ACCOUNTING C213 Accounting For Decision Makers Pre Assessment graded A+

Accounting for Decision Makers C213 Pre-Test 1. What does accounting focus on? a. The impact a business’s activities have on its public image b. The impact a business’s activities have on the environment c. The impact a business’s activities have on its overall financial performance d. The impact a business’s activities have on its relationships with customers 2. Which report summarizes cash collections and cash expenditures from operating, investing, and financing activities over a period of time? a. Cash flow schedule b. Statement of cash flows c. Cash receipts and disbursements sheet d. Summary of cash receipts 3. Which users would have a primary concern with an organization’s ability to provide healthcare benefits? a. Employees b. Competitors c. Suppliers d. Vendors 4. Which benefit does a corporation gain by following Generall Accepted Accounting Principles (GAAP)? a. A decrease in its income tax obligations b. An increase in its comparability to other companies c. A decrease in the amount of net income it reports d. An increase in the amount of assets it reports 5. Which body regulates a certified public accounting firm’s audit practices when the firm is auditing a large publicly traded company? a. The Financial Accounting Standards Board (FASB) b. The Public Company Accounting Oversight Board (PCAOB) c. Another certified public accounting (CPA) firm d. The Internal Revenue Service (IRS) 6. What has had the most significant impact on accounting practices? a. Certification requirements b. New product innovations c. Information technology d. Mobile computing 7. What 2 items of information are revealed on the balance sheet? a. Ownership b. Costs c. Debt d. Revenues e. Expenses 8. Which term is defined as the residual interest in the net assets of a company? a. Operating income b. Revenues c. Liabilities d. Owner’s equity 9. A corporation has total liabilities of $300 million, total owner’s equity of $100 million, and current assets of $50 million. What is the value of the firm’s long-term assets? a. $250 million b. $350 million c. $400 million d. $450 million 10. Which situation should result in revenue recognition on the income statement for the year ending 12/31/14 if the firm is using accrual-bases accounting? a. In 2014, a company collects cash from a customer for services it will provide next year (2015) b. In 2014, a company enters into a contract whereby it agrees to provide services to a customer next year (2015) c. In 2014, a company collects cash from a customer for services it provided in the previous year (2013) d. In 2014, a company provides services to a customer for which cash will be collected the next year (2015) 11. Which category on the statement of cash flows summarizes cash receipts and payments to owners and creditors of the company? a. Cash flows from investing activities b. Cash flows from business activities c. Cash flows from operating activities d. Cash flows from finances activities 12. Where would an investor find a summary of a company’s significant accounting policies? a. In the income statement b. In the balance sheet c. In the notes to financial statements d. In the statement of cash flows 13. Which assurance does an external audit report provide for its readers? a. The company’s financial statements fairly reflect its financial position b. The company will generate positive cash flows c. The company will generate net income d. The company will be a good credit risk 14. Match each accounting term with its definition. Answer options may be used more than once or not at all Material information that is important enough to make a difference Reliable information that can be verified Relevant information having to do with the matter at hand Conservatism information related to recognizing losses as they occur 15. Order the steps in the decision cycle from first (1) to last (5) Select your answers from the pull-down list 1. Prepare financial statements 2. Analyze financial statements 3. Gather information 4. Make decision 5. Implement decision 16. Partial financial information for a company is as follows: Current assets $36,543 Total assets $58,719 Current Liabilities $24,824 Total liabilities 48,561 Stockholder’s equity 10,150 Sales 46,997 Net income 3,761 Market value of shares 41,316 What is the price-earnings (PE) ration for this company? Price-earnings ratio = Market value of shares / Net income 41,316/3,761 = 11 17. What does it mean if a company has a debt ration of 101.5% a. The company has 1.5% more total liabilities than gross sales. b. The company has 1.5% more current liabilities than current assets. c. The company has 1.5% more total liabilities than net income. d. The company has 1.5% more total liabilities than total assets I used debt ratio = total liabilities / total assets to get this answer. 18. What is consistent with a continual decline in gross profit if the firm's cost of goods sold remains the same? a. Continual decrease in salaries b. Continual increase in interest c. Continual increase in taxes d. Continual decrease in sales 19. Which 2 cash flow adequacy ratios represent a cash cow? a. $4510/$4932 b. $6991/$5486 c. $8091/$9374 d. $5220/$1875 e. $7589/$9210 20. Which formula yields a cash times interest earned ratio of 11? a. Cash before interest and taxes of $11,000/cash paid for income taxes of $1000 b. Cash before interest and taxes of $11,000/cash paid for interest of $1000 c. Cash before interest and taxes of $11,000/cash paid for operations of $1000 d. Cash before interest and taxes of $11,000/cash paid for acquisitions of $1000 21. Which form of debt should be reported in the long-term liability category? a. Unearned revenue that will be earned in 9 months b. Notes payable expected to be paid in 18 months c. Accounts payable due in 30 days d. Salaries payable due in 2 weeks 22. In January of year 1, a company began doing business as a corporation in order to sell technology-related accessories and services. During its first month of operations, the following events occurred: Jan 1 – the corporation received $1,000,000 in cash in exchange for stock issued to stockholders. Jan 3 – the corporation borrowed $250,000 from the bank. The loan is a 4 year loan with an interest rate of 12%, payable each year on Jan 1st beginning in year 2. Jan 5 – the corporation purchased equipment to be used in the business for $200,000 cash Jan 8 – the corporation purchased inventory costing $200,000 by paying $120,000 in cash. The remainder was put on credit accounts with suppliers. Jan 15 – the corporation hired 5 employees. Each employee will be paid $1000 at the end of each month. Jan 30 – the corporation paid $6000 cash for a 1-yr insurance policy. The policy period will begin on Feb 1st, year 1. What will the impact of the Jan 5 event on the company’s balance sheet on that date? a. Equipment will increase $200,000, and cash will decrease $200,000 b. Cash will decrease $200,000, and paid-in-capital will decrease $200,000 c. Equipment will increase $200,000, and retained earnings will decrease $200,000 d. Cash will decrease $200,000, and loan payable will decrease $200,000 23. In Jan of year 1, a company began doing business as a corporation in order to sell technology- related accessories and services. During its first month of operations, the following events occurred: Jan 1 – the corporation received $1,000,000 in cash in exchange for stock issued to stockholders. Jan 3 – the corporation borrowed $250,000 from the bank. The loan is a 4 year loan with an interest rate of 12%, payable each year on Jan 1st beginning in year 2. Jan 5 – the corporation purchased equipment to be used in the business for $200,000 cash Jan 8 – the corporation purchased inventory costing $200,000 by paying $120,000 in cash. The remainder was put on credit accounts with suppliers. Jan 15 – the corporation hired 5 employees. Each employee will be paid $1000 at the end of each month. Jan 30 – the corporation paid $6000 cash for a 1-yr insurance policy. The policy period will begin on Feb 1st, year 1. What will the impact of the Jan 31 event on the company’s balance sheet on that date? a. Cash will decrease $6000, and paid-in-capital will decrease $6000 b. Prepaid insurance will increase $6000, and cash will decrease $6000 c. Prepaid insurance will decrease $6000, and accounts payable will decrease $6000 d. Cash will decrease $6000, and accounts receivable will increase $6000 24. Which 2 values affect the measurement of net income? a. Dividends paid b. Stockholders contributions c. Operating expenses d. Ordinary gains and losses 25. Which 2 items’ subtotals are included in a multi-step income statement? a. Gross profit b. Total assets c. Current liabilities d. Income from operations 26. A furniture company using accrual accounting purchased 20 sofas in Nov 2011. In Dec 2011, 8 of the 20 sofas were sold to customers. The customers all signed contracts agreeing to pay half the amount owed in Feb 2012 and the remaining half in March 2012. At the time of sale, the company was reasonably sure the customers would pay the amount owed. The furniture company pays its salespeople a commission on each sofa sold, with commission for Dec 2011 sales paid in Jan 2012. The furniture company paid $3000 for advertising that ran in the local paper in Nov 2011. In which month should advertising costs be expensed? a. Feb 2012 b. Jan 2012 c. Dec 2011 d. Nov 2011 27. On May 1, 2011, a company using accrual accounting purchased equipment costing $500,000. It expects the equipment to have a useful life of five years. At the time of purchase, the company also purchased a one-year insurance policy on this equipment, which cost $6,000. How much insurance expense should the company have recognized for the year ending in 2011? a. $3000 b. $4000 c. $6000 d. $8000 28. In January of year 1, a company began doing business as a corporation in order to sell technology-related accessories and services. During its first month of operations, it focused on obtaining the financing needed to start its operations. In February of year 1, the company sold inventory costing $25,000 for $75,000 cash. In February of year 1, the company provided technology-related services worth $10,000. Customers paid a total of $4,000 in cash for these services and promised to pay the remainder the following month. What will be the total impact of these services provided on the company’s balance sheet other than an increase in cash of $4,000? Choose 2 answers a. Accounts receivable will increase $6,000. b. Retained earnings will increase $10,000 c. Retained earnings will decrease $2000 d. Retained earnins will increase $6000 e. Accounts receivable will decrease $6000 29. What was the 2012 net profit amount if the 2013 pro-forma net profit of $187,000 was based on a 22% increase? a. $228,140 b. $182,975 c. $153,279 d. $145,860 I took a number 153,279 * .22 , then took answer plus 153,279 = 187,000. 30. What is a common category in a statement of cash flows? a. Cash from planning activities b. Cash from production activities c. Cash from marketing activities d. Cash from investing activities 31. Which cash flow category would include “cash received from investors”? a. Cash from financing activities b. Cash from charitable activities c. Cash from investing activities d. Cash from sponsoring activities 32. Which item is an investing activity? a. Cash receipts from dividend revenue b. Cash receipts from issuance of stock c. Cash payments for dividends d. Cash payments for purchase of plant assets 33. What impact does the sale of equipment have on the statement of cash flows? a. Increase in cash from investing activities b. Increase in cash from operating activities c. Increase in cash from financing activities d. Decrease in cash from operating activites 34. What is known about the direct and indirect methods of preparing statement of cash flow? a. The direct method is more popular among large U.S. companies b. The indirect method is more popular among large U.S. companies c. Both methods have the same popularity among large U.S. companies d. Neither method is very popular among large U.S. companies 35. A company’s statement of cash flows includes the following cash transactions? Sales $1,250,000 Inventory purchase -750,000 Property & Equipment Purchase -270,000 Interest Pmt on long-term debt -25,000 Payment of wages -315,000 Payment of rent -40,000 Borrowing long-term debt 200,000 Pmt of cash dividends -15,000 Repurchase of treasury stock -40,000 Total cash flows -5,000 Assuming the company uses US GAAP standards, what is the total cash flow from financing activities? borrowing long term dept 200,000 Repurchase treasury stock -40,000 Pmt dividends -15,000 Total 36. Which two examples represent financial statement errors? Choose 2 answers a. An accounting employee overpays a supplier and receives a portion of the excess as a kickback b. The accounting department miscalculates the payroll tax due at year-end, resulting in an inaccurate liability c. The outside auditor disagrees with the amount reported as an allowance for uncollectible accounts receivable d. The accountant unintentionally records amounts as revenue that were prepaid by customers but not yet earned 37. Which internal control is intended to ensure that a company does not mistakenly pay a supplier for an invoice that includes more items than were actually received? a. The purchasing department authorizes the order of all items before they occur b. The company requires 2 signatures on each check in order for a pmt to be sent c. The inventory department counts and inspects items as received and forwards the receiving record to accounts payable d. The accounts payable department utilizes prenumbered checks in the pmt of supplier invoices 38. What are 2 common reasons for managers to manipulate report earnings? a. They are feeling pressured to meet internal sales goals b. They are preparing to qualify for a bank loan c. They are feeling pressured to comply with an external auditor d. They are preparing to meet Sarbanes-Oxley requirements 39. Which two requirements must accounting firms that audit public companies meet under the Sarbanes-Oxley Act? Choose 2 answers a. Firms must not provide certain nonaudit services to audit clients, such as management functions or legal services. b. Firms must report to and be retained by the audit committee rather than the CFO or other company management. c. Firms must help to develop and enforce a code of ethics on audit clients. d. Firms must not audit the same public company for more than five consecutive years. (the audit partners must rotate every 5 years, not the firm.) 40. Which two requirements must management of public companies meet under the Sarbanes-Oxley Act? Choose 2 answers a. They must provide an assessment of the effectiveness of internal controls with each annual report b. they must support a stronger board and audit committee c. they must rotate every 5 years d. they must authorize any loans to members of the board of directors 41. which 2 actions do internal auditors perform to assist in maintaining the integrity of financial statements? Choose 2 answers a. they search for and investigate fraud. b. They review financial records and internal controls c. They perform the initial accounting for various transactions d. they issue opinions regarding whether financial statements align w/Generally Accepted Accounting Principles (GAAP) 42. what is a significant role of the U.S. Securities and Exchange Commission (SEC) in financial reporting? a. They ensure that financial statement users are provided with reliable information to use in decision making. b. They ensure that auditors have the resources and information necessary to provide valuable professional services. c. They support company management and boards of directors in the effective discharge of their responsibilities. d. They provide representation and training to controllers of public companies. 43. What does management accounting provide? Choose 2 answers a. The insight that management needs so the business can perform more effectively b. The insight that outside stakeholders need to choose a company that has a competitive advantage over competitors c. The detailed data that managers need to make decisions that will give the business a competitive edge d. The information needed by the IRS to decide if a company should have a tax audit performed 44. How does management accounting differ from financial accounting? a. Management accounting presents an unbiased view of a company’s economic performance. b. Management accounting is used primarily for internal planning, control, and evaluation c. Management accounting is restricted to providing financial rather than nonfinancial data d. Management accounting is not used to gain a competitive advantage in the marketplace. 45. Which account is seen on the balance sheet of a manufacturing company but not on the balance sheet of a service-oriented company? a. Equipment b. Accounts receivable c. Inventory d. Cash 46. What is a cost that will change in the future based upon the decision made? a. Opportunity cost b. Differential cost c. Sunk cost d. Out-of-pocket cost 47. Which 2 examples are period costs? a. Direct labor b. Administrative expenses c. Selling expenses d. Manufacturing overhead 48. A company manufactures custom-built wooden bookshelves. Which 2 costs would the company classify as period costs? a. Wood cost b. Salary cost of the craftsperson c. Salary cost of the receptionist d. Advertising cost 49. What role do ethical standards have in management accounting? a. To prevent all unethical behavior of anyone the management accountant may work with b. To provide the management accountant with the ability to know if a person will act ethically or not c. To guide the resolution to possible ethical dilemmas that the managerial accountant may encounter d. To provide the management accountant with the ability to work with only companies that follow strict ethical principles. 50. During its first month of operations, a manufacturer incurs the following costs in dollars related to activities within its factory: Direct materials costs $5,000 Indirect materials $2,000 Direct labor $15,000 Indirect labor $3,000 Factory rent $10,000 Depreciation on factory equipment $8,000 What are the manufacturer’s total product costs for the month? a. $20,000 b. $25,000 c. $38,000 d. $43,000 51. During its 1st month of operations, a manufacturer incurs the following costs (in dollars) related to activities within its factory: Direct materials 15,000 Direct labor 30,000 Manufacturing overhead 40,000 What amount should be reported as cost of goods sold on the income statement if 5,000 units are produced and 4,000 are sold? a. 56,000 b. 68,000 c. 70,000 d. 85,000 85,000/5,000 units = 17 17 * 4000 units sold = 68,000 52. Which 2 costs are include when calculating inventory costs? Choose 2 answers a. Selling b. Direct labor c. Overhead d. Legal 53. In which scenario would activity-based costing be more appropriate than traditional costing? a. Direct labor and direct materials are the major costs associated with a company’s 2 products. The small overhead cost is closely associated with the products’ use of direct labor hours. b. A company produces 1 product line. All of the overhead is, therefore, allocated to that product line. c. A company produces several different products. The products have very similar requirements for their production and have minimal variation between them. d. A company produces 5 different products. The products are highly differentiated and have significantly different demands for their use of overhead costs. 54. Which category of ABC activities are machine setup and material movement costs associated with? a. Unit-level activites b. Batch-level activities c. Product line activities d. Facility support activities 55. The director of a marathon race wants to assign the cost of having police officers along the race route to manage crowd control. Which consideration is an appropriate cost driver? a. The amount of hours the director spends on organizing the race b. The amount of the registration fee c. The number of race participants and spectators d. The cost of liability insurance for the race 56. A manufacturer produces 3 products: A, B, and C. The company uses the following information to determine activity rates for each pool: Cost pool Costs Total activity Pool 1 300,000 20,000 hrs Pool 2 20,000 500 pounds Pool 3 10,000 100 moves Total $330,000 Data concerning the 3 products appear below: Cost driver product A product B product C # of hrs 10,000 7,500 2,500 # of pounds 150 250 100 # of moves 20 30 50 What is the total amount of overhead applied to product A? 300,000/20,000hrs = 15 20,000/500 lbs = 40 10,000/100 moves = 100 Product A 10,000Hrs * 15 = 150,000 150lbs * 40 = 6,000 20 moves * 100 = 2000 Total 158,000 57. 250,000/20,000 pairs = 12.5 10,000/500 batches = 20 5,000/100 parts = 50 2500 pairs * 12.5 = 31,250 100 batches * 20 = 2,000 50 parts * 50 = 2,500 Total = 35,750 58. 2,500,000 (shoes produced) x .75 (overhead rate) = 1,875,000 60. 425,000 – 375,000 = 50,000 increase 375,000 / .75 per gal = 500,000 100,000/500 = 200 180,000/1000 = 180 Total = 500,380 500,000 x .85 = 441,176 61. profits and level of activity=654 67. April may June April 200,000 * 65% = 130,000 78,000 39,000 13,000 May 250,000 * 65% = 162,500 97,500 48,750 June 275,000 * 65% = 178,750 cash collections 107,250 Total 169,000 credit 15 35 50 69. July aug Sept oct nov dec July 100,000 Aug75,000 Sept 225,000 Oct 125,000 62,500 43,750 18750 Nov 250,000 125,000 87,500 Dec 30,000 15000 1. What does accounting focus on? Your Answer Correct Answer The impact a business's activities have on its relationships with customers The impact a business's activities have on the environment The impact a business's activities have on its public image The impact a business's activities have on its overall financial performance 2. Which report summarizes cash collections and cash expenditures from operating, investing, and financing activities over a period of time? Your Answer Correct Answer Cash receipts and disbursements sheet Cash flow schedule Summary of cash receipts Statement of cash flows 3. Which users would have a primary concern with an organization’s ability to provide healthcare benefits? Your Answer Correct Answer Competitors Employees Vendors Suppliers 4. Which benefit does a corporation gain by following Generally Accepted Accounting Principles (GAAP)? Your Answer Correct Answer A decrease in its income tax obligations Your Answer Correct Answer A decrease in the amount of net income it reports An increase in its comparability to other companies An increase in the amount of assets it reports 5. Which body regulates a certified public accounting firm’s audit practices when the firm is auditing a large publicly traded company? The Public Company Accounting Oversight Board (PCAOB) Your Answer Correct Answer The Financial Accounting Standards Board (FASB) Another certified public accounting (CPA) firm The Internal Revenue Service (IRS) 6. What has had the most significant impact on accounting practices? Your Answer Correct Answer Certification requirements New product innovations Information technology Mobile computing 7. What two items of information are revealed on the balance sheet? Choose 2 answers Ownership Debt Your Answer Correct Answer Your Answer Correct Answer Expenses Revenues Costs 8. Which term is defined as the residual interest in the net assets of a company? Your Answer Correct Answer Operating income Liabilities Revenues Owners’ equity 9. A corporation has total liabilities of $300 million, total owners’ equity of $100 million, and current assets of $50 million. What is the value of the firm's long-term assets? Your Answer Correct Answer $250 million $350 million $400 million $450 million 10. Which situation should result in revenue recognition on the income statement for the year ending 12/31/14 if the firm is using accrual-basis accounting? Your Answer Correct Answer In 2014, a company enters into a contract whereby it agrees to provide services to a customer next year (2015). Your Answer Correct Answer In 2014, a company collects cash from a customer for services it will provide next year (2015). In 2014, a company provides services to a customer for which cash will be collected the next year (2015). In 2014, a company collects cash from a customer for services it provided in the previous year (2013). 11. Which category on the statement of cash flows summarizes cash receipts and payments to owners and creditors of the company? Your Answer Correct Answer Cash flows from investing activities Cash flows from operating activities Cash flows from business activities Cash flows from financing activities 12. Where would an investor find a summary of a company’s significant accounting policies? Your Answer Correct Answer In the balance sheet In the income statement In the statement of cash flows In the notes to financial statements 13. Which assurance does an external audit report provide for its readers? Your Answer Correct Answer The company will be a good credit risk The company will generate net income The company’s financial statements fairly reflect its financial position Your Answer Correct Answer The company will generate positive cash flows 14. Match each accounting term with its definition. Answer options may be used more than once or not at all. Your Answer Correct Answer Reliable Information that can be verified Information that can be verified Relevant Information having to do with the matter at hand Material Information that is important enough to make a difference Conservatism Information related to recognizing losses as they occur Information having to do with the matter at hand Information that is important enough to make a difference Information related to recognizing losses as they occur 15. Order the steps in the decision cycle from first (1) to last (5). Select your answers from the pull-down list. Your Correct Answer Answer 1 Prepare financial statements Prepare financial statements 2 Analyze financial statements Analyze financial statements 3 Gather information Gather information 4 Make decision Make decision 16. 5 Implement decision Implement decision Partial financial information for a company is as follows: Current assets $36,543 Total assets $58,719 Current liabilities $24,824 Total liabilities $48,561 Stockholders' equity $10,158 Sales $46,997 Net Income $ 3,761 Market value of shares $41,316 What is the price-earnings (PE) ratio for this company? 11.0 Your Answer Correct Answer 12.5 12.9 15.6 17. What does it mean if a company has a debt ratio of 101.5%? The company has 1.5% more total liabilities than total assets. The company has 1.5% more total liabilities than gross sales. Your Answer Correct Answer The company has 1.5% more current liabilities than current assets. The company has 1.5% more total liabilities than net income. 18. What is consistent with a continual decline in gross profit if the firm's cost of goods sold remains the same? Your Answer Correct Answer Continual decrease in salaries Your Answer Correct Answer Continual increase in interest Continual increase in taxes Continual decrease in sales 19. Which two cash flow adequacy ratios represent a cash cow? Choose 2 answers Your Answer Correct Answer $4,510 / $4,932 $6,991 / $5,486 $8,091 / $9,374 $5,220 / $1,875 $7,589 / $9,210 20. Which formula yields a cash times interest earned ratio of 11? Your Answer Correct Answer Cash before interest and taxes of $11,000 / cash paid for income taxes of $1,000 Cash before interest and taxes of $11,000 / cash paid for interest of $1,000 Cash before interest and taxes of $11,000 / cash from operations of $1,000 Cash before interest and taxes of $11,000 / cash paid for acquisitions of $1,000 21. Which form of debt should be reported in the long-term liability category? Your Answer Correct Answer Unearned revenue that will be earned in 9 months Notes payable expected to be paid in 18 months Your Answer Correct Answer Accounts payable due in 30 days Salaries payable due in 2 weeks 22. In January of year 1, a company began doing business as a corporation in order to sell technology-related accessories and services. During its first month of operations, the following events occurred: January 1 The corporation received $1,000,000 in cash in exchange for stock issued to stockholders. January 3 The corporation borrowed $250,000 from bank. The loan is a four-year loan with an interest rate of 12 percent, payable each year on January 1 beginning in year 2. January 5 The corporation purchased equipment to be used in the business for $200,000 cash. January 8 The corporation purchased inventory costing $200,000 by paying $120,000 in cash. The remainder was put on credit accounts with suppliers. January 15 The corporation hired five employees. Each employee will be paid $1,000 at the end of each month. January 30 The corporation paid $6,000 cash for a one-year insurance policy. The policy period will begin on February 1, year 1. What will be the impact of the January 5 event on the company’s balance sheet on that date? Equipment will increase $200,000, and cash will decrease $200,000. Your Answer Correct Answer Cash will decrease $200,000, and paid-in-capital will decrease $200,000. Equipment will increase $200,000, and retained earnings will decrease $200,000. Cash will decrease $200,000, and loan payable will decrease $200,000. 23. In January of year 1, a company began doing business as a corporation in order to sell technology-related accessories and services. During its first month of operations, the following events occurred: January 1 The corporation received $1,000,000 in cash in exchange for stock issued to stockholders. January 3 The corporation borrowed $250,000 from a bank. The loan is a four-year loan with an interest rate of 12 percent, payable each year on January 1 beginning in year 2. January 5 The corporation purchased equipment to be used in the business for $200,000 cash. January 8 The corporation purchased inventory costing $200,000 by paying $120,000 in cash. The remainder was put on credit accounts with suppliers. January 15 The corporation hired five employees. Each employee will be paid $1,000 at the end of each month. January 31 The corporation paid $6,000 cash for a one-year insurance policy. The policy period will begin on February 1, year 1. What will be the impact of the January 31 event on the company’s balance sheet on that date? Your Answer Correct Answer Cash will decrease $6,000, and paid-in capital will decrease $6,000. Prepaid insurance will increase $6,000, and cash will decrease $6,000. Prepaid insurance will decrease $6,000, and accounts payable will decrease $6,000. Cash will decrease $6,000, and accounts receivable will increase $6,000. 24. Which two values affect the measurement of net income? Choose 2 answers Your Answer Correct Answer Dividends paid Stockholder contributions Operating expenses Ordinary gains and losses 25. Which two items’ subtotals are included in a multi-step income statement? Choose 2 answers Gross profit Your Answer Correct Answer Total assets Current liabilities Income from operations 26. A furniture company using accrual accounting purchased 20 sofas in November 2011. In December 2011, 8 of the 20 sofas were sold to customers. The customers all signed contracts agreeing to pay half the amount owed in February 2012 and the remaining half in March 2012. At the time of sale, the company was reasonably sure the customers would pay the amount owed. The furniture company pays its salespeople a commission on each sofa sold, with commissions for December 2011 sales paid in January 2012. The furniture company paid $3,000 for advertising that ran in the local newspaper in November 2011. In which month should advertising costs be expensed? Your Answer Correct Answer February 2012 January 2012 December 2011 November 2011 Your Answer Correct Answer 27. On May 1, 2011, a company using accrual accounting purchased equipment costing $500,000. It expects the equipment to have a useful life of five years. At the time of purchase, the company also purchased a one-year insurance policy on this equipment, which cost $6,000. How much insurance expense should the company have recognized for the year ending in 2011? Your Answer Correct Answer $3,00 0 $4,00 0 $6,00 0 $8,00 0 28. In January of year 1, a company began doing business as a corporation in order to sell technology-related accessories and services. During its first month of operations, it focused on obtaining the financing needed to start its operations. In February of year 1, the company sold inventory costing $25,000 for $75,000 cash. In February of year 1, the company provided technology-related services worth $10,000. Customers paid a total of $4,000 in cash for these services and promised to pay the remainder the following month. What will be the total impact of these services provided on the company’s balance sheet other than an increase in cash of $4,000? Choose 2 answers Accounts receivable will increase $6,000. Your Answer Correct Answer Retained earnings will increase $10,000. Your Answer Correct Answer Retained earnings will decrease $2,000. Retained earnings will increase $6,000. Accounts receivable will decrease $6,000. 29. What was the 2012 net profit amount if the 2013 pro-forma net profit of $187,000 was based on a 22% increase? Your Answer Correct Answer $228,14 0 $182,97 5 $153,27 9 $145,86 0 30. What is a common category in a statement of cash flows? Your Answer Correct Answer Cash from planning activities Cash from production activities Cash from marketing activities Cash from investing activities 31. Which cash flow category would include "cash received from investors"? Cash from financing activities Your Answer Correct Answer Cash from charitable activities Cash from investing activities Cash from sponsoring activities 32. Which item is an investing activity? Your Answer Correct Answer Cash receipts from dividend revenue Cash receipts from issuance of stock Cash payments for dividends Cash payments for purchase of plant assets 33. What impact does the sale of equipment have on the statement of cash flows? Increase in cash from investing activities Your Answer Correct Answer Increase in cash from operating activities Increase in cash from financing activities Decrease in cash from operating activities 34. What is known about the direct and indirect methods of preparing statements of cash flow? Your Answer Correct Answer The direct method is more popular among large U.S. companies The indirect method is more popular among large U.S. companies Both methods have the same popularity among large U.S. companies Your Answer Correct Answer Neither method is very popular among large U.S. companies 35. A company's statement of cash flows includes the following cash transactions: Sales 1,250,000 Inventory Purchase -750,000 Property and Equipment Purchase -270,000 Interest Payment on Long-Term Debt -25,000 Payment of Wages -315,000 Payment of Rent -40,000 Borrowing Long-Term Debt 200,000 Payment of Cash Dividends -15,000 Repurchase of Treasury Stock -40,000 Total Cash Flows -5,000 Assuming the company uses US GAAP standards, what is the total cash flow from financing activities? Your Answer Correct Answer $175,00 0 $160,00 0 $145,00 0 $120,00 0 36. Which two examples represent financial statement errors? Choose 2 answers Your Answer Correct Answer An accounting employee overpays a supplier and receives a portion of the excess as a kickback The accounting department miscalculates the payroll tax due at year-end, resulting in an inaccurate liability The outside auditor disagrees with the amount reported as an allowance for uncollectible accounts receivable The accountant unintentionally records amounts as revenue that were prepaid by customers but not yet earned 37. Which internal control is intended to ensure that a company does not mistakenly pay a supplier for an invoice that includes more items than were actually received? Your Answer Correct Answer The purchasing department authorizes the order of all items before they occur. The company requires two signatures on each check in order for a payment to be sent. The inventory department counts and inspects items as received and forwards the receiving record to accounts payable. The accounts payable department utilizes prenumbered checks in the payment of supplier invoices. 38. What are two common reasons for managers to manipulate reported earnings? Choose 2 answers They are feeling pressured to meet internal sales goals. They are preparing to qualify for a bank loan. Your Answer Correct Answer Your Answer Correct Answer They are feeling pressured to comply with an external auditor. They are preparing to meet Sarbanes-Oxley requirements. 39. Which two requirements must accounting firms that audit public companies meet under the Sarbanes- Oxley Act? Choose 2 answers Your Answer Correct Answer Firms must not provide certain nonaudit services to audit clients, such as management functions or legal services. Firms must report to and be retained by the audit committee rather than the CFO or other company management. Firms must help to develop and enforce a code of ethics on audit clients. Firms must not audit the same public company for more than five consecutive years. 40. Which two requirements must management of public companies meet under the Sarbanes-Oxley Act? Choose 2 answers Your Answer Correct Answer They must provide an assessment of the effectiveness of internal controls with each annual report. They must support a stronger board and audit committee. They must be rotated every five years. They must authorize any loans to members of the board of directors. 41. Which two actions do internal auditors perform to assist in maintaining the integrity of financial statements? Choose 2 answers They search for and investigate fraud. They review financial records and internal controls. Your Answer Correct Answer They perform the initial accounting for various transactions. They issue opinions regarding whether financial statements align with Generally Accepted Accounting Principles (GAAP). 42. What is a significant role of the U.S. Securities and Exchange Commission (SEC) in financial reporting? Your Answer Correct Answer They ensure that financial statement users are provided with reliable information to use in decision making. They ensure that auditors have the resources and information necessary to provide valuable professional services. They support company management and boards of directors in the effective discharge of their responsibilities. They provide representation and training to controllers of public companies. 43. What does management accounting provide? Choose 2 answers Your Answer Correct Answer The insight that management needs so the business can perform more effectively The insight that outside stakeholders need to choose a company that has a competitive advantage over competitors Your Answer Correct Answer The detailed data that managers need to make decisions that will give the business a competitive edge The information needed by the IRS to decide if a company should have a tax audit performed 44. How does management accounting differ from financial accounting? Your Answer Correct Answer Management accounting presents an unbiased view of a company’s economic performance. Management accounting is used primarily for internal planning, control, and evaluation. Management accounting is restricted to providing financial rather than nonfinancial data. Management accounting is not used to gain a competitive advantage in the marketplace. 45. Which account is seen on the balance sheet of a manufacturing company but not on the balance sheet of a service-oriented company? Your Answer Correct Answer Equipment Accounts receivable Inventory Cash 46. What is a cost that will change in the future based upon the decision made? Your Answer Correct Answer Opportunity cost Differential cost Your Answer Correct Answer Sunk cost Out-of-pocket cost 47. Which two examples are period costs? Choose 2 answers Your Answer Correct Answer Direct labor Administrative expenses Selling expenses Manufacturing overhead 48. A company manufactures custom-built wooden bookshelves. Which two costs would the company classify as period costs? Choose 2 answers Your Answer Correct Answer Wood cost Salary cost of the craftsperson Salary cost of the receptionist Advertising cost 49. What role do ethical standards have in management accounting? Your Answer Correct Answer To prevent all unethical behavior of anyone the management accountant may work with To provide the management accountant with the ability to know if a person will act ethically or not To guide the resolution to possible ethical dilemmas that the managerial accountant may encounter To provide the management accountant with the ability to work with only companies that follow strict ethical principles 50. During its first month of operations, a manufacturer incurs the following costs in dollars related to activities within its factory: Direct materials costs $5,000 Indirect materials $2,000 Direct labor $15,000 Indirect labor $3,000 Factory rent $10,000 Depreciation on factory equipment $8,000 What are the manufacturer’s total product costs for the month? Your Answer Correct Answer $20,00 0 $25,00 0 $38,00 0 $43,00 0 51. During its first month of operations, a manufacturer incurs the following costs (in dollars) related to activities within its factory: Direct materials $15,000 Direct labor $30,000 Manufacturing overhead $40,000 What amount should be reported as cost of goods sold on the income statement if 5,000 units are produced and 4,000 are sold? Your Answer Correct Answer $56,00 0 $68,00 0 $70,00 0 $85,00 0 52. Which two costs are included when calculating inventory costs? Choose 2 answers Your Answer Correct Answer Selling Direct labor Overhead Legal 53. In which scenario would activity-based costing be more appropriate than traditional costing? Your Answer Correct Answer Direct labor and direct materials are the major costs associated with a company's two products. The small overhead cost is closely associated with the products' use of direct labor hours. A company produces one product line. All of the overhead is, therefore, allocated to that product line. A company produces several different products. The products have very similar requirements for their production and have minimal variation between them. A company produces five different products. The products are highly differentiated and have significantly different demands for their use of overhead costs. 54. Which category of ABC activities are machine setup and material movement costs associated with? Your Answer Correct Answer Unit-level activities Batch-level activities Product line activities Facility support activities 55. The director of a marathon race wants to assign the cost of having police officers along the race route to manage crowd control. Which consideration is an appropriate cost driver? Your Answer Correct Answer The amount of hours the director spends on organizing the race The amount of the registration fee The number of race participants and spectators The cost of liability insurance for the race 56. A manufacturer produces three products: A, B, and C. The company uses the following information to determine activity rates for each pool: Cost Pool Costs Total Activity Pool 1 $300,000 20,000 hours Pool 2 $20,000 500 pounds Pool 3 $10,000 100 moves Total $330,000 Data concerning the three products appear below: Cost Driver Products A Products B Products C Number of hours 10,000 7,500 2,500 Number of pounds 150 250 100 Number of moves 20 30 50 What is the total amount of overhead applied to product A? Your Answer Correct Answer $125,50 0 $150,00 0 $158,00 0 $265,00 0 57. A running shoe manufacturer produces three types of shoes: traditional, minimalist, and spikes. The company uses the following information to determine activity rates for each pool: Cost Pool Costs Total Activity Shoe Production $250,000 20,000 pairs of shoes Shoe batches $10,000 500 batches Shoe design $5,000 100 parts Total $265,000 Data concerning the three shoe products appear below: Cost Driver Traditional Minimalist Spikes Number of pairs of shoes 10,000 7,500 2,500 Number of batches 150 250 100 Number of parts 20 30 50 What is the total amount of overhead applied to spikes shoes? Your Answer Correct Answer $265,00 0 $100,25 0 $35,750 $31,250 58. Given the following information: Pairs of shoes expected to be produced 1,950,000 Pairs of shoes produced 2,500,000 Overhead rate $0.75 What is the amount of applied overhead? Your Answer Correct Answer $412,500 $550,000 $1,462,50 0 $1,875,00 0 59. Company A calculated the following information under traditional and activity-based costing for the production and sale of 1,000 units of Product B: Traditional ABC Sales $100,000 $100,000 Cost of goods sold $70,000 $110,000 Gross margin $30,000 ($10,000) Which decision should be made about the selling price of Product B? The price of Product B should be increased. Your Answer Correct Answer The price of Product B should be decreased. The number of production batches of Product B should be increased. Traditional costing should be used instead of activity-based costing. 60. A company reported the following information for the production and sale of 500,000 gallons of oil: Overhead was applied based upon the following predetermined overhead rates: $0.75 per gallon $500 per batch $1,000 per ingredient What would be the gross profit if the company increased their selling price per gallon by $0.10? Your Answer Correct Answer $10,00 0 $20,00 0 $50,00 0 $75,00 0 61. Which two concepts are studied in cost-volume-profit analysis? Choose 2 answers Your Answer Correct Answer Liabilities Profits Levels of activity Your Answer Correct Answer Inventory 62. What are two impacts on costs as sales volume increases? Choose 2 answers Your Answer Correct Answer Total fixed costs will increase in direct proportion. Total fixed costs will decrease in direct proportion. Fixed costs per unit will stay the same. Fixed costs per unit will increase. Total fixed costs will stay the same. Fixed costs per unit will decrease. 63. A company manufactures and sells widgets. The following information is available: • Each widget sells for $100. • The variable cost per widget is $50. • Total fixed costs per month are $300,000. How many widgets does the company need to sell each month to break even? Your Answer Correct Answer 6,00 0 4,50 0 3,00 0 2,00 0 64. What do total revenues equal at the break-even point? Your Answer Correct Answer $2,00 0 $2,50 0 $4,50 0 $6,50 0 65. Which statement is true with respect to the point on this graph when sales are at 150 units per month? Your Answer Correct Answer Sales revenue equals $2,500. Total costs equal $2,000. Total costs equal $3,500. Fixed costs equal $2,750. 66. A company is experiencing an increase in their bad debt expense. Which change in credit policy would cause this increase? Your Answer Correct Answer Credit terms of 2/10, n/30 were granted on all credit sales. The company tightened their credit policy. Credit limits were increased for all customers. Your Answer Correct Answer Some customers were allowed to pay their bills in 60 days versus the normal 30 days. 67. A company has projected the following sales for the spring quarter of 2014: April $200,000 May $250,000 June $275,000 65% of all sales are paid for with cash. The remainder is on credit. The pattern for credit receivables collections are: Month of Sale 60% Month After Sale 30% Second Month After Sale What are the forecasted cash collections for the month of June? 10% Your Answer Correct Answer $178,75 0 $248,75 0 $269,75 0 $275,00 0 68. A company budgeted the following purchases for raw materials: Month January February March April May June July Budget $10,000 $20,000 $25,000 $22,000 $27,000 $30,000 $24,000 The company has a policy of paying for 40% of the purchases in the month of purchase, 35% in the month following the purchase, and 25% in the second month following the purchase. Based on this information, what are the budgeted cash disbursements for May? Your Answer Correct Answer $18,50 0 $24,75 0 $25,05 0 $27,30 0 69. A company plans to purchase inventory for the second half of 2014 as follows: July $100,000 August $75,000 September $225,000 October $125,000 November $250,000 December $30,000 They usually pay 50% of inventory purchases in the month of purchase, 35% in the following month, and 15% in the second month. Based on this information, what are the forecasted total 2014 cash payments for inventory purchased in the second half of 2014? Your Answer Correct Answer $705,00 0 $752,50 0 $790,00 0 $805,00 0