Archives: Quiz

The accounting rate of return shows the effect of the investment on the company’s accrual-based income. Journal entries are required if the bank reconciliation includes outstanding checks. FALSE AICPA Functional: Measurement PE Question Type: Concept H2 : Journalizing Transactions From […]

The financing section of the statement of cash flows involves transactions relating to the equity accounts and the long-term liability accounts. Differential analysis is a common approach to making long-term business decisions. FALSE Explanation: Differential analysis is a common approach […]

Generally Accepted Accounting Principles (GAAP) require every organization to prepare reversing entries. The accounting rate of return also is known as the average rate of return or annual rate of return. TRUE AICPA Functional: Decision modeling PE Question Type: Concept […]

Investments accounted for by the equity method are recorded at cost at the time of purchase. Absorption costing is more appropriate when determining the product costs for long-term planning. TRUE AICPA Functional: Measurement PE Question Type: Concept The Accumulated Depreciation […]

The return on investment of a company is a measure of profitability and efficiency. Absorption costing is required by the Generally Accepted Accounting Principles (GAAP) for financial statements issued to investors, creditors, and other external users. TRUE AICPA Functional: Measurement […]

A high current ratio indicates that current liabilities are greater than current assets. The Social Security system is funded by contributions from both the employer and employee. TRUE AICPA Functional: Measurement PE Question Type: Concept H2 : Employer Payroll Taxes […]

An operational budget is a short-term financial plan that coordinates activities needed to achieve short-term goals. A retailer purchases goods from a manufacturer and sells them to customers. TRUE AICPA Functional: Measurement PE Question Type: Concept H2 : What Are […]

Budgeting software is often designed as a component of the company’s Enterprise Resource Planning (ERP) system. According to Generally Accepted Accounting Principles, if the fair value of goodwill decreases below its book value, an impairment loss must be recorded. TRUE […]

Assets are something of value that the business owns or has control of. Nurix, Inc. sold goods on credit terms n/20 to Jelly Harper, Inc. This means no discounts are offered, and the amount of the invoice is due 20 […]

All available-for-sale investments are reported as long-term assets on the balance sheet. Mumbai Travel Services provided the following information: Direct labor rate: $40 per hour Predetermined overhead allocation rate for indirect costs: $22 per direct labor hour If Mumbai Travel […]

Fixed manufacturing overhead is considered a product cost under variable costing. After a bond is issued, investors may buy and sell it through the bond market. TRUE AICPA Functional: Measurement PE Question Type: Concept H2 : Bond Prices Both job […]

Fixed costs per unit decrease as production levels decrease. Free cash flow is calculated by adding cash payments planned for investments in long-term assets and cash dividends to the amount of net cash provided by operating activities. FALSE AICPA Functional: […]

Net income (loss) is the difference between the total debits and the total credits in the income statement columns of the worksheet. Capitalizing a cost involves crediting the asset account. FALSE AICPA Functional: Measurement PE Question Type: Concept H2 : […]

A mortgage payable is a long-term debt that is backed with a security interest in specific property. A sales allowance is recorded with a credit to Accounts Payable. FALSE AICPA Functional: Measurement PE Question Type: Concept H2 : Sales Returns […]

The difference that arises between the balance on the bank statement and the balance on the company’s books because of a time lag in recording transactions is known as a timing difference. Critical thinking and judgment skills are not necessary […]

When using the periodic inventory system, the process of recording the ending Merchandise Inventory is completed by making an adjusting entry. If the debt ratio is too high, the company may be unable to pay its debts. TRUE AICPA Functional: […]

Uncontrollable costs are the costs that can be influenced by the decisions of a manager. The current ratio is calculated using the values from the income statement. FALSE AICPA Functional: Measurement PE Question Type: Concept H2 : How Do We […]

For an accounting equation to balance, a transaction must affect both sides of the equation. A compound journal entry has more than two accounts, but the total dollar value of the debits still must equal total dollar value of the […]

A just-in-time costing system does not use the Finished Goods Inventory account; instead, it combines the Finished Goods Inventory account with the Work-in-Process Inventory account. If an investment’s internal rate of return is higher than the required rate of return, […]

Regardless of the type of plant asset disposal, the first step is to bring the depreciation up to date. The income statement also is called the statement of financial position. FALSE AICPA Functional: Measurement PE Question Type: Concept H2 : […]

A worksheet is an external document that forms a part of the financial statements. When a corporation issues no-par stock, it debits the asset received and credits the stock account. TRUE AICPA Functional: Measurement PE Question Type: Concept The net […]

Direct labor costs are accumulated in the Manufacturing Overhead account. For a centralized company, the major planning and controlling decisions are made by top management. TRUE AICPA Functional: Measurement PE Question Type: Concept The terms of payment for a note […]

A quarterly report filed with the Securities and Exchange Commission is called a Form 10-K. Performance evaluation systems provide top management with a framework for maintaining control over the entire organization. TRUE AICPA Functional: Measurement PE Question Type: Concept A […]

The return on investment formula focuses on the amount of operating income earned before considering other revenue and expense items, such as interest expense. The accounting rate of return is calculated by dividing the average annual operating income by the […]

Knowing the unit cost per item helps managers set appropriate selling prices. When a manufacturing company uses a standard cost system, Work-in-Process Inventory is debited at standard input quantities and standard costs. TRUE AICPA Functional: Measurement PE Question Type: Concept […]

If a business changes the estimated useful life, or estimated residual value, of a plant asset, depreciation expense must be recalculated. Under the perpetual inventory system, two journal entries are used to record the sales of merchandise. One entry records […]

When a business records the earning of service revenue, the Service Revenue account is credited. In order to keep accurate records about the collection of cash for a previously written off account, collection of cash for a previously written off […]

Liabilities represent creditors’ claims on the business’s assets. Debits in the journal are always posted as debits in the ledger. TRUE AICPA Functional: Measurement PE Question Type: Concept H2 : Journalizing and Posting Transactions A predetermined overhead allocation rate is […]

The just-in-time costing system waits until the units are completed to record the cost of production. An annuity is a stream of equal cash payments made at equal time intervals. TRUE AICPA Functional: Measurement PE Question Type: Concept Developing efficiency […]

If a physical count of inventory indicates that the Merchandise Inventory account is overstated, an adjusting entry is required to record the difference. Long Company owns a 2% investment in the common stock of Smith Company. The receipt of a […]

Cash in the bank is more liquid than a petty cash fund. In practice, most companies face complex situations. In these cases, a spreadsheet can help in preparing the statement of cash flows. TRUE AICPA Functional: Measurement PE Question Type: […]

A production cost report provides inventory and cost of goods sold data that are needed for the balance sheet. A current ratio that has increased from the prior period indicates an improvement in the company’s ability to pay its current […]

Accounting is the information system that measures business activities, processes the information into reports, and communicates the results to decision makers. Revenue center responsibility reports show all costs incurred by the department and are useful when management needs to know […]

In selecting machine usage as the primary cost driver for the Production Department, management feels that there is a direct relationship between the number of machine hours used and the amount of overhead costs incurred. The current ratio is calculated […]

Higher fixed costs increase the total number of units required to break even. Dezire Travel Services provided the following information: Direct labor rate: $80 per hour Predetermined overhead allocation rate for indirect costs: $18 per direct labor hour If Dezire […]

The direct write-off method for uncollectible accounts violates the matching principle. Discontinued operations and extraordinary items are reported without consideration of the income tax effects. FALSE AICPA Functional: Measurement PE Question Type: Concept The units-of-production method is used to compute […]

Accounts Receivable are generally reported at the gross amount on the balance sheet. An increase in sales price per unit increases the number of units required to break even. FALSE AICPA Functional: Measurement PE Question Type: Concept The guidelines for […]

When all the units produced are sold, the operating income calculated under absorption costing is higher when compared to the operating income calculated under variable costing. Assume that there is no beginning Finished Goods Inventory. Short-term investments are investments in […]

Sand Corporation manufactures two styles of lamps—a Bedford Lamp and a Lowell Lamp. The following per unit data are available: Total fixed costs are $42,000, and the machine hour capacity is 32,000 hours per year. The Lowell Lamp has the […]

For this question, assume that policy makers are pursuing a fixed exchange rate regime and that output is initially less than the natural level of output. The economy will tend to move toward the natural level of output when which […]

Suppose that the nominal interest rate increases while the expected inflation rate rises. Given this information, we know with certainty that the real interest rate A) will not change. B) will fall. C) will fall, but only if the increase […]

Based on our understanding of the paradox of saving, we know that a reduction in the desire to save will cause A) an increase in equilibrium GDP. B) a reduction in GDP. C) an increase in the desire to invest. […]

The less staggered are labor contracts, A) the more rapidly the economy will adjust to changes in aggregate demand. B) the less rapidly the economy will adjust to changes in aggregate demand. C) the greater the inflationary effects of a […]

An increase in income will tend to cause which of the following? A) an increase in the monetary base (H) B) a reduction in H C) an increase in the interest rate D) a reduction in the money multiplier E) […]

In 1965, Gordon Moore predicted that the number of transistors in a chip would double approximately every A) 6-12 months. B) 18-24 months. C) five years. D) 10 years. E) none of the above Which of the following would cause […]

Since 1971, the annual growth rate of real wages has been A) remarkably high. B) positive, but low. C) zero. D) negative. E) impossible to measure accurately, and so has not been reported. When answering this question, assume individuals consider […]

Which of the following is considered out of the labor force? A) the unemployed B) those temporarily laid off who will soon be recalled C) those who worked full time, but in a family business D) those individuals who have […]

The difference between the official and correct measures of the deficit will be greater, A) the lower is inflation. B) the lower is the level of debt, B. C) the higher is growth of output. D) all of the above […]

Based on price setting behavior, we know that an increase in the unemployment rate will cause A) no change in the real wage. B) a reduction in the real wage. C) an increase in the real wage. D) an upward […]

In which of the following periods was the relationship between the U.S. unemployment rate and U.S. inflation rate unstable? A) 1901 to 1909 B) 1911 to 1919 C) 1921 to 1929 D) 1931 to 1939 E) none of the above […]