provides loans to businesses. It rejects a textile company's request for a loan after it reviews the value of the company's assets, liabilities, and owners' equity and finds them to be unsatisfactory. In this scenario, Rolette Clemens most likely analyzed the company's _____ to assess its financial condition. A. balance sheet B. statement of cash flows C. operating budget D. income statement

A. balance sheet

Milora, a clothing company, purchases 50 sewing machines from a company called Quick Sew on credit. Milora is supposed to pay an amount of $76,000 to Quick Sew. This amount is due within a year of the date on the balance sheet. In this scenario, the amount of credit that Milora owes Quick Sew is referred to as Milora's _____. A. current liability B. borrowing base C. intangible asset D. charge-off

A. current liability

A famous musician sells the copyright of one of his songs to a record company for $2 million. In this scenario, the sale of the copyright of the song exemplifies the sale of a(n) _____. A. intangible asset B. current liability C. operating liability D. tangible asset

A. intangible asset

In the context of budgeting, a flexible budget: A. is designed to show the appropriate budgeted level of costs for each different level of sales. B. cannot be used by companies for evaluation and comparisons involving real-world sales situations. C. is based on a single assumed level of sales. D. is the budget that is prepared before a static budget.

A. is designed to show the appropriate budgeted level of costs for each different level of sales.

Lossaire, a jewelry house, needs to increase the company's declining cash inflow through its financing activities. In this context, Lossaire is most likely to: A. issue additional shares of its own stock. B. sell the goods and services that it produces. C. sell its fixed assets and financial assets bought as long-term investments. D. form partnerships and mergers with companies operating in the same industry.

A. issue additional shares of its own stock

Jonathan, a grocery store owner, is due to pay suppliers for delivering goods for a specific month. To ascertain how much money he owes the suppliers, Jonathan should check the: A. operating budget. B. balance sheet. C. rate card. D. pro forma statement.

B. balance sheet.

To give the company's stockholders, creditors, and other external stakeholders an accurate idea of the company's overall performance, Rowensport Corporation, a multinational company, releases statements that contain details of the company's profits and losses over the past five years. In this scenario, the company is most likely involved in _____. A. social auditing B. financial accounting C. cost accounting D. follow-up auditing

B. financial accounting

Sidney is a member of the Financial Accounting Standards Board (FASB) and is entrusted with the responsibility of establishing accounting principles in the United States. As a member of the board, Sidney: A. is to serve a seven-year term and cannot be reappointed to serve another term. B. must sever all ties with any firms or institutions that she served prior to joining the board. C. is responsible for directing the Securities and Exchange Commission to enforce the accounting standards. D. must pass a rigorous two-day, four-part examination to be promoted as a certified fraud examiner.

B. must sever all ties with any firms or institutions that she served prior to joining the board.

Maurice, the supervising manager of a telecommunications company, requires detailed information about the expenses that the company incurred from its monthly operations in the last fiscal year. In this scenario, Maurice should refer to the _____. A. statement of cash flow B. profit and loss statement C. statement of retained earnings D. owners' equity statement

B. profit and loss statement

The preparation of operating budgets begins with the development of a(n) _____. A. budgeted income statement B. sales budget C. expenditure budget D. capital and taxes budget

B. sales budget

In the context of owners' equity, which of the following is true of retained earnings? A. They are a firm's earnings that are kept aside for crisis management situations. B. They refer to a firm's additional profits that are used for paying executive salary. C. They are accumulated earnings reinvested in a company rather than being paid to the owners. D. They refer to salaries that are withheld in case an employee is involved in fraudulent activities.

C. They are accumulated earnings reinvested in a company rather than being paid to the owners.

Luke works in an accounting firm that offers services such as tax preparation and external auditing to corporate companies. Luke is currently providing consultation to a client that deals in automobile parts. In this scenario, Luke is most likely a: A. forensic accountant. B. managerial accountant. C. public accountant. D. government accountant.

C. public accountant.

A severe cyclone causes substantial damage to a brick manufacturing company's production equipment. As a result, the company spends a sum of $25,000 to repair the equipment. Given this information, the sum of $25,000 that the company spends is its _____. A. implicit cost B. direct cost C. explicit cost D. indirect cost

D. Indirect cost

Dylan is a supervisory manager in the production department of a tea manufacturing company. Each year, he actively participates in the budgeting process of the company. His input is valued by the top management as he is able to identify the issues in his department. In this scenario, it can be said that Dylan's company follows the _____ to budgeting. A. incremental approach B. zero-based approach C. top-down approach D. bottom-up approach

D. bottom-up approach

Prenora Inc., a newly established company, is set to prepare its first budget. The top management of the company decides to use a budgeting approach that will seek active participation from the middle and supervisory managers of the company. In the given scenario, Prenora Inc. will most likely use the _____ to budgeting. A. zero-based approach B. top-down approach C. incremental approach D. bottom-up approach

D. bottom-up approach

While performing a financial analysis for his organization, Morris discovers that there has been mismanagement of employee funds over the past three months. He immediately reports this to his supervisors. In this scenario, Morris is most likely a(n) _____. A. public accountant B. public prosecutor C. government accountant D. internal auditor

D. internal auditor

Aegirine Corp., a publicly traded firm based in New Mexico, manufactures iron. According to U.S. securities laws, the firm must: A. hire auditors to analyze its financial statements and file them with the SEC (Securities and Exchange Commission). B. refrain from involving any third party in the process of auditing to maintain confidentiality. C. declare any discrepancies in its financial statements before they come up in the independent auditor's report. D. let an independent CPA (Certified Public Accountant) firm perform an annual external audit of its financial statements.

D. let an independent CPA (Certified Public Accountant) firm perform an annual external audit of its financial statements.

T or F: In top-down budgeting, top management prepares the budget with the involvement of the middle and supervisory managers.

False

What is the profit or loss a firm earns in the time period covered by the income statement?

Net income