Archives: Quiz

1) Enterprise resource planning software packages include the programs that manage a company’s vital operations such as accounting, order taking, and manufacturing. 2) If an owner’s capital account had a $10,000 credit balance at the beginning of the period, and […]

1) Market prospects are the ability to provide financial rewards sufficient to attract and retain financing. 2) If the exchange rate for Canadian and U.S. dollars is 0.7382 to 1, this implies that 2 Canadian dollars can be purchased for […]

1) The FASB requires a reconciliation of net income to net cash provided or used by operating activities when the direct method is used (which can be reported in the notes). 2) In producing oat bran, the joint cost of […]

1) Four factors come together in production activity: beginning work in process inventory, raw materials, direct labor, and factory overhead. 2) Cost accounting information is helpful to management for pricing decisions but has no effect on controlling costs. Answer: FALSE […]

1) U.S. Government Treasury bonds provide low return and low risk to investors. 2) A high level of expected risk suggests a low price-earnings (PE) ratio. Answer: TRUE 3) The primary objective of managerial accounting is to provide general purpose […]

1) Recording of a stock dividend results in a liability being recorded. 2) Budget preparation is best determined in a top-down managerial approach. Answer: FALSE 3) A ratio expresses a mathematical relation between two quantities and can be expressed as […]

1) The use of debt is sometimes described as financial leverage because debt can have the effect of increasing the return on equity. 2) The direct materials section of a job cost sheet shows the materials costs assigned to a […]

1) A reverse stock split increases the market value per share and the par value per share of stock. 2) Plant assets can be disposed of by discarding, selling, or exchanging them. Answer: TRUE 3) Period costs are incurred by […]

1) The factor for the present value of an annuity for 6 years at 10% is 4.3553. This implies that an annuity of six $2,000 payments at 10% would equal $8,710.60. 2) According to IRS guidelines, companies may use FIFO […]

1) Evaluation of company performance does not include analysis of (1) past and current performance, (2) current financial position, and (3) future performance and risk. 2) Product costs are capitalized as inventory on the balance sheet and period costs are […]

1) According to the cost principle, it is necessary for managers to report an approximation of an asset’s market value upon purchase. 2) A budget performance report shows budgeted amounts, actual amounts, and differences between budgeted and actual amounts. Answer: […]

1) Employers must pay FICA taxes twice the amount of the FICA taxes withheld from their employees. 2) In a process costing system, factory overhead costs can be allocated to production departments by using a predetermined overhead allocation rate. Answer: […]

1) Companies promoting continuous improvement strive to achieve practical standards rather than ideal standards. 2) In process costing, indirect materials are always classified as factory overhead, even if they are linked with a specific production process or department. Answer: FALSE […]

1) A company invests $10,000 at 7% compounded annually. At the end of the second year, the company should have $11,400 in the fund. 2) Budgets are long term financial plans that generally cover more than a one-year period. Answer: […]

1) Revising an estimate of the useful life or salvage value of a plant asset is referred to as a change in accounting estimate and is reflected in the current, and future financial statements. 2) Assume that the M & […]

1) A trend percent, or index number, is calculated by dividing the analysis period amount by the base period amount and multiplying the result by 100. 2) Most companies do not take a physical count of inventory each year, but […]

1) If a department that applies process costing starts the reporting period with 50,000 physical units that were 25% complete with respect to direct materials and 40% complete with respect to direct labor, it must add 12,500 equivalent units of […]

1) In process costing, direct labor includes only the labor that is applied directly to individual units of product. 2) If a production department has 100 equivalent units of production with respect to direct materials in a given reporting period, […]

1) Actual factory overhead incurred in a job costing system is debited to a Factory Overhead general ledger account and credited to various other accounts. 2) Dividend yield is defined as the annual cash dividends per share divided by the […]

1) Stock is attractive to investors because stockholders are not liable for the corporation’s actions and debts and because stock is easily transferred. 2) Cash registers, check protectors, time clocks and personal identification scanners are examples of technologies that can […]

1) Dividend yield shows the annual amount of cash dividends distributed to common shares relative to the stock’s market price. 2) A work sheet contains all of the balances for each account and therefore may be used as a substitute […]

1) Budgeting is an informal plan for future business activities. 2) Obligations not due within one year or the company’s operating cycle, whichever is longer, are reported as current liabilities. Answer: FALSE 3) An out-of-pocket cost requires a future outlay […]

1) A debit entry is always an increase in the account. 2) Predetermined overhead rates are calculated at the end of the accounting period once the actual amount of factory overhead is known. Answer: FALSE 3) Bonds and long-term notes […]

1) The business entity principle means that accounting information reflects a presumption that the business will continue operating instead of being closed or sold. 2) Using the retail inventory method, if the cost to retail ratio is 70% and ending […]

1) The Form W-2 must be given to employees before January 31 following the year covered by the Form W-2. 2) Within the same flexible budget performance report, it is impossible to have both favorable and unfavorable variances. Answer: FALSE […]

1) Which of the following best describes assets? A.They are equal to liabilities minus stockholders’ equity. B.They are considered to be the economic resources of the business. C.They are all reported on the balance sheet at their current market value. […]

1) Which of the following has primary responsibility to develop Generally Accepted Accounting Principles? A.Financial Accounting Standards Board. B.Company Executives. C.Securities & Exchange Commission. D.Public Company Accounting Oversight Board. 2) Which of the following journal entries is correct when common […]

2) Which of the following is correct for Smith Company when Smith issues 10,000 shares of $10 par value common stock and pays $20,000 cash in exchange for a building? The market price of the Smith stock on the exchange […]

1) You have a goal of having $100,000 five years from today. The return on the investment is expected to be 10% and will be compounded semi-annually. The amount that needs to be invested today is closest to: A.$61,390. B.$62,090. […]

1) Which of the following accounts would not be considered an intangible asset? A.Goodwill B.Patents C.Research and development costs D.Trademarks 2) Which of the following is correct? A.If a company fails to record depreciation expense, net income and expenses are […]

1) Which of the following is true? A.An extraordinary gain would increase income before taxes. B.Discontinued operations would be shown as a component of continuing operations on the income statement. C.Discontinued operations shown on the income statement will include that […]

1) The accrual of interest results in the following: A.Increase in assets and liabilities. B.Increase in assets and stockholders’ equity. C.Increase in liabilities and decrease in stockholders’ equity. D.Increase in liabilities and increase in stockholders’ equity. 2) JDR Company purchased […]

1) Lauer Corporation uses the periodic inventory system and has provided the following information about one of its laptop computers: During the year, Lauer sold 750 laptop computers. What was ending inventory using the LIFO cost flow assumption? A.$40,000. B.$45,000. […]

1) Alden Trucking Company is replacing part of their fleet of trucks by purchasing them under a note agreement with Kenworthy on January 1, 2014. Alden financed $37,908,000, and the note agreement will require $10 million in annual payments starting […]

1) During 2014, Edna Enterprises had a capital acquisitions ratio of 8.0. During 2014, Carlos’ Corporation had a capital acquisitions ratio of 3.4. The amount of cash flow from operating activities was $5,968,000 for Edna’s and $5,054,000 for Carlos. Which […]

1) Which of the following statements is false? A.An expense is a cost incurred to generate revenues. B.Selling assets at a gain does not result in earning revenue. C.Revenues are reported on the income statement as they are earned. D. […]

1) The records of Marshall Company include the following: The return on assets is closest to: A.14.9%. B.18.3%. C.15.3%. D.14.7%. 2) Which of the following is false? A.The major difference between the quick and current ratios is inventory. B.Current liabilities […]

1) The indirect method of reporting operating activities on the statement of cash flow begins with net income and adjusts for cash items. 2) The trial balance needs to be prepared prior to preparation of the income statement. Answer: TRUEThe […]

1) In the year of an overstatement of ending inventory, cost of goods sold will be understated and net income will be overstated. 2) Information on all contractual agreements is included in notes as a financial statement disclosure. Answer: FALSE […]

1) A transaction may be an exchange of assets or services by one business for assets, services, or promises to pay from a different business. 2) Working capital increases when a company purchases equipment and signs a 2-year note payable. […]

1) On the date that one company acquires 100% of the voting stock of another company, the book value of the acquired assets and liabilities will be consolidated with book values of the assets and liabilities of the acquiring company. […]

1) The LIFO inventory method will result in the lowest gross profit in comparison with the FIFO method when unit costs are decreasing. 2) The year-end journal entry to record bad debt expense reduces the accounts receivable account and increases […]

1) The amount of cash paid by a business for dividends would be reported as an operating activity cash flow on the statement of cash flows. 2) A grocery store probably would use the specific identification inventory costing method for […]

1) In order for information to be relevant, the information needs to be complete, neutral, and free from error. 2) Corporate governance refers to the procedures designed to ensure that the company is managed in the interest of the board […]

1) “Book value” refers to the amount at which an account is carried in the company’s accounting records as opposed to “carrying amount” which refers to the amount at which an account is reported in the company’s financial statements. 2) […]

1) Some intangible assets have indefinite lives and are impairment tested rather than amortized. 2) Investment analysts often compare cash flows from operations across two or more companies. Answer: TRUE 3) Stock options provide a set of “golden handcuffs” for […]

1) U.S. GAAP requires some firms to periodically recategorize a portion of actuarial adjustment losses relating to pensions into periodic net income. 2) In the highest risk S&P category of CCC/C, about 60% of the firms default within a year. […]

1) When agents do not act on behalf of their principals, the agency cost is borne by the principal alone. 2) Under current GAAP, volatility in asset returns translates directly into net income volatility because the return on plan assets […]

1) As a general rule, the proportion of pay “at risk” falls off for executives on the higher rungs of the corporate ladder. 2) The FASB endeavors to draft pronouncements that clearly identify the accounting objective, explain the accounting principle(s) […]

1) If the fair value option is not elected, the company must still disclose the fair value of its all of its notes receivable. 2) The first stage of impairment testing of a long-lived asset is to take the present […]