Question 1

In the context of balance sheets, which of the following is a difference between liabilities and owners' equity?

Accepted Answer

A)  Liabilities refer to the claims internal stakeholders have against the external stakeholders, whereas owners' equity refers to claims external stakeholders have against the internal stakeholders. 
B)  Liabilities indicate the claims outsiders have against the firm's assets, whereas owners' equity refers to the claims the owners have against their firm's assets. 
C)  Owners' equity indicates the claims internal stakeholders have against the firm's assets, whereas liabilities refer to the claims external stakeholders have against the firm's assets. 
D)  Owners' equity indicates the claims outsiders have against the firm's assets, whereas liabilities refer to the claims the owners have against their firm's assets. 
A)  Liabilities refer to the claims internal stakeholders have against the external stakeholders, whereas owners' equity refers to claims external stakeholders have against the internal stakeholders. 
B)  Liabilities indicate the claims outsiders have against the firm's assets, whereas owners' equity refers to the claims the owners have against their firm's assets. 
C)  Owners' equity indicates the claims internal stakeholders have against the firm's assets, whereas liabilities refer to the claims external stakeholders have against the firm's assets. 
D)  Owners' equity indicates the claims outsiders have against the firm's assets, whereas liabilities refer to the claims the owners have against their firm's assets.

Question 2

In the context of balance sheets, assets such as machinery, building, and equipment have a limited useful life, so accountants subtract _____ from the original value of these assets, to reflect the fact that these assets are being used up over time.

Accepted Answer

A)  deferred income 
B)  bequest value 
C)  accumulated depreciation 
D)  laid-down cost 
A)  deferred income 
B)  bequest value 
C)  accumulated depreciation 
D)  laid-down cost

Question 3

A famous musician sells the copyright of one of his songs to a record company for $2 million. In this scenario, the sale of the copyright of the song exemplifies the sale of a(n) _____.

Accepted Answer

A)  current liability 
B)  operating liability 
C)  tangible asset 
D)  intangible asset 
A)  current liability 
B)  operating liability 
C)  tangible asset 
D)  intangible asset

Question 4

David, a financial accountant at a multinational company, is asked to study the comparative financial statements of a prospective partner firm. He uses comparative income statements to determine the changes in the assets and liabilities of the firm and whether the net income of the firm has increased or decreased over the past five years. In this scenario, David is most likely using _____.

Accepted Answer

A)  activity-based costing 
B)  horizontal analysis 
C)  a statistical syllogism 
D)  static analysis 
A)  activity-based costing 
B)  horizontal analysis 
C)  a statistical syllogism 
D)  static analysis

Question 5

Colin, the manager of the production department in an apparel manufacturing company, is accused of budgetary slack by a senior manager in his company. Colin is accused of budgetary slack because he:

Accepted Answer

A)  did not create the company's budget in a timely and consistent manner. 
B)  made errors in the budgeting process, which resulted in operational problems. 
C)  did not include the minor expenses incurred by his department in the budget. 
D)  overstated the needs of his department in the budget. 
A)  did not create the company's budget in a timely and consistent manner. 
B)  made errors in the budgeting process, which resulted in operational problems. 
C)  did not include the minor expenses incurred by his department in the budget. 
D)  overstated the needs of his department in the budget.

Question 6

Which of the following is true of current assets?

Accepted Answer

A)  They include the long-term assets of a firm. 
B)  They are resources that a firm expects to use up within a year. 
C)  They include a firm's tangible assets, such as machinery and equipment. 
D)  They are resources that a firm decides to set aside to pay its long-term liabilities. 
A)  They include the long-term assets of a firm. 
B)  They are resources that a firm expects to use up within a year. 
C)  They include a firm's tangible assets, such as machinery and equipment. 
D)  They are resources that a firm decides to set aside to pay its long-term liabilities.

Question 7

A firm's operating budget represents the firm's overall plan of action for a specified time period.

Accepted Answer

A) True 
 B)False

Question 8

Logan, an independent auditor, is assigned to perform an audit for a software company. After the audit, he notices some serious lapses and discrepancies in the numbers mentioned in the firm's financial statements. In this scenario, Logan is most likely to offer a(n) _____ opinion in his audit report.

Accepted Answer

A)  qualified 
B)  unqualified 
C)  adverse 
D)  concurring 
A)  qualified 
B)  unqualified 
C)  adverse 
D)  concurring

Question 9

George, a managerial accountant in a jute manufacturing company, is asked to calculate the total amount of money the company spends on the wages of its workers and on the payments it makes to its suppliers for raw materials. By finding out the company's total actual expenses, the management can come to a decision on whether or not the company can increase its workers' wages by at least ten percent. In this scenario, George is asked to calculate the company's _____.

Accepted Answer

A)  incremental costs 
B)  implicit costs 
C)  out-of-pocket costs 
D)  opportunity costs 
A)  incremental costs 
B)  implicit costs 
C)  out-of-pocket costs 
D)  opportunity costs

Question 10

The Securities and Exchange Commission (SEC) bans publicly traded corporations from making comparative financial statements.

Accepted Answer

A) True 
 B)False

Question 11

In the context of balance sheets, resources owned by a firm are known as _____.

Accepted Answer

A)  holdings 
B)  assets 
C)  capitals 
D)  liabilities 
A)  holdings 
B)  assets 
C)  capitals 
D)  liabilities

Question 12

Expenses such as insurance and advertising that have been cleared before they are due are known as prepaid expenses.

Accepted Answer

A) True 
 B)False

Question 13

Aegirine Corp., a publicly traded firm based in New Mexico, manufactures iron. According to U.S. securities laws, the firm must:

Accepted Answer

A)  declare any discrepancies in its financial statements before they come up in the independent auditor's report. 
B)  refrain from involving any third party in the process of auditing to maintain confidentiality. 
C)  let an independent CPA (Certified Public Accountant) firm perform an annual external audit of its financial statements. 
D)  hire auditors to analyze its financial statements and file them with the Internal Revenue Service. 
A)  declare any discrepancies in its financial statements before they come up in the independent auditor's report. 
B)  refrain from involving any third party in the process of auditing to maintain confidentiality. 
C)  let an independent CPA (Certified Public Accountant) firm perform an annual external audit of its financial statements. 
D)  hire auditors to analyze its financial statements and file them with the Internal Revenue Service.

Question 14

In the context of financial budgets, the capital expenditure budget:

Accepted Answer

A)  provides quarterly estimates of the number of units of each product a firm expects to sell. 
B)  identifies a firm's planned investments in major fixed assets and long-term projects. 
C)  identifies short-term fluctuations in cash flows that display cash deficits and surpluses. 
D)  contains the budgets for direct labor, direct materials, and overhead costs. 
A)  provides quarterly estimates of the number of units of each product a firm expects to sell. 
B)  identifies a firm's planned investments in major fixed assets and long-term projects. 
C)  identifies short-term fluctuations in cash flows that display cash deficits and surpluses. 
D)  contains the budgets for direct labor, direct materials, and overhead costs.

Question 15

Dylan is a supervisory manager in the production department of a tea manufacturing company. Each year, he actively participates in the budgeting process of the company. His input is valued by the top management as he is able to identify the issues in his department. In this scenario, it can be said that Dylan's company follows the _____ to budgeting.

Accepted Answer

A)  top-down approach 
B)  incremental approach 
C)  bottom-up approach 
D)  zero-based approach 
A)  top-down approach 
B)  incremental approach 
C)  bottom-up approach 
D)  zero-based approach

Question 16

Andrew is performing an audit of the financial statements of a cosmetics company. While analyzing the financial statements, he identifies some minor concerns. However, he believes that on balance the company's statements are accurate and its accounting methods are consistent with the generally accepted accounting principles. In this scenario, the independent auditor's report will most likely offer a(n) _____.

Accepted Answer

A)  qualified opinion 
B)  unqualified opinion 
C)  adverse opinion 
D)  concurring opinion 
A)  qualified opinion 
B)  unqualified opinion 
C)  adverse opinion 
D)  concurring opinion

Question 17

Harold, a financial accountant at an automobile company, is asked to calculate the net income of the company for a given period. He deducts the cost of goods sold from the revenue earned during that period. Before deducting the company's operating expenses from the gross profit, he deducts the rent and the insurance premium paid by the company during that period. In the given scenario, Harold deducted the company's _____ from the company's operating expenses.

Accepted Answer

A)  testamentary expenses 
B)  selling expenses 
C)  administrative expenses 
D)  accrued expenses 
A)  testamentary expenses 
B)  selling expenses 
C)  administrative expenses 
D)  accrued expenses

Question 18

Milora, a clothing company, purchases 50 sewing machines from a company called Quick Sew on credit. Milora is supposed to pay an amount of $76,000 to Quick Sew. This amount is due within a year of the date on the balance sheet. In this scenario, the amount of credit that Milora owes Quick Sew is referred to as Milora's _____.

Accepted Answer

A)  current liability 
B)  borrowing base 
C)  charge-off 
D)  intangible asset 
A)  current liability 
B)  borrowing base 
C)  charge-off 
D)  intangible asset

Question 19

In the context of budget preparation, briefly describe operating budgets, financial budgets, and master budgets.

Accepted Answer

Answers will vary. The budgeting process

Question 20

Costs are deducted from revenue in several stages to show how net income is determined. The first step in this process is to deduct:

Accepted Answer

A)  costs of damaged goods. 
B)  costs of purchased goods 
C)  costs of goods mortgaged. 
D)  costs of goods sold. 
A)  costs of damaged goods. 
B)  costs of purchased goods 
C)  costs of goods mortgaged. 
D)  costs of goods sold.

In the context of balance sheets, which of the following is a difference between liabilities and owners' equity?

In the context of balance sheets, assets such as machinery, building, and equipment have a limited useful life, so accountants subtract _____ from the original value of these assets, to reflect the fact that these assets are being used up over time.

A famous musician sells the copyright of one of his songs to a record company for $2 million. In this scenario, the sale of the copyright of the song exemplifies the sale of a(n) _____.

Colin, the manager of the production department in an apparel manufacturing company, is accused of budgetary slack by a senior manager in his company. Colin is accused of budgetary slack because he:

Which of the following is true of current assets?

A firm's operating budget represents the firm's overall plan of action for a specified time period.

The Securities and Exchange Commission (SEC) bans publicly traded corporations from making comparative financial statements.

In the context of balance sheets, resources owned by a firm are known as _____.

Expenses such as insurance and advertising that have been cleared before they are due are known as prepaid expenses.

Aegirine Corp., a publicly traded firm based in New Mexico, manufactures iron. According to U.S. securities laws, the firm must:

In the context of financial budgets, the capital expenditure budget:

In the context of budget preparation, briefly describe operating budgets, financial budgets, and master budgets.

Costs are deducted from revenue in several stages to show how net income is determined. The first step in this process is to deduct:

Business Now: Change Is the Only Constant

Economics: The Framework of Business

The World Marketplace: Business Without Borders

Business Ethics Social Responsibility: Doing Well by Doing Good

Business Communication: Creating Delivering Messages That Matter

Business Formation: Choosing the Form That Fits

Small Business Entrepreneurship: Economic Rocket Fuel

Finance: Acquiring Using Funds to Maximize Value

Securities Markets: Trading Financial Resources

Marketing: Building Profitable Customer Connections

Product and Promotion: Creating and Communicating Value

Distribution and Pricing: Right Product, Right Person, Right Place, Right Price

Management, Motivation, and Leadership: Bringing Business to Life

Human Resource Management: Building a Top Quality Workforce

Managing Information Technology: Finding New Ways to Learn and Link

Operations Management: Putting It All Together

Appendix :personal-Finance-Appendix

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Exam 8: Accounting: Decision Making by the Numbers

In the context of balance sheets, which of the following is a difference between liabilities and owners' equity?

In the context of balance sheets, assets such as machinery, building, and equipment have a limited useful life, so accountants subtract _____ from the original value of these assets, to reflect the fact that these assets are being used up over time.

A famous musician sells the copyright of one of his songs to a record company for $2 million. In this scenario, the sale of the copyright of the song exemplifies the sale of a(n) _____.

Colin, the manager of the production department in an apparel manufacturing company, is accused of budgetary slack by a senior manager in his company. Colin is accused of budgetary slack because he:

Which of the following is true of current assets?

A firm's operating budget represents the firm's overall plan of action for a specified time period.

The Securities and Exchange Commission (SEC) bans publicly traded corporations from making comparative financial statements.

In the context of balance sheets, resources owned by a firm are known as _____.

Expenses such as insurance and advertising that have been cleared before they are due are known as prepaid expenses.

Aegirine Corp., a publicly traded firm based in New Mexico, manufactures iron. According to U.S. securities laws, the firm must:

In the context of financial budgets, the capital expenditure budget:

In the context of budget preparation, briefly describe operating budgets, financial budgets, and master budgets.

Costs are deducted from revenue in several stages to show how net income is determined. The first step in this process is to deduct:

Business Now: Change Is the Only Constant

Economics: The Framework of Business

The World Marketplace: Business Without Borders

Business Ethics Social Responsibility: Doing Well by Doing Good

Business Communication: Creating Delivering Messages That Matter

Business Formation: Choosing the Form That Fits

Small Business Entrepreneurship: Economic Rocket Fuel

Finance: Acquiring Using Funds to Maximize Value

Securities Markets: Trading Financial Resources

Marketing: Building Profitable Customer Connections

Product and Promotion: Creating and Communicating Value

Distribution and Pricing: Right Product, Right Person, Right Place, Right Price

Management, Motivation, and Leadership: Bringing Business to Life

Human Resource Management: Building a Top Quality Workforce

Managing Information Technology: Finding New Ways to Learn and Link

Operations Management: Putting It All Together

Appendix :personal-Finance-Appendix

Filters