Question 1

Marcus is a venture capitalist who invests in start-ups and small businesses. He is interested in investing in an online start-up company that has been in business for a year. Before making a decision, Marcus does some research on the value of the company's assets and liabilities. In this scenario, Marcus is most likely analyzing the company's:

Accepted Answer

A)  income statement. 
B)  balance sheet. 
C)  articles of incorporation. 
D)  operating budget.

Question 2

Lossaire, a jewelry house, needs to increase the company's declining cash inflow through its financing activities. In this context, Lossaire is most likely to:

Accepted Answer

A)  sell the goods and services that it produces. 
B)  sell its fixed assets and financial assets bought as long-term investments. 
C)  form partnerships and mergers with companies operating in the same industry. 
D)  issue additional shares of its own stock.

Question 3

Leemo, a soft drink manufacturing company, sells approximately 400 batches of its soft drinks worth $80,000 every week. In this context, the 400 batches of soft drinks that Leemo produces weekly represent the company's _____.

Accepted Answer

A)  intangible assets 
B)  current assets 
C)  defensive assets 
D)  fixed assets

Question 4

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 _____.

Accepted Answer

A)  forensic accountant 
B)  government accountant 
C)  public accountant 
D)  management accountant

Question 5

Grubbies, a popular fast-food restaurant, spends $75,000 on redesigning its interiors and modifying its ambience. In this scenario, the expenses that the restaurant incurs from refurbishing its appearance exemplify cash flows from:

Accepted Answer

A)  investing activities. 
B)  financing activities. 
C)  operating activities. 
D)  manufacturing activities.

Question 6

Acloe Inc., a nutrition bar manufacturing company, plans to commence its budget preparation. The management of the organization comes to a consensus that it will use a budgeting approach that will encourage the active participation of the middle and supervisory managers and consider their suggestions while creating the budget. Acloe Inc. is most likely to adopt the _____ budgeting approach.

Accepted Answer

A)  top-down 
B)  incremental 
C)  bottom-up 
D)  evolutionary

Question 7

In the context of the income statement of an organization, accountants use accrual-basis accounting when recognizing _____.

Accepted Answer

A)  debts 
B)  investments 
C)  revenues 
D)  cost of shares

Question 8

The total assets of a dairy products manufacturing company are calculated. However, a sum of $5 million from the value of the company's property, plant, and equipment assets is not taken into account as the machinery is bound to become unusable after a certain period of time. In the context of balance sheets, the amount of $5 million that is subtracted from the original value of the total assets is called _____.

Accepted Answer

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

Question 9

A static budget is based on a single assumed level of sales and is an excellent tool for planning.

Accepted Answer

A) True 
 B)False

Question 10

Inventory is an example of a current asset.

Accepted Answer

A) True 
 B)False

Question 11

Jonathan, a grocery store owner, is due to pay suppliers for delivering goods for a specific month. To ascertain how much money he owes the suppliers, Jonathan should check the:

Accepted Answer

A)  rate card. 
B)  balance sheet. 
C)  pro forma statement. 
D)  operating budget.

Question 12

Prenora Inc., a newly established company, is set to prepare its first budget. The top management of the company decides to use a budgeting approach that will seek active participation from the middle and supervisory managers of the company. In the given scenario, Prenora Inc. will most likely use the _____ to budgeting.

Accepted Answer

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

Question 13

Alexis decides to check with his accountant as to how much money his company owes to the raw materials supplier. To determine this, Alexis should ask the accountant to provide him with the company's balance sheet.

Accepted Answer

A) True 
 B)False

Question 14

Maurice, the supervising manager of a telecommunications company, requires detailed information about the expenses that the company incurred from its monthly operations in the last fiscal year. In this scenario, Maurice should refer to the _____.

Accepted Answer

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

Question 15

The Securities and Exchange Commission hires Tim to procure and analyze data on the state's tax revenues and expenditures to ensure that they are recorded and reported in accordance with regulations and requirements. In this case, Tim is most likely a(n) _____.

Accepted Answer

A)  external auditor 
B)  government accountant 
C)  public prosecutor 
D)  public accountant

Question 16

Luke works in an accounting firm that offers services such as tax preparation and external auditing to corporate companies. Luke is currently providing consultation to a client that deals in automobile parts. In this scenario, Luke is most likely a:

Accepted Answer

A)  public accountant. 
B)  managerial accountant. 
C)  government accountant. 
D)  forensic accountant.

Question 17

The direct labor method of costing is a technique to assign product costs based on links between the daily tasks of a company that drive costs and the production of specific products.

Accepted Answer

A) True 
 B)False

Question 18

In the context of the statement of retained earnings, any change in retained earnings is found by subtracting:

Accepted Answer

A)  cash flows from operating activities from cash flows from investing activities. 
B)  the value of capital expenditures, such as remodeling, from net income. 
C)  operating expenses from gross profit. 
D)  dividends paid to shareholders from net income.

Question 19

Which of the following is a difference between managerial accounting and financial accounting?

Accepted Answer

A)  Financial accounting is governed by a set of generally accepted accounting principles, whereas managerial accounting uses procedures developed internally that are not required to follow generally accepted accounting principles. 
B)  Financial accounting is primarily intended to provide information to internal stakeholders, whereas managerial accounting is primarily intended to provide information to external stakeholders. 
C)  Managerial accounting summarizes the past performance of a company, whereas financial accounting provides reports on the past performance of a company and also makes projections about the future. 
D)  Managerial accounting presents financial statements on a predetermined schedule, whereas financial accounting creates reports upon request by management rather than according to a predetermined schedule.

Question 20

In the context of managerial accounting, _____ are costs that are incurred as the result of some specific cost object.

Accepted Answer

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

Exam 8: Accounting: Decision Making by the Numbers

Lossaire, a jewelry house, needs to increase the company's declining cash inflow through its financing activities. In this context, Lossaire is most likely to:

Leemo, a soft drink manufacturing company, sells approximately 400 batches of its soft drinks worth $80,000 every week. In this context, the 400 batches of soft drinks that Leemo produces weekly represent the company's _____.

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 _____.

Grubbies, a popular fast-food restaurant, spends $75,000 on redesigning its interiors and modifying its ambience. In this scenario, the expenses that the restaurant incurs from refurbishing its appearance exemplify cash flows from:

In the context of the income statement of an organization, accountants use accrual-basis accounting when recognizing _____.

A static budget is based on a single assumed level of sales and is an excellent tool for planning.

Inventory is an example of a current asset.

Jonathan, a grocery store owner, is due to pay suppliers for delivering goods for a specific month. To ascertain how much money he owes the suppliers, Jonathan should check the:

Alexis decides to check with his accountant as to how much money his company owes to the raw materials supplier. To determine this, Alexis should ask the accountant to provide him with the company's balance sheet.

Maurice, the supervising manager of a telecommunications company, requires detailed information about the expenses that the company incurred from its monthly operations in the last fiscal year. In this scenario, Maurice should refer to the _____.

The Securities and Exchange Commission hires Tim to procure and analyze data on the state's tax revenues and expenditures to ensure that they are recorded and reported in accordance with regulations and requirements. In this case, Tim is most likely a(n) _____.

Luke works in an accounting firm that offers services such as tax preparation and external auditing to corporate companies. Luke is currently providing consultation to a client that deals in automobile parts. In this scenario, Luke is most likely a:

The direct labor method of costing is a technique to assign product costs based on links between the daily tasks of a company that drive costs and the production of specific products.

In the context of the statement of retained earnings, any change in retained earnings is found by subtracting:

Which of the following is a difference between managerial accounting and financial accounting?

In the context of managerial accounting, _____ are costs that are incurred as the result of some specific cost object.