When several alternative investment proposals involving different amounts

BUSINESS BMAL 590 ALC3 Accounting

BUSINESS BMAL 590 ALC3 Accounting / ALC 3 Accounting

-The percentage analysis of increases and decreases in individual items in comparative financial statements is called

vertical analysis

solvency analysis

profitability analysis

horizontal analysis

-The percent of fixed assets to total assets is an example of

vertical analysis

solvency analysis

profitability analysis

horizontal analysis

-An analysis in which all the components of an income statement are expressed as a percentage of net sales is called

horizontal analysis

liquidity analysis

vertical analysis

common-size analysis

-Statements in which all items are expressed only in relative terms (percentages of a common base) are

horizontal statements

common-size statements

percentage statements

vertical statements

-The ability of a business to pay its debts as they come due and to earn a reasonable amount of income is referred to as

solvency and leverage

solvency and profitability

solvency and liquidity

solvency and equity

-Which of the following is NOT an analysis used in assessing solvency?

Number of times interest charges are earned

Current position analysis

Ratio of net sales to assets

Inventory analysis

-The ratio computed by dividing current assets by current liabilities is the

current ratio

earnings ratio

acid-test ratio

quick ratio

-The ratio of the sum of cash, receivables, and marketable securities to current liabilities is called the

price-earnings ratio

earnings ratio

quick ratio

current ratio

-An acceleration in the collection of receivables will tend to cause the accounts receivable turnover to

Decrease

remain the same

either increase or decrease

increase

-Which of the following ratios provides a solvency measure that shows the margin of safety of noteholders or bondholders and also gives an indication of the potential ability of the business to borrow additional funds on a long-term basis?

Ratio of fixed assets to long-term liabilities

Ratio of net sales to assets

Number of days' sales in receivables

Rate earned on stockholders' equity

-The number of times interest charges are earned is computed as

net income plus interest charges divided by interest charges

income before income tax plus interest charges divided by interest charges

net income divided by interest charges

income before income tax divided by interest charges

-The blank______________ measures the profitability of total assets, without considering how the assets are financed.

price-earnings ratio

ratio of net sales to assets

rate earned on total assets

dividend yield

-For most profitable companies, the rate earned on total assets will be less than

the rate earned on stockholders' equity

the rate earned on total liabilities and stockholders' equity

the rate earned on sales

cannot be determined without more information

-Which one of the following is NOT a characteristic generally evaluated in ratio analysis?

Liquidity

Profitability

Solvency

Marketability

-Which additional report is required of independent auditors since the passage of the Sarbanes-Oxley Act in 2002?

A report assessing the probability that the company will remain in business

A report attesting to management's assessment of internal control

A report assessing the market value of the company's current stock price

A report assessing the competency of the company's board of directors

-Decisions to install new equipment, replace old equipment, and purchase or construct a new building are examples of

sales mix analysis

variable cost analysis

capital investment analysis

absorption cost analysis

-Which of the following are present value methods of analyzing capital investment proposals?

Internal rate of return and average rate of return

Average rate of return and net present value

Net present value and internal rate of return

Net present value and payback

-By converting dollars to be received in the future into current dollars, the present value methods take into consideration that money

has an international rate of exchange.

is the language of business.

Is the measure of assets, liabilities, and stockholders' equity on financial statements.

Has a time value

-The primary advantages of the average rate of return method are its ease of computation and the fact that

it is especially useful to managers whose primary concern is liquidity.

there is less possibility of loss from changes in economic conditions and obsolescence when the commitment is short-term.

it emphasizes the amount of income earned over the life of the proposal

rankings of proposals are necessary.

-Which of the following can be used to place capital investment proposals involving different amounts of investment on a comparable basis for purposes of net present value analysis?

Price-level index

Present value factor

Annuity

Present value index

-An analysis of a proposal by the net present value method indicated that the present value exceeded the amount to be invested. Which of the following statements best describes the results of this analysis?

The proposal is desirable and the rate of return expected from the proposal exceeds the minimum rate used for the analysis.

The proposal is desirable and the rate of return expected from the proposal is less than the minimum rate used for the analysis.

The proposal is undesirable and the rate of return expected from the proposal is less than the minimum rate used for the analysis.

The proposal is undesirable and the rate of return expected from the proposal is less than the minimum rate used for the analysis.

-In general, present value methods of analyzing capital investments are more desirable than methods ignoring present value because

the calculations in methods that ignore present value are more complex than those in methods using present value.

the present value methods consider that a dollar today is worth more than a dollar in the future due to the potential earning power of that dollar.

the calculations in methods that consider present value are less complex than those methods ignoring present value.

the present value methods consider that a dollar in the future is worth more than a dollar today due to the potential earning power of that dollar.

-Which method of evaluating capital investment proposals uses the concept of present value to compute a rate of return?

Average rate of return

Accounting rate of return

Cash payback period

Internal rate of return

-When several alternative investment proposals of the same amount are being considered, the one with the largest net present value is the most desirable. If the alternative proposals involve different amounts of investment, it is useful to prepare a relative ranking of the proposals by using a(n)

average rate of return.

consumer price index

present value index.

price-level index.

-Which method of evaluating capital investment proposals uses present value concepts to compute the rate of return from the net cash flows expected from capital investment proposals?

Internal rate of return

Cash payback

Net present value

Average rate of return

-The present value index is computed using which of the following formulas?

Amount to be invested/Average rate of return

Total present value of net cash flow/Amount to be invested

Total present value of net cash flow/Average rate of return

Amount to be invested/Total present value of net cash flo

-Which of the following is a present value method of analyzing capital investment proposals?

Average rate of return

Cash payback method

Accounting rate of return

Net present value

-All of the following are factors that may complicate capital investment analysis EXCEPT

the leasing alternative.

changes in price levels

sunk cost.

the federal income tax.

-Which of the following provisions of the Internal Revenue Code can be used to reduce the amount of the income tax expense arising from the capital investment projects?

Interest deduction

Depreciation deduction

Minimum tax provision

Charitable contributions

-Periods in time that experience increasing price levels are known as periods of

inflation.

recession.

depression.

deflation.

-The process by which management allocates available investment funds among competing investment proposals is called

investment capital.

investment rationing.

cost-volume-profit analysis.

capital rationing.

-In capital rationing, an initial screening of alternative proposals is usually performed by establishing minimum standards. Which of the following evaluation methods are normally used?

Cash payback method and average rate of return method

Average rate of return method and net present value method

Net present value method and cash payback method

Internal rate of return and net present value methods

-In capital rationing, alternative proposals that survive initial and secondary screening are normally evaluated in terms of

net income.

nonfinancial factors.

maximum cost.

net cash flow

-The basic financial statements do NOT include the

income statement.

tax return.

balance sheet.

statement of cash flows.

-Which of the following is NOT an element of the financial accounting system?

A set of rules for determining the recording of economic events

A framework for preparing financial statements

A set of rules for the stock exchange

Controls to determine whether errors occur during recording

-Which of the following accounts is a stockholders’ equity account?

Cash

Accounts Payable

Prepaid Insurance

Retained Earnings

-The stockholders’ equity will be reduced by which of the following accounts:

Revenues

Expenses

dividends.

all of these.

-The gross increases in stockholders’ equity attributable to business activities are called

assets.

liabilities.

revenues.

net income.

-A blank__________ is an economic event that under generally accepted accounting principles affects an element of the financial statements and must be recorded.

framework

control

set of rules

transaction

-The statement of cash flows is integrated with the balance sheet because

the cash at the beginning of the period plus or minus the cash flows from operating, investing, and financing activities equals the end of period cash reported on the balance sheet.

-RST borrowed $25,000 from the bank. Which of the following accurately shows the effects of the transaction?

Increase cash $25,000 and decrease notes payable $25,000

Increase cash $25,000 and increase notes payable $25,000

Decrease cash $25,000 and decrease notes payable $25,000

Decrease cash $25,000 and increase notes payable $25,000

-Anderson, Inc. paid rent expense of $4,000 for the month of October. How are the accounts affected due to this transaction?

Increase in cash $4,000 and increase in retained earnings $4,000

ncrease in cash $4,000 and decrease in retained earnings $4,000

Decrease in cash $4,000 and decrease in retained earnings $4,000

Decrease in cash $4,000 and increase in retained earnings $4,000

-Anderson, Inc. receives $5,000 cash for fees earned. What is the effect of this transaction?

Total assets remain unchanged.

Cash flow from Financing Activities will increase.

Net income will increase.

Retained earnings will remain unchanged.

-Declaring and paying cash dividends affects which balance sheet accounts?

Cash only

Stockholders’ equity only

Cash and stockholders’ equity

Cash and capital stock

-If Assets have a balance of $50,000 and Stockholders’ Equity has a balance of $40,000, then Liabilities must have a balance of

90000

20000

40000

10000

-A to Z Corporation engaged in the following transaction “Paid a $10,000 cash dividend.” On the Statement of Cash Flows, the transaction would be classified as

Cash Flows from Operating Activities.

Cash Flows from Investing Activities.

Cash Flows from Financing Activities.

Noncash transaction

-The income statement for August indicates net income of $50,000. The corporation also paid $10,000 in dividends during the same period. If there was no beginning balance in stockholders’ equity, what is the ending balance in stockholders’ equity?

40000

50000

10000

60000

-The first month of operation showed the net cash from operating activities to be $3,760, the net cash from investing activities to be ($5,415), and the ending cash balance to be $2,425. The net cash from financing activities must be

$770.00.

$4,080.00.

($11,600).

$11,600.00.

-The purpose of the Sarbanes-Oxley Act of 2002 is to

restore public confidence and trust in the financial statements of publicly held companies.

require all companies to prepare financial statements.

protect companies from demands of investors, stockholders, and creditors.

do all of these

-The Sarbanes-Oxley Act of 2002 requires companies and their independent accountants to

report on the financial activities of the company.

report on any fraud and theft detected in the company.

report on the state of the economy and likelihood of fraud.

report on the effectiveness of the company’s internal controls.

-The objectives of internal control are to

control the internal organization of the Accounting Department personnel and equipment.

provide reasonable assurance that assets are safeguarded, information is processed accurately, and laws and regulations are complied with.

prevent fraud and promote the social interest of the company.

provide control over “internal-use only” reports and employee internal conduct.

-A firm’s internal control environment is influenced by

Management’s operating style.

organizational structure.

personnel policies.

all of these.

-When a firm uses internal auditors, it is adhering to which of the following internal control elements?

Risk assessment

Monitoring

Proofs and security measures

Separating responsibilities for related operations

-Which of the following is NOT defined as cash?

Coins

Checks

Money orders

Commercial paper

-The notification accompanying a check that indicates the specific invoice being paid is called a

remittance advice.

voucher.

debit memorandum.

credit memorandum.

-EFT

means Efficient Funds Transfer.

can process certain cash transactions at less cost than by using the mail.

makes it easier to document purchase and sale transactions.

means Effective Funds Transfer.

-On the bank’s accounting records, customers’ accounts are normally shown as

Revenue

Expenses

An asset

a liability.

-Credit memorandums from the bank

decrease a bank customer’s account.

are used to show a bank service charge.

show that a company has deposited a customer’s NSF check.

show the bank has collected a note receivable for the customer.

-A bank reconciliation should be prepared periodically because

the depositor’s records and the bank’s records are in agreement.

the bank has not recorded all of its transactions.

any differences between the depositor’s records and the bank’s records should be determined, and any errors made by either party should be discovered and corrected.

the bank must make sure that its records are correct.

-The amount of the outstanding checks is included on the bank reconciliation as a(n)

deduction from the balance per depositor’s records.

addition to the balance per bank statement.

deduction from the balance per bank statement.

addition to the balance per depositor’s records.

-A special cash fund used to make small payments that occur frequently is called a(n)

operating expenses fund.

change fund.

market fund.

petty cash fund.

-Cash equivalents include

checks.

coins and currenc

money market accounts and commercial pape

stocks and short-term bonds

-A minimum cash balance required by a bank is called

cash in bank.

cash equivalent.

compensating balance.

EFT.

-The budget process involves doing all the following EXCEPT

establishing specific goals.

executing plans to achieve the goals.

periodically comparing actual results with the goals.

dismissing all managers who fail to achieve operational goals specified in the budget.

-When department managers plan lower goals than possible in order to build in a cushion for unexpected events, the result is

budgetary slack.

zero-based budgeting

goal conflict.

flexible budgeting.

-The process of developing budget estimates by requiring all levels of management to estimate sales, production, and other operating data as though operations were being initiated for the first time is referred to as

flexible budgeting.

continuous budgeting.

zero-based budgeting.

master budgeting.

-A variant of fiscal-year budgeting whereby a twelve-month projection into the future is maintained at all times is termed

flexible budgeting.

continuous budgeting.

zero-based budgeting.

master budgeting.

-The production budgets are used to prepare which of the following budgets?

Selling and administrative expenses

Direct materials purchases, direct labor cost, factory overhead cost

Sales

Capital expenditures

-The first budget customarily prepared as part of an entity’s master budget is the

production budget.

cash budget.

sales budget.

direct materials purchases.

-The budget that summarizes future plans for the acquisition of fixed assets is the

direct materials purchases budget.

production budget.

sales budget.

capital expenditures budget.

-Estimated cash payments are planned reductions in cash from all of the following EXCEPT

manufacturing and selling and administrative expenses.

capital expenditures.

notes and accounts receivable collections.

payments for interest or dividends.

-Management accountants usually provide for a minimum cash balance in their cash budgets for which of the following reasons?

Stockholders demand a minimum cash balance.

It is an important way of effectively managing cash.

It provides a safety buffer for variations in estimates.

It makes funds available for major capital expenditures

-Planning for capital expenditures is necessary for all of the following reasons EXCEPT

machinery and other fixed assets wear out.

expansion may be necessary to meet increased demand.

amounts spent for office equipment may be immaterial.

fixed assets may fall below minimum standards of efficiency.

-Standards that represent levels of operation that can be attained with reasonable effort are called

theoretical standards.

ideal standards.

reasonable standards.

normal standards.

-Periodic comparisons between planned objectives and actual performance are reported in

zero-base reports.

budget performance reports.

master budgets.

budgets.

-The standard price and quantity of direct materials are separated because

GAAP reporting requires this separation.

direct materials prices are controlled by the Purchasing Department, and quantity used is controlled by the Production Department.

standard quantities are more difficult to estimate than standard prices.

standard prices change more frequently than standard quantities.

-If the price paid per unit differs from the standard price per unit for direct materials, the variance is termed

variable variance.

controllable variance.

price variance.

volume variance.

-If the actual direct labor hours spent producing a commodity differ from the standard hours, the variance is termed

time variance.

price variance.

quantity variance

rate variance

-Variances from standard costs are usually reported to

suppliers.

stockholders.

management.

creditors

-The use of standards for nonmanufacturing expenses is

not as common as it is for manufacturing costs.

as common as it is for manufacturing costs.

not useful.

impossible.