At the beginning of the fiscal year, the balance sheet showed assets of $2,728 and
stockholders’ equity of $1,672. During the year, assets increased $148 and liabilities
decreased $76.
Stockholders’ equity at the end of the year totaled:
A. $1,672
B. $1,744
C. $1,896
D. $2,876
Opportunity costs are:
A. included in inventory.
B. foregone benefits.
C. sunk costs.
D. included in cost of goods sold.
The standards for one case of Saycheles are:
During the week ended April 15, the following activity took place:
• 14,500 lbs. of raw material were purchased for inventory at a total cost of $81,200;
• 1,800 cases of finished product were produced;
• 13,680 lbs. of raw material were used;
• 7,380 labor hours were worked at an average rate of $13.40 per hour.
Calculate each of the following variances:
(a.) Raw materials purchase price variance.
(b.) Raw materials usage variance.
(c.) Direct labor rate variance.
(d.) Direct labor efficiency variance.
(e.) Explain the factors that most likely caused the variances computed above.
The key data element on which the entire budget is based is the:
A. sales/revenue forecast.
B. income statement budget.
C. cash budget.
D. balance sheet forecast.
Which of the following accounts is part of working capital?
A. Retained Earnings
B. Sales
C. Merchandise Inventory
D. Common Stock
In order to calculate the net present value of a proposed investment, it is necessary to
know:
A. the cash flows expected from the investment.
B. the net income expected from the investment.
C. the interest rate paid on funds borrowed to make the investment.
D. the cash dividends paid on the stock each year.
Under most circumstances, in order to recognize revenue:
A. cash must have been received.
B. the entity must expect to receive cash in the future.
C. the entity must have paid for all expenses incurred in generating the revenue.
D. the revenue must be realized or realizable, and earned.
In comparison to the stockholders’ equity section of a corporation’s balance sheet,
owners’ equity of a proprietorship or partnership:
A. normally does not make a distinction between invested capital and retained earnings.
B. normally uses “Capital” accounts for each individual owner, rather than a “Retained
Earnings” account for all of the stockholders.
C. normally uses a “Drawings” account for each individual owner, rather than a
“Dividends” account for all of the stockholders.
D. all of the above.
Financial statement ratios support informed judgments and decision making most
effectively:
A. when viewed for a single year.
B. when viewed as a trend of entity data.
C. when compared to an industry average for the most recent year.
D. when the trend of entity data is compared to the trend of industry data.
Cassady, Inc. borrowed $25,000 for 3 months at an APR of 10%. The amount of interest
paid on this loan was:
A. $1,200
B. $600
C. $625
D. $2.500
The concept of operating leverage refers to which of the following?
A. Operating income changes proportionately more than revenues for any given change
in activity level.
B. Operating income changes proportionately less than revenues for any given change
in activity level.
C. Operating income changes proportionately more than income for any given change
in activity level.
D. Operating income changes proportionately less than income for any given change in
activity level.
If the actual level of activity is different from the budgeted level, a _________ budget is
prepared for the actual level of activity:
A. continuous
B. zero-based
C. master
D. flexible
Moped, Inc. purchased machinery at a cost of $44,000 on January 1, 2017. The
expected useful life is 5 years and the asset is expected to have salvage value of $4,000.
Moped depreciates its assets using the double-declining balance method.
What is the firm’s gain or loss if the machinery is sold for $22,000 on December 31,
2018?
A. Gain of $8,000
B. Gain of $6,160
C. Loss of $1,200
D. Loss of $8,000
The income statement shows amounts for:
A. revenues, expenses, losses, and liabilities.
B. revenues, expenses, gains, and fair value per share.
C. revenues, assets, gains, and losses.
D. revenues, gains, expenses and losses.
Another term for return on equity is:
A. return on investment.
B. return on assets.
C. return on retained earnings.
D. none of these.
Which of the following describes the correct sequence of flow of costs for a
manufacturing firm?
A. Raw materials, finished goods, work-in-process, cost of goods sold.
B. Work-in-process, raw materials, finished goods, cost of goods sold.
C. Raw materials, work-in-process, finished goods, cost of goods sold.
D. Raw materials, work-in-process, cost of goods sold, finished goods.
Which of the following entities would not require accounting information pertaining to
their economic activities?
A. Social clubs.
B. Not-for-profit entities.
C. State governments.
D. All of the above require accounting information.
E. None of the above requires accounting information.
Major classifications of accounting activity would not include:
A. financial accounting, internal auditing, public accounting.
B. internal auditing, governmental accounting, managerial accounting.
C. financial accounting, national accounting, cost accounting.
D. auditing, income tax accounting, governmental accounting.
A management decision that would have a long term influence on the operating
leverage of a firm would be:
A. increasing the advertising budget.
B. substituting robots for hourly paid production workers.
C. increasing prices in proportion to raw material cost increases.
D. having a season-end sale of seasonal products.
The cost of capital used in the capital budgeting analytical process is primarily a
function of:
A. ROE.
B. ROI.
C. the cost of acquiring the funds that will be invested.
D. the discount rate.
Managerial accounting supports the management process most significantly by:
A. measuring and reporting financial results after the fact.
B. determining the goals and objectives of the entity.
C. helping management identify and achieve goals and measure the degree to which the
goals have been accomplished.
D. establishing operating policies to be followed during a period of time.
Corporate governance includes concerns about:
A. business ethics and social responsibility.
B. the responsibilities of the board of directors.
C. equitable treatment of all stakeholders.
D. disclosures and transparency.
E. all of the above.
The capital budgeting analytical technique that calculates the rate of return on the
investment based on the impact of the investment on the financial statements is known
as the:
A. internal rate of return.
B. accounting rate of return.
C. payback period.
D. net present value.
The accounting rate of return method for evaluating proposed investments:
A. is based on cash receipts and disbursements related to the investment.
B. uses accounting net income from the operating budget.
C. does not recognize the time value of money.
D. is easier to use than the net present value method.
A firm’s products have an average contribution margin ratio of 40%, which will be
maintained for the next month even though fixed expenses are expected to rise by
$20,000. In order to keep operating income for the month from being affected, revenues
will have to increase by:
A. $8,000.
B. $12,000.
C. $20,000.
D. $50,000.
An item that cost $120 is to be sold for a price that will yield a gross profit ratio of
20%. The selling price should be:
A. $96
B. $144
C. $150
D. $600 Selling Price = Cost of product/(1 – Desired gross profit ratio)
Accounting for natural resources:
A. involves using the accumulated depreciation account.
B. involves estimating the quantity of the natural resource to be recovered.
C. involves an exception to the matching concept.
D. involves a double-declining balance depletion calculation.
ROI used to evaluate the performance of an investment center manager can sometimes
lead to suboptimization. A performance measure designed to avoid the risk of
suboptimization is:
A. operating income.
B. residual income.
C. segment income.
D. the DuPont model.
Which of the following is not a stockholders’ equity account?
A. Common stock.
B. Capital stock.
C. Retained earnings.
D. Accumulated depreciation.
E. Paid-in-capital in excess of par.
The dollar amount of the common stock on the balance sheet of a corporation that has
common stock with a par value is the number of shares:
A. issued, multiplied by the amount received per share.
B. outstanding, multiplied by the amount received per share.
C. issued, multiplied by the par value per share.
D. outstanding, multiplied by the par value per share.
The present value concept is widely applied in business because:
A. inflation erodes the purchasing power of money.
B. money has value over time.
C. accounting for operating leases requires its use.
D. most obligations are settled within a year.