Reference no: EM1360691

1. Common stock of corporations may be listed on stock exchanges or traded:

a. over-the-counter.

b. by brokers who own an inventory of shares from which they buy/sell.buy/sell.

c. between directors of the corporation.

d. on the New York Stock Exchange.

2. All but one of the following is known as a financial market?

a. foreign exchange market

b. pension fund market

c. money market

d. fixed-income market

3. The first time a security is sold it is in the _______ market; subsequent trading of the security is in the ______ market.

a. money; capital

b. capital; money

c. banking; secondary

d. primary; secondary

4. A common-size balance sheet portrays the firm's accounts as a percent of the:

a. industry's assets.

b. firm's net income.

c. firm's total assets.

d. strongest competitor's assets.

5. Which of the following actions will improve a firm's current ratio if it is now less than 1.0?

a. Convert marketable securities to cash.

b. Pay accounts payable with cash.

c. Buy inventory on credit.

d. Sell inventory at cost.

6. When Tri-C Corp. compares its ratios to industry averages, it has a higher current ratio, an average quick ratio, and a low inventory turnover. What might you assume about Tri-C?

a. Its cash balance is too low.

b. Its cost of goods sold is too low.

c. Its current liabilities are too low.

d. Its average inventory is too high.

7. When a firm finances long-term assets with short-term sources of funding, it:

a. reduces the risk of cash shortage.

b. will have higher interest expenses.

c. improves the leverage ratio.

d. is ignoring the principle of matched maturities.

8. Trade credit is created when:
a. customers return unacceptable goods.

b. final consumers purchase goods on credit.

c. companies purchase goods on credit.

d. current assets exceed current liabilities.

9. What is the total carrying cost for an inventory of 200 widgets if the per-widget carrying cost is $4, the cost per order is $14, and there are 5 orders per year?

a. $400

b. $470

c. $800

d. $870

10. A firm's safety stock represents the:
a. inventory having passed quality-control inspection.

b. largest order size that retains minimum order costs.

c. inventory of most frequently ordered items.

d. reorder point that considers lags and uncertainties.

11. Which statement is true about terms of trade credit of 2/10, net 30?

a. A 10% cash discount is offered for payment before 30 days.

b. A 2% cash discount can be taken for payment before the 10th of the following month.

c. A 10% cash discount can be taken if paid by the second day after invoicing.

d. No cash discount is offered after the eleventh day.

12. At what point does a customer's unpaid account become delinquent when the terms of sale are 2/10, net 60?

a. 11 days after the sale.

b. 31 days after the sale.

c. 61 days after the sale.

d. 71 days after the sale.

13. Which primary financial statement shows a business enterprise's resources, obligations, and equities?
a. Statement of cash flows
b. Balance sheet
c. Income statement

d. Statement of retained earnings

14. Several organizations have developed codes of ethics for accountants. Which of the following organizations did NOT develop a code of ethics for accountants?

a. American Institute of Certified Public Accountants (AICPA)
b. Institute of Management Accountants (IMA)
c. Securities Exchange Commission (SEC)
d. All of the above developed a code of ethics for accountants

15. The functions of an accounting system include all of the following except:

a. Gather marketing data
b. Handle routine bookkeeping tasks
c. Structure information so that it can be used to evaluate performance of a business

d. Analyze transactions

16. In which form of business is income taxed twice: once when the business earns it and again when it is distributed to owners?

a. Proprietorship
b. Partnership
c. Corporation
d. Agency

17. Which of the following is NOT normally considered to be an asset?

a. Retained earnings
b. Cash
c. Buildings
d. Accounts receivable

18. If a company has $15,000 in assets and $10,000 in equities, then liabilities are:

a. $25,000
b. $10,000
c. $5,000
d. $0

19. When preparing a statement of cash flows, activities associated with buying and selling assets are:

a. Operating activities
b. Investing activities
c. Financing activities
d. Revenue activities

20. In order for the data of a transaction to be accurately represented, an assumption must be made that the transaction was conducted between buyer and seller with no bias toward either party. This concept is called the:

a. Arm's-length transaction assumption
b. Separate entity concept
c. Going concern assumption
d. Monetary measurement concept

21. A company's retained earnings balance would increase by
a. Net income
b. Expenses
c. Investments by owners
d. The declaration and payment of dividends

22. Bosso Company repaid a note payable of $20,000 and the interest due of $400. The journal entry to record this transaction would include a

a. Debit to cash
b. Credit to notes payable
c. Debit to interest expense
d. Credit to interest revenue

23. After preparing its trial balance, the Wright-Way Company found that total debits equaled total credits. This equality would assure the company that

a. There are no errors in the accounting records
b. No transactions were omitted from the accounting records
c. No transactions were recorded incorrectly
d. The accounting equation is in balance

24. No matter the type of adjusting entry, which of the following accounts would not be affected by an adjusting entry?

a. Cash
b. Unearned revenue
c. Rent expense
d. Prepaid insurance

25. On October 1, 2005, the Wolfzorn Company was paid $14,000 for a job that would not be completed until March 1, 2006. On the date they were paid, Wolfzorn credited a revenue account and debited cash. If Wolfzorn fails to make an adjusting entry on December 31, 2005, the effects will be

a. Understatement of revenues and overstatement of assets
b. Understatement of revenues and overstatement of liabilities

c. Overstatement of revenues and overstatement of liabilities

d. Overstatement of revenues and understatement of liabilities

26. Which of the following is NOT a nominal account?
a. Advertising expense
b. Consulting revenue
c. Rent expense
d. Retained earnings

27. One of the weaknesses of common-size financial statements is that they don't help eliminate difficulties in doing comparisons across time or between firms arising from differences in the actual dollar amounts of financial statement items.

a. True
b. False

28. Higher and higher current ratios are always desirable.
a. True
b. False

29. Recording $500 of advertising expense as prepaid rent will result in

a. An understatement of assets and an understatement of expenses

b. An overstatement of assets and an overstatement of expenses

c. An overstatement of assets and an understatement of expenses

d. None of the above

30. If an employee steals cash from a company and tries to cover up his actions by recording a fictitious debit to Miscellaneous Expense and a credit to Cash, then

a. Expenses will be understated
b. Net income will be overstated
c. Net income will be understated
d. Net income will be stated correctly

31. Which of the following is true regarding an external auditor's responsibility to find fraud?

a. Auditors are required to find all fraud
b. Auditors must provide reasonable assurance that they have found all fraud

c. Auditors must provide reasonable assurance that they have found fraud that is material

d. Auditors have no responsibility to find fraud

32. Clancy Company sold $12,000 of merchandise to Lee Jones, with terms 2/10, n/30. If Lee paid for one-third of the merchandise within the discount period and two-thirds after the discount period, he paid a total of

a. $12,000
b. $11,760
c. $11,920
d. $11,852

33. When the allowance method of recognizing bad debt expense is used, which of the following accounts would not be used to write off an account that is uncollectible?

a. Bad debt expense
b. Accounts receivable
c. Allowance for bad debts
d. All of the above accounts are used in the allowance method

34. The ratio that measures how many times during a year accounts receivable are collected is the

a. average collection period
b. accounts receivable turnover
c. asset turnover
d. none of the above

35. The type of company that has three inventories and more complex inventory accounting is

a. Merchandising companies
b. Service companies
c. Manufacturing companies
d. Wholesale companies

36. If a firm's beginning inventory is $70,000, goods purchased during the period cost $260,000, and the cost of goods sold is $300,000, what is the ending inventory?

a. $30,000
b. $50,000
c. $40,000
d. $90,000

37. Which of the following statements is true under the perpetual inventory method?

a. Freight-In is subtracted from the inventory account
b. Freight-In is added to the inventory account
c. Freight-In is used only with the perpetual inventory method.

d. Freight-In is added to purchases in order to derive net purchases

38. An example of a post-employment benefit is a
a. Stock option
b. Bonus
c. Pension fund
d. Severance pay

39. Many companies collect sales tax at the time of sale. Between the collection of this tax and its payment to a government, the tax is classified as a(n)

a. Current liability
b. Long-term liability
c. Asset
d. Expense

40. During the year, Samson Company earned revenues of $228,000 and incurred $196,000 for various operating expenses. There are 2,500 shares of stock outstanding. Earnings per share is

a. $12.50
b. $12.80
c. $ 8.80
d. $ 8.50

41. Insurance on the factory building would be part of
a. Manufacturing overhead
b. Indirect labor
c. Direct material
d. Operating expenses

42. Another term for incremental costs is
a. Sunk costs
b. Differential costs
c. Fixed costs
d. Period costs

43. In a manufacturing company, advertising expense would best be classified as a

a. Direct expense
b. Manufacturing overhead
c. Period expense
d. Product expense

44. If activity increases, which of the following statements about cost behavior is true?

a. Fixed cost per unit will increase
b. Variable cost per unit will increase
c. Fixed cost per unit will decrease
d. Variable cost per unit will decrease

45. Sales income minus total fixed costs is equal to
a. Net income
b. Contribution margin
c. Gross margin
d. None of the above

46. If variable costs are $20 per unit, revenues are $40 per unit, and fixed costs are $10,000, the break-even point is

a. 1,000 units
b. 500 units
c. 250 units
d. 100 units

47. Just-in-time (JIT) inventory systems have dramatically changed the cost structures of many American manufacturing companies. All but which of the following are effects from using a JIT system?

a. Reduced inventory balances
b. Decreased product costs
c. Increased inventory handling costs
d. More efficient production

48. If demand is 10,000 units, cost of carry is $2 per unit, and cost of placing an order is $100, what is the EOQ?

a. 1,000 units
b. 100 units
c. 20,000 units
d. 2,000 units

49. The major difference between traditional product costing and activity-based costing relates to the assignment of which type of cost?

a. Direct labor
b. Direct material
c. Manufacturing overhead
d. All of the above

50. Which of the following is not a cost of quality?
a. appraisal
b. prevention
c. failure
d. all of the above