In the context of an audit of financial statements, substantive procedures are audit procedures that

In the context of an audit of financial statements, substantive procedures are audit procedures that 

a. May be eliminated under certain conditions.
b. May be either tests of details of transactions, tests of details of account balances, or analytical procedures.
c. Are primarily designed to ensure the effective operation of internal controls.
d. Will increase proportionately with an increase in the auditor's reliance on internal control.

Answer: B

Hawkins requested permission to communicate with the predecessor auditor and review certain portions of the predecessor auditor's working papers. The prospective client's refusal to permit this will bear directly on Hawkins' decision concerning the

Hawkins requested permission to communicate with the predecessor auditor and review certain portions of the predecessor auditor's working papers. The prospective client's refusal to permit this will bear directly on Hawkins' decision concerning the

a. Adequacy of the pre planned audit program.
b. Ability to establish consistency in application of accounting principles between years.
c. Integrity of management.
d. Apparent scope limitation.

Answer: C

Name three Sarbanes-Oxley Act requirements of the members and duties of the audit committee of a public company.

Name three Sarbanes-Oxley Act requirements of the members and duties of the audit committee of a public company.

-MEMBER OF THE BOARD OF DIRECTORS AND INDEPENDENT OF THE COMPANY/MANAGEMENT

-ONLY COMPENSATED FOR SERVING ON THE BOARD/AUDIT COMMITTEE.

-HIRES THE AUDITOR AND OVERSEES THE AUDIT WORK

-APPROVES ALL NON AUDIT SERVICES

-MUST ESTABLISH PROCEDURES FOR COMPLAINTS/WHISTLEBLOWING.

-MUST HAVE THE AUTHORITY TO ENGAGE INDEPENDENT COUNSEL.

_____ is the term for the written agreement that documents the understanding between the auditor and the client regarding the responsibilities of both parties.

_____ is the term for the written agreement that documents the understanding between the auditor and the client regarding the responsibilities of both parties.

Answer: Engagement Letter

Write out the acronym (i.e., memory device) that you learned to help you remember the 10 GAAS standards. I'm only asking for the acronym, not the standards themselves.

Write out the acronym (i.e., memory device) that you learned to help you remember the 10 GAAS standards. I'm only asking for the acronym, not the standards themselves.

Answer: Tip Pie Aced

Which of the following statements best describes the role of audit risk in a financial statement audit?

Which of the following statements best describes the role of audit risk in a financial statement audit?

A. Audit risk indicates that the auditor has tested all transactions.
B. The client company takes on audit risk, because an independent third party is performing the audit.
C. Audit risk indicates that the auditor has not tested everything, so there is still risk that a misstatement is present upon the completion of the audit.
D. Audit risk is the risk that a misstatement would likely change the judgment of a reasonable financial statement user.

Answer: C

Which of the following best describes the concept of audit risk?

Which of the following best describes the concept of audit risk?

A. The risk of the auditor being sued because of association with an audit client.
B. The overall risk that a material misstatement exists in the financial statements.
C. The risk that the auditor will provide an unqualified opinion on financial statements that are, in fact, materially misstated.
D. The risk that auditors use audit procedures that are inappropriate.

Answer: C

Which of the following statements best describes the role of materiality in a financial statement audit?

Which of the following statements best describes the role of materiality in a financial statement audit?

A. Materiality refers to the "material" from which audit evidence is developed.
B. The higher the level at which the auditor assesses materiality, the greater the amount of evidence the auditor must gather.
C. The lower the level at which the auditor assesses materiality, the greater the amount of evidence the auditor must gather.
D. The level of materiality has no bearing on the amount of evidence the auditor must gather.

Answer: C

Which one of the following statements best describes the concept of materiality?

Which one of the following statements best describes the concept of materiality? 

A. Materiality is determined by reference to specific quantitative guidelines established by the AICPA.
B. Materiality is largely a matter of professional judgment.
C. Materiality depends only on the dollar amount of an item relative to other items in the financial statements.
D. Materiality depends on the nature of an item but not on the dollar amount of the item.

Answer: B

Evidence is relevant if it:

Evidence is relevant if it:

A. Signals the true state of a management assertion.
B. Applies to the period being audited.
C. Relates to the audit assertion being tested.
D. Is consistent with management's assertions.

Answer: C

Evidence is reliable if it:

Evidence is reliable if it:

A. Signals the true state of a management assertion.
B. Applies to the period being audited.
C. Relates to the audit assertion being tested.
D. Is consistent with management's assertions.

Answer: A

When conducting a financial statement audit, the auditor must gather evidence about management's assertions and ascertain the degree of correspondence between those assertions and established criteria. What are the established criteria to which financial statement auditors generally compare management's assertions?

When conducting a financial statement audit, the auditor must gather evidence about management's assertions and ascertain the degree of correspondence between those assertions and established criteria. What are the established criteria to which financial statement auditors generally compare management's assertions?

Answer: GAAP

The definition of auditing refers to auditing as a "systematic process of objectively obtaining and evaluating evidence regarding assertions" What is meant by "systematic process"?

The definition of auditing refers to auditing as a "systematic process of objectively obtaining and evaluating evidence regarding assertions" What is meant by "systematic process"? 

A. All audits involve obtaining the same evidence.
B. All audits involve evaluating evidence in the same manner.
C. All assertions are equally important for all audits.
D. There should be a well-planned approach for obtaining and evaluating evidence.

Answer: D

Which of the following best describes the general character of the subset of generally accepted auditing standards classified as standards of reporting?

Which of the following best describes the general character of the subset of generally accepted auditing standards classified as standards of reporting?

A. Requirements regarding the competence, independence, and professional care of persons performing the audit.
B. Criteria for the content of the auditor's report on financial statements and related footnote disclosures.
C. Criteria for audit planning and evidence gathering.
D. Specific recommendations for establishing materiality and setting audit risk.

Answer: B

Which of the following best describes the general character of the subset of generally accepted auditing standards classified as standards of field work?

Which of the following best describes the general character of the subset of generally accepted auditing standards classified as standards of field work?

A. Requirements regarding the competence, independence, and professional care of persons performing the audit.
B. Criteria for the content of the auditor's report on financial statements and related footnote disclosures.
C. Criteria for audit planning and evidence gathering.
D. Specific recommendations for establishing materiality and setting audit risk.

Answer: C

Which of the following best describes the general character of the subset of generally accepted auditing standards classified as general standards?

Which of the following best describes the general character of the subset of generally accepted auditing standards classified as general standards?

A. Requirements regarding the competence, independence, and professional care of persons performing the audit.
B. Criteria for the content of the auditor's report on financial statements and related footnote disclosures.
C. Criteria for audit planning and evidence gathering.
D. Specific recommendations for establishing materiality and setting audit risk.

Answer: A

Which of the following represents the combined sum of direct materials and direct labor?

Which of the following represents the combined sum of direct materials and direct labor?

a) conversion costs
b) period costs
c) prime costs
d) fixed costs








Answer: C

Which of the following represents the combined sum of direct labor and manufacturing overhead?

Which of the following represents the combined sum of direct labor and manufacturing overhead?

a) conversion costs
b) period costs
c) prime costs
d) fixed costs






Answer: A

Which of the following is both a prime cost and a conversion cost?

Which of the following is both a prime cost and a conversion cost?

a) manufacturing overhead
b) direct materials
c) direct labor
d) selling expenses

Answer: C

For a manufacturing business, which of the following would be considered a period cost?

For a manufacturing business, which of the following would be considered a period cost?

a) indirect materials
b) factory utilities
c) direct labor
d) sales salaries

Answer: D

Which of the following correctly describes the accounting for advertising costs?

Which of the following correctly describes the accounting for advertising costs?

a) advertising costs are product costs are expensed as incurred
b) advertising costs are period costs and are expensed as incurred
c) advertising costs are product costs and are expensed when the manufactured product is sold
d) advertising costs are period costs and are expensed when the manufactured product is sold

Answer: B

Which of the following correctly describes the accounting for administrative expenses of a manufacturing company?

Which of the following correctly describes the accounting for administrative expenses of a manufacturing company?

a) administrative costs are product costs are expensed as incurred
b) administrative costs are period costs and are expensed as incurred
c) administrative costs are product costs and are expensed when the manufactured product is sold
d) administrative costs are period costs and are expensed when the manufactured product is sold

Answer: B

In a manufacturing firm, which of the following is an example of a period cost?

In a manufacturing firm, which of the following is an example of a period cost?

Answer: advertising expense.

Period costs are the:

Period costs are the:

Answer: costs that are incurred and expensed during the same accounting period.

Product costs are expensed:

Product costs are expensed:

Answer: when the products are consumed to sold.

Goods that have been started in the manufacturing process but are not yet complete are included in:

Goods that have been started in the manufacturing process but are not yet complete are included in:

Answer: the work-in process inventory account.

For a manufacturing company, which of the following is a period cost?

For a manufacturing company, which of the following is a period cost?

a) direct materials
b) office rent
c) wages expense of factory workers
d) indirect materials

Answer: B

What is total quality management (TQM)?

What is total quality management (TQM)?

Answer: a philosophy of supplying customers with superior products and services.

Which of the following describes a system in which suppliers deliver materials at the time they are needed and finished units are completed when customer orders need to be filled?

Which of the following describes a system in which suppliers deliver materials at the time they are needed and finished units are completed when customer orders need to be filled?

Answer: Just-In-Time (JIN) management.

Which of the following statements is true of financial accounting?

Which of the following statements is true of financial accounting?

Answer: it provides information to investors needed for their investment decisions.

Management accounting information of a company is primarily used by:

Management accounting information of a company is primarily used by:

Answer: its employees to plan and control operations.

Moore Sales purchased some equipment for $50,000 by issuing a 6-month Note Payable. How would this transaction be shown on the statement of cash flows?

Moore Sales purchased some equipment for $50,000 by issuing a 6-month Note Payable. How would this transaction be shown on the statement of cash flows?

Answer: In the non-cash financing and investing activities section.

Which is a cash outflow for a financing activity on the statement of cash flows?

Which is a cash outflow for a financing activity on the statement of cash flows?

Answer: payment of dividends.

Which section of the statement of cash flows include activities that increase and decrease long-time liabilities and stockholders equity?

Which section of the statement of cash flows include activities that increase and decrease long-time liabilities and stockholders equity?

Answer: financing section.

Which section of the statement of cash flows include activities that affect Net Income on the income statement? (assume indirect method is used)

Which section of the statement of cash flows include activities that affect Net Income on the income statement? (assume indirect method is used)

Answer: operating section.

Which section of the statement of cash flows include activities that create income, revenue, and expenses of the business?

Which section of the statement of cash flows include activities that create income, revenue, and expenses of the business?

Answer: operating section.

Restricted stock units (RSUs):

Restricted stock units (RSUs):

a. are reported as part of shareholders' equity if payable in shares rather than cash.
b. are reported as part of shareholders' equity if payable in cash rather than shares.
c. are reported as a liability if payable in shares rather than cash.
d. are reported as part of shareholders' equity if the recipient will receive cash or can elect to receive cash.

Answer: A

The company earned $48 million during 2006. At the end of the year, the board of directors declared and paid the contracted amount of preferred dividends as well as $3 per share to common shareholders. No dividends had been declared or paid during 2005. On January 5, the company distributed a 3 for 2 common stock split effected in the form of a stock dividend. What is the balance in retained earnings to be reported on the 2006 balance sheet?

The company earned $48 million during 2006. At the end of the year, the board of directors declared and paid the contracted amount of preferred dividends as well as $3 per share to common shareholders. No dividends had been declared or paid during 2005. On January 5, the company distributed a 3 for 2 common stock split effected in the form of a stock dividend. What is the balance in retained earnings to be reported on the 2006 balance sheet?

A) $143 million
B) $152 million
C) $160 million
D) $188 million

Answer: A

At the beginning of 2006, Priester Dental Supplies had outstanding 4 million shares of $100 par, 8% cumulative, non-participating preferred stock and 20 million shares of $1 par common stock. During 2006, Priester declared and paid cash dividends of $100 million. No dividends had been declared or paid during 2005. On January 12, Priester issued a 5% common stock dividend when the quoted market price the common stock was $20 per share. What amount of cash did Priester distribute to common shareholders?

At the beginning of 2006, Priester Dental Supplies had outstanding 4 million shares of $100 par, 8% cumulative, non-participating preferred stock and 20 million shares of $1 par common stock. During 2006, Priester declared and paid cash dividends of $100 million. No dividends had been declared or paid during 2005. On January 12, Priester issued a 5% common stock dividend when the quoted market price the common stock was $20 per share. What amount of cash did Priester distribute to common shareholders?

A) $36 million
B) $56 million
C) $68 million
D) $100 million

Answer: A

What amount should CD report as additional paid-in capital in its December 31, 2006, balance sheet?

What amount should CD report as additional paid-in capital in its December 31, 2006, balance sheet?

A) $37 million
B) $56 million
C) $58 million
D) $61 million

Answer: C

What amount should Pharaoh report as additional paid-in capital in its December 31, 2006, balance sheet?

What amount should Pharaoh report as additional paid-in capital in its December 31, 2006, balance sheet?

A) $37 million
B) $56 million
C) $58 million
D) $61 million

Answer: D

During 2006, Jetson declared and paid cash dividends of $45 million. The company also declared and issued a stock dividend. No other changes occurred in shares outstanding during 2006. What was Jetson's net income for 2006?

During 2006, Jetson declared and paid cash dividends of $45 million. The company also declared and issued a stock dividend. No other changes occurred in shares outstanding during 2006. What was Jetson's net income for 2006?

A) $14 million
B) $59 million
C) $65 million
D) $89 million

Answer: D

Chapman Chairs, a family-owned corporation, declared and distributed a property dividend from its overstocked inventory in place of its usual cash dividend. The inventory's carrying value exceeded its fair value. The excess is:

Chapman Chairs, a family-owned corporation, declared and distributed a property dividend from its overstocked inventory in place of its usual cash dividend. The inventory's carrying value exceeded its fair value. The excess is:

A) Not reported.
B) Reported as an ordinary loss.
C) Reported as an extraordinary loss, net of income taxes.
D) Reported as a direct reduction of shareholders' equity.

Answer: B

Westside Shipping issued "preemptive rights" to its existing shareholders without consideration whereby each shareholder is offered the opportunity to buy a percentage of any new shares issued equal to the percentage of shares he/she owns at the time. When Westside issues the rights, which of the following accounts will be increased?

Westside Shipping issued "preemptive rights" to its existing shareholders without consideration whereby each shareholder is offered the opportunity to buy a percentage of any new shares issued equal to the percentage of shares he/she owns at the time. When Westside issues the rights, which of the following accounts will be increased?

A) Common Stock: Yes; Additional Paid-in Capital: Yes
B) Common Stock: Yes; Additional Paid-in Capital: No
C) Common Stock: No; Additional Paid-in Capital: No
D) Common Stock: No; Additional Paid-in Capital: Yes

Answer: C

Sanderson Sofas, a family-owned corporation, issued 6.75% bonds with a face amount of $12 million, together with 2 million shares of its $1 par value common stock, for a combined cash amount of $22 million. The market value of Sanderson's stock cannot be determined. The bonds would have sold for $9 million if issued separately. Sanderson should record for paid-in capital - excess of par on the transaction in the amount of:

Sanderson Sofas, a family-owned corporation, issued 6.75% bonds with a face amount of $12 million, together with 2 million shares of its $1 par value common stock, for a combined cash amount of $22 million. The market value of Sanderson's stock cannot be determined. The bonds would have sold for $9 million if issued separately. Sanderson should record for paid-in capital - excess of par on the transaction in the amount of:

A) 8 million
B) 9 million
C) $11 million
D) $13 million

Answer: C

On January 5, 2007, Holmes purchased 1 million treasury shares for $9 million. Immediately after the purchase of the shares, the balances in the paid-in capital— excess of par and retained earnings accounts are:

On January 5, 2007, Holmes purchased 1 million treasury shares for $9 million. Immediately after the purchase of the shares, the balances in the paid-in capital— excess of par and retained earnings accounts are:

A) Paid-in capital - excess of par: $540; Retained earnings: $280
B) Paid-in capital - excess of par: $540; Retained earnings: $272
C) Paid-in capital - excess of par: $534; Retained earnings: $278
D) Paid-in capital - excess of par: $532; Retained earnings: $280

Answer: A

On January 5, 2007, Epsom purchased and retired 1 million shares for $9 million. Immediately after retirement of the shares, the balances in the paid-in capital - excess of par and retained earnings accounts are:

On January 5, 2007, Epsom purchased and retired 1 million shares for $9 million. Immediately after retirement of the shares, the balances in the paid-in capital - excess of par and retained earnings accounts are:

A) Paid-in capital - excess of par: $540; Retained earnings: $280
B) Paid-in capital - excess of par: $540; Retained earnings: $272
C) Paid-in capital - excess of par: $534; Retained earnings: $278
D) Paid-in capital - excess of par: $532; Retained earnings: $280

Answer: C

Motorsports Company retires shares it buys back. In its first share repurchase transaction, Motorsports purchased stock for more than the price at which the stock was originally issued. What is the effect of the purchase of the stock on each of the following?

Motorsports Company retires shares it buys back. In its first share repurchase transaction, Motorsports purchased stock for more than the price at which the stock was originally issued. What is the effect of the purchase of the stock on each of the following?

A) Retained earnings: decrease; Paid-in capital: decrease
B) Retained earnings: decrease; Paid-in capital: no effect
C) Retained earnings: no effect; Paid-in capital: no effect
D) Retained earnings: no effect; Paid-in capital: decrease

Answer: A

What is the effect of the declaration and subsequent issuance of a stock split (not effected in the form of a stock dividend) on each of the following?

What is the effect of the declaration and subsequent issuance of a stock split (not effected in the form of a stock dividend) on each of the following?

A) Retained earnings: no effect; Paid-in capital: no effect
B) Retained earnings: no effect; Paid-in capital: increase
C) Retained earnings: increase; Paid-in capital: decrease
D) Retained earnings: decrease; Paid-in capital: increase

Answer: A

Encore Industries owned investment securities with a carrying amount of $45 million on August 12. At that time, Encore's board of directors declared a property dividend consisting of these securities. The fair value of the securities was as follows:

Encore Industries owned investment securities with a carrying amount of $45 million on August 12. At that time, Encore's board of directors declared a property dividend consisting of these securities. The fair value of the securities was as follows: 

Declaration - August 12 $58 million
Record date - September 1 62 million
Distribution date - September 20 60 million
What amount of gain should Encore recognize in earnings in connection with this property dividend?



A) $0
B) $13 million
C) $15 million
D) $17 million

Answer: B

At the beginning of 2013, Priester Dental Supplies had outstanding 4 million shares of $100 par, 8% cumulative, non-participating preferred stock and 20 million shares of $1 par common stock. During 2013, Priester declared and paid cash dividends of $100 million. No dividends had been declared or paid during 2012. On January 12, Priester issued a 5% common stock dividend when the quoted market price the common stock was $20 per share. What amount of cash did Priester distribute to common shareholders?

At the beginning of 2013, Priester Dental Supplies had outstanding 4 million shares of $100 par, 8% cumulative, non-participating preferred stock and 20 million shares of $1 par common stock. During 2013, Priester declared and paid cash dividends of $100 million. No dividends had been declared or paid during 2012. On January 12, Priester issued a 5% common stock dividend when the quoted market price the common stock was $20 per share. What amount of cash did Priester distribute to common shareholders?

A) $36 million.
B) $56 million.
C) $68 million.
D) $100 million.

Answer: A

Westside Shipping issued "preemptive rights" to its existing shareholders without consideration whereby each shareholder is offered the opportunity to buy a percentage of any new shares issued equal to the percentage of shares he/she owns at the time. When Westside issues the rights, which of the following accounts will be increased?

Westside Shipping issued "preemptive rights" to its existing shareholders without consideration whereby each shareholder is offered the opportunity to buy a percentage of any new shares issued equal to the percentage of shares he/she owns at the time. When Westside issues the rights, which of the following accounts will be increased?

A) Common stock: Yes; Additional paid-in capital: Yes
B) Common stock: Yes; Additional paid-in capital: No
C) Common stock: No; Additional paid-in capital: No
D) Common stock: No; Additional paid-in capital: Yes

Answer: C

Sanderson Sofas, a family-owned corporation, issued 6.75% bonds with a face amount of $12 million, together with 2 million shares of its $1 par value common stock, for a combined cash amount of $22 million. The market value of Sanderson's stock cannot be determined. The bonds would have sold for $9 million if issued separately. Sanderson should record for paid-in capital - excess of par on the transaction in the amount of:

Sanderson Sofas, a family-owned corporation, issued 6.75% bonds with a face amount of $12 million, together with 2 million shares of its $1 par value common stock, for a combined cash amount of $22 million. The market value of Sanderson's stock cannot be determined. The bonds would have sold for $9 million if issued separately. Sanderson should record for paid-in capital - excess of par on the transaction in the amount of:

A) $8 million.
B) $9 million.
C) $11 million.
D) $13 million.

Answer: C

Gabriel Company views share buybacks as treasury stock. In its first treasury stock transaction, Gabriel purchased treasury stock for more than the price at which the stock was originally issued. What is the effect of the purchase of the treasury stock on each of the following?

Gabriel Company views share buybacks as treasury stock. In its first treasury stock transaction, Gabriel purchased treasury stock for more than the price at which the stock was originally issued. What is the effect of the purchase of the treasury stock on each of the following?

A) Retained earnings: decrease; Paid-in capital: decrease
B) Retained earnings: decrease; Paid-in capital: no effect
C) Retained earnings: no effect; Paid-in capital: no effect
D) Retained earnings: no effect; Paid-in capital: decrease

Answer: C

Motorsports Company retires shares it buys back. In its first share repurchase transaction, Motorsports purchased stock for more than the price at which the stock was originally issued. What is the effect of the purchase of the stock on each of the following?

Motorsports Company retires shares it buys back. In its first share repurchase transaction, Motorsports purchased stock for more than the price at which the stock was originally issued. What is the effect of the purchase of the stock on each of the following?

A) Retained earnings: decrease; Paid-in capital: decrease
B) Retained earnings: decrease; Paid-in capital: no effect
C) Retained earnings: no effect; Paid-in capital: no effect
D) Retained earnings: no effect; Paid-in capital: decrease

Answer: A

Dunavant Service Company views share repurchases as treasury stock. Dunavant purchased shares and then later sold the shares at more than their acquisition price. What is the effect of the sale of the treasury stock on each of the following?

Dunavant Service Company views share repurchases as treasury stock. Dunavant purchased shares and then later sold the shares at more than their acquisition price. What is the effect of the sale of the treasury stock on each of the following?

A) Retained earnings: increase; Paid-in capital: increase
B) Retained earnings: increase; Paid-in capital: no effect
C) Retained earnings: no effect; Paid-in capital: no effect
D) Retained earnings: no effect; Paid-in capital: increase

Answer: D

What is the effect of the declaration and subsequent issuance of a stock split (effected in the form of a stock dividend) on each of the following?

What is the effect of the declaration and subsequent issuance of a stock split (effected in the form of a stock dividend) on each of the following?

A) Retained earnings: no effect; Paid-in capital: no effect
B) Retained earnings: no effect; Paid-in capital: increase
C) Retained earnings: increase; Paid-in capital: decrease
D) Retained earnings: increase; Paid-in capital: increase

Answer: A

What is the effect of the declaration and subsequent issuance of a stock split (not effected in the form of a stock dividend) on each of the following?

What is the effect of the declaration and subsequent issuance of a stock split (not effected in the form of a stock dividend) on each of the following?

A) Retained earnings: no effect; Paid-in capital: no effect
B) Retained earnings: no effect; Paid-in capital: increase.
C) Retained earnings: increase; Paid-in capital: decrease
D) Retained earnings: decrease; Paid-in capital: increase

Answer: A

What is the effect of the declaration and subsequent issuance of a 5% stock dividend on each of the following?

What is the effect of the declaration and subsequent issuance of a 5% stock dividend on each of the following?

A) Retained earnings: no effect; Paid-in capital: no effect
B) Retained earnings: no effect; Paid-in capital: increase
C) Retained earnings: increase; Paid-in capital: decrease
D) Retained earnings: decrease; Paid-in capital: increase

Answer: D

Fancy Imports applies International Financial Reporting Standards. The company issued shares of the company's Class B stock. Fancy Imports should report the stock in the company's statement of financial position

Fancy Imports applies International Financial Reporting Standards. The company issued shares of the company's Class B stock. Fancy Imports should report the stock in the company's statement of financial position

A) as equity unless the shares are redeemable at the option of the issuer.
B) as equity unless the shares are manditorily redeemable.
C) among liabilities if the shares are manditorily redeemable or redeemable at the option of the shareholder.
D) among liabilities unless the shares are manditorily redeemable.

Answer: C

Which of the terms or phrases listed below is more associated with financial statements prepared in accordance with U.S. GAAP than with International Financial Reporting Standards?

Which of the terms or phrases listed below is more associated with financial statements prepared in accordance with U.S. GAAP than with International Financial Reporting Standards?

A) Accumulated other comprehensive income.
B) Asset revaluation reserve.
C) Share premium.
D) Ordinary shares.

Answer: C

At the beginning of 2016, Priester Dental Supplies had outstanding 4 million shares of $100 par, 8% cumulative, non-participating preferred stock and 20 million shares of $1 par common stock. During 2016, Priester declared and paid cash dividends of $100 million. No dividends had been declared or paid during 2015. On January 12, Priester issued a 5% common stock dividend when the quoted market price the common stock was $20 per share. What amount of cash did Priester distribute to common shareholders?

At the beginning of 2016, Priester Dental Supplies had outstanding 4 million shares of $100 par, 8% cumulative, non-participating preferred stock and 20 million shares of $1 par common stock. During 2016, Priester declared and paid cash dividends of $100 million. No dividends had been declared or paid during 2015. On January 12, Priester issued a 5% common stock dividend when the quoted market price the common stock was $20 per share. What amount of cash did Priester distribute to common shareholders?

A) $36 million
B) $56 million
C) $68 million
D) $100 million

Answer: A

The corporate charter of CD, Inc. authorized the issuance of 6 million, $1 par common shares. During 2016, its first year of operations, CD had the following transactions: -Sold 4 million shares at $15 -Purchased 1 million treasury shares at $18 per share -resold the 1 million treasury shares at $20 What amount should CD report as additional paid-in capital in its December 31, 2016, balance sheet?

The corporate charter of CD, Inc. authorized the issuance of 6 million, $1 par common shares. During 2016, its first year of operations, CD had the following transactions:
-Sold 4 million shares at $15
-Purchased 1 million treasury shares at $18 per share
-resold the 1 million treasury shares at $20
What amount should CD report as additional paid-in capital in its December 31, 2016, balance sheet?

A) $37 million
B) $56 million
C) $58 million
D) $61 million

Answer: C

The corporate charter of Pharaoh Tent Co. authorized the issuance of 6 million, $1 par common shares. During 2016, its first year of operations, Pharaoh had the following transactions: What amount should Pharaoh report as additional paid-in capital in its December 31, 2016, balance sheet?

The corporate charter of Pharaoh Tent Co. authorized the issuance of 6 million, $1 par common shares. During 2016, its first year of operations, Pharaoh had the following transactions:

What amount should Pharaoh report as additional paid-in capital in its December 31, 2016, balance sheet?

A) $37 million
B) $56 million
C) $58 million
D) $61 million

Answer: D

The following data were reported in the shareholders' equity section of the Jetson Company's comparative balance sheets for the years ended December 31: During 2016, Jetson declared and paid cash dividends of $45 million. The company also declared and issued a stock dividend. No other changes occurred in shares outstanding during 2016. What was Jetson's net income for 2016?

The following data were reported in the shareholders' equity section of the Jetson Company's comparative balance sheets for the years ended December 31:

During 2016, Jetson declared and paid cash dividends of $45 million. The company also declared and issued a stock dividend. No other changes occurred in shares outstanding during 2016. What was Jetson's net income for 2016?

A) $14 million
B) $59 million
C) $65 million
D) $89 million

Answer: D

Chapman Chairs, a family-owned corporation, declared and distributed a property dividend from its overstocked inventory in place of its usual cash dividend. The inventory's book value exceeded its fair value. The excess is:

Chapman Chairs, a family-owned corporation, declared and distributed a property dividend from its overstocked inventory in place of its usual cash dividend. The inventory's book value exceeded its fair value. The excess is:

A) Not reported.
B) Reported as a loss.
C) Reported as other comprehensive income.
D) Reported as a direct reduction of shareholders' equity.

Answer: B

Westside Shipping issued "preemptive rights" to its existing shareholders without consideration whereby each shareholder is offered the opportunity to buy a percentage of any new shares issued equal to the percentage of shares he/she owns at the time. When Westside issues the rights, which of the following accounts will be increased?

Westside Shipping issued "preemptive rights" to its existing shareholders without consideration whereby each shareholder is offered the opportunity to buy a percentage of any new shares issued equal to the percentage of shares he/she owns at the time. When Westside issues the rights, which of the following accounts will be increased?

Common stock no, additional PIC no

Treasury stock transactions may cause:



A) An increase in the balance of retained earnings.
B) A decrease in the balance of retained earnings.
C) An increase or a decrease in the amount of net income.
D) An increase or a decrease in the par value per share

Answer: B

Sanderson Sofas, a family-owned corporation, issued 6.75% bonds with a face amount of $12 million, together with 2 million shares of its $1 par value common stock, for a combined cash amount of $22 million. The market value of Sanderson's stock cannot be determined. The bonds would have sold for $9 million if issued separately. Sanderson should record for paid-in capital - excess of par on the transaction in the amount of:

Sanderson Sofas, a family-owned corporation, issued 6.75% bonds with a face amount of $12 million, together with 2 million shares of its $1 par value common stock, for a combined cash amount of $22 million. The market value of Sanderson's stock cannot be determined. The bonds would have sold for $9 million if issued separately. Sanderson should record for paid-in capital - excess of par on the transaction in the amount of:

A) $8 million
B) $9 million
C) $11 million
D) $13 million

Answer: C

Gabriel Company views share buybacks as treasury stock. In its first treasury stock transaction, Gabriel purchased treasury stock for more than the price at which the stock was originally issued. What is the effect of the purchase of the treasury stock on each of the following?

Gabriel Company views share buybacks as treasury stock. In its first treasury stock transaction, Gabriel purchased treasury stock for more than the price at which the stock was originally issued. What is the effect of the purchase of the treasury stock on each of the following?

Retained earnings Paid in Capital

a. No effect no effect
b. No effect Increase
c. Increase decrease
d. decrease decrease



A) a
B) b
C) c
D) d






Answer: A

Motorsports Company retires shares it buys back. In its first share repurchase transaction, Motorsports purchased stock for more than the price at which the stock was originally issued. What is the effect of the purchase of the stock on each of the following?

Motorsports Company retires shares it buys back. In its first share repurchase transaction, Motorsports purchased stock for more than the price at which the stock was originally issued. What is the effect of the purchase of the stock on each of the following?

Retained earnings Paid in Capital

a. No effect no effect
b. No effect Increase
c. Increase decrease
d. decrease decrease




A) a
B) b
C) c
D) d

Answer: D

Dunavant Service Company views share repurchases as treasury stock. Dunavant purchased shares and then later sold the shares at more than their acquisition price. What is the effect of the sale of the treasury stock on each of the following?

Dunavant Service Company views share repurchases as treasury stock. Dunavant purchased shares and then later sold the shares at more than their acquisition price. What is the effect of the sale of the treasury stock on each of the following?

Retained earnings Paid in Capital

a. No effect no effect
b. No effect Increase
c. Increase decrease
d. decrease increase




A) a
B) b
C) c
D) d

Answer: B

What is the effect of the declaration and subsequent issuance of a stock split (effected in the form of a stock dividend) on each of the following?

What is the effect of the declaration and subsequent issuance of a stock split (effected in the form of a stock dividend) on each of the following?

Retained earnings Paid in Capital


a. No effect no effect
b. No effect Increase
c. Increase decrease
d. decrease increase



A) a
B) b
C) c
D) d

Answer: A

What is the effect of the declaration and subsequent issuance of a stock split (not effected in the form of a stock dividend) on each of the following?

What is the effect of the declaration and subsequent issuance of a stock split (not effected in the form of a stock dividend) on each of the following?

Retained earnings Paid in Capital


a. No effect no effect
b. No effect Increase
c. Increase decrease
d. decrease increase



A) a
B) b
C) c
D) d

Answer: A

What is the effect of the declaration and subsequent issuance of a 5% stock dividend on each of the following?

What is the effect of the declaration and subsequent issuance of a 5% stock dividend on each of the following?

Retained earnings Paid in Capital


a. No effect no effect
b. No effect Increase
c. Increase decrease
d. decrease increase



A) a
B) b
C) c
D) d

Answer: D

Encore Industries owned investment securities with a book value of $45 million on August 12. At that time, Encore's board of directors declared a property dividend consisting of these securities. The fair value of the securities was as follows:

Encore Industries owned investment securities with a book value of $45 million on August 12. At that time, Encore's board of directors declared a property dividend consisting of these securities. The fair value of the securities was as follows:

What amount of gain should Encore recognize in earnings in connection with this property dividend?


A) $0
B) $13 million
C) $15 million
D) $17 million

Answer: B

Bossidy and Charan believe that to excel at execution, a leader should

Bossidy and Charan believe that to excel at execution, a leader should 

A. be hands-off once the strategy is set.
B. micromanage the tactics.
C. empower employees to take over the execution.
D. probe for weaknesses in the substance and details.
E. let the plan run its course before attempting to revise it.

Answer: D

Which of the following is not a behavior of a leader who executes?

Which of the following is not a behavior of a leader who executes? 

A. Reward the doers.
B. Insist on realism.
C. Follow through.
D. Know yourself.
E. Respect others' limitations.

Answer: E

Which of the following is not a question that Bossidy and Charan believe a strong strategic plan must address?

Which of the following is not a question that Bossidy and Charan believe a strong strategic plan must address? 

A. How will deviations from the plan be handled?
B. What is the assessment of the external environment?
C. What are the critical issues facing the business?
D. Can the business execute the strategy?
E. Are the short term and long term balanced?

Answer: A

According to Bossidy and Charan, which business process is most important for effective execution?

According to Bossidy and Charan, which business process is most important for effective execution?

A. Strategy
B. People
C. Alignment
D. Operations
E. Research

Answer: B

According to Bossidy and Charan, effective ______ requires managers to build a foundation for it within three core process: people, strategy, and operations.

According to Bossidy and Charan, effective ______ requires managers to build a foundation for it within three core process: people, strategy, and operations. 

A. tactical planning
B. strategy
C. follow-through
D. execution
E. controlling

Answer: D

A recent survey found that the top concern among CEOs worldwide is

A recent survey found that the top concern among CEOs worldwide is 

A. profit growth.
B. customer loyalty.
C. excellence in execution.
D. stimulating innovation.
E. finding qualified employees.

Answer: C

Apple's iPad has a very high percentage of the market for tablet computers, and this is also a quickly growing market. Thus, using the BCG matrix, the iPad would be classified as a

Apple's iPad has a very high percentage of the market for tablet computers, and this is also a quickly growing market. Thus, using the BCG matrix, the iPad would be classified as a 

A. star.
B. cloud.
C. question mark.
D. cash cow.
E. dog.

Answer: A

Daniel is assessing his company's portfolio of products. One of them is the best-selling brand of mayonnaise, although this is now a slow-growing market. If Daniel uses the BCG matrix, he would classify this product as a

Daniel is assessing his company's portfolio of products. One of them is the best-selling brand of mayonnaise, although this is now a slow-growing market. If Daniel uses the BCG matrix, he would classify this product as a 

A. star.
B. cloud.
C. question mark.
D. cash cow.
E. dog.

Answer: D

Which of the following strategy tools suggests that an organization will do better in fast-growing markets in which it has a high market share rather than in slow-growing markets in which it has a low market share?

Which of the following strategy tools suggests that an organization will do better in fast-growing markets in which it has a high market share rather than in slow-growing markets in which it has a low market share? 

A. SWOT analysis
B. Porter's model for industry analysis
C. Porter's competitive strategies
D. The BCG matrix
E. Trend analysis

Answer: D

_____ refers to the idea that the economic value of separate, related businesses under one ownership and management is greater together than the businesses are worth separately.

_____ refers to the idea that the economic value of separate, related businesses under one ownership and management is greater together than the businesses are worth separately. 

A. Structural benefit
B. Synergy
C. Selective function
D. Alignment
E. Consolidation

Answer: B

Which of the following is most likely to use a diversification strategy?

Which of the following is most likely to use a diversification strategy? 

A. A tax preparation business
B. A flower shop
C. A lawn service
D. A grocery store
E. A shoe store

Answer: D

Time Warner runs different divisions specializing in television, music, and publishing. Time Warner is using a(n) ______ strategy.

Time Warner runs different divisions specializing in television, music, and publishing. Time Warner is using a(n) ______ strategy. 

A. stability
B. defensive
C. diversification
D. differentiation
E. infiltration

Answer: C

The benefit of the single-product strategy for a company is

The benefit of the single-product strategy for a company is 

A. synergy.
B. focus.
C. isolated systems.
D. differentiation.
E. lower costs.

Answer: B

Which of the following carmakers pursues a focused-differentiation strategy?

Which of the following carmakers pursues a focused-differentiation strategy? 

A. Ferrari
B. Ford
C. Volkswagen
D. Honda
E. Kia

Answer: A

An organization that offers unique, superior products or services to a narrow market is pursuing a strategy of

An organization that offers unique, superior products or services to a narrow market is pursuing a strategy of 

A. cost leadership.
B. differentiation.
C. cost focus.
D. diversification.
E. focused differentiation.

Answer: E

An organization that keeps costs and prices low in targeting a narrow market is pursuing a strategy of

An organization that keeps costs and prices low in targeting a narrow market is pursuing a strategy of 

A. cost leadership.
B. differentiation.
C. cost focus.
D. stability.
E. focused differentiation.

Answer: C

Timex Group USA makes inexpensive but reliable watches sold throughout the United States and is an example of an organization pursuing a _________ strategy.

Timex Group USA makes inexpensive but reliable watches sold throughout the United States and is an example of an organization pursuing a _________ strategy. 

A. cost-leadership
B. differentiation
C. cost-focus
D. focused-differentiation
E. retrenchment

Answer: A

An example of a firm that pursues a differentiation strategy is

An example of a firm that pursues a differentiation strategy is 

A. Cartier.
B. Lexus.
C. Bic.
D. A regional discount gas station chain.
E. Home Depot.

Answer: C

An organization that is offering unique, superior products or services to a wide market is pursuing a strategy of

An organization that is offering unique, superior products or services to a wide market is pursuing a strategy of 

A. cost leadership.
B. differentiation.
C. cost focus.
D. diversification.
E. focused differentiation.

Answer: B

An organization is developing a low-cost line of environmentally friendly cleaning products that it intends to distribute internationally. Here, the organization is following a ______ strategy.

An organization is developing a low-cost line of environmentally friendly cleaning products that it intends to distribute internationally. Here, the organization is following a ______ strategy. 

A. cost leadership
B. differentiation
C. cost focus
D. retrenchment
E. focused-differentiation

Answer: A

Porter's competitive strategies include

Porter's competitive strategies include 

A. prospector, defender, analyzer, and reactor.
B. growth, stability, and retrenchment.
C. cost leadership, differentiation, cost focus, and focused differentiation.
D. strengths, weaknesses, opportunities, and threats.
E. stars, questions marks, cash cows, and dogs.

Answer: C

Oil companies must be aware of other firms' development of ethanol products since this is an example of which one force in Porter's model for industry analysis?

Oil companies must be aware of other firms' development of ethanol products since this is an example of which one force in Porter's model for industry analysis? 

A. Bargaining power of buyers.
B. Rivalry among competitors.
C. Bargaining power of suppliers.
D. Threats of new entrants.
E. Threats of substitute products and services.

Answer: E

Which of the following is not one of the forces that affects industry competition, according to Porter's model for industry analysis?

Which of the following is not one of the forces that affects industry competition, according to Porter's model for industry analysis? 

A. Threats of new entrants.
B. Threats of substitute products and services.
C. Bargaining power of buyers.
D. Threats of government interference.
E. Bargaining power of suppliers.

Answer: D

Creation of alternative hypothetical but equally likely future conditions is called

Creation of alternative hypothetical but equally likely future conditions is called 

A. contingency planning.
B. trend analysis.
C. balancing the scorecard.
D. strategy formulation.
E. forecasting.

Answer: A

A time-series forecast, which is used to predict long-term trends, cyclic patterns, and seasonal variations, is one type of

A time-series forecast, which is used to predict long-term trends, cyclic patterns, and seasonal variations, is one type of 

A. organizational strength.
B. contingency planning.
C. trend analysis.
D. balanced scorecard.
E. strategy formulation.

Answer: C

A vision or projection of the future is called a(n)

A vision or projection of the future is called a(n) 

A. trend.
B. forecast.
C. contingency.
D. strategy.
E. opportunity.

Answer: B

Alexis has prepared a report that details how prices for several raw materials her firm uses in production have risen by up to 30% in the last year. Her report would be an input into the __________ part of a SWOT analysis.

Alexis has prepared a report that details how prices for several raw materials her firm uses in production have risen by up to 30% in the last year. Her report would be an input into the __________ part of a SWOT analysis. 

A. strengths
B. weaknesses
C. opportunities
D. threats
E. structure

Answer: D

Environmental factors that the organization may exploit for a competitive advantage are known as

Environmental factors that the organization may exploit for a competitive advantage are known as 

A. organizational strengths.
B. organizational opportunities.
C. organizational threats.
D. organizational weaknesses.
E. competitive strategies.

Answer: B

The skills and capabilities that give the organization advantages in executing strategies in pursuit of its mission are known as

The skills and capabilities that give the organization advantages in executing strategies in pursuit of its mission are known as 

A. organizational strengths.
B. organizational opportunities.
C. organizational threats.
D. organizational weaknesses.
E. competitive strategies.

Answer: A

Amanda has just determined that her employees will require extensive training if they are to acquire the necessary technological expertise to produce a new product line. She has discovered one of her firm's

Amanda has just determined that her employees will require extensive training if they are to acquire the necessary technological expertise to produce a new product line. She has discovered one of her firm's 

A. strengths.
B. weaknesses.
C. opportunities.
D. threats.
E. market challenges.

Answer: B

A manager assessing the organization's access to capital is involved in analysis of

A manager assessing the organization's access to capital is involved in analysis of 

A. strengths.
B. weaknesses.
C. opportunities.
D. threats.
E. strengths or weaknesses depending on the outcome of the assessment

Answer: E

Analysis of changing demographics of the U.S. population would be part of the assessment of a company's

Analysis of changing demographics of the U.S. population would be part of the assessment of a company's 

A. strengths.
B. weaknesses.
C. opportunities.
D. threats.
E. opportunities or threats depending on the outcome of the analysis.

Answer: E

When analyzing the "T" in SWOT analysis, a manager might take note of

When analyzing the "T" in SWOT analysis, a manager might take note of 

A. the firm's cash flow problems.
B. a competitor's new product.
C. employee absenteeism.
D. strong corporate culture.
E. high service levels.

Answer: B

When analyzing the "O" in SWOT analysis, a manager might take note of

When analyzing the "O" in SWOT analysis, a manager might take note of 

A. favorable government regulations.
B. absenteeism among employees.
C. good morale among workers.
D. high service levels.
E. good financial position.

Answer: A

When analyzing the "W" in SWOT analysis, a manager might take note of

When analyzing the "W" in SWOT analysis, a manager might take note of 

A. a decrease in consumer demand.
B. a competitor's bankruptcy.
C. high turnover of employees.
D. good financial resources of the firm.
E. institution of a tariff on foreign competitors.

Answer: C

When analyzing the "S" in a SWOT analysis, a manager might take note of

When analyzing the "S" in a SWOT analysis, a manager might take note of 

A. a decrease in the size of the market.
B. competitors' new products.
C. high turnover of employees.
D. strong financial resources of the firm.
E. lifting of governmental regulations.

Answer: D

A situational analysis is also known as

A situational analysis is also known as 

A. strategic control.
B. SWOT analysis.
C. trend analysis.
D. contingency planning.
E. forecasting.

Answer: B

Careful monitoring of an organization's internal and external environment to detect early signs of opportunities and threats that may influence the firm's plans is called

Careful monitoring of an organization's internal and external environment to detect early signs of opportunities and threats that may influence the firm's plans is called 

A. competitive intelligence.
B. forecasting.
C. contingency planning.
D. trend analysis.
E. environmental scanning.

Answer: E

Rafaela is interested in learning more about what one of her competitors is doing so that she can anticipate its upcoming moves and react quickly. Which of the following would you suggest to her for this purpose?

Rafaela is interested in learning more about what one of her competitors is doing so that she can anticipate its upcoming moves and react quickly. Which of the following would you suggest to her for this purpose? 

A. Go through the competitor's trash on its property.
B. Pose as an applicant for a job with the competitor.
C. Use investor information.
D. Call the competitor, explain who you are, and ask directly.
E. Pay the competitor's customers for information.

Answer: C

Which of the following is not a likely source of information for competitive intelligence?

Which of the following is not a likely source of information for competitive intelligence? 

A. Competitors' press releases
B. Industry gossip
C. Competitors' annual reports
D. Competitor's customer records
E. Sales visits to customers

Answer: D

Gaining information about one's competitors' activities so that you can anticipate their moves and react appropriately is called

Gaining information about one's competitors' activities so that you can anticipate their moves and react appropriately is called 

A. strategic forecasting.
B. corporate espionage.
C. contingency planning.
D. trend analysis.
E. competitive intelligence.

Answer: E

Which of the following is not one of Bryan Barry's recommendations to keep a strategic plan on track?

Which of the following is not one of Bryan Barry's recommendations to keep a strategic plan on track? 

A. Keep moving.
B. Engage people.
C. Keep it simple.
D. Avoid compromise.
E. Stay focused.

Answer: D

______ consists of monitoring the execution of strategy and making adjustments, if necessary.

______ consists of monitoring the execution of strategy and making adjustments, if necessary. 

A. Mission translation
B. Strategic control
C. Strategy implementation
D. Contingency planning
E. SWOT analysis

Answer: B

Actively selling strategic plans to middle and supervisory managers, rather than just announcing them, is helpful for

Actively selling strategic plans to middle and supervisory managers, rather than just announcing them, is helpful for 

A. situation analysis.
B. strategy formulation.
C. strategy implementation.
D. contingency planning.
E. strategic control.

Answer: C

The process of choosing among different strategies and altering them to best fit the organization is called

The process of choosing among different strategies and altering them to best fit the organization is called 

A. strategy formulation.
B. contingency planning.
C. strategic control.
D. strategy implementation.
E. trend analysis.

Answer: A

After film manufacturer Kodak failed to reinvent itself and declared bankruptcy in 2012, it decided to focus on its business of making inkjet printers as part of a ______ strategy.

After film manufacturer Kodak failed to reinvent itself and declared bankruptcy in 2012, it decided to focus on its business of making inkjet printers as part of a ______ strategy. 

A. growth
B. stability
C. defensive
D. reorganization
E. reactor

Answer: C

A fine luggage maker was struggling with heavy debt and a sharp decline in customers, and it eventually declared bankruptcy. The company followed which grand strategy?

A fine luggage maker was struggling with heavy debt and a sharp decline in customers, and it eventually declared bankruptcy. The company followed which grand strategy? 

A. Growth
B. Stability
C. Defensive
D. Reduction
E. Reactive

Answer: C

Recently ConocoPhillips, America's third-biggest oil company, spun off its refineries, pipelines, and chemicals division to form a new company called Phillips 66. Now ConocoPhillips will concentrate on its upstream operations. This is a variation of which of these grand strategies?

Recently ConocoPhillips, America's third-biggest oil company, spun off its refineries, pipelines, and chemicals division to form a new company called Phillips 66. Now ConocoPhillips will concentrate on its upstream operations. This is a variation of which of these grand strategies? 

A. Right-size
B. Growth
C. Stability
D. Defensive
E. Reorganization

Answer: D

An Iowa ethanol production company has been suffering from a combination of lower demand for gasoline (into which its product is mixed) and higher corn prices (which is the largest input cost). It has responded by selling off land, buildings, and some of its reserve product inventory. This is a variation of which of these grand strategies?

An Iowa ethanol production company has been suffering from a combination of lower demand for gasoline (into which its product is mixed) and higher corn prices (which is the largest input cost). It has responded by selling off land, buildings, and some of its reserve product inventory. This is a variation of which of these grand strategies? 

A. Right-size
B. Growth
C. Stability
D. Defensive
E. Reorganization

Answer: D

A grand strategy that involves reduction in the organization's efforts is the ______ strategy.

A grand strategy that involves reduction in the organization's efforts is the ______ strategy. 

A. retrenchment
B. reorganization
C. downsizing
D. growth
E. stability

Answer: A

Faisal has been running a commercial real estate business for nearly 30 years. As he approaches retirement, he is content to simply lease the commercial space he currently has, rather than make new deals to develop additional properties. Faisal is using which grand strategy?

Faisal has been running a commercial real estate business for nearly 30 years. As he approaches retirement, he is content to simply lease the commercial space he currently has, rather than make new deals to develop additional properties. Faisal is using which grand strategy? 

A. Stability
B. Retrenchment
C. Inducement
D. Defensive
E. Growth

Answer: A

High Peaks Skate and Snowboard is a small shop that provides equipment for Utah snowboarders in winter months. It has decided to increase advertising during this period in the Salt Lake Tribune and the Park Record in Park City, as well as to sponsor a new on-mountain competition. It is following which strategy?

High Peaks Skate and Snowboard is a small shop that provides equipment for Utah snowboarders in winter months. It has decided to increase advertising during this period in the Salt Lake Tribune and the Park Record in Park City, as well as to sponsor a new on-mountain competition. It is following which strategy? 

A. Inducement
B. Defensive
C. Growth
D. Stability
E. Enhancement

Answer: C

Computer technology corporation Dell recently acquired Quest software, an IT management software provider, in order to expand upon its software expertise and offerings. Dell is pursuing a(n) ______ strategy.

Computer technology corporation Dell recently acquired Quest software, an IT management software provider, in order to expand upon its software expertise and offerings. Dell is pursuing a(n) ______ strategy. 

A. escalation
B. growth
C. stability
D. merger
E. defensive

Answer: B

The common grand strategies are

The common grand strategies are 

A. star, question mark, cash cow, and dog.
B. cost-leadership, differentiation, cost focus, and focused differentiation.
C. growth, stability, and defensive.
D. strengths, weaknesses, opportunities, and threats.
E. defender, prospector, analyzer, and reactor.

Answer: C

Which of the following is a question that should be answered by a company's mission statement?

Which of the following is a question that should be answered by a company's mission statement?

A. Will it inspire enthusiasm and encourage commitment?
B. Does it set standards of excellence?
C. Is it appropriate for the organization?
D. Is it well articulated?
E. Who is our customer?

Answer: E

Which of the following should be included in a good vision statement?

Which of the following should be included in a good vision statement? 

A. Firm's attitude toward its employees.
B. Geographical areas in which the firm will compete.
C. Firm's basic technology.
D. Firm's standards of excellence and high ideals.
E. Firm's major products or services.

Answer: D

Which of the following is not a stage in the strategic-management process?

Which of the following is not a stage in the strategic-management process? 

A. Conduct a trend analysis.
B. Maintain strategic control.
C. Establish the grand strategy.
D. Establish the mission and vision.
E. Carry out the strategic plans.

Answer: A

Which of the following steps of the strategic-management process is the source of its feedback loop?

Which of the following steps of the strategic-management process is the source of its feedback loop?

A. Carry out the strategic plan.
B. Maintain strategic control.
C. Establish the grand strategy.
D. Establish the mission and vision.
E. Formulate the strategic plans.

Answer: B

Which of the following best represents a currently popular strategy among big companies like Apple, Google, and Amazon?

Which of the following best represents a currently popular strategy among big companies like Apple, Google, and Amazon? 

A. Become involved in the community.
B. Seek niches where there is less competition.
C. Get consumers tightly connected to the company's ecosystem.
D. Offer personal or emotional connections to customers.
E. Discourage price comparisons.

Answer: C

Milo owns and manages a small bike repair store. In order to determine if strategic planning will be likely to help his business, Milo should primarily assess

Milo owns and manages a small bike repair store. In order to determine if strategic planning will be likely to help his business, Milo should primarily assess 

A. how many competitors he has.
B. foot traffic by his location.
C. his profitability in the prior six months.
D. industry trends.
E. how much he intends to grow in the next five years.

Answer: A

Anne runs a small bakery on the main street of a resort town. Though hers was the only bakery around, the business had been suffering during the economic slowdown, and she was contemplating whether she should attempt strategic planning. Anne should be aware of what research finding regarding strategic planning?

Anne runs a small bakery on the main street of a resort town. Though hers was the only bakery around, the business had been suffering during the economic slowdown, and she was contemplating whether she should attempt strategic planning. Anne should be aware of what research finding regarding strategic planning? 

A. Only large firms show performance gains from strategic planning.
B. Only small firms show performance gains from strategic planning.
C. Performance gains from strategic planning are equal among small and large firms.
D. Both small and large firms benefit from strategic planning, but small firms get a larger boost in performance.
E. Both small and large firms benefit from strategic planning, but the small improvement in . performance may not be worth the effort for small firms.

Answer: E

A small firm is likely to benefit significantly from strategic planning

A small firm is likely to benefit significantly from strategic planning 

A. regardless of the nature of its industry or market.
B. when it is in a very competitive industry.
C. when it is in a very new industry.
D. when it is in a very stable industry.
E. when it has a very small market.

Answer: B

Consumers can use a national company called Service Magic to receive bids from quality providers of a variety of services, including home remodel, landscaping, plumbing, and housecleaning. Service Magic charges service providers for the leads it provides to them monthly. Which of the following is the source of Service Magic's strategic position?

Consumers can use a national company called Service Magic to receive bids from quality providers of a variety of services, including home remodel, landscaping, plumbing, and housecleaning. Service Magic charges service providers for the leads it provides to them monthly. Which of the following is the source of Service Magic's strategic position? 

A. Low-profit margin and many customers.
B. Broad needs and few customers.
C. Broad needs and many customers.
D. High-profit margin and many customers.
E. High-profit margin and few customers.

Answer: C

Which of the following statements about strategy and strategic positioning is false?

Which of the following statements about strategy and strategic positioning is false? 

A. Many customers with broad needs can be a source of strategic position.
B. A company has to choose not only what strategy to follow but what strategy not to follow.
C. Few customers with broad needs can be a source of strategic position.
D. Strategy involves creating a "fit" among activities.
E. Few customers with narrow needs can be a source of strategic position.

Answer: E

__________ means performing different activities from rivals or performing similar ones in different ways.

__________ means performing different activities from rivals or performing similar ones in different ways. 

A. Competitive planning
B. Distinctive positioning
C. Collaborative planning
D. Strategic segmentation
E. Strategic positioning

Answer: E

Which of the following is not an area in which a company needs to get and stay ahead in order to sustain a competitive advantage?

Which of the following is not an area in which a company needs to get and stay ahead in order to sustain a competitive advantage? 

A. Talented employees
B. Quality
C. Effectiveness
D. Being responsive to customers
E. Innovating

Answer: A

Which of the following is not a typical cause of bad planning?

Which of the following is not a typical cause of bad planning?

A. Information overload.
B. Inadequate planning budgets.
C. Ineffective group dynamics.
D. Poor assessment of an organization's capabilities.
E. Faulty assumptions about the future.

Answer: B

Which of the following statements about strategic planning and strategic management is true?

Which of the following statements about strategic planning and strategic management is true? 

A. Strategic planning is rarely used in the current environment of fast change because it does not allow for flexibility.
B. Strategic management is a process completed by top managers.
C. Both should be implemented because they can provide direction and momentum.
D. Middle managers need not understand strategies; they simply follow them.
E. Strategic planning is used to accomplish tactical goals.

Answer: C

Which of the following would be considered a reason for adopting strategic management and strategic planning?

Which of the following would be considered a reason for adopting strategic management and strategic planning? 

A. To enhance employee loyalty.
B. To keep corporate taxes at a minimum.
C. To develop independent work from the staff.
D. To provide develop a sustainable competitive advantage.
E. To increase market dominance with repeat purchase.

Answer: D

Effective strategic management involves

Effective strategic management involves 

A. only top management.
B. only top and middle management.
C. only middle and lower management levels.
D. only lower management level.
E. managers from all parts of the organization.

Answer: E

"Find out what customers want, then provide it to them as cheaply and quickly as possible" is Walmart's

"Find out what customers want, then provide it to them as cheaply and quickly as possible" is Walmart's 

A. growth plan.
B. technical plan.
C. synergy.
D. strategy.
E. forecast.

Answer: D

A ______ represents an "educated guess" about what must be done in the long term for survival or the prosperity of the organization or its principal parts.

A ______ represents an "educated guess" about what must be done in the long term for survival or the prosperity of the organization or its principal parts. 

A. trend analysis
B. mission
C. strategy
D. forecast
E. contingency plan

Answer: C

Which of the following is an ethical concern of accountants?

Which of the following is an ethical concern of accountants?

a. Earnings manipulation.

b. Conservative accounting.

c. Industry practices.

d. None of the above.







Answer: A

What would be an advantage of having all countries adopt and follow the same accounting standards?

What would be an advantage of having all countries adopt and follow the same accounting standards?

a. Consistency.

b. Comparability.

c. Lower preparation costs.

d. b and c







Answer: D

What is not a reason that accounting standards may differ across countries?

What is not a reason that accounting standards may differ across countries?

a. Governments.

b. Language.

c. Culture.

d. Past Practice.







Answer: B

What is "expectation gap"?

What is "expectation gap"?

a. The difference between what the public thinks the accountant is not doing and what the accountant knows they don't do.

b. The difference between what the public thinks the accountant is doing and what Congress says the accountant is doing.

c. The difference between what the public thinks the accountant is doing and what the accountant thinks they can do.

d. The difference between what the accountant is doing and what the Courts say the accountant should be doing.

Answer: C

What is a possible danger if politics plays too big a role in accounting standard setting?

What is a possible danger if politics plays too big a role in accounting standard setting?

a. Accounting standards that are not truly generally accepted.

b. Individuals may influence the standards.

c. User groups become active.

d. The FASB delegates its authority to elected officials.

Answer: A

What is not a source of pressure that may influence the accounting standard setting process?

What is not a source of pressure that may influence the accounting standard setting process?

a. Congress.

b. Lobbyist.

c. CPA firms.

d. None of the above.







Answer: D

The purpose of the International Accounting Standards Board is to

The purpose of the International Accounting Standards Board is to

a. issue enforceable standards which regulate the financial accounting and reporting of multinational corporations.

b. develop a uniform currency in which the financial transactions of companies throughout the world would be measured.

c. promote uniform accounting standards among countries of the world.

d. arbitrate accounting disputes between auditors and international companies.

Answer: C

Financial accounting standard-setting in the United States

Financial accounting standard-setting in the United States

a. can be described as a social process which reflects political actions of various interested user groups as well as a product of research and logic.

b. is based solely on research and empirical findings.

c. is a legalistic process based on rules promulgated by governmental agencies.

d. is democratic in the sense that a majority of accountants must agree with a standard before it becomes enforceable.

Answer: A

Which of the following is not considered a component of generally accepted accounting principles?

Which of the following is not considered a component of generally accepted accounting principles?

a. FASB Implementation Guides.

b. Widely recognized industry practices.

c. Articles published in CPA journals.

d. AICPA Accounting Interpretations.

Answer: C

What is the purpose of a FASB Staff Position?

What is the purpose of a FASB Staff Position?

a. Provide interpretation of existing standards.

b. Provide a consensus on how to account for new and unusual financial transactions.

c. Provide interpretive guidance.

d. Provide timely guidance on select issues.






Answer: C

Rule 203 of the Code of Professional Conduct addresses:

Rule 203 of the Code of Professional Conduct addresses:

a. ethical requirements.

b. financial statements should be based on generally accepted accounting principles.

c. advertising to obtained clients.

d. auditing financial statements.






Answer: B

Which of the following publications does not qualify as a statement of generally accepted accounting principles?

Which of the following publications does not qualify as a statement of generally accepted accounting principles?

a. Statements of financial standards issued by the FASB

b. Accounting interpretations issued by the FASB

c. APB Opinions

d. Accounting research studies issued by the AICPA

Answer: D

Which of the following is not a part of generally accepted accounting principles?

Which of the following is not a part of generally accepted accounting principles?

a. FASB Interpretations

b. CAP Accounting Research Bulletins

c. APB Opinions

d. All of these are part of generally accepted accounting principles.







Answer: D

The most significant current source of generally accepted accounting principles is the

The most significant current source of generally accepted accounting principles is the

a. AICPA.

b. SEC.

c. APB.

d. FASB.







Answer: D

Generally accepted accounting principles

Generally accepted accounting principles

a. include detailed practices and procedures as well as broad guidelines of general application.

b. are influenced by pronouncements of the SEC and IRS.

c. change over time as the nature of the business environment changes.

d. all of these.

Answer: D

The following are part of the "due process" system used by the FASB in the evolution of a typical FASB Statement of Financial Accounting Standards:

The following are part of the "due process" system used by the FASB in the evolution of a typical FASB Statement of Financial Accounting Standards:

1. Exposure Draft

2. Statement of Financial Accounting Standards

3. Preliminary Views

The chronological order in which these items are released is as follows:


a. 1, 2, 3.

b. 1, 3, 2.

c. 2, 3, 1.

d. 3, 1, 2.

Answer: D