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TRUE/FALSE 1 ) Public accountants provide services such as tax preparation, external auditing, or management consulting to clients on a fee basis

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TRUE/FALSE

1 ) Public accountants provide services such as tax preparation, external auditing, or management consulting to clients on a fee basis.

1. : true
2. : false

2 : The members of the Financial Accounting Standards Board (FASB) are appointed by the Securities and Exchange Commission.

1. : true
2. : false

3 : The Financial Accounting Standards Board (FASB) comprises of thirteen members elected by the Financial Accounting Foundation.

1. : true
2. : false

4 : The members of the Financial Accounting Standards Board (FASB) can be reappointed to serve two additional terms after the completion of their first term.

1. : true
2. : false

5 : 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 companys balance sheet.

1. : true
2. : false

6 : In the accounting equation, assets are equal to liabilities minus the owners equity.

1. : true
2. : false

7 : Balance sheets usually classify assets into at least two major categories: current assets and property, plant, and equipment assets.

1. : true
2. : false

8 : In the context of franchises, the term accounts receivable refers to money owed to a parent company by franchisees who bought its goods on credit.

1. : true
2. : false

9 : Inventory is an example of a current asset. A : true

B : false

10 : Expenses such as insurance and advertising that have been cleared before they are due are known as prepaid expenses.

1. : true
2. : false

11 : Intangible assets are assets that have no physical existenceyou cant see or touch thembut they still have value.

1. : true
2. : false

12 : Common stock is a key owners equity account for corporations.

1. : true
2. : false

13 : The income statement is also known as the statement of financial position.

1. : true
2. : false

14 : The net income of a company is calculated by subtracting expenses from revenue.

1. : true
2. : false

15 : The deduction of a firms expenses from its revenue is shown in the income statement of the firm. A : true

B : false

16 : The difference between a firms revenue and its cost of goods sold is its accounts receivable.

1. : true
2. : false

17 : Contingent expenses are costs that a firm incurs in the regular functioning of its business.

1. : true
2. : false

18 : In order for CPA firms to perform audits with integrity, they must be tied to the firms they audit. A : true

B : false

19 : The Securities and Exchange Commission (SEC) bans publicly traded corporations from making comparative financial statements.

1. : true
2. : false

20 : John and Elizabeth evaluate three telecommunication companies to determine the best company to invest in. A horizontal analysis will enable them to make comparisons of financial statements of the three companies over the past several years and help in the determination of the increase in their profits.

1. : true
2. : false

21 : In top-down budgeting, top management prepares the budget with the involvement of the middle and supervisory managers.

1. : true
2. : false

22 : A firms operating budget represents the firms overall plan of action for a specified time period. A : true

B : false

23 : A static budget is based on a single assumed level of sales and is an excellent tool for planning. A : true

B : false

24 : The chief financial officer of NoveauNoir Production Company requests his accountant, Felipe, to prepare a customized report of the cost overruns at the companys production facility in Los Angeles. In this scenario, Felipe is a managerial accountant. A : true

B : false

25 : The direct labor method of costing is a technique to assign product costs based on links between the daily tasks of a company that drive costs and the production of specific products. A : true

B : false

MULTIPLE CHOICE

26 : Which of the following would most likely be a question asked by the stockholders of a firm?

1. : Is performance feedback being given to the employees in a constructive manner?
2. : Has the management generated a strong-enough return on their investment?
3. : Is the management looking into issues related to harassment at the workplace?D : Are there suppliers in the market who can provide resources at a lower cost?

27 : 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 _____.

1. : forensic accountant
2. : public accountant
3. : government accountant
4. : management accountant

28 : 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:

1. : public accountant.
2. : managerial accountant.
3. : government accountant.D : forensic accountant.

29 : _____ provide analysis and prepare reports and financial statements for their organization.

1. : Public accountants
2. : Management accountants
3. : Government accountants
4. : Forensic accountantsCorrect

30 : In which of the following ways do public accountants differ from management accountants? A : Public accountants rely on data provided by top managers, whereas management accounts rely on data provided by middle and supervisory managers.

2. : Management accountants are answerable to the Securities and Exchange Commission,whereas public accountants are answerable to their own organization.
3. : Management accountants are associated with CPA firms, whereas public accountants canonly be internal auditors.
4. : Public accountants conduct external audits, whereas management accountants analyze thefinancial statements of their own organization.

31 : Sebastian is an employee at Plowell Inc. His duties include preparing reports and analyzing company data. He also appraises financial performances and verifies the accuracy and validity of the companys internal records. In this scenario, Sebastians role is that of a _____ in the organization.

1. : forensic accountant
2. : social audit examiner
3. : certified fraud examiner
4. : management accountant

32 : Daryl is an accountant in Vansert Inc., a multinational healthcare company. He is responsible for providing analysis, preparing financial statements, and reporting the financial transactions of the company to the deputy chairman of the company. In this scenario, Daryl is most likely a _____.

1. : forensic accountant
2. : government accountant
3. : public accountant
4. : management accountant

33 : While performing a financial analysis for his organization, Morris discovers that there has been mismanagement of employee funds over the past three months. He immediately reports this to his supervisors. In this scenario, Morris is most likely a(n) _____.

1. : public prosecutor
2. : government accountant
3. : internal auditor
4. : public accountant

34 : Bettys job entails detecting problems such as embezzlement, waste, mismanagement, and employee theft at her organization. In this case, Betty is a(n) _____.

1. : forensic auditor
2. : government accountant
3. : internal auditor
4. : certified public accountant

35 : 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 companys expenses and prevent the problem from aggravating.

1. : public prosecutor
2. : government accountant
3. : internal auditor
4. : public accountant

36 : The management of Lovelo, a candy manufacturing company, comes across a case of employee theft in their inventory. In this case, the company should seek the help of a(n) _____ to look into the matter. A : public prosecutor

2. : gazetted officer
3. : internal auditor
4. : district attorney

37 : _____ perform a variety of accounting functions for local, state, or federal agencies, such as the Internal Revenue Service (IRS) and the Federal Deposit Insurance Corporation (FDIC). A : Public prosecutors

2. : Government accountants
3. : Public accountants
4. : Social accountants

38 : Which of the following is true of government accountants in the United States?

1. : They provide services such as tax preparation, external auditing, or management consultingto clients on a fee basis.
2. : They help ensure that a nations banks and other financial institutions comply with the rulesand regulations controlling their behavior.
3. : They perform a narrow set of accounting functions solely for federal government agencies.D : They do not need to adhere to the generally accepted accounting principles.

39 : The Securities and Exchange Commission hires Tim to procure and analyze data on the states tax revenues and expenditures to ensure that they are recorded and reported in accordance with regulations and requirements. In this case, Tim is most likely a(n) _____. A : external auditor

2. : government accountant
3. : public prosecutor
4. : public accountant

40 : Which of the following is a criterion that needs to be fulfilled by an individual to be recognized as a certified public accountant?

1. : He or she must serve the Securities and Exchange Commission for at least two years afterpassing the certified public accountancy examination.
2. : He or she must complete the equivalent of 150 semester hours of college education with aheavy emphasis in accounting and other business-related courses.
3. : He or she must complete at least three years of direct work experience in the field ofaccounting.
4. : He or she must pass a rigorous five-day, six-part examination.

41 : To give the companys stockholders, creditors, and other external stakeholders an accurate idea of the companys overall performance, Rowensport Corporation, a multinational company, releases statements that contain details of the companys profits and losses over the past five years. In this scenario, the company is most likely involved in _____.

1. : financial accounting
2. : cost accounting
3. : follow-up auditing
4. : social auditing

42 : In the context of financial accounting, the external stakeholders of a firm:

1. : are seldom interested in analyzing detailed accounting information about the individualdepartments within the firm.
2. : are least interested in looking at the firm at a macro level.
3. : are not affected by the financial performance of the firm.
4. : seldom want to know how the firms financial condition has changed over a period of severalyears by looking at its account statements.

43 : To preserve independence and impartiality, the Financial Accounting Standards Board (FASB) members are required to:

1. : serve the board until their retirement.
2. : sever all ties with any firms or institutions they served prior to joining the board.
3. : sign a non-disclosure agreement and hand over all information of their previous companiesto the board.
4. : pass a rigorous two-day, four-part examination on major accounting concepts.

44 : Sidney is a member of the Financial Accounting Standards Board (FASB) and is entrusted with the responsibility of establishing accounting principles in the United States. As a member of the board, Sidney:

1. : is to serve a seven-year term and cannot be reappointed to serve another term.
2. : must sever all ties with any firms or institutions that she served prior to joining the board.C : is responsible for directing the Securities and Exchange Commission to enforce the accounting standards.

D : must pass a rigorous two-day, four-part examination to be promoted as a certified fraud examiner.

45 : In the context of financial accounting, if a firm wants to introduce any significant changes in how it prepares its financial statements, _____.

1. : it must first pay a fee to the CPA firm conducting its audit
2. : it must get the changes preapproved from a district magistrate
3. : it must get approval for these changes from at least ten other firms working in the samesector
4. : it must first clearly identify and describe these changes as per the generally acceptedaccounting principles (GAAP)

46 : Through the establishment of a set of generally accepted accounting principles (GAAP), the Financial Accounting Standards Board (FASB) aims to ensure that financial statements are: A : flexible.

2. : inexplicit.
3. : comparable.D : incongruent.

47 : The three kinds of basic financial statements that are prepared in financial accounting are:

A : statement of debts, letter of credit, and articles of incorporation. B : comfort letter, master budget, and credit statement.

3. : balance sheet, income statement, and statement of cash flows.
4. : pro forma report, request for proposal, and articles of incorporation.

48 : In the context of financial statements, which of the following statements is true of large corporations?

1. : Large corporations with publicly traded stock must provide an annual report containingfinancial statements to all stockholders.
2. : 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.

49 : Which of the following is true of balance sheets?

1. : The balance sheets of different firms vary in specifics.
2. : They identify the sources and uses of cash for firms in a given accounting period.
3. : All balance sheets are organized to reflect the profitability index of firms.D : They do not include the value of the intangible assets of firms.

50 : In the accounting equation, assets are equal to:

1. : liabilities plus owners equity.
2. : liabilities divided by gross profit.
3. : stockholders equity subtracted from liabilities.D : owners equity multiplied by net income.

51 : Machvile Corporation, a robotics company, decides to acquire Chancera Inc., a start-up company that operates within the same industry. To better assess its decision, the management of Machvile Corporation needs to find out the value of Chancera Inc.s total assets. The management has information regarding Chancera Inc.s liabilities and stockholders equity. In this scenario, the management should most likely use the _____ to get the required information. A : accounting equation

2. : profitability index
3. : quartic equationD : liquidity index

52 : 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 _____.

1. : $1.35 million
2. : $391 million
3. : $7 million
4. : $40 million

53 : 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 Italias owners equity is equal to _____.

1. : $580 million
2. : $72,000 million
3. : $2 million
4. : $220 million

54 : Rolette Clemens is a financial institution that provides loans to businesses. It rejects a textile companys request for a loan after it reviews the value of the companys assets, liabilities, and owners equity and finds them to be unsatisfactory. In this scenario, Rolette Clemens most likely analyzed the companys _____ to assess its financial condition.

1. : statement of cash flows
2. : balance sheet
3. : income statement
4. : operating budget

55 : 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 companys assets and liabilities. In this scenario, Marcus is most likely analyzing the companys: A : income statement.

2. : balance sheet.
3. : articles of incorporation.D : operating budget.

56 : In the context of balance sheets, resources owned by a firm are known as _____.

1. : holdings
2. : assets
3. : capitals
4. : liabilities

57 : Which of the following is true of current assets?

1. : They include the long-term assets of a firm.
2. : They are resources that a firm expects to use up within a year.
3. : They include a firms tangible assets, such as machinery and equipment.
4. : They are resources that a firm decides to set aside to pay its long-term liabilities.

58 : Identify a true statement about current assets.

1. : They include the long-term assets of a firm.
2. : They are resources that a firm expects to convert into cash within a year.
3. : They are resources that a firm decides to set aside to pay its long-term liabilities.D : They include a firms tangible assets, such as machinery and equipment.

59 : Leemo, a soft drink manufacturing company, sells approximately 400 batches of its soft drinks worth $80,000 every week. In this context, the 400 batches of soft drinks that Leemo produces weekly represent the companys _____.

1. : intangible assets
2. : current assets
3. : defensive assets
4. : fixed assets

60 : In the context of balance sheets, accounts receivable is an example of _____. A : current liabilities

2. : immovable assets
3. : current assets
4. : depreciated liabilities

61 : Miller is the owner of a restaurant that has several franchises. One of the franchisees owes Miller a sum of $18,000 for the goods that he had bought from Miller on credit. In this scenario, the money owed to Miller is known as _____.

1. : checkoff
2. : the freight expense
3. : accounts receivable
4. : the laid-down cost

62 : Pastello, a bakery in New Jersey, needs to sell all the goods in its inventory before they perish. The bakery owners, Mark and Julia, plan to use the cash received from selling the goods to open a new outlet of Pastello in a different locality. In this scenario, the goods stored in Pastellos inventory represent its _____.

1. : long-term liabilities
2. : current liabilities
3. : current assets
4. : defensive assets

63 : In the context of balance sheets, assets such as machinery, building, and equipment have a limited useful life, so accountants subtract _____ from the original value of these assets, to reflect the fact that these assets are being used up over time. A : deferred income

2. : bequest value
3. : accumulated depreciation
4. : laid-down cost

64 : Which of the following is true of accumulated depreciation?

1. : It is added to the value of the total assets of a company.
2. : It is added to the long-term liabilities of a company.
3. : It represents the total value of the damaged goods present in a batch of supplies.D : It is the decrease in the value of assets such as machinery, equipment, and property over time.

65 : The total assets of a dairy products manufacturing company are calculated. However, a sum of $5 million from the value of the companys 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 _____.

1. : deferred income
2. : bequest value
3. : accumulated depreciation
4. : laid-down cost

66 : In the context of balance sheets, patents, trademarks, and copyrights are examples of _____.

1. : fixed assets
2. : current assets
3. : liquid assets
4. : intangible assets

67 : A famous musician sells the copyright of one of his songs to a record company for $2 million. In this scenario, the sale of the copyright of the song exemplifies the sale of a(n) _____. A : current liability

2. : operating liability
3. : tangible asset
4. : intangible asset

68 : Which of the following is an example of an intangible asset?

1. : The cash received by a company from the sale of its inventory stock
2. : The new machinery bought by a clothing company
3. : The land leased out by a farmer to a private company for commercial use
4. : The goodwill showed by a food manufacturing company by helping its competitor at a time ofcrisis

69 : Balance sheets usually organize liabilities into two broad categories, which are:

1. : long-term liabilities and fixed liabilities.
2. : contingent liabilities and long-term liabilities.
3. : contingent liabilities and current liabilities.D : current liabilities and long-term liabilities.

70 : Jonathan, a grocery store owner, is due to pay suppliers for delivering goods for a specific month. To ascertain how much money he owes the suppliers, Jonathan should check the: A : rate card.

2. : balance sheet.
3. : pro forma statement.D : operating budget.

71 : The current liabilities of a company are reflected in the:

1. : wages owed to the workers for work that they have already completed.
2. : value of the additional shares floated by the company for more revenue.
3. : money that is lent by the company to a borrower.D : long-term loans that are taken by the company.

72 : Milora, a clothing company, purchases 50 sewing machines from a company called Quick Sew on credit. Milora is supposed to pay an amount of $76,000 to Quick Sew. This amount is due within a year of the date on the balance sheet. In this scenario, the amount of credit that Milora owes Quick Sew is referred to as Miloras _____.

1. : current liability
2. : borrowing base
3. : charge-off
4. : intangible asset

73 : Chestelle Corporation, a sports equipment manufacturing company, borrows a considerable sum of money as loan from GRJ Bank, a private bank, at a time of financial crisis. The corporation has four years to repay the principal amount along with the interest to the bank. In this scenario, the money that Chestelle Corporation owes the bank represents its _____. A : long-term liability

2. : accumulated depreciation
3. : owners equity
4. : bequest value

74 : In the context of balance sheets, which of the following is a difference between liabilities and owners equity?

1. : Liabilities refer to the claims internal stakeholders have against the external stakeholders,whereas owners equity refers to claims external stakeholders have against the internal stakeholders.
2. : Liabilities indicate the claims outsiders have against the firms assets, whereas owners equityrefers to the claims the owners have against their firms assets.
3. : Owners equity indicates the claims internal stakeholders have against the firms assets,whereas liabilities refer to the claims external stakeholders have against the firms assets. D : Owners equity indicates the claims outsiders have against the firms assets, whereas liabilities refer to the claims the owners have against their firms assets.

75 : In the context of owners equity, which of the following is true of retained earnings?

A : They refer to a firms additional profits that are used for paying executive salary.

B : They are accumulated earnings reinvested in a company rather than being paid to the owners.

C : They are a firms earnings that are kept aside for crisis management situations.

D : They refer to salaries that are withheld in case an employee is involved in fraudulent activities.

76 : In the context of balance sheets, retained earnings are a major component of the _____ section.

1. : owners equity
2. : statement of cash flows
3. : companys liabilities
4. : articles of incorporation

77 : 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:

1. : bonus shares.
2. : retained earnings.
3. : current liabilities

.D : equity releases.

78 : In the context of balance sheets, the accounting equation tells us that the value of a firms assets must be:

1. : greater than the amount of financing provided by owners plus the amount provided bycreditors to purchase those assets.
2. : equal to the amount of financing provided by owners plus the amount provided by creditorsto purchase those assets.
3. : negligible when compared to the amount of financing provided by owners plus the amountprovided by creditors to purchase those assets.
4. : less than the amount of financing provided by owners plus the amount provided by creditorsto purchase those assets.

79 : Hopins, a medium-sized firm, has total assets whose value is equivalent to the sum of the funds provided by its owners and the loans taken by the firm from several financial institutions to purchase those assets. In this context, it can be said that:

1. : the stockholders equity of Hopins always equals the dollar value of its assets.
2. : the balance sheet of Hopins satisfies the accounting equation.
3. : the value for accounts receivable of Hopins is equal to the value of its current liabilities.D : the statement of cash flows of Hopins satisfies the quartic equation.

80 : The _____ summarizes the financial results of a firms operations over a given period of time.

1. : balance sheet
2. : income statement
3. : statement of cash flows
4. : statement of stockholders equity

81 : Grydon Inc. has applied for a business loan in the United Bank. To best assess the loan case, the loan officer at the bank, Cerejo, decides to look at the companys net income. Cerejo will find this information in Grydons _____.

1. : profit and loss statement
2. : statements of cash flow
3. : stockholders equity statement
4. : statement of retained earnings

82 : Maurice, the supervising manager of a telecommunications company, requires detailed information about the expenses that the company incurred from its monthly operations in the last fiscal year. In this scenario, Maurice should refer to the _____. A : profit and loss statement B : statement of cash flow

3. : owners equity statement
4. : statement of retained earnings

83 : Tania, a management accountant in a cosmetics company, is asked by her manager to calculate the profit or loss earned by the company in a given time period. To get the required data, Tania is most likely to:

1. : subtract the companys expenses from its revenues.
2. : add the companys current liabilities to its accounts receivable.
3. : subtract operating costs from the companys retained earnings.D : multiply the revenue of the company with its retained earnings.

84 : In the context of the income statement of an organization, accountants use accrual-basis accounting when recognizing _____.

1. : debts
2. : investments
3. : revenues
4. : cost of shares

85 : Fred, a financial accountant at a multinational company, is asked by his supervisor to find out the exact income the company earns from the sale of its products over the next five weeks. To do this, for the next five weeks, Fred matches the revenue earned from the sale of the companys products and matches the expenses incurred by the company to the revenue they help produce. In this scenario, which of the following has Fred used to get the required information?

1. : Accrual-basis accounting
2. : Horizontal analysis
3. : Liquidity index
4. : Static analysis

86 : _____ indicate the cash a firm spends, or other assets it uses up, to carry out the business activities necessary to generate its revenue.

1. : Stockholders equities
2. : Remissions
3. : Expenses
4. : Accounts receivableCorrect

87 : Costs are deducted from revenue in several stages to show how net income is determined.

The first step in this process is to deduct:

 A : costs of damaged goods.

B : costs of purchased goods

 C : costs of goods mortgaged.

 D : costs of goods sold.

88 : Gerald wants to find out the net income of his business for the last quarter. He deducts the cost of goods sold from the revenue earned during that period and then deducts the operating expenses from the gross profit. If Gerald decides to subtract the salary of his employees from the operating expenses before deducting the operating expenses from the gross profit, which of the following expenses would he be deducting?

1. : Testamentary expenses
2. : Administrative expenses
3. : Selling expenses
4. : Accrued expenses

89 : Harold, a financial accountant at an automobile company, is asked to calculate the net income of the company for a given period. He deducts the cost of goods sold from the revenue earned during that period. Before deducting the companys operating expenses from the gross profit, he deducts the rent and the insurance premium paid by the company during that period. In the given scenario, Harold deducted the companys _____ from the companys operating expenses.

1. : testamentary expenses
2. : selling expenses
3. : administrative expenses
4. : accrued expenses

90 : In the context of the calculation of the net income of a firm, the final step of the process comprises:

1. : finding the firms accounts receivable for goods sold on credit.
2. : finding the difference between the firms gross profit and its operating expenses.
3. : deducting the firms interest expenses and taxes from its net operating income.D : deducting the firms costs of goods sold from its revenue.

91 : _____ is the profit or loss a firm earns in the time period covered by the financial statement that reports the revenues and expenses.

1. : Shared debt
2. : Owners equity
3. : Net income
4. : Cash flow

92 : In the context of financial statements of a company, cash flow statements commonly begin with _____. A : net income

2. : net debt
3. : the shared profit amount
4. : the shared expenses

93 : Poline Foods, a food processing company, needs to increase its declining cash inflow through its operating activities. In this context, Poline Foods is most likely to:

1. : sell its goods or services.
2. : sell its fixed assets and financial assets bought as long-term investments.
3. : form partnerships and mergers with companies operating in the same industry.D : issue additional shares of its own stock.

94 : In the context of statement of cash flows, cash flows from operating activities show the amount of cash that flowed into the company from:

1. : dividends.
2. : public grants.
3. : executive compensations.D : taxes on capital gains.

95 : A steel manufacturing company is going through a financial crisis because of which it is unable to pay its employees and suppliers their dues. The management of the company sells some of the fixed assets of the company to cover these expenses. In the context of the statement of cash flows, the company gets the required capital by engaging in _____. A : investing activities

2. : financing activities
3. : operating activities
4. : budgeting activities

96 : Grubbies, a popular fast-food restaurant, spends $75,000 on redesigning its interiors and modifying its ambience. In this scenario, the expenses that the restaurant incurs from refurbishing its appearance exemplify cash flows from:

1. : investing activities.
2. : financing activities.
3. : operating activities.
4. : manufacturing activities.

97 : Lossaire, a jewelry house, needs to increase the companys declining cash inflow through its financing activities. In this context, Lossaire is most likely to:

1. : sell the goods and services that it produces.
2. : sell its fixed assets and financial assets bought as long-term investments.
3. : form partnerships and mergers with companies operating in the same industry.D : issue additional shares of its own stock.

98 : The management of a fertilizer company decides to increase the companys cash flow by increasing its financing activities. In this context, the company is most likely to:

1. : sell the goods and services that it produces.
2. : sell its fixed assets and financial assets bought as long-term investments.
3. : form partnerships and mergers with companies operating in the same industry.
4. : take short-term and long-term loans.

99 : The _____ of a company is a simple statement that shows how the accumulated revenues that have been reinvested in the company have changed from one accounting period to the next.

1. : profit and loss statement
2. : pro forma statement
3. : statement of operations
4. : statement of retained earnings

100 : In the context of the statement of retained earnings, any change in retained earnings is found by subtracting:

1. : cash flows from operating activities from cash flows from investing activities.
2. : the value of capital expenditures, such as remodeling, from net income.
3. : operating expenses from gross profit.
4. : dividends paid to shareholders from net income.

101 : Aegirine Corp., a publicly traded firm based in New Mexico, manufactures iron. According to U.S. securities laws, the firm must:

1. : declare any discrepancies in its financial statements before they come up in the independentauditors report.
2. : refrain from involving any third party in the process of auditing to maintain confidentiality.C : let an independent CPA (Certified Public Accountant) firm perform an annual external audit of its financial statements.

D : hire auditors to analyze its financial statements and file them with the Internal Revenue Service.

102 : If an auditor doesnt find any problems with the way a firms financial statements were prepared and presented, the report will offer a(n) _____ opinion.

1. : qualified
2. : unqualified
3. : adverse
4. : concurring

103 : Jenny, an external auditor from a public accounting firm, verified the financial statements of a real estate company. At the end of her review, Jenny did not find any discrepancies in the figures presented by the company or the accounting methods of the company. In this scenario, the independent auditors report most likely offered a(n) _____. A : qualified opinion

2. : unqualified opinion
3. : adverse opinion
4. : concurring opinion

104 : In the context of an independent auditors report, if the auditor identifies some minor concerns but believes that on balance the firms statements remain a fair and accurate representation of the companys financial position, the report will offer a(n) _____ opinion. A : qualified

2. : unqualified
3. : adverse
4. : clean

105 : Andrew is performing an audit of the financial statements of a cosmetics company. While analyzing the financial statements, he identifies some minor concerns. However, he believes that on balance the companys statements are accurate and its accounting methods are consistent with the generally accepted accounting principles. In this scenario, the independent auditors report will most likely offer a(n) _____.

1. : qualified opinion
2. : unqualified opinion
3. : adverse opinion
4. : concurring opinion

106 : 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 firms financial statements. In this scenario, Logan is most likely to offer a(n) _____ opinion in his audit report. A : qualified

2. : unqualified
3. : adverse
4. : concurring

107 : Fiona, an external auditor reviewing a telecommunications companys accounts, finds that the companys internal accountants have entered false data in the company records. Instead of stating the actual figures, which would reveal the poor performance of the company, the accountants have overstated the companys earnings. In this case, Fiona is most likely to offer a(n) _____ in the independent auditors report.

1. : qualified opinion
2. : unqualified opinion
3. : adverse opinion
4. : concurring opinion

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

1. : Sarbanes-Oxley Act of 2002
2. : Securities Exchange Act of 1934
3. : Glass-Steagall Act of 1933
4. : McCain-Feingold Act of 2002

 

109 : A public accounting firm takes up a contract to perform an external audit for an oil manufacturing company. The firm, however, is already in a consulting contract with the oil company. Because of its prior association with the oil company and the hefty fee the oil company pays the firm, the firm manipulates the audit report. Which of the following laws is violated in this scenario?

1. : The Sarbanes-Oxley Act
2. : The Blaine Act
3. : The Landrum-Griffin Act
4. : The Dawes Act

110 : Harold, a financial accountant in a company, is asked to identify the changes in the companys account values between 2014 and 2016. To get the required information, he uses comparative financial statements, which state the figures for the two years side by side. These comparative financial statements make it easier for Harold to identify the changes that may have taken place during that period. In this scenario, Harold is most likely using _____ to get the required information. A : activity-based costing

2. : horizontal analysis
3. : liquidity index
4. : static analysis

111 : David, a financial accountant at a multinational company, is asked to study the comparative financial statements of a prospective partner firm. He uses comparative income statements to determine the changes in the assets and liabilities of the firm and whether the net income of the firm has increased or decreased over the past five years. In this scenario, David is most likely using _____.

1. : activity-based costing
2. : horizontal analysis
3. : a statistical syllogism
4. : static analysis

112 : _____ is a management tool that explicitly shows how a firm will acquire and use the resources needed to achieve its goals over a specific time period.

1. : Outsourcing
2. : Benchmarking
3. : Budgeting
4. : Auditing

113 : A book publishing company follows a budgeting approach wherein the senior managers of the company prepare the annual budget with little or no input from the supervisory and middle managers. The company uses this approach as the owners of the company believe that the senior managers are more aware of the long-term strategic needs of the company. In this scenario, the book publishing company is using _____.

1. : top-down budgeting
2. : incremental budgeting
3. : bottom-up budgeting
4. : zero-based budgeting

114 : Angela is part of the senior management of Fifian Inc., an event management company. She and with other members of the senior management plans the annual budget of the company. Angela, however, is not required to take inputs from or involve the middle and supervisory managers of the company in this planning process. In the given scenario, Fifian Inc. most likely uses _____. A : top-down budgeting

2. : incremental budgeting
3. : bottom-up budgeting
4. : zero-based budgeting

115 : Acloe Inc., a nutrition bar manufacturing company, plans to commence its budget preparation. The management of the organization comes to a consensus that it will use a budgeting approach that will encourage the active participation of the middle and supervisory managers and consider their suggestions while creating the budget. Acloe Inc. is most likely to adopt the _____ budgeting approach.

1. : top-down
2. : incremental
3. : bottom-up
4. : evolutionary

116 : Prenora Inc., a newly established company, is set to prepare its first budget. The top management of the company decides to use a budgeting approach that will seek active participation from the middle and supervisory managers of the company. In the given scenario, Prenora Inc. will most likely use the _____ to budgeting.

1. : top-down approach
2. : incremental approach
3. : bottom-up approach
4. : zero-based approach

117 : Dylan is a supervisory manager in the production department of a tea manufacturing company. Each year, he actively participates in the budgeting process of the company. His input is valued by the top management as he is able to identify the issues in his department. In this scenario, it can be said that Dylans company follows the _____ to budgeting.

1. : top-down approach
2. : incremental approach
3. : bottom-up approach
4. : zero-based approach

118 : In the context of budget preparation, which of the following is an advantage of using bottom-up budgeting?

1. : It is less time consuming than the top-down approach.
2. : It eliminates the possibility of budgetary slack.
3. : Middle managers are likely to be highly motivated to achieve budgetary goals.
4. : Supervisory managers are likely to know the long-term strategic needs of a company.

119 : In the context of budget preparation, which of the following is a disadvantage of participatory budgeting?

1. : It can lead to budgetary slack.
2. : It fails to motivate middle and first-line managers.
3. : It results in an inadequate representation of the issues faced by individual departments.D : It fails to identify the resources needed to achieve goals.

120 : The overstating of needs or setting low budget goals by managers in a budgeting process can result in _____. A : budgetary slack

2. : a budget crisis
3. : a budgetary deficit
4. : budget maximization

121 : Sigborne Corp., a food and beverage company, commences its budgeting process by requesting the middle managers of the company to collect data from their respective departments and submit a consolidated report stating the needs of their departments. Harold, the manager of the packaging department, overstates the needs of his department. In this scenario, Harold is guilty of _____.

1. : outwrestling
2. : budgetary slack
3. : extortion
4. : budget maximization

122 : Colin, the manager of the production department in an apparel manufacturing company, is accused of budgetary slack by a senior manager in his company. Colin is accused of budgetary slack because he:

1. : did not create the companys budget in a timely and consistent manner.
2. : made errors in the budgeting process, which resulted in operational problems.
3. : did not include the minor expenses incurred by his department in the budget.D : overstated the needs of his department in the budget.

123 : The preparation of operating budgets begins with the development of a(n) _____.

1. : sales budget
2. : budgeted income statement
3. : capital and taxes budget
4. : expenditure budget

124 : The management of a sugar manufacturing company sets aside a sum of $50,000 in its budget for the purchase of new machinery that would double the production. In the given scenario, the management is in the process of planning the _____ of the company.

1. : marketing budget
2. : financial budget
3. : operating budget
4. : static budget

125 : The _____ of a firm combines the revenue projections from the firms sales budget and the cost projections from the firms other operating budgets to present a forecast of expected net income.

1. : budgeted income statement
2. : profit and loss statement
3. : capital expenditure budget
4. : cash budget

126 : The management of Normanster Corp., a multinational company, is in the process of preparing the operating budget for the company. It has already created the sales budget and the production budget. It is now creating a financial statement that would present a forecast of the expected revenue of the company from the projected sales. In the given scenario, the management is creating _____. A : a budgeted income statement

2. : a profit and loss statement
3. : the capital expenditure budget
4. : the cash budget

127 : In the context of financial budgets, the capital expenditure budget:

1. : provides quarterly estimates of the number of units of each product a firm expects to sell.
2. : identifies a firms planned investments in major fixed assets and long-term projects.
3. : identifies short-term fluctuations in cash flows that display cash deficits and surpluses.D : contains the budgets for direct labor, direct materials, and overhead costs.

128 : As part of its financial budget, Clover & Max, an advertising agency, prepared a document that identified the agencys planned investments in major fixed assets and long-term projects.

The given information indicates that the agency prepared the:

1. : statement of cash flows.
2. : static budget.
3. : capital expenditure budget.D : sales budget.

129 : Ashley, a manager at a toy manufacturing company, needs to create a financial document for the company that would show how the companys operating, investing, and financing activities are expected to affect the asset, liability, and owners equity accounts. To prepare this document, Ashley needs to collect data from:

1. : the static budget, the cash budget, and the budgeted income statement.
2. : the production budget, the capital expenditure budget, and the sales budget.
3. : the sales budget, the cash budget, and the budgeted income statement.
4. : the budgeted income statement, the capital expenditure budget, and the cash budget.

130 : In the context of budget preparation, the master budget of a firm organizes the _____ into a unified whole.

1. : static budget and the cash flow budget
2. : static budget and the financial budget
3. : cash flow budget and the operating budget
4. : financial budget and the operating budget

131 : The management of an electronics company created the annual budget on a single assumed level of sales. This level of sales is to remain constant for the whole year. Later, the management finds it difficult to accurately measure the financial progress of the firm as the values in the estimated budget vary significantly from the actual sales. In the given scenario, the management most likely created a _____.

1. : perpetual budget
2. : zero deficit budget
3. : black budget
4. : static budget

132 : A _____ is one that is not based on a single assumed level of sales and enables managers to make meaningful comparisons between actual costs and budgeted costs. A : static budget

2. : flexible budget
3. : rigid budget
4. : fixed budget

133 : In the context of budgeting, a flexible budget:

1. : is based on a single assumed level of sales.
2. : is designed to show the appropriate budgeted level of costs for each different level of sales.
3. : is the budget that is prepared before a static budget.
4. : cannot be used by companies for evaluation and comparisons involving real-world salessituations.

134 : A pharmaceutical company wanted to create a budget that was practical and that would enable its managers to make more accurate comparisons between actual costs and budgeted costs. Thus, the company created a budget that was developed over a range of possible sales levels and was designed to show the appropriate budgeted level of costs for each different level of sales. Given this information, which of the following budgets did the company create? A : A rolling budget

2. : A flexible budget
3. : A black budget
4. : A static budget

135 : 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 _____.

1. : financial accounting
2. : managerial accounting
3. : governmental accounting
4. : forensic accounting

136 : Which of the following is a difference between managerial accounting and financial accounting?

1. : 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.
2. : Financial accounting is primarily intended to provide information to internal stakeholders,whereas managerial accounting is primarily intended to provide information to external stakeholders.
3. : Managerial accounting summarizes the past performance of a company, whereas financialaccounting provides reports on the past performance of a company and also makes projections about the future.
4. : Managerial accounting presents financial statements on a predetermined schedule, whereasfinancial accounting creates reports upon request by management rather than according to a predetermined schedule.

137 : In the context of accounting, which of the following best defines cost?

1. : The value of equities a firm has at its disposal
2. : The income from which public expenses are met
3. : The income lost due to unaccountable decision-making
4. : The value of what is given up in exchange for something else

138 : 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 companys 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 companys _____.

1. : incremental costs
2. : implicit costs
3. : out-of-pocket costs
4. : opportunity costs

139 : Grengard Corp., a public relations firm, pays a hefty rent for its office space as it is set up in one of the best commercial areas of London. In the given scenario, the rent paid by the firm for its office space is an example of _____.

1. : incremental costs
2. : indirect costs
3. : out-of-pocket costs
4. : opportunity costs

140 : Ginnies, a candy manufacturing company, sees a sudden rise in the consumption of its kiwi-flavored candies. Thus, the company hires more labor and buys additional supplies to increase the production of these candies. In this scenario, the costs incurred by the company for purchasing these supplies and hiring more labor exemplify the companys _____. A : variable costs

2. : implicit costs
3. : indirect costs
4. : fixed costs

141 : Clausel Inc., a furniture manufacturing company, receives a bulk order from a multinational company for 150 office chairs. To complete the order on time, Clausel Inc. speeds up its production process by hiring additional labor and purchasing more supplies. In this scenario, the costs incurred by Clausel Inc. for hiring more labor and buying more supplies exemplify its _____. A : variable costs

2. : implicit costs
3. : indirect costs
4. : fixed costs

142 : In the context of managerial accounting, _____ are costs that are incurred as the result of some specific cost object.

1. : direct costs
2. : implicit costs
3. : indirect costs
4. : fixed costs

143 : A severe cyclone causes substantial damage to a brick manufacturing companys production equipment. As a result, the company spends a sum of $25,000 to repair the equipment. Given this information, the sum of $25,000 that the company spends is its _____.

1. : explicit cost
2. : implicit cost
3. : indirect cost
4. : direct cost

144 : The first stage in activity-based costing is to:

1. : multiply the total cost of producing each good by the number of goods.
2. : identify specific activities that create indirect costs and determine the factors that drive thecosts of these activities.
3. : 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.

145 : Which of the following statements is true of activity-based costing (ABC)?

1. : It determines the absolute cost per unit of production.
2. : It is more complex than the direct labor method.
3. : It involves a five-stage process.
4. : It assigns costs based on the one size fits all rule.

ESSAY

146. : Briefly describe few of the key users of a firms accounting information.
147. : In the context of financial accounting, briefly describe the role of the Financial Accounting Standards Board (FASB).
148. : In the context of balance sheets, what is the accounting equation? Define each of the elements in the accounting equation.
149. : In the context of budget preparation, briefly describe operating budgets, financial budgets, and master budgets.
150. : Define and discuss the different kinds of costs in accounting.

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