WGU Accounting for MBAs

You currently work as a school bus driver. Your salary is $28,000 per year. You are thinking about quitting your job and going back to college. It will take you two years to obtain your college degree. Tuition and other costs of the education will total $24,000. You also intend to keep your car by making the $250 per month payments out of your savings. How much is the opportunity cost of going to college?

$56,000 $62,000 $52,000 $28,000 $28,000 lost salary x 2 years = $56,000

Avondale Inc. had the following cash transactions during 2012: Sales receipts $2,000,000 Inventory payments 1,500,000 Interest payments 20,000 Wage payments 120,000 Dividend receipts 10,000 Interest receipts 6,000 Equipment purchased 150,000 Stock of Canton Company purchased 50,000 Stock issued 300,000 Repaid a note (nonoperating) 100,000 What was Avondale's net increase in cash for the year?

$576,000 $306,000 $266,000 $376,000 Net increase in cash: Sales receipts - Inventory payments - Interest payments - Wage payments + Dividend receipts + Interest receipts - Equipment purchased = Stock of Canton Company purchased + Stock issued - Repaid a note (nonoperating)

Ojeda Corporation had the following cash flows during 2012. The company uses the direct method of preparing a statement of cash flows. Cash receipt from the issuance of stock $20,000 Cash received from customers 9,000 Dividends received on long-term investments 4,000 Cash paid for wages 7,000 Cash paid for insurance 500 Cash paid for dividends 3,000 Cash paid to purchase building 30,000 Loan made to another company 10,000 Given this information, net cash inflow (outflow) from operating activities is

$8,500 $15,000 $3,500 $5,500 Net cash inflow from operating activities: Cash received from customers + Dividends receive on long-term investments - Cash paid for wages - Cash paid for insurance

Maggie's Motors manufactures boat motors. Maggie is shifting from a traditional costing system to an activity-based costing system. She has started by identifying four overhead cost activities. Listed below is the table that Maggie created identifying the cost activities and the percentage of time spent on each activity by various factory employees. Ordering parts Repairing equipment Inspecting motors Engineering changes Maintenance person 0% Ordering parts 75% Repairing equipment 0% Inspecting motors 25% Engineering changes Production foreman 15% Ordering parts 15% Repairing equipment 40% Inspecting motors 30% Engineering changes Factory superintendent 10% Ordering parts 0% Repairing equipment 50% Inspecting motors 40% Engineering changes Accountant 50% Ordering parts 0% Repairing equipment 0% Inspecting motors 50% Engineering changes Maggie also gathered the total overhead cost associated with each factory employee which is shown below: Maintenance person $ 75,000 Production foreman 90,000 Factory superintendent 105,000 Accountant 85,000 Using the information above, compute the amount of the cost pool associated with engineering changes.

$88,500 $130,250 $105,000 $66,500 Cost pool for engineering changes: ($75,000 x 25%) + ($90,000 x 30%) + ($105,000 x 40%) + ($85,000 x 50%) = $130,250

Rhododendron Company offers yard maintenance services for residential clients. Costs for the year were direct labor, $80,000 and indirect labor, $5,000. Additional expenses for the year were supplies $6,000; depreciation of lawn maintenance equipment, $1,000; advertising expense, $500; receptionist payroll, $13,000 and fuel, $2,500. Which amount is Rhododendron's total service costs?

$94,500 $80,000 $14,500 $11,000 Manufacturing Overhead: $5,000 + $6,000 + $1,000 + $2,500 = $14,500 Total Service Costs: $80,000 + $14,500 = $94,500

Chen Corporation had the following cash flows during 2012. The company uses the direct method of preparing a statement of cash flows. Cash receipt from the issuance of stock $80,000 Cash received from customers 40,000 Dividends received on long-term investments 20,000 Cash paid for wages 24,000 Cash paid for insurance 2,000 Cash paid for dividends 12,000 Cash paid to purchase building 120,000 Loan made to another company 40,000 Given the information above, net cash inflow (outflow) from financing activities is

($52,000) $80,000 ($12,000) $68,000 Cash inflow from financing activities: Cash receipt from the issuance of stock - Cash paid for dividends

Chen Corporation had the following cash flows during 2012. The company uses the direct method of preparing a statement of cash flows. Cash receipt from the issuance of stock $80,000 Cash received from customers 40,000 Dividends received on long-term investments 20,000 Cash paid for wages 24,000 Cash paid for insurance 2,000 Cash paid for dividends 12,000 Cash paid to purchase building 120,000 Loan made to another company 40,000 Given the information above, net cash inflow (outflow) from ALL activities is

($98,000) $22,000 ($58,000) $40,000 Cash inflow from operating activities: Cash received from customers + Dividends received on long-term investments - Cash paid for wages - Cash paid for insurance Cash outflow from investing activities: (Cash paid to purchase building) + (Loan made to another company) Cash inflow from financing activities: Cash receipt from the issuance of stock - Cash paid for dividends Net cash outflow from all activities: Cash inflow from operating activities - Cash outflow from investing activities + Cash inflow from financing activities

The balance sheet at the end of the first year of operations indicates the following: 2012 Total current assets $600,000 Total investments 85,000 Total property, plant, and equipment 900,000 Total current liabilities 250,000 Total long-term liabilities 350,000 Common stock, $10 par 600,000 Paid-in capital in excess of par-common stock 60,000 Retained earnings 325,000 If sales revenue for 2012 is $950,000, what is the asset turnover for 2012 (round to two decimal places)?

0.60 2.64 1.58 0.96 Asset turnover: Sales revenue 950,000 / (Common stock, $10 par 600,000 + Total investments 85,000 + Total property, plant, and equipment 900,000 Asset Turnover: Sales / Total Assets

Cash paid for income taxes: $11,986 Cash paid for interest: 5,204 Cash from operations: 62,030 Using the above information, computer the company's cash times interest earned ratio.

15.2 times 12.9 times 11.9 times 4.6 times (Cash paid for income taxes: $11,986 + Cash paid for interest: 5,204 + Cash from operations: 62,030) / Cash paid for interest: 5,204

The following data came from the financial statements of the Green Company: Cash from operations $900,000 Cash from investing activities 350,000 Cash from financing activities 220,000 Cash paid for capital expenditures 55,000 Net income 425,000 Compute the cash flow-to-net income ratio.

2.57 2.12 4.09 16.36 Cash flow-to-net income: Cash from operations $900,000 / Net income 425,000

Selected information for Isaac Company is as follows: Common stock $1,200,000 Additional paid-in capital 500,000 Retained earnings 740,000 Sales revenue for year 1,830,000 Net income for year 480,000 Isaac's return on equity, rounded to the nearest percentage point, is

28 percent. 40 percent. 21 percent. 20 percent. Return on Equity: Net income for year 480,000 / (Common stock $1,200,000 + Additional paid-in capital 500,000 + Retained earnings 740,000) Return on Equity: Net Income / Stockholders' Equity

Assume that Lily Company has total fixed costs of $48,000 for the period. Each unit sells for $40. The variable cost per unit is $24. How many units must be sold to break even?

4,000 2,000 1,200 3,000

The following data came from the financial statements of the Green Company: Cash from operations $900,000 Total assets 350,000 Cash from financing activities 220,000 Cash paid for investing activities 55,000 Net income 425,000 Compute the cash flow adequacy ratio.

4.09 2.57 2.12 16.36 Cash flow adequacy: Cash from operations $900,000 / Cash paid for investing activities 55,000

The balance sheet at the end of the first year of operations indicates the following: 2012 Total current assets $600,000 Total investments 85,000 Total property, plant, and equipment 900,000 Total current liabilities 250,000 Total long-term liabilities 350,000 Common stock, $10 par 600,000 Paid-in capital in excess of par-common stock 60,000 Retained earnings 325,000 What is the debt ratio for 2012 (rounded to one decimal places)?

40.0% 37.9% 41.7% 22.1% Debt Ratio: (Total current liabilities 250,000 + Total long-term liabilities 350,000) / (Common stock, $10 par 600,000 + Total investments 85,000 + Total property, plant, and equipment 900,000) Debt Ratio: Total Liabilities / Total Assets

Selected information for Alastair Company is as follows: 2012 Current assets $450,000 Total assets 725,000 Cost of goods sold 700,000 Sales revenue 915,000 Net income 145,000 What is the percentage that would be given to sales revenue on a common-size income statement (round to the nearest percent)?

49 percent 100 percent 20 percent. 77 percent

Selected information for Alastair Company is as follows: 2012 Current assets $450,000 Total assets 725,000 Cost of goods sold 700,000 Sales revenue 915,000 Net income 145,000 What is the percentage that would be given to cost of goods sold on a common-size income statement (round to the nearest percent)?

49 percent 77 percent 100 percent 20 percent.

Which form must be filed quarterly by all publicly held corporations?

8-Q 8-K 10-Q 10-K

A company's asset mix is strongly influence by

A company's competitors The company's industry Government regulation affecting the company The philosophy of management regarding financing decisions

A nonmanufacturing cost is usually classified as:

A product cost A period cost Manufacturing overhead Direct materials

Which of the following is NOT one of the effects that the Securities Exchange Act of 1934 had on accountants?

Accountants must audit all 10-K reports. Accountants must audit all 10-Q reports. Accountants' work is subject to approval by the SEC All of these are effects of the Securities Exchange Act of 1934.

Which of the following accounts would NOT be considered a current asset?

Accounts Receivable Cash Equipment Inventory

Which method for allocating manufacturing overhead costs is usually more accurate?

Activity-based costing Job order costing Unit-based costing Process costing

Which of the following types of costing systems identifies business activities that create overhead costs and then assigns overhead to products or divisions according to these activities?

Activity-based costing Process costing Unit-based costing Job order costing

Assume that direct labor and direct materials are the major cost components of a product and that the small amount of overhead cost can easily be associated with products using a simple overhead allocation basis such as direct labor hours. Which one of the following statements is the most correct?

Activity-based costing should probably be used in this situation. Activity-based costing is probably too expensive to justify using it in this situation. Job order costing is probably too expensive to justify using it in this situation. None of these are correct

Which of the following is NOT one of the four general types of financial statement notes?

Additional information about the summary totals found in the financial statements Disclosure of important information that is not recognized in the financial statements Supplementary information required by the Internal Revenue Service Summary of significant accounting policies

Which of the following types of costs are most likely to be classified as period costs?

Administrative costs Direct materials used in production Property taxes on factory Indirect materials

C-V-P analysis is useful to managers in:

All of these are correct Planning Evaluating decisions Controlling decisions

Activity-based costing systems assume that:

All of these are correct Products consume overhead costs Overhead costs are insignificant Activities consume overhead costs

The internal control structure of a company is a system of policies and procedures established to

All of these are correct Safeguard assets Ensure accurate accounting records Promote operational efficiency

Which of the following usually is NOT considered to be an owners' equity account?

All these are owners' equity accounts Capital stock Inventory Retained earnings

The current standard-setting board for accounting in the private sector is the

American Accounting Association (AAA) International Accounting Standards Board (IASB) Securities and Exchange Commission (SEC) Financial Accounting Standards Board (FASB)

Which of the following would be subtracted from net income on a statement of cash flows prepared by the indirect method?

An increase in accounts payable A gain from the sale of equipment Depreciation expense A decrease in accounts receivable

A gain on the sale of machinery in the ordinary course of business should be presented in a statement of cash flows (indirect method) as

An outflow of cash An addition to net income A deduction from net income An inflow and outflow of cash

XYZ Company generally produces between 200 and 350 units of product. Its fixed costs, within this relevant range, are $50,000. Its variable costs at 250 units of production are $10 per unit. What are the fixed costs per unit at 250 and 300 units of production, respectively? (Round to the nearest dollar.)

Answer cannot be determined from data given $10 and $200 $200 and $167 $250 and $143 Fixed costs per unit at 250 units: $50,000 / 250 = $200 Fixed costs per unit at 300 units: $50,000 / 300 = $167

A useful tool in financial statement analysis is the common-size financial statement. What does this tool enable the financial analyst to do?

Ascertain the relative potential of companies of similar size in different industries. Compare the mix of revenue, and expenses, and determine efficient use of resources within a company over time or between companies within a given industry without respect to relative size. Evaluate financial statements of companies within a given industry of approximately the same value. Determine which companies in the same industry are at approximately the same stage of development.

Costs that are incurred during the normal operations of a business to generate revenues are called

Assets Losses Liabilities Expenses

Which of the following types of accounts are NOT found on the balance sheet?

Assets Owners' equity Liabilities Revenues

When a company determines to get out of a specific line of business

Assets and liabilities from the discontinued line are included with other assets and liabilities until they are sold. Revenues and expenses from that line of business are excluded from the company's recurring revenues and expenses when preparing an income statement. Only the net of revenues and expenses and the net of the assets and liabilities is disclosed in the financial statements. All revenues, expenses, assets, and liabilities of the discontinued line of business are excluded from the financial statements and instead are disclosed in the financial statement notes.

If the total amount for Rent Expense is inadvertently posted to Prepaid Rent at the end of the year, what will be the effect on the year-end financial statements?

Assets will be understated Revenues will be overstated Revenues will be understated Revenues will be correctly stated

Which of the following is the correct way to date an income statement?

At December 31, 2012 As of December 31, 2012 For the Year Ended December 31, 2012 December 31, 2012

The statement of cash flows replaces the

Balance sheet Statement of financial position Income statement None of these

Which of the following financial statements provides a picture of the enterprise at a particular point in time?

Balance sheet Statement of retained earnings Statement of cash flows Income statement

The exchange of debt for equipment would

Be shown on a statement of cash flows as an investing activity Be shown on a statement of cash flows as an operating activity Be shown on a statement of cash flows as a financing activity Be shown as a supplementary disclosure

Which of the following classifications refers to those activities associated with buying and selling long-term assets?

Borrowing Financing Investing Operating

Which of the following is a common method of analyzing mixed costs?

Both high-low and scattergraph Scattergraph High-Low Neither high-low nor scattergraph

Which of the following would be included on an income statement?

Cash Accounts receivable Rent expense Land

Analysis of revenue and expense transactions requires the use of the:

Cash Flow Adequacy Equation Assets-to-equity Ratio Break-even Point Expanded Accounting Equation: Assets = Liabilities + Paid-in Capital + (Revenues - Expenses - Dividends)

Compute cash flow from operating activities.

Cash collected from customers - Cash paid for wages payable - Cash paid for rent

Which cash flow ratio reflects a company's ability to make its interest payments from cash generated through operations?

Cash flow adequacy Cash flow to operating profit Cash times interest earned Cash flow to net income

Which cash flow ratio reflects the extent to which accrual accounting adjustments and assumptions have been included in net income?

Cash flow-to-net income Cash flow adequacy Cash flow-to-operating profit Cash flow frequency

Which cash flow ratio reflects a company's ability to finance its capital expansion through cash from operations?

Cash flow-to-net income Cash flow-to-operating profit Cash flow frequency Cash flow adequacy

The purchase of inventory on account would increase

Cash from operating activities Cash from financing activities Working capital None of these are correct

The cash flow adequacy ratio is computed as

Cash from operations ÷ Cash paid for dividends Cash from operations ÷ Cash for investing activities Cash for investing activities ÷ Cash from operations Cash from operations ÷ Cash for financing activities

Which of the following would be reported as a cash flow from financing activities?

Cash receipts from interest on notes receivable Cash receipts from the issuance of long-term debt Cash receipts from dividends on long-term investments Cash receipts from the sale of equipment

Which of the following items would be reported on a statement of cash flows prepared by the indirect method but NOT by the direct method?

Cash received from issuance of stock Cash paid for dividends Cash received from the sale of a building Depreciation expense

Which of the following would be classified as an operating activity on a statement of cash flows?

Cash received from selling equity securities Cash received as dividends on investments Cash paid to purchase treasury stock Cash dividends paid to stockholders

____ is increased and ____ is decreased when cash is collected from customers who had previously purchased a product or service on account.

Cash, Accounts Payable Cash, Accounts Receivable Debt, Cash Assets, Liability

What is the most common professional designation for external auditors?

Certified External Auditor Certified Internal Auditor Certified Professional Accountant Certified Public Accountant

The initials CPA stand for

Certified Public Accountant Certified Professional Appraiser Certified Public Auditor Certified Professional Accountant

Which of the following is the formula used to calculate the slope of the regression line on a scattergraph?

Change in cost ÷ change in activity Fixed costs ÷ change in activity Fixed costs ÷ change in cost Change in activity ÷ change in cost

Which of the following typically involves the use of non-GAAP accounting?

Changing an interest rate and disclosing it in the financial statements Changing an interest rate but not disclosing it in the financial statements Recording expenses as assets Delaying a transaction to be recorded in a more advantageous quarter

Earnings management through strategic matching is best exemplified by

Changing the interest rate used in accounting for leases without describing the change in the notes to the financial statements. Changing the useful life of a depreciable asset. Capitalizing as assets expenditures that have no future economic benefit. Timing transactions such that large one-time gains and losses occur in the same quarter.

Earnings management through deceptive accounting is best exemplified by

Changing the interest rate used in accounting for leases without describing the change in the notes to the financial statements. Timing transactions such that large one-time gains and losses occur in the same quarter. Capitalizing as assets expenditures that have no future economic benefit. Changing the useful life of a depreciable asset and fully disclosing it in the notes.

Which of the following would NOT be considered cash or cash equivalents for purposes of preparing a statement of cash flows?

Checking accounts Notes receivable Money market funds Treasury bills

According to Sarbanes-Oxley, who are auditors required to report to and be retained by?

Chief Financial Officer Audit committee Internal auditors Chief Executive Officer

The top accountant in most large organizations is usually called the:

Chief financial officer Chief executive officer Sales' manager Controller

The first step in management planning is:

Choosing and implementing the best alternative Evaluating the alternatives Identifying reasonable alternative courses of action Defining the problem

The idea that certain figures on an operating statement help to explain changes in figures on comparative balance sheets is referred to as

Classification Articulation Liquidity Double entry

An example of a stepped fixed cost is:

Commissions Depreciation Factory supervisors' salaries Direct materials

Which of the following below generally is the most useful in analyzing companies of different sizes?

Common-sized financial statements Comparative statements Price-level accounting Audit report

Which of the following distinguishes between current and long-term assets?

Comparative balance sheet Classified balance sheet Income statement Liquidity balance sheet

Which of the following audit processes is used primarily by external auditors and not by internal auditors?

Confirmation Sampling Interviews Observations

The notion that when doubt exists concerning two or more reporting alternatives, users should select the alternative with the least favorable impact on reported income, assets, and liabilities is referred to as

Conservatism Comparability Relevance Materiality

Whether an item is big enough that proper accounting will make a difference to users of accounting information is referred to as

Conservatism Comparability Relevance Materiality

The notion that information will be more useful if it will impact a decision is referred to as

Conservatism Materiality Relevance Comparability

Which management function analyzes results, rewards performance and identifies problems?

Controlling Tracking Planning Evaluating

Which is NOT a period cost of operating a retail store?

Corporate computer cost Store manager's salary Cost of merchandise sold Store rent

In non-U.S. Balance sheets, you will often see each of the following EXCEPT:

Current assets and current liabilities will be netted together The stockholders' equity section will be listed first on the balance sheet Property, plant, and equipment will be listed first

When a company buys a warehouse by using a mortgage with a local bank, the effect on the accounting equation for the company will be to

Decrease Cash and increase Buildings Increase Cash and increase Mortgage Payable Increase Buildings and increase Mortgage Payable Increase Mortgage Payable and increase Inventory

Current assets usually are listed on a balance sheet in

Decreasing order of liquidity A random fashion Decreasing order of profitability Increasing order of liquidity

Which of the following would most likely NOT be considered a source of a product line activity?

Depreciation on the product warehouse In-house training for special services Maintenance of machinery Product manager

The most important costs to consider when making a decision involving future action are:

Differential costs Out-of-pocket costs Opportunity costs Sunk costs

Costs that are specifically traceable to a unit of business are known as which of the following costs to that unit?

Direct Indirect Differential Opportunity

Costs incurred for the benefit of more than one segment of the business are called:

Direct costs Variable costs Opportunity costs Common costs

Within the relevant range some fixed costs may actually be:

Direct costs Variable costs Stepped costs Nonlinear costs

What is the first step a business professional should take when confronted with a situation that may involve an ethical conflict?

Discuss the problem with the immediate supervisor. Use an objective advisor to help clarify issues. Resign from the organization. Refrain from discussing the problem with anyone.

Which of the following would be added to net income on a statement of cash flows prepared using the indirect method?

Dividends received A gain from the sale of equipment A decrease in accounts receivable A decrease in accounts payable

A company's asset mix is determined by

Dividing each balance sheet item by total sales for the period Dividing each asset item on the balance sheet by total equity Dividing each asset item on the balance sheet by total liabilities Dividing each asset item on the balance sheet by total assets

The Public Company Accounting Oversight Board

Enforces compliance with the Foreign Corrupt Practices Act Conducts inspections of accounting firms Establishes requirements for entry into the CPA profession Reviews tax returns of public companies

Which of the following statements is true about errors in the financial statements of a company?

Errors are not intentional and therefore do not need to be corrected. Errors are usually an intentional attempt at fraud. Errors are a result of intentional mistakes made while recording or posting transactions. Errors are not intentional and when detected are immediately corrected.

The Public Company Accounting Oversight Board is NOT required to

Establish standards relating to the preparation of audit reports for public companies Register all public accounting firms that provide audits for public companies Conduct inspections of accounting firms Enforce compliance with the Foreign Corrupt Practices Act

Which management function implements management plans and identifies how plans compare with actual performance?

Evaluating Planning Controlling Tracking

In completing an audit of a company's financial statements, auditors

Examine every transaction underlying the financial statements Guarantee that the financial statements are accurate Assume responsibility for the accuracy of the financial statements Provide some assurance that the financial statements are not misleading

Which statement best describes the role of external auditors when auditing a large public company?

Examine the organization's accounting for a sample of business transactions to provide reasonable assurance that the financial statements are presented fairly Examine the organization's accounting for a sample of business transactions to guarantee that the financial statements are presented fairly Examine the organization's accounting for every business transaction to guarantee that the financial statements are presented fairly Examine the organization's accounting for every business transaction to provide reasonable assurance that the financial statements are presented fairly

Estimates are used in many instances when recording a company's results of operations. Which of the following would NOT require an estimate to be made?

Expected life of machinery Wages earned Contract percentage of completion Uncollectible accounts

Which of the following would NOT be reported as an investing activity on a statement of cash flows?

Extending loans to other entities Amounts borrowed Collection of a long-term note receivable Sale of a building

Management accounting is established by:

FASB SEC Individual companies GAAP

If activity-based costing is used, security guard wages would be classified as a:

Facility support activity Unit-level activity Product line activity Batch-level activity

Which one of the following errors causes net income to be overstated?

Failure to record depreciation expense Failure to accrue revenue earned but not billed Failure to record collection of an account receivable Failure to record fees received in advance that are earned by the end of the period

Relationships between financial statement amounts are called

Financial statement analyses Liquidity ratios DuPont ratios Financial ratios

Those transactions and events that enter into the determination of net income are reported under which section of the statement of cash flows?

Financing activities Operating activities Investing activities Significant noncash investing and financing activities

External users of financial statements use financial statement analysis for

Financing decisions Investing decisions Operating and financing decisions Operating, investing, and financing decisions

The type of cost that remains constant (in total) over the relevant range is a:

Fixed cost Semi-variable cost Mixed cost Variable cost

Zodiac Company's total costs are increasing in direct proportion to the increases in activity levels. The company's cost structure must have all:

Fixed costs Stepped costs Mixed costs Variable costs

What is the detailed report that companies file annually with the Securities and Exchange Commission?

Form 10-K Form S-16 Form 10-Q Form 8-K

The initials GAAP stand for

General Accounting Administration Practices Generally Accepted Accounting Practices Generally Accepted Accounting Principles Generally Applied Accounting Procedures

Which of the following requires CPAs to provide reasonable assurance that significant fraud or misstatement is NOT present in financial statements?

Generally Accepted Accounting Principles Sarbanes-Oxley Act Generally Accepted Auditing Standards Foreign Corrupt Practices Act

When using the scattergraph method to analyze mixed costs, the regression line should be visually fit to:

Go through the highest and the lowest points Maximize the average distance between all the data points and the regression line Minimize the average distance between all the data points and the regression line Go through the cost axis at 0

The primary internal group that uses accounting information is

Government agencies Investors Competitors Management

Financing mix is a measure of

Government regulation affecting the company The degree to which a company finances assets using liabilities or owners' equity The company's industry A company's competitors

In general, most companies have significant noncash expenses that reduce net income and also cause the cash flow-to-net income ratio to be

Greater than 1 Equal to 1 Less than 1 None of these are correct

Which of the following is an example of an independent check on performance?

Greg is in charge of recording receipt of payments made to accounts receivable, while Susan is in charge of making deposits to the bank. Every year, Doug is required to take one full week of vacation time. John, a clerk, is authorized to perform transactions as large as $5,000 but must maintain authorization from Andrea to perform larger transactions. Every evening, Shellie makes a back-up file of all transactions recorded in the computer that day, burns the back-up file onto a CD and then locks the CD into a fire-proof vault for the night.

For greater accuracy when using activity-based costing, management accountants should:

Have a reasonable number of cost pools Compute a plant-wide rate of allocation based on volume Carefully estimate the total amount of overhead costs Use the just-in-time inventory system

Which of the following products usually consumes the highest amount of overhead costs per unit?

High-volume unique products Low-volume standard products High-volume standard products Low-volume unique products

A measure of a company's performance that includes all items that are expected to continue into the future is -

Income from Continuing Operations Gross Profit Net Income Operating Income

As William is preparing the end of year financial statements, he realizes that the earnings are not quite up to par for the large loan application that is being currently processed. He decides to stretch the assumptions just enough to be able to meet the requirements for the loan application. This is an example of

Income smoothing Window dressing Meeting external expectations Meeting internal targets

Vital information that CANNOT be captured solely by dollar amounts is reported in a firm's

Income statement Statement of retained earnings Balance sheet Notes to financial statements

When a company pays for a warehouse by paying cash, the effect on the accounting equation will be to

Increase Buildings and decrease Cash Increase Buildings and increase a liability Increase Equipment and decrease Cash Increase Equipment in increase Cash

When a company rents a warehouse by paying for the first six month's rent in advance, the effect on the accounting equation on the day of payment would be to

Increase Cash and increase Prepaid Rent Increase Buildings and decrease Cash Increase Land and decrease Cash Increase Prepaid Rent and decrease Cash

When an investor pays cash into a business to become a part owner, the effect on the accounting equation for the business will be to

Increase Cash and increase a liability Decrease a liability and increase Paid-in Capital Increase a liability and increase Paid-in Capital Increase Cash and increase Paid-in Capital

A company has a credit policy of net 10 and is considering changing it to net 30 to be more in line with industry standards. What is a benefit to changing the credit policy?

Increase in carrying costs Discount for customer Reduction in long-term financing Attracting more customers

Which of the following statements is true regarding retained earnings?

Increasing revenues will increase retained earnings Increasing expenses will decrease retained earnings Increasing dividends will decrease retained earnings All of the statements are true

Which of the following would NOT usually be considered a product cost of a manufacturing company?

Indirect labor Direct materials Advertising Property taxes on factory building

The particular analytical measures chosen to analyze a company may be influenced by all BUT which one of the following?

Industry type Product quality or service effectiveness Diversity of business operations Companies are conglomerates

The organization that develops worldwide accounting standards is the

International Accounting Standards Board (IASB) International Accounting Standards Committee (IASC) International Committee on Accounting Standards (ICAS) International Board of Accounting Standards (IBAS)

Standards established by the International Accounting Standards Board are referred to as

International Financial Reporting Standards International Auditing Standards International Financial Accounting Standards Generally Accepted Accounting Standards

Which of the following classifications refers to those activities whereby cash is obtained or repaid to owners and creditors?

Investing Financing Operating Borrowing

The repayment of the principal on a loan should be classified as a(n)

Investing activity Noncash transaction Financing activity Operating activity

Which of the following is the typical sequencing of activities on the statement of cash flows?

Investing, financing, and operating Investing, operating, and financing Operating, investing, and financing Operating, financing, and investing

Which of the following is a primary use of cash?

Investment by owners Borrowing Sale of equipment Operating expenses

With regard to a particular company, which of the following groups generally has the widest variety of decisions to make?

Investors Regulators Managers Creditors

The emphasis in financial accounting is on which of the following external user groups?

Investors and creditors Management Educators Certified public accountants

The statement of cash flows

Is intended primarily to provide necessary information for assessing the profitability of an entity Is a required statement only for those companies using cash-basis accounting Summarizes all cash inflows and outflows of an entity for a given period of time Provides a connecting link between two consecutive income statements

Which of the following is NOT a purpose of the statement of cash flows?

It highlights changes in managerial strategy regarding investments and finances. It provides information about an entity's cash receipts and payments over a period of time. It measures the profitability of an entity. It provides investors with information about the investing and financing activities of an entity.

Which of the following is NOT true of the Financial Accounting Standards Board (FASB)?

It is a government agency It has no legal power to enforce the standards it sets It seeks consistency for its proposed standards It consists of seven full-time members

According to Sarbanes-Oxley, which one of the following services is an accounting firm permitted to provide to its audit client?

Legal services and expert services unrelated to the audit Internal audit outsourcing services Opinions about the reliability of internal controls Bookkeeping or other services related to the accounting records or financial statements

Internal reports are generally used by

Lenders Employees Suppliers Management

The ability a company has to pay its debts in the short run is its

Leverage Profitability Liquidity Efficiency

An enterprise's obligations to pay cash or other economic resources to others are called

Losses Expenses Liabilities Assets

An independent audit report is usually issued by

Management A government accountant A private detective A certified public accountant

Internal controls are designed to help and protect all of the following groups of people, EXCEPT

Management Creditors Tax collectors Investors

Which of the following is NOT an external user of financial information?

Management Suppliers Customers Competitors

The allocation of which of the following can cause the greatest errors when computing product costs?

Manufacturing overhead Direct labor All of these are correct Direct materials

Activity-based costing deals with the allocation of:

Manufacturing overhead costs Direct material costs Indirect materials costs Direct labor costs

Which of the following are usually members of a company's audit committee?

Members of the board of directors who are not officers of the company Officers of the company Internal auditors External auditors

Which of the following has no inventories?

Merchandising company None of these are correct Manufacturing company Service company

The scattergraph method is used to analyze:

Mixed costs Variable costs Relevant costs Fixed costs

Which of the following is generally considered to be an asset?

Mortgage payable Accounts receivable Notes payable Unearned revenue

Usually activity-based costing would be significantly more accurate than traditional product costing in a:

Multiple-product firm where products are quite similar One-product firm Multiple-product firm where products are quite different Multiple-product firm that has separate manufacturing facilities for each product

Generally accepted accounting principles are

Natural laws Based on scientific proofs Developed by accounting rule makers None of these are correct

Which of the following is one of the purposes of financial statement analysis?

Neither diagnosis nor prognosis Diagnosis Prognosis Both diagnosis and prognosis

Gross profit is the difference between -

Net Income and Comprehensive Income Sales and Cost of Goods Sold Sales and Variable Costs Operating Income and Income Tax Expense

Thus far, the only national government to adopt the accrual basis for its official accounting system is ______.

New Zealand No country has adopted the accrual basis for its official accounting system The United States of America France

Expenses generally cause

No change in net assets A decrease in net assets An increase in net assets An increase in liabilities

If a cost activity does NOT have any production-related cost driver that matches up with changes in the amount of overhead cost associated with the activity then:

No cost driver should be selected; the costs should be treated as common costs Direct labor hours should be used as the cost driver Number of items produced should be the cost driver. Any basis can be selected as a cost driver

Materials used in production are classified as "direct materials" if they are:

Not a significant part of production Commonly used in many products Fixed costs Traceable to specific products

Which one of the following is NOT an ethical guideline that the Institute of Management Accountants (IMA) requires its members to follow?

Not disclose confidential information Maintain objectivity when communicating information to decision makers Act with both actual and apparent integrity in all situations All of these are correct

An appropriate cost driver for inspection costs is:

Number of inspections completed Quantity of items produced Number of inspected products sold Direct labor hours

Which of the following audit processes attempts to identify areas that may deserve attention by using techniques such as comparative ratio analysis?

Observations Confirmation Analytical procedures Sampling

Which of the following is an application of the principle of systematic and rational allocation?

Office salaries Depreciation expense Sales commissions Telephone expense

Which of the following classifications refers to those activities that are part of the day-to-day business of a company?

Operating Borrowing Investing Financing

Which of the following classifications does NOT appear on the Statement of Cash Flows?

Operating Financing Borrowing Investing

The direct and indirect methods will usually show different amounts of cash flows from

Operating activities Financing activities Investing activities None of these are correct

You are thinking about taking a trip to Asia. The cost of the airplane ticket you have yet to purchase is a(n):

Opportunity cost Differential cost Direct cost Sunk cost

When considering the purchase of a new truck, the accumulated depreciation on the old truck is considered a(n):

Opportunity cost Variable cost Differential cost Sunk cost

Which of the following is NOT used in the evaluation of a business segment?

Opportunity costs Sunk costs Variable costs Direct costs

You want to go skiing for the day. However, you realize you are scheduled to work. If you call in sick and do not go to work, the wages you will not earn (assuming you are an hourly employee) are considered a(n):

Out-of-pocket cost Sunk cost Opportunity cost Differential cost

Future costs that change as a result of a decision are:

Out-of-pocket costs Differential costs Common costs Direct costs

Costs that do NOT change as the result of a future decision are known as:

Out-of-pocket costs Sunk costs Differential costs Variable costs

Company A allocates one type of overhead cost on the basis of movement of materials. The number of movement of materials processed is an example of a(n):

Overhead rate Cost pool Pool rate Cost driver

If a company does NOT record accrued wages expense at the end of the year, how does this affect the year-end financial statements?

Overstates owner's equity Overstates assets Overstates revenue Overstates expenses

If the total amount for Insurance Expense is inadvertently posted to Prepaid Insurance at the end of the year, what will be the effect on the year-end financial statements?

Owner's equity will be overstated All of these are true Expenses will be understated Net income will be overstated

Which of the following is an overall measure of the performance of a business entity's activities?

Owners' equity Net income (or net loss) Revenues Assets

Glue used in the manufacture of chairs would most likely be classified as:

Period cost Direct labor Direct materials Manufacturing overhead

Using independent reviewers, such as auditors, is an example of which type of accounting procedure?

Physical control over records Adequate documents and records Independent checks on performance Proper procedures for authorization

C-V-P analysis, while useful for several purposes, is primarily useful in:

Planning Evaluating decisions Financing decisions Controlling decisions

Strategic planning is:

Planning decisions regarding current operations and those of the immediate future. Broad, long-range planning. The systematic planning for long-term investments in operating assets. The continual evaluation of the profitability of the various product lines and divisions.

Capital budgeting is:

Planning decisions regarding current operations and those of the immediate future. The systematic planning for long-term investments in operating assets. The continual evaluation of the profitability of the various product lines and divisions. Broad, long-range planning.

Tracing overhead costs to activities involves dividing overhead costs into:

Pool rate Cost drivers Cost pools Overhead rates

Which of the following does Sarbanes-Oxley NOT require management to do?

Prepare a statement to accompany the audit report Develop and enforce an officer code of ethics Make loans to executive officers and directors Support a much stronger board and audit committee in each public company

Which of the following is a short-run planning decision?

Preparing operational budgets Purchasing an industrial printing press Defining the organization's mission Performing a strategic market analysis

Which of the following ratios is calculated using numbers from both the income statement and the balance sheet?

Price-earnings ratio Return on equity Current ratio Return on sales PE Ratio: Market Value of Shares / Net Income

Which of the following would be reported as a financing activity on a statement of cash flows?

Proceeds from the sale of land Purchase of treasury stock Receipt of a dividend Payment of interest

Direct labor is most often considered which of the following?

Product cost Indirect cost Manufacturing overhead Fixed cost

The cost of milk for an ice cream manufacturer would be considered all of the following EXCEPT:

Product cost Indirect cost Variable cost Manufacturing cost

With activity-based costing, overhead costs are assigned using:

Product costs Cash flows Direct labor hours Cost drivers

If activity-based costing is used, assembly would be classified as a:

Product line activity Facility support activity Batch-level activity Unit-level activity

Traditional product costing systems (e.g. job order costing and process costing) usually assume that:

Products consume overhead costs Activities consume overhead costs Overhead costs are insignificant All of these are correct

Which of the following would most likely be considered a variable cost?

Property taxes Depreciation Bolts of cloth in a clothing factory Rent

Which of the following is NOT a fixed cost?

Property taxes Direct labor Executives' salaries Depreciation

Which of the following would NOT be considered a manufacturing cost?

Property taxes on the factory for an ice cream maker Sales commissions for an automobile manufacturer Tires for an automobile manufacturer Milk for an ice cream maker

Which of the following would be reported as an operating activity on a statement of cash flows?

Purchase of a building Payment of dividends Payment of taxes Repayment of a loan

Reporting the details of a transaction in the notes to the financial statements is called

Recognition Disclosure Materiality Valuation

The process of determining the dollar value to assign to an item that is to be recognized in the financial statements is called

Recognition Materiality Disclosure Valuation

The process of formally recording an item in the accounting records so that it will be reflected in the financial statements is called

Recognition Valuation Disclosure Materiality

Which of the following is NOT a service typically provided by large public accounting firms?

Redesigning operating procedures Making management decisions Establishing accounting systems Performing audits

The idea that information becomes more useful when it can be related to a benchmark or a standard is referred to as

Relevance Conservatism Comparability Materiality

Historical cost has long been used in accounting because it is

Relevant Reliable Useful Conservative

Which of the following types of costs always change in total in proportion to changes in the level of activity of a firm?

Relevant costs Fixed costs Opportunity costs Variable costs

Fixed costs per unit:

Remain constant as activity levels increase Increase as activity levels increase Decrease as activity levels increase None of these are correct

Which one of these is NOT one of the benchmarking problems that arises when analyzing financial statements?

Reported financial statement numbers may actually be a measurement of different things Companies that are being compared may be conglomerates Not all companies use the same accounting practices All of these are benchmarking problems

Significant noncash financing and investing transactions are

Reported in a narrative or in a separate schedule Converted to cash equivalents Reported under the financing and investing activities sections Listed in the body of a statement of cash flows

In the scattergraph method fixed costs are:

Represented by the slope of the line The highest point in the graph The point where the line crosses the activity axis The point where the line crosses the cost axis

Which of the following is desirable in a good system of internal accounting control?

Responsibility and authority for a given function should be shared among several employees All accounting personnel in a company should be Certified Public Accountants To obtain the benefit of specialization, employees should not be rotated among jobs Appropriate forms, such as checks and sales invoices, should be prenumbered

What ratio is used to measure a firm's liquidity?

Return on equity Asset turnover Debt ratio Current ratio Current Ratio: Current Assets / Current Liabilities

Which of the following ratios is the fundamental measure of overall company performance?

Return on equity Current ratio Asset turnover Return on sales

Which of the following ratios is used to measure the profit earned on each dollar of sales in a firm?

Return on sales Asset turnover Current ratio Return on equity Return on Sales: Net Income / Sales

Which of the following ratios represents the proportion of borrowed funds used to acquire the company's assets?

Return on sales Debt ratio Return on assets Current ratio

Which of the following ratios is calculated using only income statement numbers?

Return on sales Return on equity Debt ratio Current ratio

In a common-size income statement, each item on the statement is expressed as a percentage of

Revenue Gross profit Net income Expenses

Which of the following are the two economic factors that enable us to trust an independent auditor despite the fact that the auditor was hired by the company being audited?

Risk of lawsuits and integrity of auditor Reputation of auditor and government policy Integrity of auditor and government policy Reputation of auditor and risk of lawsuits

Which of the following is NOT a reason for problems occurring in the financial statements?

Safeguards Disagreement Errors Fraud

Which of the following costs would LEAST likely be a variable cost?

Sales commissions Plant manager's salary Direct labor Indirect materials

The behavior of a cost is usually defined in terms of how that cost varies with respect to:

Sales price Level of activity Profit Time

Which of the following items is NOT a key factor involved in cost-volume-profit (C-V-P) analysis?

Sales revenue Fixed and variable costs The mix of products sold Time value of money

Increased federal oversight of the audit process resulted from the passage of the following act of Congress -

Sarbanes-Oxley Act Financial Reports Act Access to High Standards Act AGOA Acceleration Act

In constructing a custom cabinet, an indirect material would be:

Screws Hinges Brass handles Wood

Which of the following is the government agency that stipulates the rules and regulations that govern the collection of taxes in the United States?

Securities and Exchange Commission Federal Accounting Standards Board American Institute of Certified Public Accountants Internal Revenue Service

The accuracy of the information contained in the financial statements is the responsibility of the

Securities and Exchange Commission Stockholders Management Certified Public Accountant

The idea that the activities of the entity are to be separated from those of the individual owner is the

Separate entity concept Money measurement concept Arm's-length transaction assumption Going concern assumption

In the Lily Ice Cream example, number of purchase orders is an example of an overhead cost associated with

Servicing the special needs of each individual ice cream flavor Keeping the factory open Producing a specific batch of ice cream Operating the ice cream production process

Significant noncash financing transactions

Should not be disclosed in the body of a statement of cash flows but should appear in the notes to the financial statements elsewhere Are deducted from net income to determine cash provided by operating activities on a statement of cash flows Are included parenthetically on a statement of cash flows Should not be disclosed at all since they are irrelevant to actual performance

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)

Statement of Cash Flows Income Statement Statement of Retained Earnings Balance Sheet

Within the relevant range, variable costs are considered to be:

Stepped Mixed Linear Curvilinear

Determining the best use of financial resources is an aspect of:

Strategic planning Capital budgeting Operational budgeting Production prioritizing

The cost of milk used to manufacture ice cream would most likely be classified as a(n):

Sunk cost Fixed cost Variable cost Indirect cost

Costs that are NOT classified as direct materials or direct labor but are essential to the production of goods and services are:

Sunk costs Fixed costs Manufacturing overhead costs Differential costs

The only kind of costs that do NOT involve any outlay of cash are:

Sunk costs Indirect costs Opportunity costs Differential costs

Zodiac Company's total costs are the same at all levels of activity. The company's cost structure must have all:

Sunk costs Variable costs Fixed costs Product costs

Which of the following types of costs would be allocated among segments rather than directly attributable to a segment?

Sunk costs Variable costs Indirect costs Fixed costs

Which of the following is most likely to be a variable cost?

Supervisor's salary Raw materials New computing technology Insurance

Providing information for planning, controlling, and evaluating is a function of:

Tax accounting Financial accounting Governmental accounting Management accounting

Which of the following generally is NOT considered to be a liability?

Taxes payable Inventory Notes payable Accounts payable

Which of the following is NOT one of the three primary financial statements?

The Statement of Retained Earnings The Balance Sheet The Statement of Cash Flows The Income Statement

Which of the following is NOT one of the major concerns most companies have when they are designing internal controls?

The assets and records are safeguarded The Securities and Exchange Commission's regulations are followed The Foreign Corrupt Practices Act is complied with Management policies are followed

Which of the following is an example of a significant accounting policy that would be explained in the notes to the financial statements?

The disclosure of quarterly financial information The disclosure of the uncertain, potential outcome of a lawsuit The method used to estimate depreciation on a piece of equipment The description of all the individual items that comprise notes payable

Which of the following is an example of a disclosure of information NOT recognized that would be explained in the notes to the financial statements?

The disclosure of quarterly financial information The method used to estimate depreciation on a piece of equipment The disclosure of the uncertain, potential outcome of a lawsuit The description of all the individual items that comprise notes payable

Which of the following is an example of additional information about summary totals that would be explained in the notes to the financial statements?

The disclosure of the uncertain, potential outcome of a lawsuit The method used to estimate depreciation on a piece of equipment The description of all the individual items that comprise notes payable The disclosure of quarterly financial information

The GAAP Oval best represents

The fact that only one true earnings number exists. The flexibility managers have within GAAP to report one earnings number from among many possibilities. The fact that GAAP is not subject to interpretation. The philosophy that earnings management within limits is ethical.

When analyzing financial statements, diagnosis is

The identification of where a business has problems The prediction of how many employees will lose their jobs in the coming year The prediction of how a business will perform in the future The identification of the trends in future numbers

When analyzing financial statements, prognosis is

The prediction of how many employees will lose their jobs in the coming year The identification of the trends in past numbers The identification of where a business has problems The prediction of how a business will perform in the future

Which of the following statements is NOT true?

The statement of cash flows provides details as to how the cash account changed during a period. The statement of cash flows does not replace the income statement. The statement of cash flows sheds some light on a company's ability to generate income in the future. The statement of cash flows includes transactions that are not already reflected in the balance sheet and income statement.

Earnings management through aggressive accounting is best exemplified by

Timing transactions such that large one-time gains and losses occur in the same quarter. Changing the interest rate used in accounting for leases without describing the change in the notes to the financial statements. Changing the useful life of a depreciable asset and fully disclosing it in the notes. Capitalizing as assets expenditures that have no future economic benefit.

Earnings per share is equal to

Total revenues divided by total number of shares of stock outstanding Net income divided by the number of shares of stock sold during the year Total revenues divided by the number of shares of stock sold during the year Net income divided by total number of shares of stock outstanding

A company is thought to 'breaks even' when:

Total sales revenue covers all manufacturing costs Total sales revenue covers all fixed and variable costs Total sales revenue covers all fixed costs Total sales revenue covers all variable costs

A borrower benefits from providing financial information regarding income and expenses in the form of a lower interest rate on the loan because of reduced uncertainty for the lender with regard to repayment.

True False

One reason for a company's preparing and providing financial statements is to reduce uncertainty for an investor regarding the firm's future financial performance.

True False

The International Accounting Standards Board (IASB) is charged with developing worldwide accounting practices?

True False

With a multiple-step income statement all revenues are grouped together, all expenses are grouped together, and net income is computed as the difference between the two.

True False

With a single-step income statement all revenues are grouped together, all expenses are grouped together, and net income is computed as the difference between the two.

True False

With the current state of information technology, investors outside a company are now allowed access to a company's internal database of financial information and do their own customized analysis of a firm's performance.

True False

Recording the payment of an account payable twice will result in the

Understatement of total assets and total liabilities Understatement of total assets and overstatement of total liabilities Overstatement of total assets and understatement of total liabilities Overstatement of total assets and total liabilities

Which of the following is the correct sequence of the five steps of implementing and using an activity-based costing system?

Use the cost data to make decisions, analyze individual overhead costs in terms of those cost activities, identify measurable cost drivers, assign overhead, and identify overhead cost activities Identify overhead cost activities, analyze individual overhead costs in terms of those cost activities, identify measurable cost drivers, assign overhead, and use the cost data to make decisions Identify measurable cost drivers, assign overhead, identify overhead cost activities, analyze individual overhead costs in terms of those cost activities, and use the cost data to make decisions Identify overhead cost activities, identify measurable cost drivers, assign overhead, analyze individual overhead costs in terms of those cost activities, and use the cost data to make decisions

This is sometimes done in place of recognition when the effects of an event cannot be quantified with any degree of certainty.

Valuation Materiality Recognition Disclosure

The two components of a mixed cost are:

Variable costs and opportunity costs Variable costs and relevant costs Variable costs and fixed costs Relevant costs and fixed costs

The relevant range refers to the activity range over which:

Variable costs per unit decrease Fixed and variable cost relationships remain the same Total variable costs do not change Fixed costs per unit remain the same

As activity level increases within the relevant range, total variable costs usually will:

Vary randomly Decrease Remain the same Increase

______ is/are not considered to be an expense of doing business.

Wages Cash dividends Buying Landscaping Supplies None are considered to be an expenses of doing business

Which of the following is NOT a situation when it would be important to analyze cash flow information because net income is NOT giving an accurate portrayal of the economic performance of the company?

When a company has a negative operating cash flow When a company is striving to present a stellar financial record When a company is growing rapidly When a company has several large non-cash expenses

When does the Securities and Exchange Commission (SEC) typically require a company to submit a registration statement to the SEC for approval?

When the company receives a qualified opinion from the external auditors When the company receives a disclaimer of opinion from the external auditors When the company has experienced a major fraud When the company issues new debt or stock securities to the public

As William is preparing the end of year financial statements, he has been asked to review the accrual judgments and estimates to see if the originally calculated net loss can be changed to a net profit. This is an example of

Window dressing Income smoothing Meeting external expectations Meeting internal targets

The revenue principle states that revenue should be recognized at a point when

a contract between buyer and seller has been signed by both parties. an order for shipment of a definite amount of merchandise has been received. an exchange transaction involving goods and services has occurred and the earnings process is essentially complete. the seller has shipped merchandise to a customer under the terms that the customer need not pay for the merchandise until it is sold.

An example of direct matching of an expense with revenues would be

advertising expense. depreciation expense. direct labor costs incurred to produce inventory sold during a period. office salaries expense.

Generally, recognition criteria are met and revenues are recognized

at appropriate points throughout the operating cycle. when cause and effect are associated. at the point of sale. at the point of cash collection.

Assets-to-equity ratio

computed as assets divided by equity and is interpreted as the number of dollars of assets acquired for each dollar invested by stockholders.

Cash flow adequacy ratio

computed as cash from operations divided by expenditures for fixed asset additions and acquisitions of new businesses, indicates whether a business is a cash cow.

Return on Sales

computed as net income divided by sales and is interpreted as the number of pennies in profit generated from each dollar of sales.

Asset turnover

computed as sales divided by assets and is interpreted as the number of dollars in sales generated by each dollar of assets.

The concept that income is defined as the excess of net assets at the end of an accounting period over the net assets at the beginning of the accounting period, excluding effect of transactions with owners is called -

economic capital maintenance component capital maintenance financial capital maintenance physical capital maintenance

The excess of sales over variable costs is:

equal to a company's gross margin applied to cover a company's fixed costs thought of as a company's break-even point profit for the company

Costs that can be reasonably associated with specific revenues but NOT with specific products should be

expensed in the period in which the related revenue is recognized. charged to expense in the period incurred. capitalized and then amortized over a period not to exceed 60 months. allocated to specific products based on the best estimate of the production processing time.

When a company purchases equipment on credit, the effect on the accounting equation will be to

increase Equipment and decrease Cash increase Equipment and increase a liability increase Supplies and increase a liability increase Inventory and decrease Cash

Most forecasting exercises begin with a forecast of

net income. total assets. cash. sales.

If a company anticipates a 40% increase in sales volume, then it is most likely that the company will need about a 40% increase in

operating profit. bank loans payable. property, plant, and equipment. accounts payable.

When revenue and expense items are arranged to highlight important profit relationships, the resulting income statement format is called a -

single-step income statement comparative income statement multiple-step income statement classified income statement

Which of the following is NOT a reason for the integration of worldwide accounting standards?

the need to evaluate investments across the world the integration of the global economy the increased efficiency of financial markets the theoretical necessity of a common set of accounting standards

Bird's Eye View manufactures three different sizes of bird cages: small (for finches and canaries), medium (for cockatiels and small parrots), and large (for cockatoos and other large parrots). The company has recently implemented an activity-based costing system. Bird's Eye View has identified five different production activities as well as the best cost driver for each activity. Each activity and driver is listed below, along with the budgeted amount that is associated with each activity for next year. Budgeted Activity Cost Driver Costs Materials handling Labor hours $ 55,000 Automated processing Machine hours 40,000 Plastic parts insertion Number of parts 6,000 Inspections Labor hours 29,000 Packaging Orders shipped 31,000 Total indirect manufacturing cost $161,000 The following information relates to each size of bird cage and next year's anticipated manufacturing operations: Large Medium Small Units to be produced 350 400 600 Orders to be shipped 180 200 250 Number of parts per unit 8 6 4 Machine hours per unit 4 2 1 Labor hours per unit 2 2 2 What is Bird's Eye View cost per cost driver for parts insertion for next year (rounded)?

$0.25 per part $7.56 per part $0.79 per part $21.18 per part Total number of parts: (350 x 8) + (400 x 6) + (600 x 4) = 7,600 Cost per part: $6,000 / 7,600 = $0.79 (rounded)

Given the following information, compute net income - Extraordinary Loss -80 Income Taxes 150 Interest Expense 100 Operating Income 1,500 Unrealized Gain not included in Net Income 120

$1,250 $1,500 $1,290 $1,170 Operating Income - Income Taxes - Interest Expense - Extraordinary Loss

The following information was taken from the records of Merle Corporation for the period ending December 31, 2012: Advertising expense $1,200 Equipment 800 Accounts receivable 1,500 Notes payable 6,000 Retained earnings 8,420 Utilities expense 1,385 Revenues 4,620 Dividends 975 Interest receivable 125 Rent expense 655 Assuming that 3,450 shares of stock are outstanding, earnings per share is approximately

$1.40 $0.27 $0.40 $0.23 Net income: Revenues - Advertising expense - Utilities expense - Rent expense Earnings per share: Net income / shares of stock outstanding

For 2011, Raster Graphics forecasts cash receipts of $405,000 and cash disbursements of $430,000. If the beginning cash balance is $35,000 and the desired ending balance is $21,000, how much must Raster borrow during the year?

$10,000 $11,000 $0 $25,000 Financing needed: $35,000 + $405,000 - $430,000 - $21,000 = (11,000)

Bird's Eye View manufactures three different sizes of bird cages: small (for finches and canaries), medium (for cockatiels and small parrots), and large (for cockatoos and other large parrots). The company has recently implemented an activity-based costing system. Bird's Eye View has identified five different production activities as well as the best cost driver for each activity. Each activity and driver is listed below, along with the budgeted amount that is associated with each activity for next year. Budgeted Activity Cost Driver Costs Materials handling Labor hours $ 55,000 Automated processing Machine hours 40,000 Plastic parts insertion Number of parts 6,000 Inspections Labor hours 29,000 Packaging Orders shipped 31,000 Total indirect manufacturing cost $161,000 The following information relates to each size of bird cage and next year's anticipated manufacturing operations: Large Medium Small Units to be produced 350 400 600 Orders to be shipped 180 200 250 Number of parts per unit 8 6 4 Machine hours per unit 4 2 1 Labor hours per unit 2 2 2 What is Bird's Eye View cost per cost driver for inspections for next year (rounded)?

$10.74 per part $11.48 per part $1.18 per part $3.58 per part Total labor hours: (350 x 2) + (400 x 2) + (600 x 2) = 2,700 Cost per labor hour: $29,000 / 2,700 = $10.74 (rounded)

Cheroke Company had an accounts receivable balance of $60,000 at December 31, 2013. Projected sales for the first three months of 2014 are: January $120,000 February 130,000 March 100,000 All sales are credit sales. Cheroke Company usually collects 40% of its sales during the month of sale, 50% in the month following the sale, and 10% in the second month following the sale. Given the information above, cash collections during January should be:

$108,000 $88,000 $128,000 The answer cannot be determined

Cheroke Company had an accounts receivable balance of $16,000 at December 31, 2013. Projected sales for the first three months of 2014 are: January $120,000 February 130,000 March 100,000 All sales are credit sales. Cheroke Company usually collects 40% of its sales during the month of sale, 50% in the month following the sale, and 10% in the second month following the sale. Given the information above, cash collections during February should be:

$112,000 $128,000 $129,000 The answer cannot be determined

Markanich Company purchased land for $90,000 in 2010. In 2013, the land is valued at $115,000. The land would appear on the company's books in 2013 at

$115,000 $75,000 $25,000 $90,000

Cheroke Company had an accounts receivable balance of $16,000 at December 31, 2013. Projected sales for the first three months of 2014 are: January $120,000 February 130,000 March 100,000 All sales are credit sales. Cheroke Company usually collects 40% of its sales during the month of sale, 50% in the month following the sale, and 10% in the second month following the sale. Given the information above, cash collections during March should be:

$117,000 $130,000 $113,000 The answer cannot be determined Cash collections: ($120,000 x 10%) + ($130,000 x 50%) + ($100,000 x 40%) = $117,000

Burke Corporation had accounts receivable of $44,400 on April 1 and $33,600 on April 30. How much cash was collected from accounts receivable during April if Burke's April sales on account totaled $134,400?

$123,600 $145,200 $134,400 $100,800 Cash collected from accounts receivable: $134,400 + $44,400 - $33,600 = $145,200

Hee Jung Company had the following information available: Collections on accounts receivable $53,200 Payments for equipment purchase $23,200 Payments for wages and salaries $18,000 Receipt of interest revenue $ 2,500 Payments to principal amount on loan $12,800 Payments for inventory $22,200 Using this information, compute Hee Jung's cash provided by (paid for) operating activities.

$13,000 $14,500 $15,500 $12,000 Operating activities: Collections on accounts receivable - Payments for wages and salaries + Receipt of interest revenue - Payments for inventory

Dahbi Corporation has the following financial information available: Operating activities $14,250 Financing activities $ 3,500 Beginning cash balance $ 1,450 Ending cash balance $ 5,650 Given this information, what is the amount of cash provided by (used in) Dahbi's investing activities?

$13,550 $17,750 ($13,550) ($24,850) Investing activities = x Beginning cash balance + Operating activities + x + Financing activities

Kimball Co. wishes to forecast it cash disbursements relating to inventory for the month of March. Estimated purchases of inventory in January, February, and March are $100,000, 120,000, and $150,000, respectively. Kimball typical pays for 40 percent of its inventory purchased in the month of purchase, 50 percent in the month following purchase, and the remaining 10% in the second month following the purchase. Given this information, forecasted cash paid for inventory in March is:

$130,000 $120,000 $133,000 $150,000 Forecasted cash paid in March = $10,000 + $60,000 + $60,000 = $130,000 From January purchases = $100,000 x .10 = $10,000 From February purchases = $120,000 x .50 = $60,000 From March purchases = $150,000 x .40 = $60,000

Cherry Company manufactures electronic yard tools. Costs for May were direct labor, $84,000; indirect labor, $51,000; direct materials, $69,000; indirect materials, $9,000; factory utilities, $6,900; and insurance on manufacturing equipment, $2,100. Cherry Company's total manufacturing costs for May are:

$135,000 $69,000 $222,000 $138,000 Manufacturing Overhead: $51,000 + $9,000 + $6,900 + $2,100 = $69,000 Total Manufacturing Costs: $84,000 + $69,000 + $69,000 = $222,000

The Dormir Company uses an activity-based costing system to account for its process of manufacturing camping tents. Each tent has $140 of direct materials, includes 15 parts, and requires 3 hours of machine time. Information on conversion costs, manufacturing activities, and cost drivers is listed below. Cost Per Manufacturing Activity Cost Driver Unit Material handling Number of parts $ 3.00 Sewing Machine hours 20.00 Assembling Number of parts 1.00 Testing Number of finished units 8.00 The cost of assembling per tent is:

$15.00 $45.00 $20.00 $3.00 Cost of assembling per tent: 15 x $1.00 = $15

If a corporation has total assets of $350,000, total liabilities of $150,000, and retained earnings of $100,000, what is the amount of capital stock?

$150,000 $0 $100,000 $250,000

The following information was taken from the records of Tellers Corporation for the month ended December 31, 2012: Advertising expense $20,625 Income tax expense 13,095 Accounts payable 13,450 Dividends paid 14,125 Retained earnings (12/1/12) 57,860 Consulting fees revenue 93,550 Rent expense 11,728 Supplies expense 16,917 If Tellers has 2,100 shares of stock outstanding, earnings per share is approximately

$16.81 $14.85 $4.67 $46.51 Net income: Consulting fees revenue - Advertising expense - Income tax expense - Rent expense - Supplies expense Earnings per share: Net income / shares of stock outstanding

Cherry Company manufactures electronic yard tools. Costs for May were direct labor, $84,000; indirect labor, $51,000; direct materials, $69,000; indirect materials, $9,000; factory utilities, $6,900; and insurance on manufacturing equipment, $2,100. Cherry Company's manufacturing overhead for May is:

$18,000 $69,000 $222,000 $138,000 Manufacturing Overhead: $51,000 + $9,000 + $6,900 + $2,100 = $69,000

Winthrop Merchandising is preparing its budget for 2011 (its first year of operation). Sales for the year are budgeted at $1,500,000; 20% are cash sales and 80% are credit sales. The company expects to collect 60% of all credit sales in 2011. Budgeted expenses are $1,200,000. These expenditures include $37,500 for depreciation and $745,500 for variable manufacturing overhead. If the desired ending cash balance is $45,000, how much must Winthrop borrow during the year?

$187,500 $142,500 $180,000 $225,000 Cash available: (1,500,000 x 20%) + (1,500,000 x 80% x 60%) = $1,020,000 Total cash needed: $1,200,000 - $37,500 + $45,000 = $1,207,500 Total cash borrowed: $1,020,000 - $1,207,500 = ($187,500)

Given the following information, compute income from continuing operations - Cost of Goods Sold $2,000 Extraordinary Item -170 Income Taxes 350 Interest Expense 200 Operating Expenses 1,500 Sales 5,500

$2,000 $1,450 $3,500 $1,280 Sales - Cost of Goods Sold - Operating Expenses - Income Taxes - Interest Expense

Avondale Inc. had the following cash transactions during 2012: Sales receipts $2,000,000 Inventory payments 1,500,000 Interest payments 20,000 Wage payments 120,000 Dividend receipts 10,000 Interest receipts 6,000 Equipment purchased 150,000 Stock of Canton Company purchased 50,000 Stock issued 300,000 Repaid a note (nonoperating) 100,000 What was Avondale's net cash provided by (used in) operating activities?

$2,016,000 $376,000 $360,000 $516,000 Cash provided by operating activities: Sales receipts - Inventory payments - Interest payments - Wage payments + Dividend receipts + Interest receipts

The following cost data are available for Malta Marketing: Total Manufacturing Direct Month Overhead Cost Labor Hours July $64,000 8,400 August 57,000 6,800 September 48,000 4,000 October 77,000 12,000 November 90,000 18,000 December 82,000 15,000 Given the data above and using the high-low method of analysis, total fixed costs are approximately:

$20,000 $36,000 $16,000 $24,000 Variable costs: ($90,000 - $48,000) / (18,000 - 4,000) = $3 Fixed costs: $90,000 - (18,000 x $3) = $36,000

Yuka Company had a beginning cash balance of $1,875. In addition, Yuka Company reported the following items from its cash flow statement: Operating activities $6,450 Investing activities ($4,735) Financing activities ($1,200) Given this information, Yuka Company's ending cash balance is

$3,590 $2,480 $2,390 $515 Beginning cash balance + Operating activities - Investing activities - Financing activities

The Dormir Company uses an activity-based costing system to account for its process of manufacturing camping tents. Each tent has $140 of direct materials, includes 15 parts, and requires 3 hours of machine time. Information on conversion costs, manufacturing activities, and cost drivers is listed below. Cost Per Manufacturing Activity Cost Driver Unit Material handling Number of parts $ 3.00 Sewing Machine hours 20.00 Assembling Number of parts 1.00 Testing Number of finished units 8.00 The cost of material handling per tent is:

$3.00 $120.00 $15.00 $45.00 Cost of material handling: 15 parts x $3 = $45

BigView Monitors manufactures three different sizes of computer monitors: 15-inch, 17-inch, and 20-inch. The company has recently implemented an activity-based costing system. BigView has identified five different production activities as well as the best cost driver for each activity. Each activity and driver is listed below, along with the budgeted amount that is associated with each activity for next year. Budgeted Activity Cost Driver Costs Parts handling Number of parts $ 90,000 Parts insertion Number of parts 990,000 Automated processing Machine hours 336,000 Testing Labor hours 68,000 Packaging Orders shipped 68,000 Total indirect manufacturing cost $1,552,000 The following information relates to each size of monitor and next year's anticipated manufacturing operations: 20-inch 17-inch 15-inch Units to be produced 2,000 3,000 5,000 Orders to be shipped 200 500 800 Number of parts per unit 30 20 10 Machine hours per unit 4 2 1 Labor hours per unit 2 2 2 What is BigView's cost per cost driver for testing for next year (rounded)?

$3.40 per labor hour $6.80 per labor hour $1.33 per labor hour $3.58 per labor hour Total labor hours: (2,000 x 2) + (3,000 x 2) + (5,000 x 2) = 20,000 Cost per labor hour: $68,000 / 20,000 = $3.40 (rounded)

LeMinton Company expects the following credit sales for the first five months of the year: January, $25,000; February, $40,000; March, $30,000; April, $36,000, May $40,000. Experience has shown that payment for the credit sales is received as follows: 60% in the month of sale, 25% in the first month after sale, 12% in the second month after sale, and the remainder is uncollectible. How much cash can LeMinton Company expect to collect in March as a result of credit sales?

$30,000 $31,000 $18,000 $28,600 Cash collected in March: ($25,000 x 12%) + ($40,000 x 25%) + ($30,000 x 60%) = $31,000

The Zig-Zag Company manufactures zippers for many clothing manufacturers. Costs for the year were direct materials, $5,000; indirect materials, $1,600; direct labor, $12,000; and indirect labor, $4,000. Additional expenses for the year were factory utilities $3,500; depreciation of factory equipment, $1,300; advertising expense, $900; delivery expense on sales to customers, $1,700; and property taxes on factory buildings, $5,200. Which amount is total manufacturing costs for the year?

$32,600 $17,000 $22,000 $15,600 Manufacturing Overhead: $1,600 + $4,000 + $3,500 + $1,300 + $5,200 = $15,600 Total Manufacturing Costs: $5,000 + $12,000 + $15,600 = $32,600

Chaffee Company's financial statements show a net loss of $180,000. The following items also appear on Chaffee's balance sheet: Depreciation expense $84,000 Accounts receivable increase 120,000 Inventory decrease 48,000 Accounts payable decrease 24,000 Accrued liabilities increase 36,000 What is Chaffee's net cash flow from operating activities? The company uses the indirect method.

$348,000 $84,000 ($180,000) ($156,000) Net cash flow from operating activities: Net loss + Depreciation expense - Accounts receivable increase + Inventory decrease - Accounts payable decrease + Accrued liabilities increase

The following information is available for Dakota Company: Product 1 Product 2 Sales $1,400,000 $1,800,000 Direct materials (200,000) (400,000) Direct labor (600,000) (600,000) Manufacturing overhead* (500,000) (500,000) Gross margin $ 100,000 $ 300,000 *allocated based on direct labor hours Dakota Company has decided to allocate its manufacturing overhead cost using activity-based costing. Manufacturing overhead will be allocated based on batch-level and product line manufacturing as follows: Total Manufacturing Overhead Costs Product 1 Product 2 Batch-level manufacturing overhead $600,000 20 batches 60 batches Product line manufacturing overhead $400,000 10 lines 40 lines What is Dakota Company's gross margin for Product 2 using activity based costing?

$350,000 $30,000 $300,000 $480,000 Batch-level cost per batch: $600,000 / 80 batches = $7,500 Product line cost per product line: $400,000 / 50 lines = $8,000 Manufacturing overhead for Product 2: ($7,500 x 60) + ($8,000 x 40) = $770,000 Gross margin for Product 2: Sales $1,800,000 - Direct materials $400,000 - Direct labor $600,000 - Manufacturing overhead $770,000 = $30,000

If fixed costs are $40,000 and total costs are $200,000 at an activity level of 8,000 units, variable costs are approximately:

$40 per unit $5 per unit $25 per unit $20 per unit Variable costs: ($200,000 - $40,000) / 8,000 = $20 per unit

Wimmer Company makes swimming suits and wants to analyze its mixed costs. The diagram below shows a scattergraph representing Wimmer's mixed costs for the previous five months. Using the graph above, determine the amount of Wimmer's fixed costs.

$400 $600 $650 $475 y-value at x = 0

The following information is available for Dakota Company: Product 1 Product 2 Sales $1,400,000 $1,800,000 Direct materials (200,000) (400,000) Direct labor (600,000) (600,000) Manufacturing overhead* (500,000) (500,000) Gross margin $ 100,000 $ 300,000 *allocated based on direct labor hours Dakota Company has decided to allocate its manufacturing overhead cost using activity-based costing. Manufacturing overhead will be allocated based on batch-level and product line manufacturing as follows: Total Manufacturing Overhead Costs Product 1 Product 2 Batch-level manufacturing overhead $600,000 20 batches 60 batches Product line manufacturing overhead $400,000 10 lines 40 lines What is Dakota Company's gross margin for Product 1 using activity based costing?

$400,000 $370,000 $520,000 $450,000 Batch-level cost per batch: $600,000 / 80 batches = $7,500 Product line cost per product line: $400,000 / 50 lines = $8,000 Manufacturing overhead for Product 1: ($7,500 x 20) + ($8,000 x 10) = $230,000 Gross margin for Product 1: $1,400,000 - $200,000 - $600,000 - $230,000 = $370,000

Winthrop Merchandising is preparing its budget for 2011 (its first year of operation). Sales for the year are budgeted at $1,500,000; 20% are cash sales and 80% are credit sales. The company expects to collect 60% of all credit sales in 2011. Budgeted expenses are $1,200,000. These expenditures include $37,500 for depreciation and $745,500 for variable manufacturing overhead. Given the information above, total cash outflows for 2011 would be:

$454,500 $1,200,000 $417,000 $1,162,500 Cash outflow: $1,200,000 - $37,500 = $1,162,500