Question 1

In the context of financial accounting, the external stakeholders of a firm:

Accepted Answer

A)  are seldom interested in analyzing detailed accounting information about the individual departments within the firm. 
B)  are least interested in looking at the firm at a macro level. 
C)  are not affected by the financial performance of the firm. 
D)  seldom want to know how the firm's financial condition has changed over a period of several years by looking at its account statements.

Question 2

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

Accepted Answer

A)  static budget and the cash flow budget 
B)  static budget and the financial budget 
C)  cash flow budget and the operating budget 
D)  financial budget and the operating budget

Question 3

The management of a sugar manufacturing company sets aside a sum of $50,000 in its budget for the purchase of new machinery that would double the production. In the given scenario, the management is in the process of planning the _____ of the company.

Accepted Answer

A)  marketing budget 
B)  financial budget 
C)  operating budget 
D)  static budget

Question 4

Grydon Inc. has applied for a business loan in the United Bank. To best assess the loan case, the loan officer at the bank, Cerejo, decides to look at the company's net income. Cerejo will find this information in Grydon's _____.

Accepted Answer

A)  profit and loss statement 
B)  statements of cash flow 
C)  stockholders' equity statement 
D)  statement of retained earnings

Question 5

In the context of balance sheets, what is the accounting equation? Define each of the elements in the accounting equation.

Accepted Answer

The answer of In the context of balance sheets, what...

Question 6

_____ is the profit or loss a firm earns in the time period covered by the financial statement that reports the revenues and expenses.

Accepted Answer

A)  Shared debt 
B)  Owners' equity 
C)  Net income 
D)  Cash flow

Question 7

A pharmaceutical company wanted to create a budget that was practical and that would enable its managers to make more accurate comparisons between actual costs and budgeted costs. Thus, the company created a budget that was developed over a range of possible sales levels and was designed to show the appropriate budgeted level of costs for each different level of sales. Given this information, which of the following budgets did the company create?

Accepted Answer

A)  A rolling budget 
B)  A flexible budget 
C)  A black budget 
D)  A static budget

Question 8

Angela is part of the senior management of Fifian Inc., an event management company. She and with other members of the senior management plans the annual budget of the company. Angela, however, is not required to take inputs from or involve the middle and supervisory managers of the company in this planning process. In the given scenario, Fifian Inc. most likely uses _____.

Accepted Answer

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

Question 9

In the context of budgeting, a flexible budget:

Accepted Answer

A)  is based on a single assumed level of sales. 
B)  is designed to show the appropriate budgeted level of costs for each different level of sales. 
C)  is the budget that is prepared before a static budget. 
D)  cannot be used by companies for evaluation and comparisons involving real-world sales situations.

Question 10

The preparation of operating budgets begins with the development of a(n) _____.

Accepted Answer

A)  sales budget 
B)  budgeted income statement 
C)  capital and taxes budget 
D)  expenditure budget

Question 11

Janice is an accountant in a public relations firm. She prepares financial reports upon request by the management of the firm and does not stick to a predetermined schedule. The reports that she prepares mainly help the internal stakeholders of the firm. Given this information, it can be said that Janice performs _____.

Accepted Answer

A)  financial accounting 
B)  managerial accounting 
C)  governmental accounting 
D)  forensic accounting

Question 12

Betty's job entails detecting problems such as embezzlement, waste, mismanagement, and employee theft at her organization. In this case, Betty is a(n) _____.

Accepted Answer

A)  forensic auditor 
B)  government accountant 
C)  internal auditor 
D)  certified public accountant

Question 13

Chestelle Corporation, a sports equipment manufacturing company, borrows a considerable sum of money as loan from GRJ Bank, a private bank, at a time of financial crisis. The corporation has four years to repay the principal amount along with the interest to the bank. In this scenario, the money that Chestelle Corporation owes the bank represents its _____.

Accepted Answer

A)  long-term liability 
B)  accumulated depreciation 
C)  owners' equity 
D)  bequest value

Question 14

To give the company's stockholders, creditors, and other external stakeholders an accurate idea of the company's overall performance, Rowensport Corporation, a multinational company, releases statements that contain details of the company's profits and losses over the past five years. In this scenario, the company is most likely involved in _____.

Accepted Answer

A)  financial accounting 
B)  cost accounting 
C)  follow-up auditing 
D)  social auditing

Question 15

In the context of balance sheets, accounts receivable is an example of _____.

Accepted Answer

A)  current liabilities 
B)  immovable assets 
C)  current assets 
D)  depreciated liabilities

Question 16

In the context of franchises, the term accounts receivable refers to money owed to a parent company by franchisees who bought its goods on credit.

Accepted Answer

A) True 
 B)False

Question 17

The members of the Financial Accounting Standards Board (FASB) are appointed by the Securities and Exchange Commission.

Accepted Answer

A) True 
 B)False

Question 18

Ginnie's, a candy manufacturing company, sees a sudden rise in the consumption of its kiwi-flavored candies. Thus, the company hires more labor and buys additional supplies to increase the production of these candies. In this scenario, the costs incurred by the company for purchasing these supplies and hiring more labor exemplify the company's _____.

Accepted Answer

A)  variable costs 
B)  implicit costs 
C)  indirect costs 
D)  fixed costs

Question 19

The assets of Prosian Italia, a marble and granite company, amount to $400 million, and its liabilities add up to $180 million. Based on the accounting equation, Prosian Italia's owners' equity is equal to _____.

Accepted Answer

A)  $580 million 
B)  $72,000 million 
C)  $2 million 
D)  $220 million

Question 20

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

Accepted Answer

A)  greater than the amount of financing provided by owners plus the amount provided by creditors to purchase those assets. 
B)  equal to the amount of financing provided by owners plus the amount provided by creditors to purchase those assets. 
C)  negligible when compared to the amount of financing provided by owners plus the amount provided by creditors to purchase those assets. 
D)  less than the amount of financing provided by owners plus the amount provided by creditors to purchase those assets.

Exam 8: Accounting: Decision Making by the Numbers

In the context of financial accounting, the external stakeholders of a firm:

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

The management of a sugar manufacturing company sets aside a sum of $50,000 in its budget for the purchase of new machinery that would double the production. In the given scenario, the management is in the process of planning the _____ of the company.

Grydon Inc. has applied for a business loan in the United Bank. To best assess the loan case, the loan officer at the bank, Cerejo, decides to look at the company's net income. Cerejo will find this information in Grydon's _____.

In the context of balance sheets, what is the accounting equation? Define each of the elements in the accounting equation.

_____ is the profit or loss a firm earns in the time period covered by the financial statement that reports the revenues and expenses.

In the context of budgeting, a flexible budget:

The preparation of operating budgets begins with the development of a(n) _____.

Betty's job entails detecting problems such as embezzlement, waste, mismanagement, and employee theft at her organization. In this case, Betty is a(n) _____.

In the context of balance sheets, accounts receivable is an example of _____.

In the context of franchises, the term accounts receivable refers to money owed to a parent company by franchisees who bought its goods on credit.

The members of the Financial Accounting Standards Board (FASB) are appointed by the Securities and Exchange Commission.

The assets of Prosian Italia, a marble and granite company, amount to $400 million, and its liabilities add up to $180 million. Based on the accounting equation, Prosian Italia's owners' equity is equal to _____.

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