Exam 8: Accounting: Decision Making by the Numbers

Ashley, a manager at a toy manufacturing company, needs to create a financial document for the company that would show how the company's operating, investing, and financing activities are expected to affect the asset, liability, and owners' equity accounts. To prepare this document, Ashley needs to collect data from:

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:

Fiona, the external auditor reviewing a telecommunications company's accounts, finds that the company's internal accountants have entered false data in the company records. Instead of stating the actual figures, which would reveal the poor performance of the company, the accountants have overstated the company's earnings. In this case, she will most likely offer a(n) _____ in the independent auditor's report.

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.

The three kinds of basic financial statements that are prepared in financial accounting are:

In the context of budget preparation, which of the following is an advantage of using bottom-up budgeting?

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.

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) _____.

To preserve independence and impartiality, the Financial Accounting Standards Board (FASB) members are required to:

In the context of budget preparation, the master budget of a firm organizes the _____ into a unified whole.

Daryl is an accountant in Vansert Inc., a multinational healthcare company. He is responsible for providing analysis, preparing financial statements, and reporting the financial transactions of the company to the deputy chairman of the company. In this scenario, Daryl is most likely a _____.

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) _____.

John and Elizabeth evaluate three telecommunication companies to determine the best company to invest in. A horizontal analysis will enable them to make comparisons of financial statements of the three companies over the past several years and help in the determination of the increase in their profits.

In the context of owners' equity, which of the following is true of retained earnings?

Sigborne Corp., a food and beverage company, commences its budgeting process by requesting the middle managers of the company to collect data from their respective departments and submit a consolidated report stating the needs of their departments. Harold, the manager of the packaging department, overstates the needs of his department. In this scenario, Harold is guilty of _____.

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 _____.

In the context of balance sheets, the accounting equation tells us that the value of a firm's assets must be:

In the context of budget preparation, which of the following is a disadvantage of participatory budgeting?

In the context of balance sheets, retained earnings are a major component of the _____ section.

In the context of budgeting, a flexible budget: