Accounting Test 3

Front 1

The first caption in most income statements in annual reports is:

A)gross sales.

B)net sales.

C)earned revenues.

D)sales, less sales returns and allowances.

E)none of the above.

Back 1

net sales

Front 2

Gains differ from revenues because gains:

A)do not have to be realized.

B)are reported as income from operating activities.

C)do not involve any offsetting costs or expenses.

D)are normally recognized as an application of accounting conservatism.

E)are not a result of the entity's ongoing, central operations.

Back 2

E. are not a result of the entity's ongoing, central operations.

Front 3

Under most circumstances, in order to recognize revenue:

A)cash must have been received.

B)the entity must expect to receive cash in the future.

C)the entity must have paid for all expenses incurred in generating the revenue.

D)the revenue must be realized or realizable, and earned.

E)all of the above.

Back 3

D.

the revenue must be realized or realizable, and earned.

Front 4

The gross profit ratio is useful to the manager for each of the following purposes except that:

A)it can be used to determine the selling price to set for an item.

B)it can be used to estimate the amount of inventory lost in a fire.

C)it can be used to determine the amount available from a given amount of revenue to cover operating expenses.

D)it can be used to estimate the amount of operating expenses for a period.

E)it can be used for all of the above.

Back 4

it can be used to estimate the amount of operating expenses for a period.

Front 5

Because of their importance to financial statement users, certain items are normally ported as separate items on the income statement (especially when significant in amount). Which of the following is not normally reported as a separate item?

A)Advertising Expense.

B)Cost of Goods Sold.

C)Interest Expense.

D)Income Tax Expense.

E)Net Income Attributable to Non controlling Interest.

Back 5

Advertising Expense.

Front 6

When the periodic inventory system is used:

A)operating profit from the sale of an item of inventory is known when the item is sold.

B)gross profit from the sale of an item of inventory is known when the item is sold.

C)a physical inventory must be taken in order to estimate the cost of goods sold.

D)ending inventory includes the cost of goods sold.

E)cost of goods sold can be calculated by subtracting the ending inventory amount from the sum of beginning inventory and purchases.

Back 6

cost of goods sold can be calculated by subtracting the ending inventory amount from the sum of beginning inventory and purchases.

Front 7

Income from operations is:

A)sometimes called the "bottom line."

B)sometimes used in the ROI calculation.

C)usually used in the ROE calculation.

D)usually calculated after income tax expense.

E)equal to net income plus other comprehensive income (loss).

Back 7

sometimes used in the ROI calculation.

Front 8

Earnings per share calculations are required on the income statement for:

A)Cost of Goods Sold, Non controlling Interest, and Income from Continuing Operations.

B)Discontinued Operations, Operating Income, and Net Income.

C)Discontinued Operations, Extraordinary Items, and Net Income.

D)Income Tax Expense, Extraordinary Items, and Net Income.

E)Cost of Goods Sold, Discontinued Operations, and Extraordinary Items.

Back 8

Discontinued Operations, Extraordinary Items, and Net Income.

Front 9

The major difference between the indirect and the direct method of a statement of cash flows appears in which the following activities section(s)?

A)The investing activities and financing activities sections.

B)The investing activities section only.

C)The operating activities and financing activities sections.

D)The operating activities section only.

E)The operating, investing, and financing activities sections.

Back 9

The operating activities section only.

Front 10

Which of the following transactions would not be shown under the operating activities category of the statement of cash flows (using the direct method):

A)cash received from customers.

B)cash paid to purchase land.

C)cash paid for interest and taxes.

D)cash paid to merchandise suppliers.

E)cash paid to employees for salaries.

Back 10

cash paid to purchase land.

Front 11

Managerial accounting, as opposed to financial accounting, is primarily concerned with:

A)The financial condition of the organization as a whole.

B)Meeting the requirements of generally accepted accounting principles.

C)Emphasizing the future.

D)Providing data for investors and creditors.

E)Determining exact results.

Back 11

Emphasizing the future.

Front 12

Activities included in a generally accepted definition of the management process include:

A)Planning, organizing, controlling.

B)Planning, operating, reporting.

C)Preparing, operating, creating.

D)Preparing, organizing, converting.

E)None of the above.

Back 12

Planning, organizing, controlling.

Front 13

Contribution margin can be expressed as:

A)Sales minus variable expenses.

B)Sales minus cost of goods sold.

C)Sales minus fixed expenses.

D)The level of sales required to cover variable expenses.

E)The level of sales required to cover fixed and variable expenses.

Back 13

Sales minus variable expenses.

Front 14

The contribution margin income statement:

A)Reports expenses based upon cost behavior pattern rather than cost function.

B)Unitizes fixed costs.

C)Shows contribution margin rather than operating income as the bottom line.

D)Is sometimes used for financial reporting purposes.

E)None of the above.

Back 14

Reports expenses based upon cost behavior pattern rather than cost function.

Front 15

The relevant range concept refers to:

A)A firm's range of profitability.

B)A firm's range of sales.

C)A firm's range of rates of return.

D)A firm's range of activity.

E)A firm's range of expenses.

Back 15

A firm's range of activity.

Front 16

Cost behavior refers to:

A)Costs that are both good and bad.

B)Costs that are variable or fixed.

C)Costs that decrease at a quicker rate than others.

D)Costs that increase at a quicker rate than others.

E)None of the above.

Back 16

Costs that are variable or fixed.

Front 17

Which of the following is the correct calculation for the contribution margin ratio?

A)Revenue divided by variable costs.

B)Revenue divided by contribution margin.

C)Contribution margin divided by variable costs.

D)Contribution margin divided by fixed costs.

E)Contribution margin divided by revenue.

Back 17

Contribution margin divided by revenue.

Front 18

Cost-volume-profit analysis assumes fixed costs:

A)Remains constant on a per unit basis as activity changes.

B)Remains constant from one period to the next.

C)Increases in total as activity increases.

D)Remains constant as activity changes.

E)None of the above.

Back 18

Remains constant as activity changes.

Front 19

At the break-even point:

A)Fixed cost is always less than the contribution margin.

B)Fixed cost is always equal to the contribution margin.

C)Fixed cost is always more than the contribution margin.

D)Fixed cost is always more than variable cost.

E)Fixed cost is always equal to variable cost.

Back 19

Fixed cost is always equal to the contribution margin.

Front 20

Which of the following will increase a company's break-even point?

A)Increasing variable cost per unit.

B)Decreasing variable cost per unit.

C)Reducing total fixed costs.

D)Increasing selling price per unit.

E)Increasing contribution margin per unit.

Back 20

Increasing variable cost per unit.

Front 21

A job order costing system would probably be appropriate for a firm that produces:

A)Automobiles.

B)Stained glass windows.

C)Video cassettes.

D)Desktop computers.

E)None of the above.

Back 21

Stained glass windows.

Front 22

Suppose your accounting textbook is the cost object of concern. The paper used to print the textbook is a(n):

A)Fixed cost.

B)Labor cost.

C)Direct cost.

D)Indirect cost.

E)Period cost.

Back 22

Direct cost

Front 23

An example of a period cost is:

A)Salary of a production supervisor.

B)Raw materials used in production.

C)Property taxes on a factory building.

D)Advertising and promotion expenditures.

E)None of the above.

Back 23

Advertising and promotion expenditures.

Front 24

An example of a product cost is:

A)Advertising expense for the product.

B)A portion of the president's travel expense.

C)Interest expense on a loan to finance inventory.

D)Production equipment maintenance costs.

E)None of the above.

Back 24

Production equipment maintenance costs.

Front 25

Costs may be allocated to a product or activity for many purposes, but care must be exercised when using allocated costs because:

A)Direct costs identified with the product or activity may not be accurately assigned.

B)Fixed costs will change in total if the volume of activity changes.

C)Period costs may not have been allocated to the product or activity.

D)Arbitrarily allocated costs may not behave in the way assumed in the allocation method.

E)Variable costs will remain constant in total if the volume of activity changes.

Back 25

Arbitrarily allocated costs may not behave in the way assumed in the allocation method.

Front 26

Common costs pertain to costs that:

A)Are directly traceable to a cost object.

B)Are not directly traceable to a cost object.

C)Are commonly incurred.

D)Are mixed costs.

E)Are direct costs.

Back 26

Are not directly traceable to a cost object.

Front 27

Which of the following best describes the correct sequence of the flow of costs for a manufacturing firm?

A)Raw materials, finished goods, work-in-process, cost of goods sold.

B)Work-in-process, raw materials, finished goods, cost of goods sold.

C)Raw materials, work-in-process, finished goods, cost of goods sold.

D)Raw materials, work-in-process, cost of goods sold, finished goods.

E)None of the above.

Back 27

Raw materials, work-in-process, finished goods, cost of goods sold.

Front 28

An industry most likely to use process costing is:

A)Coal mining.

B)Textbook publishing.

C)Aircraft manufacturing.

D)Construction.

E)Legal services.

Back 28

Coal mining.

Front 29

When a manufacturing firm has a highly automated plant, the most probable basis for applying manufacturing overhead costs to units produced would be:

A)Units produced.

B)Machine hours.

C)Direct labor cost.

D)Material cost.

E)Direct labor hours.

Back 29

Machine hours.

Front 30

Over applied overhead would result when:

A)Overhead costs budgeted for the period exceeds actual overhead cost incurred.

B)Actual overhead costs incurred exceed overhead applied to production.

C)Overhead applied to production exceeds actual overhead costs incurred.

D)The plant operated at fewer hours than were budgeted.

E)None of the above

Back 30

Overhead applied to production exceeds actual overhead costs incurred.

Front 31

Which of the following is not a benefit of budgeting?

A)Budgeting provides benchmarks against which performance can be measured.

B)Budgeting forces managers to concentrate on planning and to formalize their planning efforts.

C)Budgeting helps managers build favorable variances into the performance evaluation process.

D)Budgeting requires different functional areas of the firm to communicate and coordinate activities.

E)All of the above are benefits of budgeting.

Back 31

Budgeting helps managers build favorable variances into the performance evaluation process.

Front 32

When costs are classified according to a time horizon perspective:

A)All costs are non controllable.

B)Costs are labeled direct or indirect.

C)The focus is on differential costs.

D)Costs are labeled committed or discretionary.

E)All costs are controllable.

Back 32

Costs are labeled committed or discretionary.

Front 33

The cash budget is prepared:

A)Concurrently with the sales forecast.

B)Based upon the purchases/production budget.

C)After the budgeted income statement.

D)From the budgeted balance sheet.

E)Independently from the other budgets.

Back 33

After the budgeted income statement.

Front 34

The key data element on which the entire budget is based is the:

A)Sales/revenue budget.

B)Production budget.

C)Income statement budget.

D)Cash budget.

E)Budgeted balance sheet.

Back 34

Sales/revenue budget.

Front 35

Which of the following is the last budgeted financial statement to be prepared?

A)Budgeted income statement.

B)Budgeted balance sheet.

C)Cash budget.

D)It doesn't matter which one is prepared last.

E)None of the above.

Back 35

Budgeted balance sheet.

Front 36

Operating expenses are best budgeted on the basis of knowledge about:

A)Cost behavior patterns.

B)Relevant range.

C)Prior period actual expenses.

D)Prior period budget amounts.

E)Current period budget amounts.

Back 36

Cost behavior patterns.

Front 37

The amount of production to budget would be calculated as:

A)BI + sales - EI

B)EI + sales - BI

C)EI + BI - sales

D)Sales - BI + purchases

E)Sales - purchases

Back 37

EI + sales - BI

Front 38

A continuous budget:

A)Is used only in manufacturing firms.

B)Is a budget that is computer generated and is based on last year's actual results.

C)Is a budget that is revised monthly by adding a new month at the end of the 12-month budget period.

D)Requires adjustments on a daily basis.

E)None of the above.

Back 38

Is a budget that is revised monthly by adding a new month at the end of the 12-month budget period.

Front 39

A standard cost:

A)Is a budget for a single unit of product.

B)Is used for product costing purposes.

C)Identifies the price and quantity of production resources that should be incurred to produce each unit of product.

D)Can be used by manufacturing firms and service organizations.

E)All of the above.

Back 39

All of the above.

Front 40

Attainable standards, as compared to ideal standards:

A)Do not allow for operating inefficiencies.

B)Are more likely to elicit employee enthusiasm.

C)Are more difficult to adjust for changes in worker efficiency.

D)Are more difficult to achieve.

E)All of the above

Back 40

Are more likely to elicit employee enthusiasm.

Front 41

All the following are appropriate revenue accounts except.

A. fees

B. Sales

C. Gross Profit

D. Service Revenues

E. Interest Revenues

Back 41

Gross Profit

Front 42

Extraordinary items include all of the following except

A. utilization of tax loss carry forwards

B. Litigation settlements

C. earthquake losses

D. All of the above are examples

Back 42

All of the above

Front 43

Michael sells Melissa his grand piano and wishes to avoid both the cost of shipping it and the risk of loss while the piano is in transit. He should send the piano

Back 43

FOB shipping point, freight collect

Front 44

The periodic and perpetual inventory systems share the following similarity:

Back 44

Both systems can be used in conjunction with any of the cost flow assumptions (FIFO, LIFO, or weighted average)

Front 45

In what circumstances is it proper to recognize revenues before a sales transaction has occurred?

Back 45

when it is certain that competitors will raise their prices in the near future

Front 46

Which of the following is not one of the three broad categories presented in the statement of cash flows?

Back 46

Income Activities

Front 47

If the percentage change in operating income resulting from a given percentage change in sales is higher than the percentage change in sales itself, then

Back 47

the company has operating leverage

Front 48

If both costs associated with a product and the variable costs decrease, what will effect on the contribution margin ratio and the break-even point,

Back 48

Increase, decrease

Front 49

Overhead is most often applied to production on the basis of

Back 49

direct labor hours

Front 50

Cost objects can be

Back 50

a product, a service, the computer center, the machining department

Front 51

Costs may be both

Back 51

indirect and fixed

Front 52

Operating budget prepared:

Back 52

sales budget, purchases budget, income statement budget, cash budget, balance sheet budget

Front 53

Zero based budgeting

Back 53

classifies budget requests by activity and estimates the benefits arising from each activity

Front 54

Under a standard cost system

Back 54

attainable standards are more likely to be achieved by workers than are ideal standards

Front 55

Budget slack is the situation in which:

Back 55

there is the intentional overstatement of expenses