Simmons Company has required sales of $1,500,000 to meet its target net income. It has fixed costs of $200,000 and the contribution margin ratio is 40%. The company's target net income is

Simmons Company has required sales of $1,500,000 to meet its target net income. It has fixed costs of $200,000 and the contribution margin ratio is 40%. The company's target net income is 

A. $400,000.
B. $500,000.
C. $1,300,000.
D. $600,000.

Answer: A

Bergman Company has total fixed costs of $350,000 and a contribution margin ratio of 20%. Hampton's target net income is $250,000. Sales in dollars to meet the target net income would be

Bergman Company has total fixed costs of $350,000 and a contribution margin ratio of 20%. Hampton's target net income is $250,000. Sales in dollars to meet the target net income would be

A. $600,000.
B. $1,250,000.
C. $3,000,000.
D. $1,750,000.

Answer: C

Required sales in dollars to meet a target net income is computed by dividing

Required sales in dollars to meet a target net income is computed by dividing

A. variable costs plus target net income by contribution margin per unit.
B. fixed costs plus target net income by contribution margin ratio.
C. total costs plus target net income by contribution margin ratio.
D. fixed costs plus target net income by contribution margin per unit.

Answer: B

The mathematical equation for computing required sales to obtain target net income is: Required sales =

The mathematical equation for computing required sales to obtain target net income is: Required sales = 

A. no correct answer is given.
B. variable costs + fixed costs + target net income.
C. variable costs + target net income.
D. fixed costs + target net income.

Answer: B

Palms, Inc. wants to sell enough palm trees to earn a profit of $20,000. If the unit sales price is $40, unit variable cost is $22, and total fixed costs are $120,400, how many trees must be sold to earn a profit of $20,000?

Palms, Inc. wants to sell enough palm trees to earn a profit of $20,000. If the unit sales price is $40, unit variable cost is $22, and total fixed costs are $120,400, how many trees must be sold to earn a profit of $20,000?

A. 7,800.
B. 312,000.
C. 6,689.
D. 8,911.

Answer: A

Moss, Inc. has total fixed costs of $56,000 and a contribution margin ratio of 40%. Moss wants to generate net income totaling $35,000. How much will sales revenue be at Moss' target net income?

Moss, Inc. has total fixed costs of $56,000 and a contribution margin ratio of 40%. Moss wants to generate net income totaling $35,000. How much will sales revenue be at Moss' target net income?

A. $127,400.
B. $227,500.
C. $57,400.
D. $140,000.

Answer: B

T/F Target net income is an income objective for individual product lines set by management.

T/F Target net income is an income objective for individual product lines set by management.

Answer: True

Maya Company manufactures a product which sells for $20 each. Each unit of product has a variable cost of $5 to manufacture. Fixed costs normally incurred are $60,000. Maya Company is considering automating the manufacturing process, which would require a capital investment which would increase fixed costs by $30,000. As a result of the automation, variable costs would decrease by 20%. What would the new breakeven level in units be for Maya Company if it decides to automate the manufacturing process?

Maya Company manufactures a product which sells for $20 each. Each unit of product has a variable cost of $5 to manufacture. Fixed costs normally incurred are $60,000. Maya Company is considering automating the manufacturing process, which would require a capital investment which would increase fixed costs by $30,000. As a result of the automation, variable costs would decrease by 20%. What would the new breakeven level in units be for Maya Company if it decides to automate the manufacturing process?

A. 5,625 units.
B. 4,000 units.
C. 6,000 units.
D. 3,750 units.

Answer: A

Dahlia Company sells a product which has a unit selling price of $5. Variable costs are 60% of the sales and total fixed costs are $200,000. The number of units that the Dahlia Company must sell to break even is

Dahlia Company sells a product which has a unit selling price of $5. Variable costs are 60% of the sales and total fixed costs are $200,000. The number of units that the Dahlia Company must sell to break even is

A. 400,000 units.
B. 66,667 units.
C. 100,000 units.
D. 40,000 units.

Answer: C

Benson Company produces flash drives for computers which have variable costs of $10 per flash drive to produce. Each flash drive sells for $20 each. During the current month, 1,000 flash drives were sold. Fixed costs for the current month were $4,500. If variable costs increase by 10%, what happens to the breakeven level in units for the month for Benson Company?

Benson Company produces flash drives for computers which have variable costs of $10 per flash drive to produce. Each flash drive sells for $20 each. During the current month, 1,000 flash drives were sold. Fixed costs for the current month were $4,500. If variable costs increase by 10%, what happens to the breakeven level in units for the month for Benson Company?

A. It is 10% higher than the original breakeven point.
B. It increases by 50 units.
C. It depends on the number of units the company expects to produce and sell.
D. It is 10% lower than the original breakeven point.

Answer: B

Walden Company expects to sell 500,000 units for $6 per unit. The contribution margin ratio is 30%. If Walden will break even at this level of sales, fixed costs are

Walden Company expects to sell 500,000 units for $6 per unit. The contribution margin ratio is 30%. If Walden will break even at this level of sales, fixed costs are

A. $300,000.
B. $2,100,000.
C. $150,000.
D. $900,000.

Answer: D

At the break-even point

At the break-even point

A. sales equal total fixed costs.
B. contribution margin equals total fixed costs.
C. sales equal total variable costs.
D. contribution margin equals total variable costs.

Answer: B

The break-even point in dollars is computed by dividing

The break-even point in dollars is computed by dividing

A. variable costs by contribution margin per unit.
B. variable costs by contribution margin ratio.
C. fixed costs by contribution margin ratio.
D. fixed costs by contribution margin per unit.

Answer: C

The break-even point can be

The break-even point can be

A. computed from a mathematical equation.
B. computed by using contribution margin.
C. derived from a cost-volume-profit graph.
D. all of the options are correct.

Answer: D

Gossen Company is planning to sell 200,000 pliers for $4 per unit. The contribution margin ratio is 25%. If Gossen will break even at this level of sales, what are the fixed costs?

Gossen Company is planning to sell 200,000 pliers for $4 per unit. The contribution margin ratio is 25%. If Gossen will break even at this level of sales, what are the fixed costs?

A. $200,000.
B. $300,000.
C. $100,000.
D. $160,000.

Answer: A

Brownstone Company's contribution margin ratio is 30%. If Brownstone's sales revenue is $100 greater than its break-even sales in dollars, its net income

Brownstone Company's contribution margin ratio is 30%. If Brownstone's sales revenue is $100 greater than its break-even sales in dollars, its net income

A. will be $70.
B. cannot be determined without knowing fixed costs.
C. will be $30.
D. will be $100.

Answer: C

Panera Bread sells a box of bagels for $6 with a contribution margin of 62.5%. Its fixed costs are $150,000 per year. How much sales in dollars does Panera Bread need to break-even per year if bagels are its only product?

Panera Bread sells a box of bagels for $6 with a contribution margin of 62.5%. Its fixed costs are $150,000 per year. How much sales in dollars does Panera Bread need to break-even per year if bagels are its only product? 

A. $240,000.
B. $937,500.
C. $93,750.
D. $333,750.

Answer: A

Werth Company produces tie racks. Its estimated fixed costs for the year are $288,000, and the estimated variable costs per unit are $14. Werth expects to produce and sell 60,000 racks at a price of $20 per unit. How many units will be sold at breakeven?

Werth Company produces tie racks. Its estimated fixed costs for the year are $288,000, and the estimated variable costs per unit are $14. Werth expects to produce and sell 60,000 racks at a price of $20 per unit. How many units will be sold at breakeven? 

A. 14,400.
B. 20,571.
C. 48,000.
D. 3,600.

Answer: C

T/F The amount of income or loss at each level of sales can be derived from the total sales and total cost lines in a CVP graph.

T/F The amount of income or loss at each level of sales can be derived from the total sales and total cost lines in a CVP graph.

Answer: True

T/F At the break-even point, contribution margin equals total variable costs.

T/F At the break-even point, contribution margin equals total variable costs.

Answer: False

Contribution margin is

Contribution margin is

A. the amount available to cover fixed costs and contribute to income for the company.
B. sales less fixed costs.
C. unit selling price less unit fixed costs.
D. the amount of revenue remaining after deducting fixed costs.

Answer: A

When comparing a traditional income statement to a CVP income statement

When comparing a traditional income statement to a CVP income statement

A. net income will be greater or less depending on the sales volume.
B. net income will always be greater on the traditional statement.
C. net income will always by identical on both.
D. net income will always be less on the traditional statement.

Answer: C

Contribution margin

Contribution margin

A. is revenue remaining after deducting variable costs.
B. may be expressed as contribution margin per unit.
C. is selling price less cost of goods sold.
D. both (a) and (b) above.

Answer: D

Which one of the following is correct concerning contribution margin?

Which one of the following is correct concerning contribution margin?

A. It equals sales revenue minus total costs.
B. It is calculated by subtracting total manufacturing costs from sales revenue.
C. It is calculated by subtracting variable manufacturing costs from sales.
D. It is helpful in determining the effect of changes in sales on net income.

Answer: D

What is contribution margin?

What is contribution margin?

A. The amount of revenue remaining after deducting fixed costs.
B. The amount available to cover fixed costs and contribute to profits.
C. The amount available to cover fixed and variable costs and contribute to profits.
D. The percent of selling price pertaining to the cost of goods sold.

Answer: B

T/F The contribution margin ratio is computed by multiplying contribution margin by unit selling price.

T/F The contribution margin ratio is computed by multiplying contribution margin by unit selling price.

Answer: False

Starwise Company had the following amounts from its income statement:

Starwise Company had the following amounts from its income statement:

Sales revenue $100,000
Cost of goods sold -fixed 32,000
Cost of goods sold -variable 25,000
Selling expenses - fixed 9,000
Selling expenses - variable 11,000
Administrative expenses - fixed 12,000
Administrative expenses - variable 8,000
How much is Starwise's contribution margin?



A. $43,000.
B. $75,000.
C. $3,000.
D. $56,000.

Answer: D

Deighan Company had the following amounts from its income statement:

Deighan Company had the following amounts from its income statement:

Sales revenue (800 units) $80,000
Cost of goods sold -fixed 20,000
Cost of goods sold -variable 18,500
Selling expenses - fixed 7,000
Selling expenses - variable 6,000
Administrative expenses - fixed 5,000
Administrative expenses - variable 7,500
How much is Deighan's contribution margin?



A. $16,000.
B. $41,500.
C. $48,000.
D. $61,500.




Answer: C

Cournot Company sells 100,000 wrenches for $12 a unit. Fixed costs are $300,000, and net income is $200,000. What should be reported as variable expenses in the CVP income statement?

Cournot Company sells 100,000 wrenches for $12 a unit. Fixed costs are $300,000, and net income is $200,000. What should be reported as variable expenses in the CVP income statement? 

A. $1,000,000.
B. $500,000.
C. $900,000.
D. $700,000.

Answer: D

On a CVP income statement

On a CVP income statement

A. Sales - Variable costs - Fixed costs = Contribution margin.
B. Sales - Variable costs = Contribution margin.
C. Sales - Cost of goods sold = Contribution margin.
D. Sales - Fixed costs = Contribution margin.

Answer: B

CVP analysis considers the interrelationships among all of the following components except

CVP analysis considers the interrelationships among all of the following components except

A. unit selling prices.
B. fixed costs per unit.
C. variable cost per unit.
D. volume/level of activity.

Answer: B

Cost-volume-profit analysis includes all of the following assumptions except

Cost-volume-profit analysis includes all of the following assumptions except

A. costs can be classified accurately as either variable or fixed.
B. changes in activity are the only factors that affect costs.
C. the behavior of costs is curvilinear throughout the relevant range.
D. all units produced are sold.

Answer: C

One of the following is not involved in CVP analysis. That factor is

One of the following is not involved in CVP analysis. That factor is

A. fixed costs per unit.
B. volume or level of activity.
C. unit selling prices.
D. sales mix.

Answer: A

Which one of the following is not an assumption of CVP analysis?

Which one of the following is not an assumption of CVP analysis?

A. Costs can be classified as variable or fixed.
B. Profit for the period is constant.
C. The sales mix is constant.
D. Volume or level of activity affects costs.

Answer: B

Which one of the following is not an assumption of cost-volume-profit analysis?

Which one of the following is not an assumption of cost-volume-profit analysis?

A. Changes in activity and sales mix are the only factors that affect costs.
B. The behavior of costs is linear throughout the relevant range.
C. All units produced are sold.
D. All costs can be classified as either variable or fixed.

Answer: A

T/F When companies prepare a detailed CVP income statement, they provide more detail about specific variable costs but not fixed cost items.

T/F When companies prepare a detailed CVP income statement, they provide more detail about specific variable costs but not fixed cost items.

Answer: False

T/F Cost-volume-profit analysis assumes that changes in activity are the only factors that affect costs.

T/F Cost-volume-profit analysis assumes that changes in activity are the only factors that affect costs.

Answer: True

An example of a mixed cost is

An example of a mixed cost is

A. supervisory salaries.
B. direct materials.
C. utility costs.
D. property taxes.

Answer: C

Costs that change in total but not proportionately with changes in the activity level are

Costs that change in total but not proportionately with changes in the activity level are

A. variable costs.
B. fixed costs.
C. mixed costs.
D. semifixed costs.

Answer: C

Your phone service provider offers a plan that is classified as a mixed cost. The cost per month is $50 flat rate for the first 1,000 minutes plus $0.35 for each minute exceeding 1,000 minutes. If you use 1,200 minutes this month, your cost will be

Your phone service provider offers a plan that is classified as a mixed cost. The cost per month is $50 flat rate for the first 1,000 minutes plus $0.35 for each minute exceeding 1,000 minutes. If you use 1,200 minutes this month, your cost will be

A. 0.
B. $70.
C. $120.
D. $50

Answer: C

Mixed costs consist of a

Mixed costs consist of a

A. variable cost element and a relevant cost element.
B. fixed cost element and a controllable cost element.
C. variable cost element and a fixed cost element.
D. relevant cost element and a controllable cost element.

Answer: C

Delivery costs at Walco, Inc. appear below for specific months of operations:

Delivery costs at Walco, Inc. appear below for specific months of operations:

Month Amount Units Produced
June $9,680 11,000
July $8,100 10,800

Which type of costs are delivery costs at Walco?



A. Fixed.
B. Mixed.
C. Unable to determine the answer without more information.
D. Variable.

Answer: B

Delivery costs at Hernandez, Inc. appear below for specific months of operations:

Delivery costs at Hernandez, Inc. appear below for specific months of operations:

Month Amount Units Produced
March $20,000 16,000
April $18,000 12,000

Which type of cost are delivery costs at Hernandez?



A. Unable to determine the answer without more information.
B. Mixed.
C. Variable.
D. Fixed.

Answer: B

Mixed costs

Mixed costs

A. are costs that vary as activity level changes, but do not stay the same per unit like variable cost.
B. remain the same per unit at every level of activity.
C. remain the same in total at every level of activity.
D. change with the volume of production.

Answer: A

T/F Mixed costs change proportionately with changes in the activity level.

T/F Mixed costs change proportionately with changes in the activity level.

Answer: False

The relevant range is

The relevant range is

A. usually from zero to 100% of operating capacity.
B. the range of activity in which variable costs will be curvilinear.
C. the range of activity in which fixed costs will be curvilinear.
D. the range over which the company expects to operate during a year.

Answer: D

Which of the following is likely to contain a linear relationship between costs and activities?

Which of the following is likely to contain a linear relationship between costs and activities? 

A. Small-scale operations.
B. The entire range of possible activity.
C. Relevant range.
D. Full capacity.

Answer: C

Why is determination of a relevant range important?

Why is determination of a relevant range important?

A. Costs that occur outside this range are assumed to be linear.
B. Most companies operate at 100% of capacity.
C. Costs outside this range cause losses to companies.
D. Cost behavior outside the relevant range may be distorted.

Answer: D

T/F The range over which a company expects to operate during a year is called the relevant range of the activity index.

T/F The range over which a company expects to operate during a year is called the relevant range of the activity index.

Answer: True

Variable costs are costs that

Variable costs are costs that

A. vary in total directly and proportionately with changes in the activity level.
B. remain the same per unit at every activity level.
C. neither of the above.
D. both (a) and (b) above.

Answer: D

Which statement describes a fixed cost?

Which statement describes a fixed cost?

A. It varies in total at every level of activity.
B. The unit cost varies directly to the activity level.
C. When activity declines, its cost per unit increases.
D. The unit costs stay the same at every activity level.

Answer: C

What type of cost remains the same per unit at every level of activity?

What type of cost remains the same per unit at every level of activity?

A. Variable cost.
B. Fixed cost.
C. Mixed cost.
D. Semivariable cost.

Answer: A

T/F Fixed costs are costs that remain the same per unit regardless of changes in the activity level.

T/F Fixed costs are costs that remain the same per unit regardless of changes in the activity level.

Answer: False

Which of the following would be depleted?

Which of the following would be depleted?

a) equipment
b) patents
c) oil wells
d) land

Answer: C

Which of the following is not included in the land account value of an acquired piece of land?

Which of the following is not included in the land account value of an acquired piece of land?

a) 5,000 to tear down a useless shack on the property
b) 8,000 to level the site
c) 60,000 on a sewer system
d) 12,000 for a security fence

Answer: C

Factors that affect the market price of bonds include all of the following except:

Factors that affect the market price of bonds include all of the following except:

a) length of time until maturity
b) purchasers' credit rating
c) market rate of interest
d) issuing companies' credit rating

Answer: B

Which of the following may be a contingent liability?

Which of the following may be a contingent liability?

a)sales tax owed
b) accrued interest
c) future lawsuits claims
d) customer deposits

Answer: C

Who determines the price at which bonds will sell?

Who determines the price at which bonds will sell?

a) the issuing company
b) the market ( purchasers of the bonds)
c) the bonds underwriters
d) the SEC

Answer: B

Which of the following is not true of contingent liabilities?

Which of the following is not true of contingent liabilities?

a) they result from a past transaction or promise
b) lawsuits and loan guarantees are example
c) they occur in the present
d) they result in some other event takes place

Answer: C

GAAP requires that intangible assets be amortized over a period not to exceed how many years?

GAAP requires that intangible assets be amortized over a period not to exceed how many years?

a) 40
b)20
c) 17
d) no such requirements exists

Answer: A

What is the fair market value of an item?

What is the fair market value of an item?

a) the amount that a buyer would pay for the item under the barter system
b) the amount that the seller's parents would pay for the item
c) the amount that an independent buyer would pay for the item
d) the cost of an item

Answer: C

What is the consistency principle?

What is the consistency principle?

a) all the companies in an industry should use the same accounting procedure
b) a company can change an accounting principle as often as it wants
c) once chosen, the same accounting method should be applied in all periods
d) a company can change an accounting method for any reason

Answer: C

Which inventory system lets a company know exactly how much of a product is in inventory at any point in time?

Which inventory system lets a company know exactly how much of a product is in inventory at any point in time?

a) periodic
b) perpetual
c) GAAP
d) all of these

Answer: B

Why does a company reconcile its bank statement?

Why does a company reconcile its bank statement?

a) to turn up discrepancies between its records and the banks records
b) FASB requires it
c) accountants have nothing better to do
d) to audit the banks maintenance of the company's account

Answer: A

Which of the following is not considered a type of long-lived asset?

Which of the following is not considered a type of long-lived asset?

a) accounts receivable
b) land
c)plant and equipment
d) natural resources

Answer: A

The costing method that deals with inventory items that may be identified individually is:

The costing method that deals with inventory items that may be identified individually is:

a) LIFO
b) FIFO
C) specific unit cost or specific identification
d) weighted average cost

Answer: C

Internal controls included all of the following except:

Internal controls included all of the following except:

a) use of competent employees
b)separation of duties
c)maintenance of customers
d) proper documentation

Answer: C

Under the direct write-off method of accounting for uncollectible accounts (bad debts), when a specific account is written off:

Under the direct write-off method of accounting for uncollectible accounts (bad debts), when a specific account is written off:

a) the accountant debits Bad debt expense
b) the accountant credits bad debt expense
c) the accountant debits allowance for bad debt
d) the accountant credits allowance for bad debt

Answer: A

The small amount of cash held on hand to pay minor expenses is known as:

The small amount of cash held on hand to pay minor expenses is known as: 

a) petty cash
b) small cash fund
c) money on hand
d) cash

Answer: A

Factoring is:

Factoring is:

a) a mathematical procedure frequently used in accounting
b) done by people called fractioners
c) simplified method developed for counting inventory
d) a way companies can get cash quickly

Answer: D

Which if the following would not cause an adjustment to gross inventory after a purchase occurs?

Which if the following would not cause an adjustment to gross inventory after a purchase occurs?

a) returns
b) quantity discounts
c) allowances
d) purchase discounts

Answer: B

Why would a company want to estimate its inventory ?

Why would a company want to estimate its inventory ?

a)the company might physically count inventory only once a year, yet they might need to produce financial statements on a monthly basis
b) inventory is lost in a fire, and the claim for insurance requires the inventory amount lost
c)as a test of the accuracy of an actual physical inventory count
d) all of these

Answer: D

Which of the following would NOT be considered an intangible asset:

Which of the following would NOT be considered an intangible asset:

a) interest payable
b)a patent
c)a trade mark
d) all of these are intangible assets

Answer: A

Which of the following would be amortized?

Which of the following would be amortized?

a) equipment
b) oil wells
c)patents
d) land

Answer: C

What is the IRS rule of the LIFO conformity?

What is the IRS rule of the LIFO conformity?

a) a company thats uses FIFO on their financial statements must use FIFO for tax purposes
b)a company that uses LIFO for tax purposes must use FIFO on their financial statements
c) a company that uses LIFO for tax purposes must use LIFO on their financial statements
d) all companies must use FIFO for tax purposes

Answer: C

Which of the following is not considered a type of long-lived asset?

Which of the following is not considered a type of long-lived asset?

a)accounts receivable
b)land
c)plant and equipment
d) natural resources

Answer: A

Which of the following would be amortized?

Which of the following would be amortized?

a)franchises
b)equipment
c)oil wells
d) land

Answer: A

Which of the following is not an intangible asset?

Which of the following is not an intangible asset?

a) trademarks
b) patents
c)copyrights
d)land

Answer: D

A perpetual inventory system:

A perpetual inventory system:

a) assures that a company will never run out of inventory
b) updates the inventory figures each tim a transaction is made
c) lasts forever
d) requires the company to count inventory at the end of each period

Answer: B

How is inventory classified on the financial statement?

How is inventory classified on the financial statement?

a) as an asset
b) as a liability
c) as a rev
d) an a expense

Answer: A

Which of the following would be classified as cash on a company's balance sheet?

Which of the following would be classified as cash on a company's balance sheet?

a) IOUs
b)cash at a bank in a country at war with the united states
c)stamps
d) none of the above would be classified as cash

Answer: D

Documents used to control checking accounts do not include:

Documents used to control checking accounts do not include:

a) deposit tickets
b) bank statements
c)score cards
d)signature cards

Answer: C

Which of the following is not an aspect of good internal control?

Which of the following is not an aspect of good internal control?

a) performance of audits
b) assignment of responsibility for each duty to a large number of employees
c)use if reliable employees
d)clear authorization of transactions

Answer: B

What is an imprest system?

What is an imprest system? 

a) a system restricted to the payment of liabilities
b) a system which is controlled by having a clearly defined maximum level
c) a system created for a special project that a company feels will likely occur
d) a system which is only accessible by passwords

Answer: B

Which of the following is not considered cash?

Which of the following is not considered cash?

a) money and coins
b) checks and money orders
c) IOUs
d) unrestricted, accessible amounts in foreign banks

Answer: C

The lower- of -cost -or market rule is an example of:

The lower- of -cost -or market rule is an example of:

a)matching
b)consistency
c)conservatism
d)going concern

Answer: C

How will an intangible asset which has been purchased from another entity be recorded?

How will an intangible asset which has been purchased from another entity be recorded? 

a) as a revenue expenditure
b)as as liability
c) as a capital expenditure
d) as a gain on sale

Answer: C

What is a copyright?

What is a copyright?

a) the right, granted by a governmental agency, to the exclusive use of a product or process
b)a grant to the owner for the exclusive right to reproduce and sell an artistic or literary work
c)special words or symbols that identify a particular product
d) an agreement granting to a business the right to use the name, product, processes,etc. of another entity according to a set of conditions and within a specified area

Answer: B

In the periods of rising costs, which inventory cost flow method results in a higher cost of goods sold, a lower ending inventory, and a smaller net income?

In the periods of rising costs, which inventory cost flow method results in a higher cost of goods sold, a lower ending inventory, and a smaller net income?

a) specific unit
b)weighted average
c)FIFO
d)LIFO

Answer: D

What is the fair market value of an item?

What is the fair market value of an item?

a)the amount that a buyer would pay for the item under a fair barter system
b)the amount that an independent buyer would pay for the item
c)the amount that the seller's parents would pay for the item
d)the cost of an item

Answer: B

Which of the following is an associated with the development of competent, reliable, employees?

Which of the following is an associated with the development of competent, reliable, employees?

a) proper training that enables personnel to perform their jobs
b) creation of a sense of employee loyalty to the organization
c) providing workers with appropriate supervision
d) all of these

Answer: D

To what account if net purchases closed?

To what account if net purchases closed?

A)income summary
b) costs of goods sold
C)inventory
d) its not closed, its a balance sheet account

Answer: C

Which of the following is not a common adjustment to the purchases account?

Which of the following is not a common adjustment to the purchases account?

a) Costs incurred getting an item to the merchandiser
b) items that arrive damaged or otherwise unacceptable to the merchandiser
c)Costs of goods sold
d)discounts for early payment

Answer: C

The principal difference between a merchandising and a manufacturing income statement is the

The principal difference between a merchandising and a manufacturing income statement is the

A. revenue section.
B. cost of goods sold section.
C. extraordinary item section.
D. operating expense section.

Answer: B

For a manufacturing firm, cost of goods available for sale is computed by adding the beginning finished goods inventory to

For a manufacturing firm, cost of goods available for sale is computed by adding the beginning finished goods inventory to

A. cost of goods purchased.
B. total manufacturing costs.
C. cost of goods manufactured.
D. net purchases.

Answer: C

Cost of goods available for sale is reported on the income statement of

Cost of goods available for sale is reported on the income statement of

A. a merchandising company but not a manufacturing company.
B. a manufacturing company but not a merchandising company.
C. a merchandising company and a manufacturing company.
D. neither a manufacturing company nor a merchandising company.

Answer: C

For the year, Redder Company has cost of goods manufactured of $600,000, beginning finished goods inventory of $200,000, and ending finished goods inventory of $250,000. The cost of goods sold is

For the year, Redder Company has cost of goods manufactured of $600,000, beginning finished goods inventory of $200,000, and ending finished goods inventory of $250,000. The cost of goods sold is

A. $600,000.
B. $550,000.
C. $450,000.
D. $500,000.

Answer: B

One key difference appears when comparing the income statements of a manufacturing company to a merchandising company. What is that difference?

One key difference appears when comparing the income statements of a manufacturing company to a merchandising company. What is that difference? 

A. Cost of goods manufactured is subtracted from sales to get gross profit on a manufacturing income statement, while cost of goods purchased is subtracted from sales to get gross profit on a merchandising income statement.
B. Manufacturing companies use cost of goods manufactured and merchandising companies use cost of goods purchased.
C. Manufacturing companies use work in process, raw materials, and finished goods inventory balances to calculate cost of goods sold, while merchandising companies use only merchandise inventory balances.
D. Cost of goods sold equals the cost of merchandise purchased for a merchandising company, while cost of goods sold equals the cost of raw materials purchased for a manufacturing company.

Answer: B

Which of the following would you find on the income statement of a manufacturing company, but not on the income statement of a merchandising company?

Which of the following would you find on the income statement of a manufacturing company, but not on the income statement of a merchandising company?

A. Raw materials
B. Work in process
C. Cost of goods purchased
D. Cost of goods manufactured

Answer: D

T/F Manufacturers compute cost of goods sold by adding the beginning finished goods inventory to the cost of goods purchased and subtracting the ending finished goods inventory.

T/F Manufacturers compute cost of goods sold by adding the beginning finished goods inventory to the cost of goods purchased and subtracting the ending finished goods inventory.

Answer: False

Pharmco incurred the following costs while manufacturing its product: Materials used in production, $120,000; factory depreciation, $60,000; property taxes on the administrative offices, $12,000; labor costs of assembly-line workers, $95,000; factory supplies used, $8,000; advertising expense, $13,000; property taxes on the factory, $20,000; delivery expense, $23,000; salaries of the sales staff, $53,000; and sales commissions, $17,000. The total product costs for Pharmco are

Pharmco incurred the following costs while manufacturing its product: Materials used in production, $120,000; factory depreciation, $60,000; property taxes on the administrative offices, $12,000; labor costs of assembly-line workers, $95,000; factory supplies used, $8,000; advertising expense, $13,000; property taxes on the factory, $20,000; delivery expense, $23,000; salaries of the sales staff, $53,000; and sales commissions, $17,000. The total product costs for Pharmco are

A. $421,000.
B. $315,000.
C. $391,000.
D. $303,000.

Answer: D

Each of the following is a period cost except

Each of the following is a period cost except

A. Indirect labor.
B. selling expenses.
C.administrative expenses.
D. non-manufacturing costs.

Answer: A

Product costs include each of the following except

Product costs include each of the following except

A. direct labor.
B. direct materials.
C. manufacturing overhead.
D. selling and administrative expenses.

Answer: D

Which of the following costs are classified as a period cost?

Which of the following costs are classified as a period cost?

A. Wages paid to an assembly worker.
B. Wages paid to a factory custodian.
C. Wages paid to a production department supervisor.
D. Wages paid to a cost accountant department supervisor.

Answer: C

Indirect labor is a

Indirect labor is a

A. non-manufacturing cost.
B. period cost.
C. product cost.
D. raw material cost.

Answer: C

Which group of costs consists of only product costs?

Which group of costs consists of only product costs?

A. Factory maintenance, sales commissions, salaries paid to sales clerks
B. Direct labor, direct materials, and selling expenses
C. Direct labor, indirect labor, factory utilities
D. Indirect labor, factory building depreciation, administrative expenses

Answer: C

Barry's BarBQue incurred the following costs: $1,400 for ribs, 45 hours of labor to cook the ribs at $10 per hour, $50 for seasoning and sauce, $300 for signs to advertise the ribs, $150 to clean the grill after cooking the ribs, and $100 of administrative costs. How much are total product costs?

Barry's BarBQue incurred the following costs: $1,400 for ribs, 45 hours of labor to cook the ribs at $10 per hour, $50 for seasoning and sauce, $300 for signs to advertise the ribs, $150 to clean the grill after cooking the ribs, and $100 of administrative costs. How much are total product costs?

A. $1,850
B. $2,150
C. $2,350
D. $2,050

Answer: A

T/F Product costs are costs that are a necessary and integral part of producing the finished product.

T/F Product costs are costs that are a necessary and integral part of producing the finished product.

Answer: True

On average, studies have shown that the smallest component of total manufacturing cost is

On average, studies have shown that the smallest component of total manufacturing cost is

A. factory overhead.
B. manufacturing overhead.
C. direct materials.
D. direct labor.

Answer: C

Manufacturing overhead includes all of the following except

Manufacturing overhead includes all of the following except

A. indirect labor.
B. maintenance.
C. depreciation.
D. direct materials.

Answer: C

Which of the following is not an element of manufacturing overhead?

Which of the following is not an element of manufacturing overhead?

A. Plant manager's salary.
B. Product inspector's salary.
C. Sales manager's salary.
D. Factory repairman's wages.

Answer: C

Which of the following costs would a computer manufacturer include in manufacturing overhead?

Which of the following costs would a computer manufacturer include in manufacturing overhead?

A. The wages earned by computer assemblers.
B. Depreciation on testing equipment.
C. The cost of the memory chips.
D. The cost of the disk drives.

Answer: B

Which of the following answer choices lists the three manufacturing costs?

Which of the following answer choices lists the three manufacturing costs?

A. Raw materials, work in process, and finished goods
B. Work in process, finished goods, and cost of goods sold
C. Indirect materials, indirect labor, and factory-related costs
D. Direct materials, direct labor, and manufacturing overhead

Answer: D

Which one of the following is not a manufacturing cost?

Which one of the following is not a manufacturing cost?

A. Advertising cost
B. Wages of assembly workers
C. Factory maintenance
D. Wheels that are being installed on new automobiles being manufactured

Answer: A

T/F Manufacturing overhead consists of costs that are indirectly associated with the manufacture of the finished product.

T/F Manufacturing overhead consists of costs that are indirectly associated with the manufacture of the finished product.

Answer: True

T/F Indirect material costs are easily traced to products because of their physical association with the finished product.

T/F Indirect material costs are easily traced to products because of their physical association with the finished product.

Answer: False

The process of keeping the company's activities on track is

The process of keeping the company's activities on track is

A. directing.
B. evaluating.
C. planning.
D. controlling.

Answer: D

The management function that requires management to look ahead and establish objectives is

The management function that requires management to look ahead and establish objectives is

A. directing.
B. evaluating.
C. planning.
D. controlling.

Answer: C

After passage of the Sarbanes-Oxley Act of 2002

After passage of the Sarbanes-Oxley Act of 2002

A. CEOs and CFOs must certify that financial statements give a fair presentation of the company's operating results.
B. reports prepared by managerial accountants must be audited by CPAs.
C. the audit committee, rather than top management, is responsible for the company's financial statements.
D. reports prepared by managerial accountants must comply with generally accepted accounting principles (GAAP).

Answer: A

Which of the following is considered part of the controlling process?

Which of the following is considered part of the controlling process?

A. Coordinating activities and human resources to produce a smooth running operation
B. Keeping the company's activities on track
C. Looking ahead and establishing objectives
D. Implementing planned objectives

Answer: B

Which of the following are considered to be management's three broad functions?

Which of the following are considered to be management's three broad functions?

A. Conducting, directing, manufacturing
B. Planning, directing, and controlling
C. Planning, calculating, and controlling
D. Controlling, directing, manufacturing

Answer: B

T/F Planning is the process of keeping the company's activities on track.

T/F Planning is the process of keeping the company's activities on track.

Answer: False

All of the following are distinguishing features of managerial accounting except

All of the following are distinguishing features of managerial accounting except

A. internal users.
B. reports pertaining to subunits of the entity.
C. to provide special-purpose information.
D. independent audits.

Answer: D

Managerial Accounting

Managerial Accounting

A. is governed by generally accepted accounting principles.
B. places emphasis on special-purpose information.
C. is limited to cost data.
D. pertains to the entity as a whole and is highly aggregated.

Answer: B

Which of the following statements is true about managerial accounting?

Which of the following statements is true about managerial accounting? 

A. It pertains to a business as a whole.
B. It provides more detailed information than financial accounting does.
C. It is primarily for internal users such as stockholders and managers.
D. It must be prepared using generally accepting accounting principles.

Answer: B

Which of the following statements is not true about managerial accounting?

Which of the following statements is not true about managerial accounting? 

A. It is highly aggregated.
B. Reports are generated as needed.
C. It does not require an audit by a CPA.
D. It is primarily for internal users such as officers and managers

Answer: A

T/F Managerial accounting applies to all types of businesses, including service, merchandising, and manufacturing, as well as to all forms of business organizations.

T/F Managerial accounting applies to all types of businesses, including service, merchandising, and manufacturing, as well as to all forms of business organizations.

Answer: True

A company's monthly bank statement shows a collection of a note receivable by the bank in the amount of $500. Which of the following is one part of the journal entry needed to record the note collection by the company?

A company's monthly bank statement shows a collection of a note receivable by the bank in the amount of $500. Which of the following is one part of the journal entry needed to record the note collection by the company?

A. Credit to Notes Receivable for $500
B. Credit to Cash for $500
C. Debit to Notes Receivable for $500
D. Credit to Note Expense for $500

Answer: A

For which of the following will an adjusting entry be required as the result of a bank reconciliation?

For which of the following will an adjusting entry be required as the result of a bank reconciliation?

A. Outstanding checks
B. Deposits in transit
C. NSF checks
D. Bank error

Answer: C

Springer Company listed outstanding checks totaling $4,500 on its September bank reconciliation. In October, the company issued checks totaling $45,700. The October bank statement shows that checks totaling $39,800 cleared the bank. In addition, a check from one of Springer's customers in the amount of $500 was returned as NSF. The outstanding checks on the October bank reconciliation should total

Springer Company listed outstanding checks totaling $4,500 on its September bank reconciliation. In October, the company issued checks totaling $45,700. The October bank statement shows that checks totaling $39,800 cleared the bank. In addition, a check from one of Springer's customers in the amount of $500 was returned as NSF. The outstanding checks on the October bank reconciliation should total

A. $1,400.
B. $9,900.
C. $5,900.
D. $10,400.

Answer: D

For which item below might a bank issue a credit memorandum to a depositor's account?

For which item below might a bank issue a credit memorandum to a depositor's account?

A. Outstanding checks
B. An NSF check
C. Interest earned
D. Monthly service charges

Answer: C

T/F Deposits in transit are added to the cash balance per books on the bank reconciliation.

T/F Deposits in transit are added to the cash balance per books on the bank reconciliation.

Answer: False

Which of the following is classified in an income statement as a nonoperating activity?

Which of the following is classified in an income statement as a nonoperating activity?

A. Advertising expense
B. Cost of goods sold
C. Interest expense
D. Freight-out

Answer: C

What type of accounts are Sales Returns and Allowances and Sales Discounts?

What type of accounts are Sales Returns and Allowances and Sales Discounts?

A. Contra asset accounts
B. Expense accounts
C. Contra revenue accounts
D. Contra expense accounts

Answer: C

In a perpetual inventory system, which accounts will the seller credit when merchandise is returned by a customer?

In a perpetual inventory system, which accounts will the seller credit when merchandise is returned by a customer?

A. Sales Returns and Allowances and Accounts Receivable
B. Sales Returns and Allowances and Inventory
C. Inventory and Cost of Goods Sold
D. Accounts Receivable and Cost of Goods Sold

Answer: D

On what amount is a sales discount based?

On what amount is a sales discount based? 

A. Invoice price plus freight-in
B. Invoice less discount
C. Invoice price plus freight-out
D. Invoice price less returns and allowances

Answer: D

Which of the following items does not result in an entry to the Inventory account under a perpetual system?

Which of the following items does not result in an entry to the Inventory account under a perpetual system?

A. A purchase of merchandise
B. Payment of freight costs for goods received from a supplier
C. A return of Inventory to the supplier
D. Payment of freight costs for goods shipped to a customer

Answer: A

Which of the following is not a typical example of an accrued expense?

Which of the following is not a typical example of an accrued expense?

A. depreciation
B. wages
C. taxes
D. interest

Answer: A

T/F Prior to an accrual adjustment, the revenue account (and the related asset account) or the expense account (and the related liability account) is understated.

T/F Prior to an accrual adjustment, the revenue account (and the related asset account) or the expense account (and the related liability account) is understated.

Answer: True

At December 31, 2017, before any year-end adjustments, Mccarty Company's Prepaid Insurance account had a balance of $2,700. It was determined that $1,500 of the Prepaid Insurance had expired. The adjusted balance for Insurance Expense for the year would be

At December 31, 2017, before any year-end adjustments, Mccarty Company's Prepaid Insurance account had a balance of $2,700. It was determined that $1,500 of the Prepaid Insurance had expired. The adjusted balance for Insurance Expense for the year would be

A. $1,200

B. $1,500

C. $2,700

D. $1,900

Answer: B

Ignatenko Company purchased office supplies costing $5,000 and debited Supplies for the full amount. Supplies on hand at the end of the accounting period were $1,300. The appropriate adjusting journal entry to be made would be

Ignatenko Company purchased office supplies costing $5,000 and debited Supplies for the full amount. Supplies on hand at the end of the accounting period were $1,300. The appropriate adjusting journal entry to be made would be

A. Supplies Expense $3,700
Supplies $3,700


B. Supplies $1,300
Supplies Expense $4,000


C. Supplies $3,700
Supplies Expense $3,700


D. Supplies Expense $1,300
Supplies $1,300

Answer: A

Adjustments for prepaid expenses

Adjustments for prepaid expenses

A. decrease assets and increase expenses.

B. decrease revenues and increase assets.

C. decrease expenses and increase assets.

D. decrease assets and increase revenues.

Answer: A

Adjustments for unearned revenues

Adjustments for unearned revenues

A. decrease liabilities and increase revenues.

B. increase liabilities and increase revenues.

C. increase assets and increase revenues.

D. decrease revenues and decrease assets.

Answer: A

Cash received before services are preformed are recorded as?

Cash received before services are preformed are recorded as?

A. revenues

B. equity

C. liabilities

D. expenses

Answer: C

The difference between an asset's cost and its accumulated depreciation is called

The difference between an asset's cost and its accumulated depreciation is called

A. market value

B. book value

C. real value

D. fair value

Answer: B

Which of the following is not a typical example of a prepaid expense?

Which of the following is not a typical example of a prepaid expense?

A. Supplies

B. Rent

C. Wages

D. Insurance

Answer: C

T/F Book value is equal to cost minus accumulated depreciation.

T/F Book value is equal to cost minus accumulated depreciation.

Answer: True

Which one of the following is not a justification for adjusting entries?

Which one of the following is not a justification for adjusting entries?

A. Adjusting entries are necessary to enable financial statements to be in conformity with GAAP.

B. Adjusting entries are necessary to bring the general ledger accounts in line with the budget.

C. Adjusting entries are necessary to ensure that the revenue recognition principle is followed.


D. Adjusting entries are necessary to ensure that the expense recognition principle is followed.

Answer: B

T/F Accrued expenses are expenses that have already been paid.

T/F Accrued expenses are expenses that have already been paid.

Answer: False

In 2017, Costello Company performs work for a customer and bills the customer $10,000; it also pays expenses of $3,000. The customer pays Costello in 2018. If Costello uses the accrual-basis of accounting, then Costello will report

In 2017, Costello Company performs work for a customer and bills the customer $10,000; it also pays expenses of $3,000. The customer pays Costello in 2018. If Costello uses the accrual-basis of accounting, then Costello will report

A. revenue of $10,000 in 2018.

B. expenses of $3,000 in 2018.

C. net income of $7,000 in 2018.

D. revenue of $10,000 in 2017.

Answer: D

Which of the following is the correct sequence of events?

Which of the following is the correct sequence of events?

a. Post; journalize; prepare a trial balance
b. Prepare a trial balance; post; journalize
c. Prepare a trial balance; journalize; post
d. Journalize; post; prepare a trial balance

Answer: D

What type of account is unearned revenue?

What type of account is unearned revenue?

a. liability
b. expense
c. revenue
d. asset

Answer: A

What journal entry is recorded as a result of issuing stock to investors for cash?

What journal entry is recorded as a result of issuing stock to investors for cash?

a. A credit to Cash and a debit to Retained Earnings
b. A debit to Common Stock and a credit to Cash
c. A debit to Cash and a credit to Retained Earnings
d. A debit to Cash and a credit to Common Stock

Answer: D

Which of the following is not a part of a complete journal entry?

Which of the following is not a part of a complete journal entry?

a. The accounts and amounts to be debited and credited
b. The balance of each account affected by the transaction
c. The date of the transaction
d. A brief explanation of the transaction

Answer: B

Accounts with normal credit balances include

Accounts with normal credit balances include

a. revenues and expenses.
b. liabilities and stockholders' equity.
c. revenues and assets.
d. assets and liabilities.

Answer: B

Accounts with normal debit balances include

Accounts with normal debit balances include

a. expenses and assets.
b. liabilities and expenses.
c. stockholders' equity and revenues.
d. assets and liabilities.

Answer: A

Payment of a dividend

Payment of a dividend

a. decreases cash; increases stockholders' equity.
b. decreases cash; decreases retained earnings.
c. increases retained earnings; increases expenses.
d. increases expenses; decreases cash.

Answer: B

Receipt of an unearned revenue

Receipt of an unearned revenue

a. increases an asset; increases a liability.
b. increases an asset; increases a revenue.
c. decreases a revenue; increase stockholders' equity.
d. decreases a liability; increases stockholders' equity.

Answer: A

If an expense is paid with cash

If an expense is paid with cash

a. expenses will decrease.
b. assets will decrease.
c. retained earnings will increase.
d. liabilities will increase.

Answer: B

During 2017, Gibson Company assets decreased $50,000 and its liabilities decreased $90,000. Its stockholders' equity

During 2017, Gibson Company assets decreased $50,000 and its liabilities decreased $90,000. Its stockholders' equity

a. decreased $40,000.
b. decreased $140,000.
c. increased $140,000.
d. increased $40,000.

The effect on the basic accounting equation of performing services for cash are to

The effect on the basic accounting equation of performing services for cash are to

a. increase assets and increase liabilities.
b. increase assets and decrease stockholders' equity.
c. increase assets and increase stockholders' equity.
d. increase liabilities and increase stockholders' equity.

Answer: C

A company can change to a new method of accounting if management can justify that the new method results in terms of

A company can change to a new method of accounting if management can justify that the new method results in terms of

a. less likelihood of clerical errors.
b. a higher net income.
c. a lower net income for tax purposes.
d. more meaningful financial information.

Answer: D

Under IFRS, what is the label used for common stock?

Under IFRS, what is the label used for common stock?

a. Common shares
b. Share common stock
c. Ordinary shares
d. Share capital

Answer: D

Under IFRS, which of the following current assets section would be presented correctly in accordance with IFRS standards?

Under IFRS, which of the following current assets section would be presented correctly in accordance with IFRS standards?

a. Marketable securities, Land, Cash
b. Short term investments, Cash, Land
c. Short term notes receivable, Accounts receivable, Cash
d. Cash, Intangibles, Short term notes receivable

Answer: C

What is the primary criterion by which accounting information can be judged?

What is the primary criterion by which accounting information can be judged?

a. Usefulness for decision making
b. Consistency
c. Predictive value
d. Comparability

Answer: A

An item is ________ if it is likely to influence the decision of an investor or creditor.

An item is ________ if it is likely to influence the decision of an investor or creditor.

a. consistent
b. material
c. faithful representation
d. comparable

Answer: A

Which of the following are constraints that allow a company to modify generally accepted accounting principles without jeopardizing the usefulness of the financial statements?

Which of the following are constraints that allow a company to modify generally accepted accounting principles without jeopardizing the usefulness of the financial statements?

a. Relevance and faithful representation
b. Cost constraint
c. Timeliness and neutrality
d. Consistency and comparability

Answer: B

Which of the following is not a fundamental quality of useful accounting information?

Which of the following is not a fundamental quality of useful accounting information?

a. Neutrality
b. Faithful representation
c. Verifiability
d. Relevance

Answer: C

Which of the following is not a characteristic of relevance?

Which of the following is not a characteristic of relevance?

a. Confirmatory value
b. Verifiability
c. Predictive value
d. Materiality

Answer: B

What are generally accepted accounting principles?

What are generally accepted accounting principles?

a. Usually established by the Internal Revenue Service.
b. The guidelines used to resolve ethical dilemmas.
c. Fundamental truths that can be derived from the laws of nature.
d. A set of accounting rules and practices that have authoritative support.

Answer: D

For what purpose might a company use free cash flow?

For what purpose might a company use free cash flow?

a. Pay additional dividend
b. Acquire property, plant, and equipment
c. Pay off debts
d. All of the answer choices are correct

Answer: D

What is measured by current assets minus current liabilities?

What is measured by current assets minus current liabilities?

a. flow
b. Solvency
c. Working capital
d. Profitability

Answer: C

Which of these measures is an evaluation of a company's ability to pay current liabilities?

Which of these measures is an evaluation of a company's ability to pay current liabilities?

a. Earnings per share
b. Current ratio
c. Both earnings per share and current ratio
d. None of these answer choices are correct

Answer: B

Which statement is used by most corporations instead of the retained earnings statement?

Which statement is used by most corporations instead of the retained earnings statement?

a. Statement of cash flows
b. Statement of stockholders' equity
c. Balance sheet
d. Statement of owners' equity

Answer: A

Issuing new shares of common stock will

Issuing new shares of common stock will

a. decrease common stock.
b. increase retained earnings.
c. increase common stock.
d. decrease retained earnings.

Answer: C

Which of the following is the correct order for listing current assets on the balance sheet?

Which of the following is the correct order for listing current assets on the balance sheet?

a. Cash, short-term investments, accounts receivable, inventories, prepaid expenses
b. Cash, accounts receivable, prepaid expenses, inventories, short-term investments
c. Cash, short-term investments, inventories, prepaid expenses, accounts receivable
d. Cash, accounts receivable, inventories, short-term investments, prepaid expenses

Answer: B

The correct order of presentation in a classified balance sheet for the following current assets is

The correct order of presentation in a classified balance sheet for the following current assets is

a. accounts receivable, cash, prepaid insurance, inventories.
b. cash, accounts receivable, inventories, prepaid insurance.
c. cash, inventories, accounts receivable, prepaid insurance.
d. inventories, cash, accounts receivable, prepaid insurance.

Answer: B

T/F Current assets are economic resources that are expected to be converted to cash or used up by the business within one year or the normal operating cycle, whichever is shorter.

T/F Current assets are economic resources that are expected to be converted to cash or used up by the business within one year or the normal operating cycle, whichever is shorter.

Answer: False

The most common description of IFRS as contrasted to GAAP is that

The most common description of IFRS as contrasted to GAAP is that

a. GAAP is principles based and IFRS is rules based.
b. GAAP is principles based and IFRS is concepts based.
c. GAAP is rules based and IFRS is rules based.
d. GAAP is rules based and IFRS is principles based.

Answer: D

Which section of the annual report presents highlights of favorable or unfavorable trends and identifies significant events and uncertainties affecting a company's ability to pay near-term obligations, and a company's ability to fund operations and expansion?

Which section of the annual report presents highlights of favorable or unfavorable trends and identifies significant events and uncertainties affecting a company's ability to pay near-term obligations, and a company's ability to fund operations and expansion?

a. Auditor's report
b. Notes to the financial statements
c.Financial statements
d. Management discussion and analysis

Answer: A

An annual report includes all of the following except

An annual report includes all of the following except

a. a management discussion and analysis section.
b. notes to the financial statements.
c. an auditor's report.
d. a listing of all of the stockholders.

Answer: B

When the auditor is satisfied that the financial statements provide a fair representation of the company's financial position and results of operation in accordance with generally accepted accounting principles, the auditor will express

When the auditor is satisfied that the financial statements provide a fair representation of the company's financial position and results of operation in accordance with generally accepted accounting principles, the auditor will express

a. a disclaimer of opinion.
b. an adverse opinion.
c. unqualified opinion.
d. a qualified opinion.

Answer: D

The segment of the annual report that presents an opinion regarding the fairness of the presentation of the financial position and results of operations is/are the

The segment of the annual report that presents an opinion regarding the fairness of the presentation of the financial position and results of operations is/are the

a. balance sheet.
b. financial statements.
c. income statement.
d. auditor's opinion.

Answer: B

The segment of a corporation's annual report that describes the corporation's accounting methods is the

The segment of a corporation's annual report that describes the corporation's accounting methods is the

a. income statement.
b. notes to the financial statements.
c. management discussion and analysis.
d. auditor's report.

Answer: B

Stockholders' equity represents

Stockholders' equity represents

a. the difference between revenues and expenses.
b. economics resources to be used in the future.
c. claims of creditors.
d. claims of owners.

Answer: D

The ending retained earnings balance appears on

The ending retained earnings balance appears on

a. both the retained earnings statement and the balance sheet.
b. the retained earnings statement only.
c. the balance sheet only.
d. the income statement and the retained earnings statement.

Answer: B

How do you find stockholder's equity at the end of the year?

How do you find stockholder's equity at the end of the year?

Answer: Beg. Stockholder's equity + Net Income - Dividends = Ending Stockholders Equity.

T/F The statement of cash flows reports net income, investing, and financing activities?

T/F The statement of cash flows reports net income, investing, and financing activities?

Answer: False

Which of the following would not appear on the retained earnings statement?

Which of the following would not appear on the retained earnings statement?

a. Service revenue
b. Dividends
c. Net income
d. Beginning retained earnings balance

Answer: B

What kind of classification is cost of goods sold?

What kind of classification is cost of goods sold?

a. expense.
b. liability.
c. revenue
d. asset

Answer: A

Which of the following is an example of a financing activity?

Which of the following is an example of a financing activity?

a. Buying delivery equipment
b. Buying inventory
c. Issuing shares of common stock
d. Selling goods on account

Answer: C

The payment of dividends is an example of a(n)

The payment of dividends is an example of a(n) 

a. financing activity.
b. investing activity.
c. delivery activity.
d. operating activity.

Answer: A

Paying interest expense and receiving interest revenue are examples of

Paying interest expense and receiving interest revenue are examples of 

a. financing activities
b. delivery activities
c. operating activities
d. investing activities

Answer: C

T/F Interest expense is classified under operating activities on the statement of cash flows.

T/F Interest expense is classified under operating activities on the statement of cash flows.

Answer: True

Which of the following is required as a result of SOX?

Which of the following is required as a result of SOX?

a. All shareholders now have an oversight role of the company's financial activities.
b. Top management must certify the financial statements for their company.
c. Public companies must present audited financial statements.
d. Companies that go bankrupt must repay shareholders for loss investments.

Answer: B

Which of the following did not result from the Sarbanes-Oxley Act?

Which of the following did not result from the Sarbanes-Oxley Act?

a. Penalties for fraudulent activity increased.
b. Auditors cannot provide non-audit services to the same client.
c. Tax rates on corporations increased.
d. Top management must now certify the accuracy of financial information.

Answer: C

Which of the following is not an external user of accounting data?

Which of the following is not an external user of accounting data?

a. economic planners.
b. labor unions.
c. customers.
d. chief financial officers.

Answer: D

Which forms of business organizations are considered to be separate accounting entities?

Which forms of business organizations are considered to be separate accounting entities?

a. only corporations.
b. sole proprietorships, corporations, and partnerships.
c. sole proprietorships and partnerships only.
d. partnerships and corporations only.

Answer: B

The most common description of IFRS as contrasted to GAAP is that

The most common description of IFRS as contrasted to GAAP is that

a. GAAP is rules based and IFRS is rules based.
b. GAAP is principles based and IFRS is rules based.
c. GAAP is principles based and IFRS is concepts based.
d. GAAP is rules based and IFRS is principles based.

Answer: D

Which of the following are not considered to be primary users of financial statements in countries outside the U.S.?

Which of the following are not considered to be primary users of financial statements in countries outside the U.S.?

a. Economic advisors
b. Central government planners
c. Tax authorities
d. Private investors

Answer: A

Which section of the annual report presents highlights of favorable or unfavorable trends and identifies significant events and uncertainties affecting a company's ability to pay near-term obligations, and a company's ability to fund operations and expansion?

Which section of the annual report presents highlights of favorable or unfavorable trends and identifies significant events and uncertainties affecting a company's ability to pay near-term obligations, and a company's ability to fund operations and expansion?

a. Management discussion and analysis
b. Financial statements
c. Notes to the financial statements
d. Auditor's report

Answer: A

An annual report includes all of the following except

An annual report includes all of the following except

a. an auditor's report.
b. a listing of all of the stockholders.
c. a management discussion and analysis section.
d. notes to the financial statements.

Answer: B

When the auditor is satisfied that the financial statements provide a fair representation of the company's financial position and results of operation in accordance with generally accepted accounting principles, the auditor will express

When the auditor is satisfied that the financial statements provide a fair representation of the company's financial position and results of operation in accordance with generally accepted accounting principles, the auditor will express

a. an adverse opinion.
b. a disclaimer of opinion.
c. a qualified opinion.
d. unqualified opinion.

Answer: B

If total liabilities decreased by $15,000 and stockholders' equity increased by $5,000 during a period of time, then total assets must change by what amount and direction during that same period?

If total liabilities decreased by $15,000 and stockholders' equity increased by $5,000 during a period of time, then total assets must change by what amount and direction during that same period?

a. $10,000 decrease
b. $10,000 increase
c. $15,000 decrease
d. $20,000 increase

Answer: B

Saira's Maid Service began the year with total assets of $120,000 and stockholders' equity of $40,000. During the year the company earned $90,000 in net income and paid $20,000 in dividends. Total assets at the end of the year were $215,000. How much are total liabilities at the end of the year?

Saira's Maid Service began the year with total assets of $120,000 and stockholders' equity of $40,000. During the year the company earned $90,000 in net income and paid $20,000 in dividends. Total assets at the end of the year were $215,000. How much are total liabilities at the end of the year?

a. $105,000
b. $80,000
c. $110,000
d. $90,000

Answer: D

The segment of the annual report that presents an opinion regarding the fairness of the presentation of the financial position and results of operations is/are the

The segment of the annual report that presents an opinion regarding the fairness of the presentation of the financial position and results of operations is/are the

a. balance sheet.
b. financial statements.
c. income statement.
d. auditor's opinion.

Answer: D