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Accounting exam




Question;Par value per share is the price at;which a share of stock is bought or sold.;True;False;Authorized stock is the total number of shares outstanding.;True;False;3 If a corporation is authorized to issue 1,000 shares of $50;common stock, it is said to have $50,000 of stock outstanding.;True;False;4 A corporation can issue two kinds of stock - common and;preferred.;True;False;5 Retained earnings generally consist of a company's;cumulative net income less any net losses and dividends declared since its;inception.;True;False;6 Changes in accounting estimates are accounted for in;current and future periods.;True;False;7 Earnings per share is the amount of income earned per;share of a company's outstanding (weighted-average) common stock.;True;False;8 The price-earnings ratio reveals information about the;stock market's expectations for a company's future growth in earnings.;True;False;9A liability for dividends exists;When;cumulative preferred stock is sold.;On the date of declaration.;On the date;of record.;On the date;of payment.;For;dividends in arrears on cumulative preferred stock.;10 A stock dividend;Is not a;liability on the balance sheet.;Does not;reduce a corporation's assets and stockholders' equity.;Transfers a;portion of equity from retained earnings to contributed capital.;Does not;affect total equity, but does affect the components of equity.;All of the options are correct.;11 A stock dividend transfers;Contributed;capital to retained earnings.;Retained earnings to contributed;capital.;Retained;earnings to assets.;Contributed;capital to assets.;Assets to;contributed capital.;12 The legal contract between the issuing corporation and;the bondholders is called the bond indenture.;True;False;13 A bond is a written promise to pay an amount identified;as the par value of the bond along with interest.;True;False;14 Interest payments on bonds are determined by multiplying;the par value of the bond by the stated contract rate.;True;False;The use of debt financing insures an increase in return on;equity.;True;False;16;The issue price of bonds is found by computing the future;value of the bond's cash payments, discounted at the market rate of interest.;True;False;17.;The effective interest method yields increasing amounts of;bond interest expense and decreasing amounts of premium amortization over the;bond's life for bonds issued at a premium.;True;False;18.;When convertible bonds are converted to a company's stock;the carrying value of the bonds is transferred to equity accounts and no gain;or loss is recorded.;True;False;Bonds can be issued;At par.;At a;premium.;At a;discount.;Between;interest payment dates.;All of the choices are correct.;20.;A corporation borrowed $125,000 cash by signing a 5-year, 9%;installment note requiring equal annual payments each December 31 of $32,136.;What journal entry would the issuer record for the first payment?;Debit;Interest Expense $7,136, debit Notes Payable $25,000, credit Cash $32,136.;Debit Notes;Payable $32,136, debit Interest Payable $11,250, credit Cash $43,386.;Debit Interest Expense $11,250;debit Notes Payable $20,886, credit Cash $32,136.;Debit Notes;Payable $32,136, credit Cash $32,136.;Debit Notes;Payable $11,250, credit Cash $11,250.;21.;All of the following statements regarding accounting;treatments for liabilities under U.S. GAAP and IFRS are true except;Accounting;for bonds and notes under U.S. GAAP and IFRS is similar.;Both U.S.;GAAP and IFRS require companies to distinguish between operating leases and;capital leases.;The;criteria for identifying a lease as a capital lease are more general under;IFRS.;Both U.S.;GAAP and IFRS require companies to record costs of retirement benefits as;employees work and earn them.;Use of the;fair value option to account for bonds and notes is not acceptable under U.S.;GAAP or IFRS.;22.;Long-term investments are usually held as an investment of;cash for use in current operations.;True;False;Equity securities reflect a creditor relationship such as;investments in notes, bonds, and certificates of deposit.;True;False;24.;Long-term investments include investments in land or other;assets not used in a company's operations.;True;False;25.;Debt securities are recorded at cost when purchased.;True;False;26.;The equity method with consolidation is used in accounting;for long-term investments in equity securities with controlling influence.;True;False;Return on total assets can be separated into the profit;margin ratio and total asset turnover.;True;False;28.;Trading securities are always reported as current assets.;True;False;29.;Held-to-maturity securities are equity securities a company;intends and is able to hold until maturity.;True;False;30.;Long-term investments include;Investments in bonds and stocks;that are not readily convertible to cash.;Investments;in marketable stocks that are intended to be converted into cash in the;short-term.;Investments;in marketable bonds that are intended to be converted into cash in the;short-term.;Only;investments readily convertible to cash.;Investments;intended to be converted to cash within one year.;31.;The primary purpose of the statement of cash flows is to;report all major cash receipts (inflows) and cash payments (outflows) during a;period.;True;False;32.;To be classified as a cash equivalent, the only criterion an;item must meet is that it must be readily convertible to a known amount of;cash.;True;False;33.;Business activities that generate or use cash are classified;as operating, investing, or financing activities on the statement of cash;flows.;True;False;34.;Financing activities include (a) the purchase and sale of;long-term assets, (b) the purchase and sale of short-term investments, and (c);lending and collecting on loans.;True;False;35.;The full disclosure principle requires that noncash;investing and financing activities be disclosed in the financial statements.;True;False;36.;Accounting standards require companies to include a;statement of cash flows in a complete set of financial statements.;True;False;37.;A cash coverage ratio of less than 1 indicates cash;inadequacy to meet asset growth.;True;False;38.;The direct method for preparing and reporting the statement;of cash flows reports net income and then adjusts it for items necessary to;calculate net cash provided or used by operating activities.;True;False;39.;The indirect method separately lists each major item of;operating cash receipts and cash payments.;True;False;40.;Which of the following transactions or events should be;reported as a source of cash from operating activities when using the direct;method?;Credit;sales.;Cash collections from customers.;Depreciation;expense.;Cash received;from the sale of a building.;Cash;received from the sale of treasury stock.;41.;Profitability is the ability to generate future revenues and;meet long-term obligations.;True;False;Liquidity and efficiency are considered to be building;blocks of financial statement analysis.;True;False;43.;The building blocks of financial statement analysis include;(1) liquidity, (2) salability, (3) solvency, and (4) profitability.;True;False;44.;Standards for comparison are necessary when making judgments;about a company's performance.;True;False;45.;Intra-company analysis is based on comparisons with;competitors.;True;False;46.;Horizontal analysis is the comparison of a company's;financial condition and performance to a base amount.;True;False;47.;Vertical analysis is used to reveal patterns in data;covering successive periods.;True;False;48.;Trend analysis is a form of horizontal analysis that can;reveal patterns in data across successive periods.;True;False;49.;Vertical analysis is a tool to evaluate individual financial;statement items or groups of items in terms of a specific base amount.;True;False;50.;Horizontal analysis is used to reveal changes in the;relative importance of each financial statement item.;True;False;51.;Managerial accounting provides financial and nonfinancial;information to an organization's managers and other internal decision makers.;True;False;52.;One of the usual differences between financial and;managerial accounting is the time dimension of the information reported.;True;False;53.;Financial accounting relies on accepted principles that are;enforced through an extensive set of rules and guidelines, on the other hand;managerial accounting systems are flexible.;True;False;Just-in-time manufacturing is a system where companies;manufacture products only after the orders have been received from customers.;True;False;55.;When the attitude of continuous improvement exists;throughout an organization, every manager and employee seeks to continuously;experiment with new and improved business practices.;True;False;56.;The main goal of the lean business model is the elimination;of waste while satisfying the customer and providing a positive return to the;company.;True;False;57.;Direct materials are not usually easily traced to a product.;True;False;58.;Whether a cost is controllable or not controllable by an;employee is dependent on the employee's level of responsibility.;True;False;59.;Direct costs are incurred for the benefit of more than one;cost object.;True;False;60.;The model whose goal is to eliminate waste while satisfying;the customer and providing a positive return to the company is;Total quality management.;Managerial accounting.;Customer orientation.;Continuous improvement.;Lean;business model.;61.;Cost accounting systems accumulate costs and then assign;them to products or services.;True;False;62.;A company that uses a cost accounting system normally has;only two inventory accounts: Finished Goods Inventory and Goods in Process;Inventory.;True;False;63.;Cost accounting information is helpful to management in;controlling costs but has no effect on pricing decisions.;True;False;64.;There are two basic types of cost accounting systems: job;order costing and periodic costing.;True;False;65.;A company that produces a large number of standardized units;would normally use a job order cost accounting system.;True;False;66.;When a job is finished, its job cost sheet is completed and;moved from the file of jobs in process to the file of finished jobs that are;yet to be delivered to customers.;True;False;67.;Service firms, unlike manufacturing firms, should only use;actual costs when determining a selling price for their services.;True;False;68.;Job order costing is applicable to manufacturing firms only;and not service firms.;True;False;69.;Cost accounting systems used by manufacturing companies are;based on the;Periodic inventory system.;Perpetual inventory system.;Finished goods inventories.;Weighted average inventories.;LIFO inventory system.;70.;Job order costing systems normally use;Periodic inventory systems.;Perpetual inventory systems.;Real inventory systems.;General inventory systems.;All;of inventory systems normally use job order costing.;71.;Process manufacturing usually reflects a manufacturer that;produces large quantities of identical products.;True;False;72.;To determine unit cost under a process cost accounting;system, equivalent units produced must be calculated if the company has goods;in process inventories.;True;False;73.;Equivalent units of production refer to the number of units;that would be completed if all effort during a period had been applied only to;those units that were started and completed in a period.;True;False;74.;Equivalent units of production are always the same as the;total number of physical units finished during the period.;True;False;75.;The last step in the four-step accounting procedure for;process costing is the calculation of equivalent units of production.;True;False;76.;A process cost summary is an accounting report that;describes the costs charged to a department, the equivalent units of production;by the department, and how the costs were assigned to the output.;True;False;77.;The FIFO method separates prior period costs from costs;incurred during the current period.;True;False;78.;Direct costs in process cost accounting include only those;costs that can be readily identified with individual product units.;True;False;79.;Which of the following characteristics applies to process;cost accounting but not to job order cost accounting?;Use of a predetermined overhead rate.;Identifiable lots of production.;Equivalent;units of production.;Labor time ticket for each employee.;Use of a single Goods in Process Inventory account.;80.;Equivalent units of production are equal to;The;number of units that could have been completed if all effort had been applied;to units that were started and completed during a period.;The number of finished units actually produced during;a period.;The number of units introduced into the process during;a period.;The number of units still in process at the end of a;period.;Physical units that were started and completed during;a period.;81.;Variable costs per unit increase proportionately with;increases in output activity.;True;False;82.;The relevant range of operations includes extremely high and;low levels of production that are unlikely to occur.;True;False;83.;Cost-volume-profit analysis is frequently based on the;assumption that the production level is the same as the sales level.;True;False;84.;Cost-volume-profit analysis can be used to predict the;effects of reduced selling prices, increased fixed costs, and reduced variable;costs on break-even points.;True;False;85.;Contribution margin is the amount of sales that exceeds;total variable costs.;True;False;86.;Break-even analysis is a special case of cost-volume-profit;analysis.;True;False;87.;The contribution margin per unit is the price at which a;unit must be sold in order for the company to break even.;True;False;88.;A cost that remains the same in total even when volume of;activity varies is a;Fixed;cost.;Curvilinear cost.;Variable cost.;Step-wise variable cost.;Standard cost.;89.;A cost that changes in proportion to changes in volume of;activity is a(n);Differential cost.;Fixed cost.;Incremental cost.;Variable;cost.;Product cost.;90.;A budget can be an effective means of communicating;management's plans to the employees of a business.;True;False;91.;Budgets are normally more effective when all levels of;management are involved in the budgeting process.;True;False;92.;A budget is a formal statement of future plans, usually;expressed in monetary terms.;True;False;93.;Past performance is the best overall basis for evaluating;current performance and assessing the need for corrective action.;True;False;94.;Continuous budgeting is the practice of preparing a new;budget for a selected number of future periods and replacing budgets for;periods that have lapsed.;True;False;95.;The task of preparing a budget should be the sole task of;the most important department in an organization.;True;False;96.;A rolling budget is a specific budget application relevant;only to a merchandising company.;True;False;97.;The budgets within the master budget must be prepared in a;definite sequence as dictated by GAAP.;True;False;98.;For budgets to be effective;Goals should be attainable.;Employees affected by a budget should be consulted;when it is prepared.;Evaluations should be made carefully with opportunities;to explain any failures.;They should be properly applied to avoid negative;effects.;All;of the options are correct.;99.;Standard material, labor, and overhead costs can be obtained;from standard cost tables published by the Institute of Management Accountants.;True;False;100.;When standard costs are used, factory overhead is assigned;to products with a predetermined standard overhead rate.;True;False;101.;Companies promoting continuous improvement strive to achieve;practical standards rather than ideal standards.;True;False;102.;A cost variance is the difference between actual cost and;standard cost.;True;False;103.;A budget performance report that includes variances can have;variances caused by both price differences and quantity differences.;True;False;104.;When computing a price variance, the price is held constant.;True;False;105.;Another name for a static budget is a variable budget.;True;False;106.;Standard costs are;Actual costs incurred to produce a specific product or;perform a service.;Preset;costs for delivering a product or service under normal conditions.;Established by the IMA.;Rarely achieved.;Uniform among companies within an industry.;107.;The difference between actual and standard cost caused by;the difference between the actual quantity and the standard quantity is called;the;Controllable variance.;Standard variance.;Budget variance.;Quantity;variance.;Price variance.;108.;Evaluation of the performance of managers of profit centers;assumes that the managers can control or influence both costs and revenue;generation.;True;False;109.;Investment center is another name for profit center.;True;False;110.;A cost center does not directly generate revenues.;True;False;A department that is responsible for maximizing revenues is;known as a profit center.;True;False;112.;Indirect expenses should be allocated to departments based;upon the benefits received by each department.;True;False;113.;Departmental wage expenses are direct expenses of that;department.;True;False;114.;An example of a service department is the human resources;department.;True;False;115.;A cost center is a unit of a business that incurs costs but;does not directly generate revenues. All of the following are considered cost;centers except;Accounting department.;Purchasing department.;Research department.;Advertising department.;All;of these could be considered cost centers.;116.;A profit center;Incurs costs, but does not directly generate revenues.;Incurs;costs and directly generates revenues.;Has a manager who is evaluated solely on efficiency in;controlling costs.;Incurs only indirect costs and directly generates;revenues.;Incurs only indirect costs and generates revenues.;117.;Capital budgeting decisions are risky because the outcome is;uncertain, large amounts are usually involved, the investment involves a;long-term commitment, and the decision could be difficult or impossible to;reverse.;True;False;118.;If the internal rate of return (IRR) of an investment is;below the hurdle rate, the project should be accepted.;True;False;119.;An opportunity cost is the potential benefit that is lost by;taking a specific action when two or more alternative choices are available.;True;False;120.;The concept of incremental cost is the same as the concept;of differential cost.;True;False;121.;In a make or buy decision, management should focus on costs;that are constant under the two alternatives.;True;False;122.;An advantage of the break-even time (BET) method over the;payback period method is that it recognizes the time value of money.;True;False;123.;If the straight-line depreciation method is used, the annual;average investment amount used in calculating rate of return is calculated as;(beginning book value + ending book value)/2.;True;False;124.;Capital budgeting decisions usually involve analysis of;Cash;outflows only.;Short-term investments.;Long-term investments.;Investments with certain outcomes only.;Operating revenues.;125.;The process of analyzing alternative investments and;deciding which assets to acquire or sell is known as;Planning and control.;Capital;budgeting.;Variance analysis.;Master budgeting.;Managerial accounting.


Paper#41073 | Written in 18-Jul-2015

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