Chapter 8

A flexible budget

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) _____. current liability operating liability tangible asset intangible asset

retired earnings

Daniel, the owner of a bookstore, decides to reinvest his personal profits from the current fiscal year toward renovating the store and expanding its inventory. In the context of owners' equity, the profits that Daniel reinvests in the bookstore are called: bonus shares. retained earnings. current liabilities. equity releases.

current assets

In the context of balance sheets, accounts receivable is an example of__________. current liabilities immovable assets current assets depreciated liabilities

revenues

In the context of the income statement of an organization, accountants use accrual-basis accounting when recognizing _____. debts investments revenues cost of shares

identify specific activities that create indirect costs and determine the factors that drive the costs of these activities.

The first stage in activity-based costing is to: multiply the total cost of producing each good by the number of goods. identify specific activities that create indirect costs and determine the factors that drive the costs of these activities. divide the total cost of goods available for sale by the total units available for sale. identify specific activities that create direct costs and determine the marketing factors that influence the costs of these activities.

bottom-up approach

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) _____. current liability operating liability tangible asset intangible asset

qualified opinion

Andrew is performing an audit of the financial statements of a cosmetics company. While analyzing the financial statements, he identifies some minor concerns. However, he believes that on balance the company's statements are accurate and its accounting methods are consistent with the generally accepted accounting principles. In this scenario, the independent auditor's report will most likely offer a(n) _____. qualified opinion unqualified opinion adverse opinion concurring opinion

$220 million

The assets of Prosian Italia, a marble and granite company, amount to $400 million, and its liabilities add up to $180 million. Based on the accounting equation, Prosian Italia's owners' equity is equal to _____. $580 million $72,000 million $2 million $220 million

internal auditor

The employees of an information technology company complain that the company has been spending a lot of funds in wasteful activities, such as office renovation, instead of revising the employees' salaries. In this case, the company should hire a(n) _____ to keep a check on the company's expenses and prevent the problem from aggravating. public prosecutor government accountant internal auditor public accountant

$40 million

The owners' equity of Senesta Corp., an event management company, adds up to $23 million, and its liabilities add up to $17 million. Based on the accounting equation, the assets of Senesta Corp. are worth _____. $1.35 million $391 million $7 million $40 million

sales budget

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

accumulated depreciation

The total assets of a dairy products manufacturing company are calculated. However, a sum of $5 million from the value of the company's property, plant, and equipment assets is not taken into account as the machinery is bound to become unusable after a certain period of time. In the context of balance sheets, the amount of $5 million that is subtracted from the original value of the total assets is called _____. deferred income bequest value accumulated depreciation laid-down cost

intangible asset

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) _____. current liability operating liability tangible asset intangible asset

financial accounting

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) _____. current liability operating liability tangible asset intangible asset

the budgeted income statement, the capital expenditure budget, and the cash budget.

Ashley, a manager at a toy manufacturing company, needs to create a financial document for the company that would show how the company's operating, investing, and financing activities are expected to affect the asset, liability, and owners' equity accounts. To prepare this document, Ashley needs to collect data from: the static budget, the cash budget, and the budgeted income statement. the production budget, the capital expenditure budget, and the sales budget. the sales budget, the cash budget, and the budgeted income statement. the budgeted income statement, the capital expenditure budget, and the cash budget.

horizontal analysis

Harold, a financial accountant in a company, is asked to identify the changes in the company's account values between 2014 and 2016. To get the required information, he uses comparative financial statements, which state the figures for the two years side by side. These comparative financial statements make it easier for Harold to identify the changes that may have taken place during that period. In this scenario, Harold is most likely using _____ to get the required information. activity-based costing horizontal analysis liquidity index static analysis

assets

In the context of balance sheets, resources owned by a firm are known as__________. holdings assets capitals liabilities

Liabilities indicate the claims outsiders have against the firm's assets, whereas owners' equity refers to the claims the owners have against their firm's assets.

In the context of balance sheets, which of the following is a difference between liabilities and owners' equity? Liabilities refer to the claims internal stakeholders have against the external stakeholders, whereas owners' equity refers to claims external stakeholders have against the internal stakeholders. Liabilities indicate the claims outsiders have against the firm's assets, whereas owners' equity refers to the claims the owners have against their firm's assets. Owners' equity indicates the claims internal stakeholders have against the firm's assets, whereas liabilities refer to the claims external stakeholders have against the firm's assets. Owners' equity indicates the claims outsiders have against the firm's assets, whereas liabilities refer to the claims the owners have against their firm's assets.

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

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

public accountant

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: public accountant. managerial accountant. government accountant. forensic accountant.

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

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: is to serve a seven-year term and cannot be reappointed to serve another term. must sever all ties with any firms or institutions that she served prior to joining the board. is responsible for directing the Securities and Exchange Commission to enforce the accounting standards. must pass a rigorous two-day, four-part examination to be promoted as a certified fraud examiner.

budgetary slack

Sigborne Corp., a food and beverage company, commences its budgeting process by requesting the middle managers of the company to collect data from their respective departments and submit a consolidated report stating the needs of their departments. Harold, the manager of the packaging department, overstates the needs of his department. In this scenario, Harold is guilty of _____. outwrestling budgetary slack extortion budget maximization

operating budget

The management of a sugar manufacturing company sets aside a sum of $50,000 in its budget for the purchase of new machinery that would double the production. In the given scenario, the management is in the process of planning the _____ of the company. marketing budget financial budget operating budget static budget

static budget

The management of an electronics company created the annual budget on a single assumed level of sales. This level of sales is to remain constant for the whole year. Later, the management finds it difficult to accurately measure the financial progress of the firm as the values in the estimated budget vary significantly from the actual sales. In the given scenario, the management most likely created a _____. perpetual budget zero deficit budget black budget static budget

Financial accounting is governed by a set of generally accepted accounting principles, whereas managerial accounting uses procedures developed internally that are not required to follow generally accepted accounting principles.

Which of the following is a difference between managerial accounting and financial accounting? Financial accounting is governed by a set of generally accepted accounting principles, whereas managerial accounting uses procedures developed internally that are not required to follow generally accepted accounting principles. Financial accounting is primarily intended to provide information to internal stakeholders, whereas managerial accounting is primarily intended to provide information to external stakeholders. Managerial accounting summarizes the past performance of a company, whereas financial accounting provides reports on the past performance of a company and also makes projections about the future. Managerial accounting presents financial statements on a predetermined schedule, whereas financial accounting creates reports upon request by management rather than according to a predetermined schedule.