123 test bank for financial ACCT 1st edition

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123 Test Bank for Financial ACCT 1st Edition Multiple Choice Questions-Page You are a potential creditor and are concerned that a particular company you are ready to give a loan to might have too much debt Which financial statement would provide you information needed in order to evaluate your concern? Balance Sheet Income Statement Statement of Retained Earnings Statement of Public Accounting On January 1, 2010, Blackstone Company reported assets of $1,000,000 and liabilities of $600,000 During 2010 assets decreased by $200,000 and Equity decreased $250,000 What is the amount of Equity at December 31, 2010 $650,000 $150,000 $400,000 $800,000 Which of the following statements is true regarding economic events? The signing of a service contract is an example of an external event that is recorded in the accounting records Every event which affects an entity can be identified from a source document All internal and external events must be measured with sufficient reliability External events involve exchanges between an entity and another entity outside the company Which one of the following financial statements reports an entity's financial position at a specific date? Balance Sheet Statement of Retained Earnings Income Statement Both the Income Statement and the Balance Sheet Which of the following underlying assumptions for the conceptual framework is the reason the dollar is used in the preparation of financial statements? Economic Entity Continuity Time-Period Monetary Unit Which one of the following is a correct fundamental accounting equation? Assets + Liabilities = Equity Assets + Retained Earnings = Equity Assets + Equity = Liabilities Assets = Liabilities + Equity Ponzi Corporation reported the following information for the year ended December 31, 2010 Net income $100,000; Dividends 6,000; Retained earnings at December 31, 2010 $120,000; What was the economic effect of the payment of Ponzi's dividends? The dividend reduced net income for 2010 The dividend should be added to net income if the company's accounting equation is in balance The dividend reduced total retained earnings The dividends must be paid whenever Ponzi Corp reports net income Which financial statement would you analyze to determine its operating performance for the past year? Balance Sheet Statement of Retained Earnings Income Statement Statement of Public Accounting The time-period assumption is necessary because inflation exists and causes confusing swings in financial statement amounts over time external users of financial statements want accurately-reported net income for a specific period of time financial statements users expect full disclosure of all economic events throughout the entire time period it is required by the federal government Which one of the following is not one of the three business activities? Financing Operating Investing Measuring Which one of the following financial statements show the end of the year cash balance for a business entity? Income Statement and Statement of Retained Earnings Balance Sheet and Statement of Cash Flows Statement of Retained Earnings and Statement of Cash Flows Balance Sheet and Statement of Retained Earnings Which of the following is the correct date format for the financial statement heading? Balance Sheet for the Year Ended June 30, 2010 Income Statement at December 31, 2010 Income Statement for the Year Ended December 31, 2010 Statement of Retained Earnings at December 31, 2010 Businesses engage in which of the following three main activity categories? Financing, Investing, Operating Cash, Credit, Noncash Financing, Credit, Operating Financing, Management, Operating Which financial statement would you refer to in order to determine how many resources (assets) the company owned? Balance Sheet Statement of Retained Earnings Income Statement Statement of Public Accounting Which statement demonstrates the financial success or failure of the company over that specific period of time? Statement of Cash Flows Statement of Retained Earnings Balance Sheet Income Statement The going concern assumption is concerned with The company's ability to continue operations long enough to carry out its existing obligations Any information that is capable of influencing the decisions of anyone using the financial statements Measuring ongoing business activities at their exchange price at the time of the initial external transaction offsetting management's natural optimism by providing a prudent approach to uncertainty in financial statement items How is the Balance Sheet linked to the other financial statements? The amount of retained earnings is reported on the Balance Sheet as a liability Retained earnings is added to total assets and reported on the Balance Sheet Retained earnings is reported on the Balance Sheet There is no link between the Balance Sheet and other statements, as each contains different accounts and provides different information Which of the following best describes the term "retained earnings" of a company? The amount of total profits earned by a company since it began operations The amount of claim that the owners have on the assets of the company The future economic resources of a company The accumulated net income of a company that has not been distributed to owners in the form of dividends Which of the following is an assumption made in the preparation of the financial statements? Financial statements are prepared for a specific entity that is distinct from the entity's owners The current market value is assumed to be less relevant than the original cost paid The preparation of financial statements for a specific time period assumes that the balance sheet covers a designated period of time Financial statements are prepared assuming that inflation has a distinct effect on the monetary unit Which of the following is an organization that lends funds to a business entity and expects repayment of the funds? A partner A stockholder An owner A creditor Which one of the following items appears on a balance sheet? Retained Earnings Sales Revenue Utilities Expense Dividends Ponzi Corporation reported the following information for the year ended December 31, 2010 Net income $100,000; Dividends 6,000; Retained earnings at December 31, 2010 $120,000; What was the balance of Retained Earnings at January 1, 2010? $ 21,000 $ 26,000 $106,000 $214,000 IPOD Corporations' end-of-year Balance Sheet consisted of the following amounts Cash $150,000;Accounts Receivable $500,000; Property, plant & equipment 700,000;Long-term debt 400,000; Capital stock 1,000,000;Accounts payable 200,000; Retained earnings ; Inventory 350,000; What is IPOD 's Retained Earnings balance at the end of the current year? $100,000 $1,100,000 $1,600,000 $1,700,000 The Peck Company reported the following items on its financial statements for the year ending December 31, 2010 Sales $1,560,000; Cost of Sales $1,400,000; Selling, general and Other Expense 30,000; administrative expense 40,000 ; Dividends 10,000Income Tax Expense 25,000; Refer to Peck Company How much will be reported as Retained Earnings on its Balance Sheet at December 31, 2010, if this is the first year of operations? $45,000 $55,000 $85,000 Not enough information is provided Which of the following terms best describes a distribution of the net income of a corporation to its owners? Retained Earnings Dividends Liquidation of assets Monetary Unit IPOD Corporations' end-of-year Balance Sheet consisted of the following amounts Cash $ 150,000; Accounts Receivable $500,000; Property, plant & equipment 700,000; Long-term debt 400,000; Capital stock 1,000,000; Accounts payable 200,000; Retained earnings; Inventory 350,000; Refer to IPOD Corp What amount should IPOD report on its Balance Sheet for Total Assets? $1,100,000 $1,550,000 $1,700,000 $1,900,000 Correct Feedback $150,000 + $500,000 + $700,000 + $350,000 = $1,700,000 Incorrect Feedback $150,000 + $500,000 + $700,000 + $350,000 = $1,700,000 Which one of the following events involves a liability for a business? An obligation to pay for goods purchased on credit from a supplier Inventories purchased for cash Amounts invested by the owners Stock sold to the general public Which of the following best describes the term "expenses"? The cost of assets used in the investing activities of a business The amount of interest or claim that the owners have in the business The future economic resources of a business entity A decrease in resources resulting from the sale of goods or provision of services Jetson Corp reported the following information for the year ended December 31, 2010 Revenue $14,000,000; Expenses 11,500,000; Dividends 1,000,000; Retained Earnings at December 31, 2010 1,750,000; What was the retained earnings balance at December 31, 2009? $250,000 $2,500,000 $1,500,000 $ 350,000 Bailout Corp reported the following information for the year ended December 31, 2010 Revenues $2,500,000; Expenses 2,000,000; Retained Earnings at December 31, 2009 100,000; Retained Earnings at December 31, 2010 450,000; How much was paid out in dividends in 2010? $500,000 $150,000 $350,000 $250,000 Correct Feedback $100,000 + $2,500,000 - $2,000,000 - X = $450,000 X = $150,000 Incorrect Feedback $100,000 + $2,500,000 - $2,000,000 - X = $450,000 X = $150,000 b.Human resource manager c.Finance manager d.Marketing manager An example of qualitative data is: a.product cost b.customer satisfaction c.net income d.operating costs Which of the following is an example of an internal user of accounting information? a.Supplier b.Stockholder c.Manager d.Federal tax agency A company's decision on where to locate a new factory is most likely a result of: a.Operating activities b.Operational planning c.Strategic planning d.Controlling activities Which type of business manager decides whether a company should borrow money or issue stock as a way to raise money? a.Human resource manager b.Operations/production manager c.Finance manager d.Marketing manager All of the following are examples of operating activities except: a.Decisions on whether or not to schedule overtime for employees b.Decisions on what price to charge for a product c.Decisions on whether or not to accept a special order d.Decisions on whether actual outcomes were similar to desired outcomes Which of the following statements about decision-making is true? a.Risk should not be taken into account b.Objectives should be quantitative and not qualitative c.Managers often not have a clear understanding of the real source of the problem d.Sunk costs should usually be taken into account Relevant costs: a.are sunk costs b.are costs that differ among alternatives c.are unavoidable d.can not be opportunity costs Which of the following statements is not true regarding enterprise resource planning (ERP)? a.It integrates traditional accounting information systems with other information systems b.It can be customized to provide specific and relevant information to different types of users c.It has evolved in the past few years to address the shortcomings of traditional accounting information systems d.It captures quantitative but not qualitative information Looking at how a company will distinguish itself from its competitors involves: a.Operational planning b.Strategic planning c.Internal planning d.Financial planning Which type of business manager would most likely be involved in product packaging decisions? a.Marketing manager b.Operations/production manager c.Finance manager d.Human resource manager Which of the following is a characteristic of managerial accounting? a.It is used primarily by external users b.It often lacks flexibility c.It is often future-oriented d.The information it provides is extremely precise You are now considering your housing options for next semester If the cost of a dorm room and the cost of an apartment are exactly the same, housing costs are: a.sunk costs b.an opportunity cost c.not relevant d.relevant Mary Ann is trying to decide whether to fly to Florida or New York The cost of her ticket will be the same either way The cost of the ticket is an example of a(n): a.sunk cost b.opportunity cost c.relevant cost d.irrelevant cost Costs that differ between alternatives are called: a.sunk costs b.irrelevant costs c.relevant costs d.unavoidable costs Decision-makers should consider: a.only qualitative factors b.only quantitative factors c.both quantitative and qualitative factors d.sunk costs as well as quantitative and qualitative factors Which type of business manager would be the most likely to decide whether or not employees need to work overtime in order to fill a special order? a.Human resource manager b.Operations/production manager c.Finance manager d.Marketing manager Which manager activity would address the decision on whether or not to accept a special order within the next few days? a.Sales activity b.Strategic planning activity c.Operating activity d.Controlling activity Which type of business manager would most likely be in charge of deciding on the type of benefit package an employee receives? a.Finance manager b.Operations/production manager c.Human resource manager d.Marketing manager The main focus of managerial accounting is: a.decision making b.the preparation of financial statements c.the preparation of budgets d.documenting cash flows You are considering your housing options for next semester The cost of a dorm room and the cost of an apartment are the same You paid a $50 nonrefundable deposit to live in the dorm last year This deposit is an example of a(n): a.opportunity cost b.relevant cost c.sunk cost d.avoidable cost Which of the following should not be taken into account in decision-making? a.Risk b.Ethical considerations c.Irrelevant costs d.Opportunity costs involve(s) the development of short-terms objectives and goals a.Controlling activities b.Strategic planning c.Operational planning d.Financial activities Which of the following is true regarding managerial accounting? a.It often emphasizes segments rather than the organization as a whole b.It often must follow established rules called generally accepted accounting principles c.Its primary focus is on providing information to external users d.It is less flexible than financial accounting Free Text Questions Both net income and dividends can be found on this financial statement: Answer Given Statement of Retained Earnings What is the purpose of an income statement? Answer Given An income statement reports the company's revenues and expenses for a period of time and shows the company's profitability (or lack of) The income statement is sometimes called the "profit or loss statement." The names of the four basic financial statements are , , , and Answer Given Income Statement, Balance Sheet, Statement of Retained Earnings, Statement of Cash Flows The three financial statements in which net income can be found are the , and Answer Given Income Statement, Statement of Retained Earnings, Statement of Cash Flows using the Indirect Method List the four financial statements Explain the connection between these three statements Answer Given Balance Sheet; Income Statement; Statement of Retained Earnings; Statement of Cash Flows; Net income on the income statement increases retained earnings on the statement of retained earnings The balance in the statement of retained earnings goes to the balance sheet The ending balance for cash on the Statement of Cash Flows is also shown on the Balance Sheet What is the difference between comparability and consistency? Answer Given Comparability allows comparisons to be made between or among companies Even though a certain amount of freedom exists in selecting accounting principles, when this information is disclosed in the financial statements, users can still compare the information when they know what principle is used Consistency refers to the application of the same accounting principles over time It involves the relationships between a set of numbers over several periods, but within one company only, unlike comparability that can be between or among companies The fundamental accounting equation is = + Answer Given assets, liabilities, equity Paige Company claims that its financial information is useful What four qualities must be present in order to have "useful" accounting information? Explain these four qualities Answer Given The four qualitative characteristics of useful accounting information are relevance, reliability, comparability, and consistency Relevant information has the capacity to make a difference in a decision It helps users predict future events or provides feedback Reliable information is dependable, verifiable, and free from bias Comparability allows comparisons to be made between or among companies Consistency refers to the application of the same accounting principles over time The financial statement in which you list revenues, starting with sales revenue (service revenue), is called the Answer Given Income Statement The Statement of Cash Flows classifies cash flow into these three categories: , and Answer Given Operating, Investing, Financing The type of business activity that relates to obtaining funds from either issuing stock or borrowing money is called Answer Given Financing Net Income from the Income Statement increases Answer Given retained earnings Each of the situations in A through C below applies to one of the assumptions or principles included in the conceptual framework of accounting Identify which assumption or principles applies and explain why that assumption or principle applies A) Globall Inc is a U.S company that has divisions in several countries around the world Each country has a currency different that the U.S dollar Globall must include the financial data of its worldwide divisions in its financial statements B) Cheetum & Howel Answer Given A) The Monetary Unit Assumption Financial statements must be reported in monetary terms, and the standard monetary unit should be denominated in one currency B) Economic Entity Assumption A business can take three forms Regardless of the form, however, the unit itself is distinct from its owners C) Continuity (Going Concern) Assumption A business is assumed to continue to operate long enough to carry out its obligations, to more accurately reflect the valuation of assets and appropriately allocate costs to accounting periods Free Text Questions Managers are responsible for numerous activities including planning, operating, and controlling Define these three types of activities and provide at least one example of each Answer Given Planning activities involve the development of both short-term (operational) and longterm (strategic) objectives and goals of an organization and an identification of the resources needed to achieve them Examples include budget preparation, capital expenditure decisions, plant expansion decisions, production plans, etc Operating activities involve the day-to-day operations of a business Examples include special order decisions, pricing decisions, employee policy decisions, etc Controlling activities involve the motivation and monitoring of employees and the evaluation of people and other resources used in the operations of the organization Examples include employee evaluations, bonus calculations, employee rewards, etc How has the automation of accounting information altered the role of the managerial accountant? Answer Given Automation in present-day organizations allows clerical staff to gather and input accounting information Most computer systems have the ability to generate data reports Therefore, the managerial accountant is able to spend time monitoring and interpreting the reports generated by the automated system They also aid managers in the decision-making process and perform more financial planning and modeling Select one of the following functional managers and discuss how they might use accounting information in their managerial role: marketing manager, operations/production manager, human resource manager, or finance manager Answer Given Marketing manager: help set a proper sales price for an item, make product enhancement decisions, make advertising decisions, make distribution decisions; Operations/Production manager: make production planning decisions, assess the efficiency of the production process; Human resource manager: determine how many people to hire, use a cost benefit analysis to promote training on new equipment, motivate employees to perform optimally; Finance manager: plan capital expenditures, arrange financing Select one of the following functional managers and provide an example of the type of accounting information that they might request from the managerial accountant: marketing manager, operations/production manager, human resource manager, or finance manager Answer Given Marketing manager: product costs, advertising costs, costs of product enhancements, sales commissions, shipping costs; Operations/Production manager: product costs, labor costs, overhead costs; Human resource manager: production projections, labor needs; Finance manager: cash needs, capital needs Describe the role of the management accountant within an organization Answer Given Managerial accountants present financial information in a manner that is useful to managers within an organization They also help managers within various functional areas to understand financial information and make better decisions They are often involved with financial planning and financial modeling Grant Enterprises is considering the introduction of a new product The marketing and production departments have begun informal discussions about its design, production, and sales List three examples of accounting information that the marketing and production managers would find useful in their meeting Answer Given Examples might include: projected product costs, breakeven figures, the effects of the new product on corporate net income, storage costs, advertising budgets, effects of outsourcing, labor costs, production capacity, and capital expenditure analysis You are trying to decide what to during your next school break One campus group is planning a trip to Jacksonville Beach Another is planning a ski trip to Snowmass Many students will be going home to see family, and others will remain on campus List three factors that you might consider in making your decision Answer Given Answers will vary, but may include: •the student's financial situation; •whether or not the student likes the students within each campus group; •does the student prefer the beach or skiing; •does the student have to study or work during the break; •the cost of each alternative Accounting information systems generate both monetary and non-monetary accounting information List two examples of each type of accounting information Answer Given Monetary accounting information generated by an accounting information system includes sales, net income, total costs, and costs of product or services Non-monetary accounting information generated by an accounting information system includes: number of budgeted labor hours, the number of units necessary to break even, units shipped, and the time it takes to manufacture a product Identify one internal user of accounting information and one external user of accounting information Provide a specific example of how accounting information might be used by each Answer Given Examples of internal users and the manner in which they use accounting information could include: •Production manager: assess the efficiency of the production process; •Marketing manager: help set a proper sales price for an item; •Regional manager: decide whether to maintain or close individual divisions; •Finance personnel: plan capital expenditures; Examples of external users and the manner in which they use accounting information could include: •Stockholders or potential investors: help analyze the profitability of an organization; •Donors of non-profit organizations: help determine the future donations, identify use of prior donations; •Bank officials or creditors: decide whether to lend money to an organization; •Government agencies: assess compliance with laws and regulations (e.g taxes) Discuss how a managerial accounting report prepared for an internal user might differ from a financial accounting report prepared for an external user Answer Given Managerial accounting reports prepared for internal users are generally characterized by the following: •They not have to follow standardized rules set by an authoritative body; •They are typically more detailed than financial reports; •They are more futureoriented; They are focused on the needs of the user; They are timelier and more relevant.(This is not an exhaustive list.) In contrast, financial accounting reports are generally characterized by the following: A lack of flexibility; The reporting of past events using historical costs; The focus of reporting on the business on a whole rather than individual products; The reports are prepared in accordance with GAAP.(This is not an exhaustive list.) ... into a business and is considered an owner? Stockholders Creditors Bankers Lenders 73 Free Test Bank for Financial ACCT 2010 1st Edition by Godwin Multiple Choice Questions-Page "Economic resources"... following is the correct date format for the financial statement heading? Balance Sheet for the Year Ended June 30, 2010 Income Statement at December 31, 2010 Income Statement for the Year Ended December... information needed for the next statement In what order are these three statements prepared? I,RE, B B, I, RE RE, I, B B,RE, I In order for accounting information to be useful in making informed