Question 1

Daniel, the owner of a bookstore, decides to reinvest his personal profits from the current fiscal year toward renovating the store and expanding its inventory. In the context of owners' equity, the profits that Daniel reinvests in the bookstore are called:

Accepted Answer

A) bonus shares. 
B) retained earnings. 
C) current liabilities. 
D) equity releases.

Question 2

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 3

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 4

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

Question 5

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 6

In the context of an independent auditor's report, if the auditor identifies some minor concerns but believes that on balance the firm's statements remain a fair and accurate representation of the company's financial position, the report will offer a(n) _____ opinion.

Accepted Answer

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

Question 7

The management of a fertilizer company decides to increase the company's cash flow by increasing its financing activities. In this context, the company 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) take short-term and long-term loans.

Question 8

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 9

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 10

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 11

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 12

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

Question 13

Congress passed the__________that banned business relationships that might create conflicts of interest between certified public accounting (CPA) firms and the companies they audit.

Accepted Answer

A) Sarbanes-Oxley Act of 2002 
B) Securities Exchange Act of 1934 
C) Glass-Steagall Act of 1933 
D) McCain-Feingold Act of 2002

Question 14

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 15

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 16

In the recent years, the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) have come together to:

Accepted Answer

A) restructure the qualification and clearance standards for certified public accountants universally. 
B) impose stricter punishments in cases of fraudulent and unethical accounting. 
C) maneuver other nations into adopting the accounting practices of the United States. 
D) find ways to make U.S.accounting practices more consistent with those in other nations.

Question 17

The first stage in activity-based costing is to:

Accepted Answer

A) multiply the total cost of producing each good by the number of goods. 
B) identify specific activities that create indirect costs and determine the factors that drive the costs of these activities. 
C) divide the total cost of goods available for sale by the total units available for sale. 
D) identify specific activities that create direct costs and determine the marketing factors that influence the costs of these activities.

Question 18

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 19

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 20

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

Accepted Answer

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

Exam 8: Accounting: Decision Making by the Numbers