Use the following to answer questions 1 - 2:
At the beginning of the fiscal year, the balance sheet showed assets
of $1,364 and owners' equity of $836. During the year, assets
increased $74 and liabilities decreased $38.
1. Owners' equity at the end of the year totaled:
A) $836
B) $872
C) $948
D) $1,438
2. Liabilities at the end of the year totaled:
A) $490
B) $528
C) $836
D) $910
3. At the end of the year, retained earnings totaled $1,700.
During the year, net income was $250, and dividends of $120 were
declared and paid. Retained earnings at the beginning of the year
totaled:
A) $2,070
B) $1,330
C) $1,230
D) $1,570
Use the following to answer questions 4 - 5:
At the beginning of the year, paid-in capital was $82 and retained
earnings was $47. During the year, the owners invested $24 and
dividends of $6 were declared and paid. Retained earnings at the end
of the year were $52.
4. Total owners' equity at the end of the year was:
A) $82
B) $94
C) $106
D) $158
5. Net income for the year was:
A) $10
B) $11
C) $15
D) $20
6. Sage, Inc. has 20 employees who each earn $100 per day and
are paid every Friday. The end of the accounting period is on a
Wednesday. How much wages should the firm accrue at the end of the
period?
A) $2,000.
B) $1,000.
C) $0
D) $6,000.
7. The accounting concept or principle applied when an
allowance is provided for estimated uncollectible accounts receivable
is:
A) consistency
B) matching revenue and expense
C) original cost
D) objectivity
8. When costs are rising over time:
A) LIFO results in higher profits that FIFO.
B) Cost of goods sold using the weighted average method
will be greater than LIFO cost of goods sold.
C) balance sheet inventory balances will be greater under LIFO.
D) FIFO results in higher profits than LIFO.
9. Which of the following is true regarding notes receivables (N/R)?
A) A N/R is always a long-term asset.
B) A N/R t is always a current asset.
C) A note is a more formal document than an account receivable.
D) A note is a less formal document than an account receivable.
10. Prepaid expenses classified as current assets represent:
A) current year expenses that have been accrued.
B) current year disbursements that will be matched
against revenues of the next year.
C) cash that has been segregated to pay for future expenses.
D) expenses of the current year that have been paid in advance.
11. When a company issues a bond at a discount:
A) the company will pay less than the face amount of the
bond at its maturity.
B) the company will pay more than the face amount of the
bond at its maturity.
C) the company's interest expense will be less than the
interest paid each year.
D) the company's interest expense will be more than the
interest paid each year.
12. When bonds are issued at a premium:
A) interest expense on the bonds will be less than the
interest paid.
B) interest expense on the bonds will be more than the
interest paid.
C) the bonds are sold for less than their face amount.
D) the coupon interest rate is less than the market interest rate.
13. 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.
14. The gross profit ratio is useful to the manager for each of
the following purposes except that:
A) it can be used to determine the selling price to set for an item.
B) it can be used to estimate the amount of inventory
lost in a fire.
C) it can be used to determine the amount available from
a given amount of revenue to cover operating expenses.
D) it can be used to estimate the amount of operating
expenses for a period.
15. The earnings per share of common stock calculation:
A) is made by dividing net income by the number of
shares of common stock outstanding at the end of the year.
B) is complicated by the declaration of cash dividends
during the year.
C) includes gains or losses from treasury stock transactions.
D) is complicated by the presence of preferred stock in
the capital structure.
16. An item that cost $240 is to be sold for a price that will
yield a gross profit ratio of 20%. The selling price should be:
A) $192
B) 288
C) 300
D) 1200
17. In the statement of cash flows, an increase in the accounts
receivable balance from the beginning of the period to the end of the
period would:
A) be added to net income because this represents earned
revenues that have not been collected.
B) be subtracted from net income because this represents
earned revenue provided by operating earnings.
C) be added to net income because this means that
revenues were less than cash collected.
D) be subtracted from net income because this means that
revenues were more than cash collected.
18. Revenue may be recognized:
A) from the sale of a company's own common stock.
B) if a company trades inventory at its usual sale value
for newspaper advertising.
C) if management believes the market value of land held
for future development rises.
D) in 2003 from the sale of subscriptions of a magazine
to be published in 2004.
19. If a firm's payment terms for sales made on account to its
customers were 2/10, n30, the number of days' sales in accounts
receivable would be expected to be:
A) less than 10.
B) between 10 and 25.
C) between 25 and 40.
D) over 40.
20. Asset turnover calculations:
A) are made by dividing the average asset balance during
the year by the sales for the year.
B) are made by dividing sales for the year by the asset
balance at the end of the year.
C) communicate information about how promptly the entity
pays its bills.
D) should be evaluated by observing the turnover trend
over a period of time.
21. If the P/E ratio of a company's common stock were 12, and
its earnings were $ 2.50 per common share:
A) the market value of the common stock would be $20.83 per share.
B) the market value of the common stock would be $25.00 per share.
C) an increase in earnings of $0.20 per share, with no
change in the multiple, would result in a market price increase of
$2.40 per share.
D) an increase in earnings of $0.20 per share, with no
change in the multiple, would result in a market price increase of
$1.67 per share.
22. A management that wanted to increase the financial leverage
of its firm would:
A) raise additional capital by selling common stock.
B) use excess cash to purchase preferred stock for the treasury.
C) raise additional capital by selling fixed interest
rate long-term bonds.
D) try to increase its ROI by increasing asset turnover.
23. If a firm's debt ratio were 25%, its debt/equity ratio would be:
A) 25%.
B) 50%.
C) 33.33%.
D) 75%.
24. A leverage buyout refers to:
A) one firm issues stock to take over another firm.
B) one firm trades its stock for the stock of another firm.
C) a firms goes heavily into debt in order to obtain the
funds to purchase the shares of the public stockholders.
D) one firm pays cash for the shares of a takeover firm's shares.
25. The cost of a single unit of production in excess of the
breakeven point in units is:
A) its fixed cost and variable cost.
B) its fixed cost only.
C) its variable cost only.
D) none of the above.
26. What percentage of the contribution margin is profit on
units sold in excess of the breakeven point?
A) It's 50% to the contribution margin ratio.
B) It's equal to the variable cost ratio.
C) It's equal of the gross profit ratio.
D) It's 100%.
27. Which of the following is a true statement regarding
absorption and/or direct costing?
A) A firm can choose to use either absorption or direct
costing for income tax purposes.
B) A firm can choose to use either absorption or direct
costing for financial reporting purposes.
C) Direct costing assigns only direct materials and
direct labor to products.
D) Absorption costing includes fixed overhead in product
costs whereas direct costing does not.
E) None of the above.
28. The overhead component of product cost is:
A) the sum of the actual overhead costs incurred in the
manufacture of the product.
B) likely to be the same amount for every product made
by the company.
C) an estimated amount based on labor hours, machine
hours, or some other activity.
D) determined at the end of the year when actual costs
and actual production are known.
29. An example of a cost that is likely to have a variable
behavior pattern is:
A) sales force salaries.
B) depreciation of production equipment.
C) salaries of production supervisors.
D) direct labor costs.
30. An example of a cost likely to have a fixed behavior pattern is:
A) sales force commission.
B) raw material costs.
C) advertising costs.
D) electricity costs for packaging equipment.
31. 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.
32. The production budget uses all of the following except:
A) the sales forecast.
B) the inventory policy.
C) the cash receipts budget.
D) the beginning inventory quantity.
33. Which of the following costs are included in the cost
classification that is based on the relationship between total cost
and volume of activity?
A) Variable cost and fixed cost.
B) Direct cost and indirect cost.
C) Product cost and period cost.
D) Committed cost and discretionary cost.
34. Fixed costs classified according to the time frame
perspective are known as:
A) Direct cost and indirect cost.
B) Constant and inconsistent cost.
C) Committed cost and discretionary cost.
D) Product cost and period cost.
35. Developing a standard cost for a product or service will
usually involve:
A) efforts of cost accounting personnel only.
B) focusing only on variable costs.
C) the same kind of communication involved in the
overall budgeting process.
D) concentrating on historical costs and performance levels.
36. Once standard costs for products or services have been developed:
A) they must be updated monthly to be useful.
B) they can be used for more than planning and control purposes.
C) they need not be revised unless the product or
service is modified.
D) performance reports must be issued if the standards
are to be useful. |
