BAM110 - INTRODUCTION TO ACCOUNTING - Unit Exam 1, BAM110 - INTRODUCTION TO ACCOUNTING - Unit Exam 4, BAM110 - INTRODUCTION TO ACCOUNTING - Unit Exam 3, BAM110 - INTRODUCTION TO ACCOUNTING - Unit Exam 2

_____ is reported as a current asset on the balance sheet.

Merchandise inventory

The Modified Accelerated Cost Recovery System is used to ______.

compute depreciation for tax purposes

The systematic examination of the relationships among selling prices, volume of sales and production, costs, expenses, and profits is termed:

cost-volume-profit analysis

Cash and other assets that are expected to be converted to cash or sold or used up within one year or less through the normal operations of the business are called ______.

current assets

A company's ability to pay its current liabilities is called ______.

current position analysis

The amount of increase or decrease in cost that is expected from a particular course of action as compared to an alternative is termed ______

differential cost

Operating expenses directly traceable to or incurred for the sole benefit of a specific department and usually subject to the control of the department manager are termed ______.

direct expenses

Which of the following items would be classified as a part of prime cost?

direct labor cost

The _____ is determined by transactions between buyers and sellers of similar bonds.

effective interest rate

Costs incurred to earn revenue are referred to as _____.

expense

Finished goods inventory includes _____.

factory overhead

Which of the following is TRUE regarding fixed and variable costs?

fixed costs are fixed in total, and variable costs are fixed per unit

The cost of goods sold is subtracted from sales to arrive at _____.

gross profit

Which of the following conditions would cause the break-even point to increase?

increase in unit variable cost

Periods experiencing an increase in price levels are known as periods of ______.

inflation

Which of the following should be included in the acquisition cost of a piece of equipment?

installation costs

A note payable requires payment of the amount borrowed plus ______.

interest

In reference to a promissory note, the person who makes the promise to pay is called the ______.

maker

The return on stockholders' equity is computed as ______.

net income divided by average total stockholders' equity

The cost of a product warranty should be included as an expense in the ______.

period of the sale of the product

Under a _____, a business designs products that possess unique attributes or characteristics for which customers are willing to pay more.

premium-price emphasis

Identify the item that should be treated as a deferred expense by a company.

prepaid advertising

Which of the following is the expansion of the DuPont formula for return on stockholders' equity?

profit margin × asset turnover × financial leverage

The _____ is held responsible for an unfavorable quantity variance caused by low-quality direct materials.

purchasing department

Which of the following transactions decreases the profitability of a company?

recording payroll tax expense

Which of the following is an example of a capital expenditure?

replacing an engine in a company car

The Sarbanes-Oxley Act of 2002 requires companies and their independent accountants to ______.

report on the effectiveness of the company's internal controls

The portion of a corporation's net income retained in the business is called:

retained earnings

The gross increases in stockholders' equity attributable to business activities are called ______.

revenues

Which of the following elements of internal control focuses on locating weaknesses and improving control effectiveness?

risk assessment**** wrong

The profit margin is calculated as the ratio of operating income to ______.

sales

The first budget customarily prepared as part of an entity's master budget is the ______.

sales budget

Sometimes a(n) _____ is offered to buyers as a means of encouraging them to pay before the end of the credit period.

sales discount

Which of the following expenditures would be included in the cost of a fixed asset?

sales taxes

For the purpose of analysis, mixed costs are generally ______.

separated into their variable and fixed cost components

A _____ shows the expected results of a responsibility center for only one activity level.

static budget

A cost that has been incurred in the past and is irrelevant is termed a(n) ______.

sunk cost

Which of the following is NOT an example of a capital market stakeholder?

suppliers

The manager of a cost center has the responsibility for making decisions affecting ______.

the center's costs only

The amount of the total cash paid to the seller for merchandise purchased would normally include ______.

the list price plus the sales tax

The par value per share of common stock represents ______.

the monetary amount assigned to each share of stock

When the market rate of interest on bonds is equal to the contract rate, the bonds will sell at:

their face amount

Yuan Corporation purchased office equipment on account. What is the effect of this transaction?

total assets and total liabilities will increase

Which of the following is TRUE of a direct materials cost?

A direct materials cost is included in factory overhead. ***** wrong

Which of the following budgets summarizes plans for acquiring fixed assets?

a capital expenditures budget

A to Z Corporation purchased a building for $80,000 cash. On the statement of cash flows, the transaction would be classified as ______.

cash flows from investing activities

_____ is the excess of sales over variable costs.

contribution margin

Which of the following of internal control deals with hiring, training, evaluation, compensation, and promotion of employees?

control environment

Which element of internal control observes employees' behavior and the accounting system for indicators of control problems?

control environment*** wrong

Separating the custody of assets from accounting for assets is a part of which element of internal control?

control procedures

Responsibility accounting for a profit center focuses on reporting ______.

controllable revenues, controllable expenses, and controllable profits

A practical approach that is frequently used by managers when setting normal selling price is the ______.

cost-plus approach

When managers of separate divisions or units are delegated the responsibility for managing their operations, the operational responsibility is said to be _____.

decentralized

JNC Co. buys equipment for $1,500,000 cash. This transaction ______.

decreases JNC Co.'s liquidity and has no effect on its profitability metric

Which of the following is considered a part of factory overhead cost?

depreciation of factory buildings

Which component of the balanced scorecard evaluates the economic performance of the responsibility centers?

financial

The price at which stock is sold depends on a variety of factors such as the ______.

financial condition and dividend record of the corporation

If bonds are issued at a premium, the stated interest rate is ______.

higher than the market rate of interest

The financial statement that presents a summary of the revenues and expenses of a business for a specific period of time, such as a month or a year, is called a(n) ______.

income statement

Under which method of inventory costing is the cost flow assumed to be in the reverse order in which the expenditures were made?

last-in, first-out

A(n) _____ is a contract for the use of an asset for a period of time without having to buy the asset.

lease

On the bank's accounting records, customers' accounts are normally shown as a(n) ______.

liability

The amount of the promissory note plus the interest earned on the due date is called the ______.

maturity value

Which one of the following is NOT a measure that management can use in evaluating and controlling investment center performance?

negotiated price

Contingent liabilities that are probable but cannot be reasonably estimated are disclosed in the ______.

notes to the financial statements

Which of the following activity bases would be the most appropriate for food costs of a hospital?

number of patients who stay overnight at the hospital

Which of the following manufacturing costs is an indirect cost of producing a product?

oil lubricants used for factory machinery

The revenue that is forgone from an alternative use of an asset is called a(n) ______.

opportunity cost

Which of the following is an example of a cost that varies in proportion to changes in the activity base?

packaging cost

In reference to a promissory note, the person who is to receive payment is called the ______.

payee*** wrong

A responsibility center in which the department manager has responsibility for and authority over costs and revenues is called a(n) ______.

profit center

Standards that can be achieved only under perfect operating conditions, such as no idle time, no machine breakdowns, and no materials spoilage, are called ______.

theoretical standards

Defense contractors would be MORE likely to use which of the following cost concepts in pricing their product?

total cost

A _____ is an economic event that under generally accepted accounting principles affects an element of the financial statements and must be recorded.

transaction

Which of the following is NOT reported as revenue on the income statement?

unearned revenue

Managers who often make special pricing decisions are more likely to use which of the following cost concepts in their work?

variable cost

The electricity expense in a production plant is an example of a ______.

variable cost

Using accrual accounting, revenue is recorded and reported only ______.

when the services are rendered without regard to when cash is received

The performance of a profit center manager is evaluated by comparing the profit center's operating income:

with the profit center's budgeted operating income

_____ is an example of a fixed asset.

A prepaid expense**** wrong

Which of the following statements is TRUE about liabilities?

Liabilities are the debt owed by a company.

____ occurs due to obsolescence that causes an asset to no longer provide services for which it was intended.

Functional depreciation

The framework that has become widely accepted as the standard by which companies design, analyze, and evaluate internal controls is the ______.

Internal Control - Integrated Framework by the Committee of Sponsoring Organizations

How do the responsibilities of a manager in an investment center compare to the responsibilities of managers in a cost or profit center?

Investment center managers have more authority and responsibility than managers of a cost or profit center.

Which of the following is TRUE of a capital expenditures budget?

It summarizes plans for acquiring fixed assets.

Which of the following is TRUE of job order cost systems?

Job order cost systems are often used by companies that manufacture custom products for customers or batches of similar products.

The due date of a 60-day note dated July 12 is ______.

September 10

Which of the following statements is a difference between financial accounting and managerial accounting?

Under financial accounting, reports are prepared using GAAP, whereas, under managerial accounting, information that is useful to management for its decision making is not recorded using GAAP.

Deferred revenue is initially recorded as ______.

a liability but becomes revenue over time

Rights to payments from customers are ______.

accounts receivable

Expenses can be defined as ______.

all of the above

A deferred expense is initially recorded as ______.

an asset but becomes an expense over time

A bank reconciliation should be prepared periodically because ______.

any differences between the depositor's records and the bank's records should be determined, and any errors made by either party should be discovered and corrected

Since merchandise inventory is normally sold within a year, how is it reported on the balance sheet?

as a current asset

An increase in Stockholders' Equity from revenues earned will also result in an increase in ______.

assets

Which of the following is an appropriate representation of the accounting equation?

assets = liabilities + stockholders' equity

A list of assets, liabilities, and owners' equity as of a specific date is a(n) ______.

balance sheet

The statement of shareholders' equity is prepared ______.

before the preparation of the balance sheet

Managers plan _____ in a budget in order to provide a cushion for unexpected events or improve the appearance of operations.

budgetary slack

The cost incurred to extend an asset's useful life is recorded as ______.

capital expenditures