Archives: Quiz

Ownership in a condominium is considered personal property. If a person dies without making a will and has no living relatives, that person’s estate becomes the property of the state. Answer: T A(n) ____________________ may elect to receive a statutory […]

Special bailees are required to use ____________________ care. A(n) ____________________ relationship is created when one person rents real property from another. Answer: landlord-tenant The Magnuson-Moss Warranty Act covers only ____________________ warranties. Answer: written> A majority of states have repealed Article […]

Lutz took out a standard fire insurance policy on her home from two different companies. When the house was destroyed by fire, Lutz tried to collect the full amount from both companies. Will she succeed? A contract is a mere […]

Grasso sold her computer to Robb for $1,500, payable in thirty days. Robb had misrepresented his age as twenty-one when in fact he was only seventeen. At the end of the thirty days, Robb returned the computer and disaffirmed the […]

An adult has the legal right to ask a parent, guardian, or other adult to co-sign a contract made with a minor. For an instrument to be negotiable, the promise or order must be ____________________. Answer: unconditional The bankruptcy of […]

By exercising a(n) ____________________, the bailee may retain possession of the bailed property until paid for work or services. If a promissory note is not presented for payment on the due date, it is discharged. Answer: F Because of a […]

Magin offered to sell Richards some secondhand college textbooks for $75. Richards wasn’t sure he wanted the books. Magin then agreed to keep the offer open for five days if Richards would give him $5. Can Magin legally withdraw this […]

What should an attorney do before taking a case after his or her client describes in detail all the facts relating to the case? If you hire an agent to sell your house, the agency ends when the house is […]

To legally call off a contract means to rescind that contract. Specific performance is an equitable remedy. Answer: T An executor or administrator is one who handles a deceased person’s estate. Answer: T What are the two major uses of […]

Allen, a teacher, copied pages from a published novel for study by the members of his literature class. Has she infringed the copyright? Only consumers who buy items from merchants have the right to cover. Answer: F The distinction between […]

An agent is liable on a contract if the agent signs the principal’s name. A public garage’s disclaimer of liability for a car lost or stolen because of the garage owner’s negligence is likely to be unenforceable. Answer: T A […]

When a person dies, her or his rights and obligations are transferred ____________________ to an executor or administrator. A pretrial step that allows a party involved in a lawsuit to obtain detailed information about the other party’s claim or defense […]

What is the advantage of relying on prior court decisions (stare decisis doctrine) to decide future cases? A lawsuit brought by an individual on behalf of a group of consumers is known as a(n) ____________________. Answer: class action An express […]

____________________ may be money, property, not doing something, or doing something you don’t have to do. A consumer with a revolving charge account must pay the full amount owed each month. Answer: F If a negotiable instrument is not paid […]

Berman sold her business, including merchandise and fixtures, to Curran. This is a(n) a. present sale. b. sale on approval. c. bulk transfer. d. auction. A voidable contract a. is enforceable against all parties unless a party has a right […]

An item sold at or below cost in order to attract customers is called a. a rain check. b. a loss leader. c. bait. d. the switch. Which of the following remedies is not generally allowed in a breach of […]

An unsecured debt a. must be oral. b. must be in writing. c. may be either oral or written. d. must be filed in the county clerk’s office. The term that best describes an agreement whereby the offeree gives something […]

The heading of a work sheet might contain the line ‘As of February 28, 20×5.’ Segment profitability analysis includes the preparation of a segmented income statement. Answer: TRUE Budgeting is the process of identifying, gathering, summarizing, and communicating financial and […]

To understand accounting information, users must be familiar with the accounting conventions, or rules of thumb, used in preparing financial statements. Unlike ROI, residual income is expressed in dollars. Answer: TRUE The Sarbanes-Oxley Act of 2002 does not require any […]

A stock split normally increases total stockholders’ equity. One way of stating the accounting equation is: Assets – Liabilities = Owner’s Equity. Answer: TRUE The two primary types of cost behavior are fixed and variable. Answer: TRUE Net income results […]

On the income statement, freight-out is included as part of cost of goods sold. After selling all the assets and paying the liabilities in a liquidation of a partnership, the partners share any remaining cash according to the stated ratios. […]

Unrealized gains and losses on available-for-sale securities are reported on the balance sheet. Activity-based costing applies only to production-related activities. Answer: FALSE The annual interest earned on an amount deposited into a bank account will be the same each year […]

Valuation of inventory on the balance sheet impacts cost of goods sold on the income statement. All organizations use same performance measures in their day-to-day business operations. Answer: FALSE Receipt of stock dividends, depreciation, and amortization expense will not be […]

A partnership is dissolved when any partner leaves the business or dies. If the carrying value of goodwill is more than its fair value, an impairment loss must be recorded. Answer: TRUE The recognition of an expense does not depend […]

Financing a business means obtaining funds so the business can begin and continue operating. If a 20-year bond pays interest of 8 percent semiannually, the present value of the bond is calculated based upon (1) 4 percent and 40 periods […]

The calculation of cash for interest to be paid each interest period in connection with a bond payable is not influenced by any premium or discount upon issuance. A company’s acceptance of credit cards, like MasterCard, is an example of […]

The salary, interest, and stated ratio method of allocation can still be applied when a net loss has occurred. A manufacturer’s inventory consists of raw materials, work in process, and finished goods. Answer: TRUE Bond certificates are issued to creditors […]

The accounting rate-of-return method considers the time value of money. Net present value analysis is based on a project’s cash flows. Answer: TRUE The three techniques used to evaluate capital investment alternatives use the project’s expected net income. Answer: FALSE […]

Operating budgets are limited to service organizations. In moving toward the just-in-time continuous work flow concept, a key objective is the reduction in the use of raw materials for manufacturing a product. Answer: FALSE The Income Summary account appears in […]

While performing an incremental analysis for outsourcing decision, information such as depreciation is not relevant. Fair value is the exchange price of an actual or potential business transaction between market participants. Answer: TRUE Capital investment decisions are decisions about when […]

Partnership liquidation is not the same as partnership dissolution. When the effective interest method of amortization is used for a bond premium, the amount of premium to be amortized for a period is calculated by subtracting the amount of bond […]

The information needed to record the adjusting entries can be copied from the work sheet. Expected obligations arising from programs, such as frequent flyer miles, are usually recorded as a reduction in sales (in a contra-sales account) with a related […]

The cost of debt, the cost of preferred stock, the cost of common stock, and the cost of retained earnings are the components of cost of capital. For accounting purposes, stated value is treated the same way as par value. […]

A flexible budget is derived by dividing actual unit costs by the standard unit costs. A project breaks even when total revenues less variable costs equals fixed costs. Answer: TRUE The basis used in computing equivalent unit cost under process […]

The heading for a balance sheet might include the line ‘For the Month Ended December 31, 20–.’ Materials costs flow from the Materials Inventory account to the Work in Process Inventory account to the Finished Goods Inventory account. Answer: TRUE […]

Which of the following statements isTRUE of the just-in-time operating environment? A.Simplicity and quality are good, but inventories and nonvalue-adding activities are not. B.Inventories are necessary to support the production function. C.Just-in-time is based on push-through production concepts. D.Just-in-time is […]

Proper journal form is a way of recording a transaction with the date, debit account, and debit amount shown on one line, and the credit account (indented) and credit amount shown on the next line. Another term for short-term investments […]

A company that factors its receivables will have a less favorable receivable turnover than a company that does not factor. Companies that produce custom-made products usually use a process costing system. Answer: FALSE Indirect product costs incurred are charged directly […]

Regardless of beginning inventory levels, beginning inventory is always ignored while computing the equivalent units of production. When a partner leaves a partnership, it is possible that total assets will be unaffected. Answer: TRUE A decrease in the balance of […]

An informational tax return must be filed for a partnership. Tying compensation incentives to performance targets decreases the likelihood that the goals of responsibility centers, managers, and the entire organization will be well coordinated. Answer: FALSE Lubrication used for machines […]

The contribution margin equals zero at the breakeven point. Preparing the work sheet and recording closing entries are important steps that save money and prevent mistakes. Answer: TRUE Management accounting complements each stage of the management process. Answer: TRUE Only […]

If bonds are retired by an issuer by purchase on the open market at a price below the bonds’ carrying value, a loss will result. When a job has been completed, all of the costs assigned to that job are […]

A bill of activities is used to compute both the costs assigned to activities and the product unit cost. Trading securities are always short-term investments. Answer: TRUE Financing a business with common stock is more risky than financing it with […]

On a statement of cash flows prepared using the direct method, if certain expenses do not require a current outlay of cash, those expenses must be subtracted from operating expense to arrive at cash payments for operating expenses. A temporary […]

The replacement of tires on a truck is considered an ordinary repair. For tax purposes, small businesses may expense the first $250,000 of equipment expenditures, rather than having to allocate their costs over a number of years. Answer: TRUE Management […]

U.S. Treasury bills are considered equity securities. Ordinary repairs usually result in a debit to the appropriate Accumulated Depreciation account. Answer: FALSE Job order cost cards and cost flows through the inventory accounts form the core of a job order […]

Since the balance of the Accumulated Depreciation account will appear on the asset side of the balance sheet, it is placed on the debit side of the work sheet’s Balance Sheet columns. The callable feature of a bond can be […]

The higher the receivables turnover, the lower the days’ sales uncollected. A company with a current ratio of 1.0 is considered more liquid than a company with a current ratio of 2.0. Answer: FALSE Which of the following is Answer: […]

If insured goods are shipped FOB destination, the seller should file a claim for goods damaged in transit. Periodic and perpetual are examples of inventory costing systems. Answer: TRUE If a management accountant gives information about a future merger of […]

When there is an ethical conflict, the management accountant should resign if the immediate supervisor is involved in the conflict. If a bond with a face value of $1,000 and a face interest rate of 7 percent is issued for […]