Accounting

Which method of evaluating capital investment proposals uses the concept of present value to compute a rate of return? A. Average rate of return B. Accounting rate of return C. Cash payback period D. Internal rate of return

D. Internal rate of return

The use of standards for nonmanufacturing expenses is A. Not as common as it is for manufacturing costs B. As common as it is for manufacturing C. Not useful D. impossible

A. Not as common as it is for manufacturing costs

Which of the following can be used to place capital investment proposals involving different amounts of investment on a comparable basis for purposes of net present value analysis? A. Price-level index B. Present value factor C. Annuity D. Present value index

A. Price-level index

Which of the following provisions of the Internal Revenue Code can be used to reduce the amount of the income tax expense arising from the capital investment projects? A. Interest deduction B. Depreciation deduction C. Minimum tax provision D. Charitable contributions

B. Depreciation deduction

An analysis in which all the components of an income statement are expressed as a percentage of net sales is called A. Horizontal analysis B. Liquidity analysis C. Vertical analysis D. Common-size analysis

C. Vertical analysis

A to Z Corporation engaged in the following transaction "Paid a $10,000 cash dividend". " On the Statement of Cash Flows, the transaction would be classified as A. Cash Flows from Operating Activities B. Cash Flows from Investing Activities C. Cash Flows from Financing Activities D. Noncash transaction

B. Cash Flows from Investing Activities

Statements in which all items are expressed only in relative terms (percentages of a common base) are A. Horizontal statement B. Common-size statement C. Percentage statement D. Vertical statement

B. Common-size statement

A variant of fiscal-year budgeting whereby a twelve-month projection into the future is maintained at all times termed A. Flexible-budgeting B. Continuous budgeting C. Zero-based budgeting D. Master budgeting

B. Continuous budgeting

Anderson, Inc. receives $5,000 cash for fees earned. What is the effect of this transaction? A. Total assets remain uncharged B. Cash flow from Financing Activities will increase C. Net income will increase D. Retained earnings will remain unchanged

C. Net income will increase

Which of the following are present value methods of analyzing capital investment proposals? A. Internal rate of return and average rate of return B. Average rate of return and net present value C. Net present value and internal rate of return D. Net present value and payback

C. Net present value and internal rate of return

Estimated cash payments are planned reductions in cash from all of the following EXCEPT A. Manufacturing and selling and administrative expenses B. Capital expenditures C. Notes and accounts receivable collections D. Payments for interest or dividends

C. Notes and accounts receivable collections

When several alternative investment proposals of the same amount are being considered, the one with the largest net present value is the most desirable. If the alternative proposals involve different amounts of investment, it is useful to prepare a relative ranking of the proposals by using a (n) A. Average rate of return B. Consumer price index C. Present value index D. Price-level index

C. Present value index

If the price paid per unit differs from the standard price per unit for direct materials, the variance is termed A. Variable variance B. Controllable variance C. Price variance D. Volume variance

C. Price variance

The ratio of the sum of cash , receivables, and marketable securities to current liabilities is called the A. Price-earnings ratio B. Earnings ratio C. Quick ratio D. Current ratio

C. Quick ratio

The ______ measures the profitability of total assets, without considering how the assets are financed A. Price-earnings ratio f B. Ratio of net sales to assets C. Rate earned on total assets D. Dividend yield

C. Rate earned on total assets

Which of the following is NOT an analysis used in assessing solvency? A. Number of times interest charges are earned B. Current position analysis C. Ratio of net sales to assets D. Inventory analysis

C. Ratio of net sales to assets

The gross increases in stockholders' equity attributable to business activities are called A. Assets B. Liabilities C. Revenues D. Net income

C. Revenues

The first budget customarily prepared as part of an entity's master budget is the A. Production budget B. Cash budget C. Sales budget D. Direct materials purchases

C. Sales budget

All of the following are factors that may complicate capital investment analysis EXCEPT A. The leasing alternative B. Changes in price levels C. Sunk cost D. The federal income tax

C. Sunk cost

The process of developing budget estimates by requiring all levels of management to estimate sales, production, and other operating data as though operations were being initiated for the first time is referred to as A. Flexible budgeting B. Continuous budgeting C. Zero-based budgeting D. Master budgeting

C. Zero-based budgeting

a minimum cash balance required by a bank is called A. cash in bank B. cash equivalent C. compensating balance D. EFT

C. compensating balance

Cash equivalents include A. checks B. coins and currency C. money market accounts and commercial paper D. stocks and short-term bonds

C. money market accounts and commercial paper

If assets have a balance of $50,000 and Stockholders' equity has a balance of $40,000, then liabilities must have a balance of A. 90000 B. 20000 C. 40000 D. 10000

D. 10000

On the bank's accounting records, customers' accounts are normally shown as A. Revenue B. Expenses C. An asset D. A liability

D. A liability

A firms' internal control environments is influenced by A. Management's operating style B. Organizational structure C. Personnel policies D. All of these

D. All of these

The budget that summarizes future plans for the acquisition of fixed assets is the A. Direct materials purchases budget B. Production budget C. Sales budget D. Capital expenditures budget

D. Capital expenditures budget

The process by which management allocates available investment funds among competing investment proposals is called A. Investment capital B. Investment rationing C. Cost-volume-profit analysis D. Capital rationing

D. Capital rationing

Which of the following is NOT defined as cash? A. Coins B. Checks C. Money orders D. Commercial paper

D. Commercial paper

The budget process involves doing all the following EXCEPT A. Establishing specific goals B. Executing plans to achieve the goals C. Periodically comparing actual results with the goals D. Dismissing all managers who fail to achieve operational goals specified in the budget

D. Dismissing all managers who fail to achieve operational goals specified in the budget

By converting dollars to be received in the future into current dollars, the present value methods take into consideration that money A. Has an international rate of exchange B. Is the language of business C. Is the measure of assets, liabilities, and stockholders' equity on financial statements D. Has a time value

D. Has a time value

An acceleration in the collection of receivables will tend to cause the accounts receivable turnover to A. Decrease B. Remain the same C. Either increase or decrease D. Increase

D. Increase

Which one of the following is NOT a characteristic generally evaluated in ratio analysis? A. Liquidity B. Profitability C. Solvency D. Marketability

D. Marketability

Which of the following is a present value method of analyzing capital investment proposals? A. Average rate of return B. Cash payback method C. Accounting rate of return D. Net present value

D. Net present value

Standards that represent levels of operation that can be attained with reasonable effort are called A. Theoretical standards B. Ideal standards C. Reasonable standards D. Normal standards

D. Normal standards

The percentage analysis of increases and decreases in individual items in comparative financial statements is called A. vertical analysis B. solvency analysis C. profitability analysis D. horizontal analysis

D. horizontal analysis

The income statement for August indicates net income of $50,000. The corporation also paid $10,000 in dividends during the same period. If there was no beginning balance in stockholders' equity, what is the ending balance stockholders' equity? A. 40000 B. 50000 C. 10000 D. 60000

A. 40000

In capital rationing, an initial screening of alternative proposals is usually performed by establishing minimum standards. Which of the following evaluation methods are normally used? A. Cash payback method and average rate of return method B. Average rate of return method and net present value method C. Net present value method and cash payback method D. Internal rate of return and net present value methods

A. Cash payback method and average rate of return method

The ratio computed by dividing current assets by current liabilities is the A. Current ratio B. Earnings ratio C. Acid-test ratio D. Quick ratio

A. Current ratio

Which method of evaluating capital investment proposals uses present value concepts to compute the rate of return from the net cash flows expected from capital investment proposals? A. Internal rate of return B. Cash payback C. Net present value D. Average rate of return

A. Internal rate of return

Which of the following ratios provides a solvency measure that shows the margin of safety of noteholders or bondholders and also gives an indication of the potential ability of the business to borrow additional funds on a long-term basis? A. Ratio of fixed assets to long-term liabilities B. Ratio of net sales to assets C. Number of days' sales in receivables D. Rate earned on stockholders' equity

A. Ratio of fixed assets to long-term liabilities

The notification accompanying a check that indicates the specific invoice being paid is called a A. Remittance advice B. Voucher C. Debit memorandum D. Credit memorandum

A. Remittance advice

The purpose of the Sarbanes-Oxley Act of 2002 is to A. Restore public confidence and trust in the financial statements of publicly held companies B. Require all companies to prepare financial statement C. Protect companies from demands of investors, stockholders, and creditors D. Do all of these

A. Restore public confidence and trust in the financial statements of publicly held companies

The statement of cash flows is integrated with the balance sheet because A. The cash at the beginning of the period plus or minus the cash flows from operating, investing and financing activities equals the end of period cash reported on the balance sheet B. The cash at the beginning of the period plus or minus the net income equals the end of period cash reported on the balance sheet C. The cash at the beginning of the period plus or minus assets and liabilities equals the end of period cash reported on the balance sheet D. The cash at the beginning of the period plus or minus the cash flows from operating activities equals the end of period cash reported on the balance sheet

A. The cash at the beginning of the period plus or minus the cash flows from operating, investing and financing activities equals the end of period cash reported on the balance sheet

An analysis of a proposal by the net present value exceeded the amount to be invested. Which of the following statements best describes the result of this analysis? A. The proposal is desirable and the rate of return expected from the proposal exceeds the minimum rate used for the analysis B. The proposal is desirable and the rate of return expected from the proposal is less than the minimum rate used for the analysis C. The proposal is undesirable and the rate of return expected from the proposal is less than the minimum rate used for the analysis D. The proposal is undesirable and the rate of return expected from the proposal exceeds the minimum rate used for the analysis

A. The proposal is desirable and the rate of return expected from the proposal exceeds the minimum rate used for the analysis

An analysis of a proposal by the net present value method indicated that present value of future cash inflows exceeded the amount to be invested. Which of the following statements best describes the result of this analysis? A. The proposal is desirable and the rate of return expected from the proposal exceeds the minimum rate used for the analysis B. The proposal is desirable and the rate of return expected from the proposal is less than the minimum rate used for the analysis C. The proposal is undesirable and the rate of return expected from the proposal is less than the minimum rate used for the analysis D. The proposal is undesirable and the rate of return expected from the proposal exceeds the minimum rate used for the analysis

A. The proposal is desirable and the rate of return expected from the proposal exceeds the minimum rate used for the analysis

If the actual direct labor hours spent producing a commodity differ from the standard hours, the variance is termed A. Time variance B. Price variance C. Quantity variance D. Rate variance

A. Time variance

The percent of fixed assets to total assets is an example of A. vertical analysis B. solvency analysis C. profitability analysis D. horizontal analysis

A. vertical analysis

The first month of operation showed the net cash from operating activities to be $3760, the net cash from investing activities to be ($5415), and the ending cash balance to be $2425. The net cash from financing activities must be A. $770.00 B. $4,080.00 C. $11,600 D. $11,600.00

B. $4,080.00

Which additional report has required independent auditors since the passage of the Sarbanes-Oxley Act in 2002? A. A report assessing the probability that the company will remain in business B. A report attesting to management's assessment of internal control C. A report assessing the market value of the company's current stock price D. A report assessing the competency of the company's board of directors

B. A report attesting to management's assessment of internal control

Periodic comparison between planned objectives and actual performance are reported in A. Zero-based reports B. Budget performance reports C. Master budgets D. Budgets

B. Budget performance reports

EFT A. Means Efficient Funds Transfer B. Can process certain cash transactions at less cost than by using the mail C. Makes it easier to document purchase and sale transactions D. Means Effective Funds Transfer

B. Can process certain cash transactions at less cost than by using the mail

When department managers plan lower goals than possible in order to build in a cushion for unexpected events, the result is A. Budgetary slack B. Zero-based budgeting C. Goal conflict D. Flexible budgeting

A. Budgetary slack

For most profitable companies, the rate earned on total assets will be less than A. The rate earned on stockholders' equity B. The rate earned on total liabilities and stockholders' equity C. The rate earned on sales D. Cannot be determined without more information

A. The rate earned on stockholders' equity

The primary advantages of the average rate of return method are its ease of computation and the fact that A. It is especially useful to managers whose primary concern is liquidity B. There is less possibility of loss from changes in economic conditions and obsolescence when the commitment is short-term C. It emphasizes the amount of income earned over the life of the proposal D. Rankings of proposals are necessary

C. It emphasizes the amount of income earned over the life of the proposal

Management accountants usually provide for a minimum cash balance in their cash budgets for which of the following reasons? A. Stockholders demand a minimum cash balance B. It is an important way of effectively managing cash C. It provides a safety buffer for variations in estimates D. It makes funds available for major capital expenditures

C. It provides a safety buffer for variations in estimates

The Sarbanes Oxley Act of 2002 requires companies and their independent accountants to A. Report on the financial activities of the company B. Report on any fraud and theft detected in the company C. Report on the state of the economy and likelihood of fraud D. Report on the effectiveness of the company's Internal controls

D. Report on the effectiveness of the company's Internal controls

Which of the following accounts is a stockholders' equity account? A. Cash B. Account payable C. Prepaid insurance D. Retained earnings

D. Retained earnings

Credit memorandums from the bank A. Decrease a bank customer's account B. Are used to show a bank service charge C. Show that a company has deposited a customer's NSF check D. Show the bank has collected a note receivable for the customer

D. Show the bank has collected a note receivable for the customer

The basic financial statement do NOT include the A. Income statement B. Tax return C. Balance sheet D. Statement of cash flow

D. Statement of cash flow

A _____ is an economic event that under generally accepted accounting principles affects an element of the financial statements and must be recorded A. Framework B. Control C. Set of rules D. Transaction

D. Transaction

A special cash fund used to make small payments that occur frequently is called a(n) A. Operating expenses fund B. Change fund C. market fund D. petty cash fund

D. petty cash fund

Periods in time that experience increasing price levels are known as periods of A. Inflation B. Recession C. Depression D. Deflation

A. Inflation

The stockholders' equity will be reduced by which of the following accounts A. Revenues B. Expenses C. Dividends D. All of these

A. Revenues

Variances from standard costs are usually reported to A. Suppliers B. Stockholders C. Management D. Creditors

C. Management

The standard price and quality of direct materials are separated because A. GAAP reporting requires this separation B. Direct materials prices are controlled by the Purchasing Department, and quantity used is controlled by the Production Department C. Standard quantities are more difficult to estimate than standard prices D. Standard prices change more frequently than standard quantities

B. Direct materials prices are controlled by the Purchasing Department, and quantity used is controlled by the Production Department

The production budgets are used to prepare which of the following budgets? A. Selling and administrative expenses B. Direct materials purchases, direct labor cost, factory overhead cost C. Sales D. Capital expenditures

B. Direct materials purchases, direct labor cost, factory overhead cost

The number of times interest charges are earned is computed as A. Net income plus interest charges divided by interest charges B. Income before income tax plus interest charges divided by interest charges C. Net income divided by interest charges D. Income before income tax divided by interest charges

B. Income before income tax plus interest charges divided by interest charges

RST borrowed $25,000 from the bank. Which of the following accurately shows the effects of the transaction? A. Increase cash $25,000 and decrease notes payable $25,000 B. Increase cash $25,000 and increase notes payable $25,000 C. Decrease cash $25,000 and decrease notes payable $25,000 D. Decrease cash $25,000 and increase notes payable $25,000

B. Increase cash $25,000 and increase notes payable $25,000

When a firm uses internal auditors, it is adhering to which of the following internal control elements? A. Risk assessment B. Monitoring C. Proofs and security measures D. Separating responsibilities for related operations

B. Monitoring

In capital rationing, alternative proposals that survive initial and secondary screening are normally evaluated in terms of A. Net income B. Nonfinancial factors C. Maximum cost D. Net cash flow

B. Nonfinancial factors

The objectives of Internal control are to A. Control the Internal organization of the Accounting Department personnel and equipment B. Provide reasonable assurance that assets are safeguarded, information is processed accurately, and laws and regulations are complied with C. Prevent fraud and promote the social interest of the company D. Provide control over "internal-use only" reports and employee internal conduct

B. Provide reasonable assurance that assets are safeguarded, information is processed accurately, and laws and regulations are complied with

The ability of a business to pay its debts as they come due and to earn a reasonable amount of income is referred to as A. Solvency and leverage B. Solvency and profitability C. Solvency and liquidity D. Solvency and equity

B. Solvency and profitability

In general, present value methods of analyzing capital investment are more desirable than methods ignoring present value because A. The calculation in methods that ignore present value are more complex than those in methods using present value B. The present value methods consider that a dollar today is worth more than a dollar in the future due to the potential earnings power of that dollar C. The calculation in methods that consider present value are less complex than those methods ignoring present value D. The present value methods consider that a dollar in the future is worth more than a dollar today due to the potential earnings power of that dollar

B. The present value methods consider that a dollar today is worth more than a dollar in the future due to the potential earnings power of that dollar

The present value index is computed using which of the following formulas? A. Amount to be invested / Average rate of return B. Total present value of net cash flow/ Amount to be invested C. Total present value of net cash flow/ Average rate of return D. Amount to be invested/Total present value of net cash flow

B. Total present value of net cash flow/ Amount to be invested

Which of the following is NOT an element of the financial accounting system? A. A set of rules for determining the recording of economic events B. A framework for preparing financial statements C. A set of rules for the stock exchange D. Controls to determine whether errors occur during recording

C. A set of rules for the stock exchange

Planning for capital expenditures is necessary for all of the following reasons EXCEPT A. Machinery and other fixed assets wear out B. Expansion may be necessary to meet increased demand C. Amounts spent for office equipment may be immaterial D. Fixed assets may fall below minimum standards of efficiency

C. Amounts spent for office equipment may be immaterial

A bank reconciliation should be prepared periodically because A. The depositor's records and the bank's records are in agreement B. The bank has not recorded all of its transactions C. 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 D. The bank must make sure that its records are correct

C. 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

Decisions to install new equipment, replace old equipment, and purchase or construct a new building are examples of A. Sales mix analysis B. Variable cost analysis C. Capital investment analysis D. Absorption cost analysis

C. Capital investment analysis

Declaring and paying cash dividends affects which balance sheet accounts? A. Cash only B. Stockholders' equity only C. Cash and stockholders' equity only D. Cash and capital stock

C. Cash and stockholders' equity only

Anderson, Inc. paid rent expense of $4,000 for the month of October. How are the accounts affected due to this transaction? A. Increase in cash $4,000 and increase in retained earnings $4,000 B. Increase in cash $4,000 and decrease in retained earnings $4,000 C. Decrease in cash $4,000 and decrease in retained earnings $4,000 D. Decrease in cash $4,000 and increase in retained earnings $4,000

C. Decrease in cash $4,000 and decrease in retained earnings $4,000

The amount of the outstanding checks is included on the bank reconciliation as a (n) A. Deduction from the balance per depositor's records B. Addition to the balance per bank statement C. Deduction from the balance per bank statement D. Addition to the balance per depositor's records

C. Deduction from the balance per bank statement