D196 Exam (100% correct and graded A+)

What is the effect of a company's accounting department maintaining high ethical standards? - Answer-The company's accounting information will increase in value. Why might employees be interested in their company's financial accounting information? - AnswerFinancial statement data are often used in determining employee bonuses. Which group establishes financial accounting rules in the United States? - Answer-Financial accounting standards board Which report is one of the three primary financial statements? - Answer-Statement of cash flows A company paid $5,000 cash in advertising costs. How does this transaction affect the paying company's accounting equation? - Answer-Assets decrease by $5,000; expenses increase by $5,000 What is a transaction? - Answer-Two parties exchanging something of value. A company borrowed $80,000 cash from a bank. How does this transaction affect the accounting equation of the borrowing company? - Answer-Assets increase by $80,000; liabilities increase by $80,000. What is the impact of expenses on the accounting equation? - Answer-Expenses decrease owners' equity. Which type of account are accounts payable and notes payable both examples of? - Answer-Liability What is the purpose of the financial accounting cycle? - Answer-To turn information about transactions into financial statements. According to the accounting equation, the amount of liabilities and equity must always be equal to another amount. What is that other amount? - Answer-Assets Which item is an expense item? - Answer-Cost of goods soldHow is gross profit computed? - Answer-Sales minus cost of goods sold Which type of account is retained earnings? - Answer-Equity For purposes of cash flow classification in the statement of cash flows, which item is an operating activity? - Answer-Paying employees How does a classified balance sheet provide useful information to a decision maker? - Answer-It distinguished between current and long term assets. What information does a balance sheet provide to a decision maker? - Answer-Summary of the financial position of a company at a particular date. What is an account payable? - Answer-The amount owed by a company that purchased goods or services from a supplier in credit. What is an example of a financial cost that would result from poor direct labor budgeting and planning? - Answer-Increased hiring, training, and overtime costs. What does a manager have control over in a cost center? - Answer-Costs What should be considered when developing a measure to evaluate the performance of a manager? - Answer-Only controllable cost's In some companies, the performance measures for profit center managers are heavily influenced by cost allocations downward from organizational units (such as company headquarters). Why is this a mistake? - Answer-Uncontrollable costs should not be included in the performance evaluation measure of a profit center manager. Which budget should include the expected cost of supplies used by the office staff of the corporate headquarters? - Answer-Administrative expense budget Which items are uncontrollable, external variables that make it difficult to forecast the level of sales? - Answer-Customer tastes and economic conditionsWhat is the correct sequence of budgets in a manufacturing business? - Answer-Sales, production, direct materials Which type of business organization has a major focus on direct materials, direct labor, and overhead? - Answer-Manufacturing