SET 1

1. (TCO 1) Which of the following would not be considered an internal user of accounting data for a company? (Points : 4)

President of a company

Controller of a company

Creditor of a company

Salesperson of a company

2. (TCO 1) Resources owned by a business are referred to as _________. (Points : 4)

stockholders equity.

liabilities.

assets.

revenues.

3. (TCO 1) To show how successfully your business performed during a period of time, you would report its revenues and expenses in the _________. (Points : 4)

balance sheet.

income statement.

statement of cash flows.

retained earnings statement.

4. (TCO 1) Henson Company began the year with retained earnings of $175,000. During the year, the company recorded revenues of $250,000, expenses of $190,000, and paid dividends of $20,000. What was Henson s retained earnings at the end of the year? (Points : 4)

$255,000

$215,000

$405,000

$235,000

5. (TCO 4) Which of the following statements is not true? (Points : 4)

Comparability means using the same accounting principles from year to year within a company.

Reliability is the quality of information that gives assurance that it is free of error or bias.

Relevant accounting information must be capable of making a difference in a decision.

The FASB s overriding criterion is that the accounting rule adopted should be the one that generates the most useful financial information for making a decision.

6. (TCO 4) Using the following balance sheet and income statement data, what is the current ratio?

Current assets $9,000 Net income $12,000

Current liabilities 4,000 Stockholders equity 24,000

Total assets 30,000 Total liabilities 6,000

Average common shares outstanding was 10,000 (Points : 4)

1.75:1

2.00:1

0.44:1

2.25:1

7. (TCO4) Using the following balance sheet and income statement data, what is the total amount of working capital?

Current assets $12,000 Net income $12,000

Current liabilities 8,000 Stockholders equity 24,000

Total assets 32,000 Total liabilities 8,000

Average common shares outstanding was 10,000 (Points : 4)

$4,000

$24,000

$3,000

$10,000

8. (TCO 4) Using the following balance sheet and income statement data, what is the debt to total assets ratio?

Current assets $7,000 Net income $12,000

Current liabilities 4,000 Stockholders equity 21,000

Total assets 30,000 Total liabilities 9,000

Average common shares outstanding was 10,000 (Points : 4)

75%

19%

57%

30%

9. (TCO 2) Franklin Company provided consulting services and billed the client $2,500. As a result of this event, _________. (Points : 4)

assets remained unchanged.

assets increased by $2,500.

equity increased by $2,500.

both assets increased by $2,500 and equity increased by $2,500

10. (TCO 2) A credit is not the normal balance for which account listed below? (Points : 4)

Common stock account

Revenue account

Liability account

Dividends account

11. (TCO 2) In the first month of operations, the total of the debit entries to the cash account amounted to $900 and the total of the credit entries to the cash account amounted to $400. The cash account has a _________ (Points : 4)

$500 debit balance.

$900 debit balance.

$500 credit balance.

$400 credit balance.

12. (TCO 2) A trial balance would only help in detecting which one of the following errors? (Points : 4)

A transaction that is not journalized

A journal entry that is posted twice

Offsetting errors made in recording the transaction

A transposition error when transferring the debit side of a journal entry to the ledger

13. (TCO 3) Related buying activities include _________ (Points : 4)

ordering, receiving, and paying.

ordering, selling, and paying.

ordering, shipping, and billing.

selling, shipping, and paying.

14. (TCO 3) Ron Jones has been a trusted employee for over 10 years. He is responsible for ordering merchandise inventory, receiving the inventory items, and authorizing the payment for these items. Which internal control principle, if any, is being violated? (Points : 4)

None, Ron has proven to be trustworthy and has enough experience to do a good job.

Documentation procedures

Establishment of responsibilities

Segregation of duties

15. (TCO 3) For which of the following errors should the appropriate amount be subtracted from the balance per bank on a bank reconciliation? (Points : 4)

Check for $43 recorded as $34

Deposit of $500 recorded by bank as $50

A returned $200 check recorded by bank as $20

Check for $35 recorded as $53

SET 2

1) The standards and rules that are recognized as a general guide for financial reporting are called __________. A. standards of financial reporting B. generally accepted accounting principles C. operating guidelines D. generally accepted accounting standards

2) Sam’s Used Cars uses the specific identification method of costing inventory. During March, Sam purchased three cars for $6,000, $7,500, and $9,750, respectively. During March, two cars are sold for $9,000 each. Sam determines that at March 31, the $9,750 car is still on hand. What is Sam s gross profit for March? A. $8,250 B. $4,500 C. $750 D. $5,250 ((9,000X2) (6,000+7,500))

3) Which one of the following items is not generally used in preparing a statement of cash flows? A. Additional information B. Comparative balance sheets C. Current income statement D. Adjusted trial balance

4) The cost principle requires that when assets are acquired, they be recorded at __________. A. list price B. exchange price paid C. selling price D. appraisal value

5) What is the preparation of reports for each level of responsibility in the company s organization chart called? A. Master budgeting analysis B. Responsibility reporting C. Exception reporting D. Static reporting

6) The cost principle is the basis for preparing financial statements because it is __________. A. the most accurate measure of purchasing power B. an international accounting standard C. relevant and objectively measured, and verifiable D. a conservative value

7) Which list below best describes the major services performed by public accountants? A. Cost accounting, production scheduling, recruiting B. Auditing, taxation, management consulting C. Employee training, auditing, bookkeeping D. Bookkeeping, mergers, budgets

8) A well-designed activity-based costing system starts with __________. A. analyzing the activities performed to manufacture a product B. assigning manufacturing overhead costs for each activity cost pool to products C. computing the activity-based overhead rate D. identifying the activity-cost pools

9) The income statement and balance sheet columns of Pine Company’s worksheet reflects the following totals: Income Statement Balance Sheet Dr. Cr. Dr. Cr. Totals $58,000 $48,000 $34,000 $44,000 Closing entries are necessary for __________. A. permanent or real accounts only B. both permanent and temporary accounts C. temporary accounts only D. permanent accounts only

10) What exists when budgeted costs exceed actual results? A. An excess profit B. An unfavorable difference C. A favorable difference D. A budgeting error

11) Multinational corporations __________. A. are U.S. companies that trade their securities on the exchanges in other countries B. are firms that conduct their operations in more than one country through subsidiaries, divisions, or branches in foreign countries C. are U.S. companies that sell goods and services in other countries D. are required to use international accounting standards

12) The major reporting standard for management accounts is __________. A. generally accepted accounting principles B. relevance to decisions C. the Sarbanes-Oxley Act of 2002 D. the Standards of Ethical Conduct for Practitioners of Management Accounting and Financial Management

13) The primary purpose of the statement of cash flows is to __________. A. facilitate banking relationships B. provide information about the investing and financing activities during a period C. prove that revenues exceed expenses if there is a net income D. provide information about the cash receipts and cash payments during a period

14) As Plant Controller, you are trying to determine which costs over which you have the most control on a day to day basis. Your goal is to achieve better profitability. The Plant Operations Manager suggests that overhead is the easiest area to directly reduce costs. Which of the following items would be classified as manufacturing overhead? A. The western division s vice president s salary B. Factory janitor C. General corporate liability insurance D. Cost of landscaping the corporate office