ETR401 - Chapter 16

_____ is an accounting term that describes the difference between the original acquisition cost of capital assets and the amount of depreciation expense that has been recognized for them. A. Book value B. Disposal value C. Fair market value D. Replacement value

a

A general term for the facilities of a business is called: A. property. B. plant. C. equipment. D. inventory.

b

This method defines utility as being the net cash inflows that the asset will produce. A. Future cash flow valuation B. Investment cash flow valuation C. Financing cash flow valuation D. Discounted cash flow valuation

d

Which of the following is not a benefit of leasing? A. You can usually obtain a very low down payment. B. The process of negotiating and closing a lease is usually less complicated and expensive than making a purchase and obtaining borrowed funds. C. It is usually much easier for you to replace leased assets than it is to replace assets you own. D. Leased assets have less number of restrictions on how they may be used, maintained, and disposed of.

d

If Harry adopts the practice of purchasing and accepting delivery of inventory only after it has been sold to the final customer, it would be referred to as a(n) _____ inventory system. A. point-of-sale B. JIT C. EOQ D. periodic

b

A capital budgeting equation used to measure the relationship between initial investment and the profits that are expected to be received from making the investment is called: A. ROI. B. return on sales. C. current ratio. D. NPV.

a

Cost incurred in the activities necessary to get rid of an asset is called: A. whole of life costs. B. cost of disposition. C. cost of owning. D. cost of operation.

b

If Harry adopts a perpetual inventory system, _____ is one method that can be used to reduce the cost. A. periodic inventory B. JIT C. microinventory D. bar coding

d

Renting capital assets provides all of these advantages EXCEPT: A. it requires little or no cash investment. B. it does not require extensive paperwork. C. it protects you from unexpected repairs. D. it usually results in higher sales revenues due to repeat business.

d

The _____ is the amount of inventory that results in the minimum cost, considering the cost of lost sales resulting from running out of stock, the number of units sold per day, and the number of days required to receive inventory. A. microinventory B. periodic inventory C. EOQ D. optimum stocking level

d

The amount of time it takes a business to earn back the funds it paid out to obtain a capital asset is called: A. return on sales. B. net profit margin. C. ROI. D. payback period.

d

The direct cost incurred in using an asset for the purpose for which it was intended is called: A. cost of disposition. B. cost of owning. C. whole of life cost. D. cost of operating.

d

The two most commonly used financial ratios for comparing investment alternatives are: A. current and quick ratios. B. return on sales and return on investment. C. operating profit margin and net profit margin. D. payback period and ROI.

d

A general term for real estate, but that can also be applied as a legal term for anything owned or possessed is called: A. property. B. plant. C. equipment. D. inventory.

a

Capital assets are otherwise known as: A. operating assets. B. inventory. C. intangible assets. D. current assets.

a

Giving a third party legal rights to debts owed your business in order to provide assurance that borrowed money will be repaid refers to: A. pledging receivable. B. factoring. C. EOQ. D. JIT inventory.

a

Harry needs to know that when it comes to providing credit, this is true. A. It reduces the cost of selling. B. It forces all customers to pay. C. It usually results in lower sales revenues. D. It accelerates the receipt of cash.

a

Identify the term used for an asset with a fixed determinable period of utility. A. Useful life B. Salvage value C. Book value D. Disposal value

a

In practice, managers of small businesses tend to use which of these when it comes to inventory? A. Heuristic B. EOQ C. Statistical analysis D. JIT analysis

a

Laws, regulations, and the requirements of GAAP require that _____ value be used for financial reporting and income tax purposes. A. book B. fair market C. replacement D. disposal

a

Products that are held for sale to customers are called: A. inventory. B. layaways. C. accounts receivable. D. equipments.

a

What is the difference between the gross amount of the receivables and the amount that is ultimately collected? A. Factor's profit margin B. Lock box C. Profit maximization D. Commission

a

Which of these is NOT a recommended policy for managing accounts receivable? A. Maintaining constant "aging" of customers to quickly identify the ones who may become delinquent. B. Using your bank as a lock box for the receipt of payments. C. Enforcing significant late fees and interest on past due accounts. D. Discontinuing credit sales to customers who become significantly late in paying.

a

_____ is one method used to reduce the cost of perpetual inventory system. A. Bar coding B. Periodic inventory C. Microinventory D. JIT

a

EOQ helps you think in terms of A. buying and selling. B. ordering costs and carrying costs. C. borrowing cost and kiting costs. D. ordering cost and lost sales.

b

All of the following are the disadvantages to rental EXCEPT: A. it requires that you make regular payments. B. the number of dollars paid in rent usually exceeds the number of dollars you would spend to own the asset. C. by renting capital equipment you incur ongoing costs if business conditions change. D. you do not have an ownership position.

c

Assets that are expected to provide economic benefits for periods of time greater than one year are called: A. accounts receivable. B. short-term investments. C. capital assets. D. cash and cash equivalent assets.

c

For periodic inventory, the time between counts is usually: A. one quarter. B. six months. C. one business year. D. 30 days.

c

If Harry were to use EOQ, it would help him in terms of: A. borrowing cost and buying cost. B. lost sales cost and shelf-life cost. C. ordering cost and carrying cost. D. buying and selling.

c

Potential buyers and investors are most interested in _____ value of your assets. A. book B. fair market C. replacement D. disposal

c

) If you are offering assets as collateral, lenders are most interested in _____ value. A. book B. fair market C. replacement D. disposal

d

A lease in which at the end of the lease period the asset becomes the property of the lessee, possibly with an additional payment is called a(n): A. operating lease. B. short-term lease. C. reverse lease. D. capital lease.

d

A system of recording the receipt and sale of each item as it occurs is called: A. microinventory. B. periodic inventory. C. point-of-sale system. D. perpetual inventory.

d

All of these are negative effects of extending credit to customers EXCEPT: A. it delays the receipt of cash. B. it creates a borrowing situation for the owners of the business providing credit. C. some customers with credit will not pay. D. it increases the cost of selling.

d

All of these are primary inventories of manufacturing EXCEPT A. raw material. B. work in process. C. finished goods. D. presold goods.

d

Depreciation is based on all of the following assumptions EXCEPT A. that the asset has a fixed, determinable period of utility. B. that the asset has a fixed, determinable value that will exist when the depreciation process is complete. C. that the value of the asset will decline in a continuous and predictable manner over the period of utility. D. that it is the cost incurred to replace one asset with an identical asset.

d

Harry should be made aware that all of these are negative effects of extending credit to his customers EXCEPT: A. he may end up borrowing money to fill the gap. B. sometimes customers who use credit will not pay. C. it delays the receipt of cash. D. it increases the cost of selling.

d

Which of these is the largest current asset that most manufacturing, wholesale, and retail firms have? A. Cash B. Property, plant, and equipment C. Accounts receivable D. Inventory

d

The primary advantage of replacement value is: A. accuracy. B. high cost. C. low taxes. D. low cost.

a

The primary disadvantage of leasing is that: A. it usually costs more than would purchasing. B. assets tend to have more breakdowns. C. it requires extensive paperwork than would purchasing. D. it generates fewer dollars in revenue sales.

a

The primary disadvantage of the payback period is that: A. it disregards the time value of money. B. it is highly complex. C. it does not allow the comparisons of alternatives. D. it incorporates all cash flows that occur after the payback period.

a

The purchase of inventory, very typical with Internet firms, only after a sale is made is called: A. microinventory. B. periodic inventory. C. perpetual inventory. D. point-of-sale system.

a

What is the cost incurred in financing, insuring, taxing, or tracking an asset? A. Cost of owning B. Whole of life costs C. Cost of operating D. Cost of disposition

a

_____ is money that is owed to your business by your customers. A. Inventory B. Accounts receivable C. Factor receivables D. Accounts payable

b

Which of these is NOT an accounting method to value capital assets? A. Disposal value B. Book value C. Replacement value D. Inflation value

d

Which of these represents the current practice for small businesses to provide credit? A. Providing credit by accepting bank-issued credit cards. B. Providing no credit. C. Providing direct credit to customers to build loyalty. D. Providing credit only when approved and backed by government agencies.

a

Under this type of arrangement, a small business may buy only that share that it can reasonably use during the course of business. A. Partnership B. Fractional ownership C. Joint Ventures D. Limited company

b

Pledging receivables will get you about _____ of the amount that can be collected, where as, factoring can get you _____ percent of the amount due. A. one-fourth; 90-95 B. one-fifth; 40-45 C. one-half; 75-80 D. three-fourth; 20-25

c

The practice of purchasing and accepting delivery of inventory only after it has been sold to the final customer is called a(n) _____ inventory system. A. EOQ B. periodic C. JIT D. perpetual

c

The price at which goods and services are bought and sold between willing sellers and buyers in an arm's-length transaction is called: A. book value. B. disposal value. C. fair market value. D. replacement value.

c

The sum of all costs of capital assets including acquisition, ownership, operation, and disposal refers to: A. cost of operation. B. cost of owning. C. whole of life cost. D. replacement cost.

c

Which of the following is not generally considered to be very useful for any purpose other than accounting and income taxes? A. Replacement value B. Salvage value C. Book value D. Disposal value

c

Which of these also refers to reorder point? A. Microinventory B. JIT C. Optimum stocking level D. EOQ

c

_____ refers to the process of deciding among various investment opportunities to create a specific spending plan. A. ROI B. Payback period C. Capital budgeting D. Return on asset

c

Selling the right to collect accounts receivable to an entity outside your business is called: A. pledging receivable. B. factoring. C. EOQ. D. JIT inventory.

b

The practice of acquiring inventory only in response to a completed sale is called a(n): A. economic order quantity. B. pull-through system. C. periodic inventory. D. perpetual inventory.

b

The process of physically counting business assets on a set schedule is called: A. microinventory. B. periodic inventory. C. point-of-sale system. D. perpetual inventory.

b

What is an arbitrary, but regular and systematic method used to take an asset value as an expense for the purpose of calculating net income or loss? A. Book value B. Depreciation C. Arm's length transaction D. Disposal value

b

Which of the following is a statistical technique that determines the quantity of inventory that a business must hold to minimize total inventory cost? A. JIT B. EOQ C. Reorder point D. Microinventory

b

_____ comprises both hardware and software to integrate inventory management directly into your accounting system. A. Microinventory B. Point-of-sale system C. Periodic inventory D. Perpetual inventory

b

_____ is a method of estimating asset value by calculating the net amount that you would realize were you to sell the asset in an "arm's-length" transaction. A. Book value B. Disposal value C. Fair market value D. Replacement value

b

_____ is the fixed and determinable value of an asset that will exist when the depreciation process is complete. A. Useful life B. Salvage value C. Book value D. Disposal value

b

JIT inventory system attempts to reduce inventory levels to the absolute minimum by all of the following EXCEPT: A. accepting inventory only as it is sold. B. assembling product in the absolute minimum time possible. C. keeping safety stock in case sales might be greater than forecast. D. shipping product to the customer immediately upon completion.

c

Operational control depends on all of the following types of feedback EXCEPT: A. informational feedback. B. corrective feedback. C. interpretive feedback. D. reinforcing feedback.

c

Which of these is true about providing credit? A. It usually results in lower sales revenues. B. It accelerates the receipt of cash. C. It reduces the cost of selling. D. It forces all the customers to pay

c