Archives: Quiz

Rule-of-thumb measures are the most precise and best standards of comparison in financial performance evaluation. The inventory turnover measures the relative size of the inventory and the effectiveness of credit policies. Answer: FALSE Contribution margin is calculated by deducting total […]

For a manufacturer, the final customer is part of the supply chain and customer service is part of the value chain. Because noncash investing and financing transactions do not affect cash, they should not be reflected in the body of […]

Closing entries can be prepared by referring solely to the Income Statement columns of the work sheet. When customers pay with bank credit cards, cash sales are considered to have taken place. Answer: TRUE Net income can be used to […]

If any portion of a long-term debt is to be paid in the next year, that portion should be classified as a current liability. A petty cash fund is established for small payments for which writing a check would be […]

On the income statement, freight-in is treated as an operating expense. In a liquidation, one partner may have to make up the deficit in another partner’s account. Answer: TRUE One argument in favor of accelerated depreciation is that the asset’s […]

Static budgets are prepared on quarterly basis and require frequent change during the annual budget period. The quick ratio and the current ratio are measures of short-term debt-paying ability. Answer: TRUE In a job order costing system, when the goods […]

A stock dividend exceeding 20 to 25 percent is properly treated as a stock split. The weighted-average contribution margin is computed by multiplying each product’s unit contribution margin by the sales mix percentage of each product. Answer: TRUE It is […]

In calculating the depletion of a natural resource, its useful life in years is irrelevant. Taking a physical inventory refers to making a count of all merchandise on hand at a particular time. Answer: TRUE Cost-volume-profit analysis assumes costs and […]

Overhead costs are not recorded in the Work in Process Inventory account. The primary purpose of an expense is to generate revenue. Answer: TRUE In a job order costing system, indirect labor costs incurred are debited to the Overhead account. […]

Compensation expense related to employee stock options is a tax-deductible expense for the corporation. The Income Statement columns of the work sheet show all the accounts that need to be closed, except for the Withdrawals account. Answer: TRUE Direct materials […]

Because accounting measures should be verifiable, liabilities should not be estimated. Once the products are completed, packaged, and ready for sale, their costs are transferred to the Finished Goods Inventory account. Answer: FALSE A U.S. Treasury bill with an original […]

Direct materials cost is a fixed cost because it always occurs in a production process. In order to use a process costing system, products produced should be homogenous in nature. Answer: FALSE The price/earnings (P/E) ratio is an indication of […]

The matching rule dictates that both the accrued interest and the amortization of a premium or discount be recorded at the year end. Costs that vary among alternatives are irrelevant for decision making. Answer: FALSE Any proposal that fails to […]

When common stock with a par value is sold for a price that exceeds par value, the Common Stock account is credited for the cash proceeds received from the sale of the shares. A positive free cash flow means that […]

Trading securities are valued on the balance sheet at market value. A job order cost card can be used to record all product costs incurred during production. Answer: TRUE A promissory note may be issued for an amount to be […]

Using or not using the contribution margin for cost-volume-profit computations will not change the resulting amount of breakeven units in a given situation. Bonding provides a guarantee against theft. Answer: FALSE Under the perpetual inventory system, the return of goods […]

Cost hierarchy includes only value-adding activities. Residual value is relevant when calculating double-declining-balance depreciation. Answer: TRUE Supply-chain management helps companies maintain lower levels of inventory. Answer: TRUE An overstatement of ending inventory in a period will result in an understatement […]

Using bar codes to take a physical inventory is considered poor accounting practice. Return on assets is a measure of liquidity. Answer: FALSE Full product cost includes both nonproduction costs and production costs required to satisfy customers. Answer: TRUE Incremental […]

When a bond issue is converted into common stock, total contributed capital is increased by the fair market value of the bonds converted. Since investing activities center on the long-term assets shown on the balance sheet, they do not include […]

Entering transactions into the journal is called posting. It is not necessary to ascertain the portion of ending Work in Process Inventory applicable to direct materials costs versus conversion costs. Answer: FALSE Noncash investing and financing transactions, such as the […]

The account Common Stock Distributable is classified as a current liability. The accrual basis of accounting results in a more accurate measurement of net income for the period than does the cash basis of accounting. Answer: TRUE The costs of […]

Another name for a flexible budget is a variable budget. Depreciation calculated using the straight-line method is an example of a fixed cost. Answer: TRUE Cost traceability is decreased in a just-in-time operating environment. Answer: FALSE ‘Breakeven’ is the point […]

The cost of a previously purchased machine is an example of a sunk cost. If an accrued liability for salaries is not recorded, income for the following period will be overstated. Answer: FALSE Interest on debt is tax-deductible to the […]

A stock dividend will cause a decrease in the total number of shares issued and outstanding. The main differences among the balance sheets of the sole proprietorship, the partnership, and the corporation are found in the current assets and current […]

Regardless of whether the straight-line method or the effective interest method is used, the carrying value of a term bond issued at a discount will increase continually over the life of the bond. The purchase of treasury stock qualifies as […]

Wages are compensation of employees at a yearly or monthly rate. Damaged goods that can be sold at a reduced price should be included in a company’s merchandise inventory. Answer: TRUE Payables turnover is measured in number of days. Answer: […]

A company with a low debt to equity ratio is in a more vulnerable position during poor economic times than a company with a high debt to equity ratio. A manufacturing chain is a path that leads from the suppliers […]

The reporting format of financial accounting information is based on generally accepted accounting principles. Lean uses ABC to assign overhead costs to the product by using appropriate cost drivers. Answer: FALSE If management wants specific information on individual items, a […]

When a withdrawing partner withdraws assets less than his or her capital balance, the excess is treated as a bonus to the remaining partners. Interim financial statements report data for a period of less than one year. Answer: TRUE Operating […]

The amount of cost of goods manufactured is transferred from the Work in Process Inventory account to the Finished Goods Inventory account. A just-in-time operation would attempt to eliminate inspection time. Answer: TRUE Managers at all levels are evaluated in […]

A job order costing system is used by companies that manufacture large amounts of similar products or liquid products. The taking of a physical inventory is an example of periodic independent verification. Answer: TRUE The purchasing process begins with a […]

WinLaw is a legal services provider. It is planning to extend its operations by providing tax consultancy services. Which of the following statements will beTRUE if the company extends its operation as planned? A.The cost of providing legal services is […]

Managerial accounting primarily provides information on past performance. Separation of duties relates to a control activity in the accounting system. Answer: TRUE In verifying a claim for a loss of inventory, an insurance company might use the gross profit method. […]

In periods of rising inventory prices, the LIFO method will result in a higher inventory valuation than will the average-cost method. A proper heading for the income statement could include ‘For the Year Ended December 31, 20–.’ Answer: TRUE One […]

The payment of taxes would be included in the operating activities section of the statement of cash flows. ROI is a performance measure, which uses information only from a company’s income statement. Answer: FALSE In a just-in-time environment, a manager […]

The existence of uncollectible accounts is evidence of poor credit policies. Bill Pierce owns several ice cream shops all within 50 miles of his home. He has plans to expand the number of shops he owns. This planned expansion will […]

A trade discount is the same as a sales discount. Income and losses are divided equally among the partners unless the partnership agreement specifies otherwise. Answer: TRUE Which of the following isTRUE of the net present value method? A.It measures […]

A common pitfall in selecting a new venture is a. poor financial understanding. b. proper objective evaluation. c. real insight into the market. d. none of the above. Which of the following statements about a business plan is true? a. […]

A marketing information system compiles and organizes data relating to _______ from the customer base. a. price b. revenue c. demand d. supply Which is not one of the chief characteristics of an entrepreneur? a. personal initiative b. ability to […]

Which of the following statements is false? a. Entrepreneurs want the authority to make important decisions. b. Management skills are not important characteristics for entrepreneurs to possess. c. Successful entrepreneurs strive to build a successful team around them. d. An […]

Which of the following costs add to the cost of franchising? a. insurance b. payroll c. legal and professional fees d. all of the above The inventory should be examined for which of the following? a. salability b. correspondence between […]

Financial considerations play a major role in a. lifestyle ventures. b. smaller profitable ventures. c. high-growth ventures. d. corporate debentures. The entrepreneurial ego can cause the entrepreneur to a. have a sense of pessimism. b. take characteristics that usually lead […]

What is the significance of a harvest strategy segment in a business plan? a. It is important for the entrepreneur to plan for a liquidity event as an exit strategy. b. It is important for the entrepreneur to know how […]

____ people thoroughly understand the concept of corporate entrepreneurship. a. Just about all b. Most c. Many d. Few In the study of contemporary entrepreneurship, one concept reoccurs: a. no one understands the field b. folklore dominates the studies c. […]

When considering employees, the entrepreneur should be concerned about a. total number of single employees. b. total number of female employees. c. total number of employees by function. d. employee productivity. Which of the following is not a common characteristic […]

What does a post-money valuation include that a pre-money valuation does not? a. market value b. replacement value c. excess earnings d. venture capital investment Production requirements are figured by subtracting the period’s beginning inventory from a. inventory from the […]

The incubation process involves which of the following? a. working harder b. letting the subconscious work c. talking with friends d. changing jobs When should a potential franchisee receive the FDD (Franchise Disclosure Document)? a. two days before signing a […]

Coming up with a unique good or service is a _____ approach, while adapting something that is currently on the market or extending the offering to an area where it is not presently available is a(n) _____ approach. a. new-new, […]

Success of the corporate entrepreneurship plan depends on a. resources provided by the firm. b. shirking ethics to ensure entrepreneurial wins. c. a few individuals. d. the reaction of rivals. Secretly working on new ideas on company time as well […]

People practice the creative search for background knowledge in which of the following ways: a. join professional groups and organizations b. attend seminars or professional meetings c. a and b d. socializing at parties It is important that an entrepreneur […]