Question 1

Which of the following is a criterion that needs to be fulfilled by an individual to be recognized as a certified public accountant?

Accepted Answer

A)  He or she must serve the Securities and Exchange Commission for at least two years after passing the certified public accountancy examination. 
B)  He or she must complete the equivalent of 150 semester hours of college education with a heavy emphasis in accounting and other business-related courses. 
C)  He or she must complete at least three years of direct work experience in the field of accounting. 
D)  He or she must pass a rigorous five-day, six-part examination.

Question 2

Poline Foods, a food processing company, needs to increase its declining cash inflow through its operating activities. In this context, Poline Foods is most likely to:

Accepted Answer

A)  sell its goods or services. 
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

As part of its financial budget, Clover & Max, an advertising agency, prepared a document that identified the agency's planned investments in major fixed assets and long-term projects. The given information indicates that the agency prepared the:

Accepted Answer

A)  statement of cash flows. 
B)  static budget. 
C)  capital expenditure budget. 
D)  sales budget.

Question 4

In the context of financial statements, which of the following statements is true of large corporations?

Accepted Answer

A)  Large corporations with publicly traded stock must provide an annual report containing financial statements to all stockholders. 
B)  They must file reports with the Securities and Exchange Commission every five years. 
C)  Large corporations with privately traded stock must provide an annual report containing details of incoming and outgoing cash. 
D)  They must file quarterly and annual reports with the Financial Accounting Standards Board.

Question 5

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

Accepted Answer

A)  statement of debts, letter of credit, and articles of incorporation. 
B)  comfort letter, master budget, and credit statement. 
C)  balance sheet, income statement, and statement of cash flows. 
D)  pro forma report, request for proposal, and articles of incorporation.

Question 6

Lorraine works for an accounting firm that performs external audits, provides consulting services, and does the tax preparation for other businesses and individuals. Given this information, Lorraine is most likely a _____.

Accepted Answer

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

Question 7

In the context of balance sheets, patents, trademarks, and copyrights are examples of _____.

Accepted Answer

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

Question 8

Intangible assets are assets that have no physical existence-you can't see or touch them-but they still have value.

Accepted Answer

A) True 
 B)False

Question 9

The owners' equity of Senesta Corp., an event management company, adds up to $23 million, and its liabilities add up to $17 million. Based on the accounting equation, the assets of Senesta Corp. are worth _____.

Accepted Answer

A)  $1.35 million 
B)  $391 million 
C)  $7 million 
D)  $40 million

Question 10

Gerald wants to find out the net income of his business for the last quarter. He deducts the cost of goods sold from the revenue earned during that period and then deducts the operating expenses from the gross profit. If Gerald decides to subtract the salary of his employees from the operating expenses before deducting the operating expenses from the gross profit, which of the following expenses would he be deducting?

Accepted Answer

A)  Testamentary expenses 
B)  Administrative expenses 
C)  Selling expenses 
D)  Accrued expenses

Question 11

Sidney is a member of the Financial Accounting Standards Board (FASB) and is entrusted with the responsibility of establishing accounting principles in the United States. As a member of the board, Sidney:

Accepted Answer

A)  is to serve a seven-year term and cannot be reappointed to serve another term. 
B)  must sever all ties with any firms or institutions that she served prior to joining the board. 
C)  is responsible for directing the Securities and Exchange Commission to enforce the accounting standards. 
D)  must pass a rigorous two-day, four-part examination to be promoted as a certified fraud examiner.

Question 12

The _____ of a firm combines the revenue projections from the firm's sales budget and the cost projections from the firm's other operating budgets to present a forecast of expected net income.

Accepted Answer

A)  budgeted income statement 
B)  profit and loss statement 
C)  capital expenditure budget 
D)  cash budget

Question 13

Identify a true statement about current assets.

Accepted Answer

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

Question 14

Public accountants provide services such as tax preparation, external auditing, or management consulting to clients on a fee basis.

Accepted Answer

A) True 
 B)False

Question 15

Balance sheets usually classify assets into at least two major categories: current assets and property, plant, and equipment assets.

Accepted Answer

A) True 
 B)False

Question 16

Define and discuss the different kinds of costs in accounting.

Accepted Answer

The answer of Define and discuss the different kinds of...

Question 17

The employees of an information technology company complain that the company has been spending a lot of funds in wasteful activities, such as office renovation, instead of revising the employees' salaries. In this case, the company should hire a(n) _____ to keep a check on the company's expenses and prevent the problem from aggravating.

Accepted Answer

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

Question 18

A severe cyclone causes substantial damage to a brick manufacturing company's production equipment. As a result, the company spends a sum of $25,000 to repair the equipment. Given this information, the sum of $25,000 that the company spends is its _____.

Accepted Answer

A)  explicit cost 
B)  implicit cost 
C)  indirect cost 
D)  direct cost

Question 19

Contingent expenses are costs that a firm incurs in the regular functioning of its business.

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

A)  It is less time consuming than the top-down approach. 
B)  It eliminates the possibility of budgetary slack. 
C)  Middle managers are likely to be highly motivated to achieve budgetary goals. 
D)  Supervisory managers are likely to know the long-term strategic needs of a company.

Exam 8: Accounting: Decision Making by the Numbers

Which of the following is a criterion that needs to be fulfilled by an individual to be recognized as a certified public accountant?

Poline Foods, a food processing company, needs to increase its declining cash inflow through its operating activities. In this context, Poline Foods is most likely to:

As part of its financial budget, Clover & Max, an advertising agency, prepared a document that identified the agency's planned investments in major fixed assets and long-term projects. The given information indicates that the agency prepared the:

In the context of financial statements, which of the following statements is true of large corporations?

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

Lorraine works for an accounting firm that performs external audits, provides consulting services, and does the tax preparation for other businesses and individuals. Given this information, Lorraine is most likely a _____.

In the context of balance sheets, patents, trademarks, and copyrights are examples of _____.

Intangible assets are assets that have no physical existence-you can't see or touch them-but they still have value.

The owners' equity of Senesta Corp., an event management company, adds up to $23 million, and its liabilities add up to $17 million. Based on the accounting equation, the assets of Senesta Corp. are worth _____.

Sidney is a member of the Financial Accounting Standards Board (FASB) and is entrusted with the responsibility of establishing accounting principles in the United States. As a member of the board, Sidney:

The _____ of a firm combines the revenue projections from the firm's sales budget and the cost projections from the firm's other operating budgets to present a forecast of expected net income.

Identify a true statement about current assets.

Public accountants provide services such as tax preparation, external auditing, or management consulting to clients on a fee basis.

Balance sheets usually classify assets into at least two major categories: current assets and property, plant, and equipment assets.

Define and discuss the different kinds of costs in accounting.

A severe cyclone causes substantial damage to a brick manufacturing company's production equipment. As a result, the company spends a sum of $25,000 to repair the equipment. Given this information, the sum of $25,000 that the company spends is its _____.

Contingent expenses are costs that a firm incurs in the regular functioning of its business.

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