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C213 - Accounting > Preassessment > Flashcards

Preassessment Flashcards

1
Q

What does accounting focus on

A

The impact a business’s activities have on its overall financial performance

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2
Q

Which report summarizes cash collections and cash expenditures from operating, investing, and financing activities over a period of time?

A

Statement of Cash Flows

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3
Q

Which users would have a primary concern with an organization’s ability to provide healthcare benefits

A

Employees

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4
Q

Which benefit does a corporation gain by following Generally Accepted Accounting Principles (GAAP)

A

An increase in its comparability to other companies

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5
Q

Which body regulates a certified public accounting firm’s audit practices when the firm is auditing a large publicly traded company

A

The Public Company Accounting Oversight Board

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6
Q

What has had the most significant impact on accounting practices

A

Information technology

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7
Q

What two items of information are revealed on the balance sheet

A

Ownership and Debt

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8
Q

Which term is defined as the residual interest in the net assets of a company

A

Owners’ Equity

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9
Q

A corporation has total liabilities of $300 million, total owners’ equity of $100 million, and current assets of $50 million. What is the value of the firm’s long-term assets?

A

$350 million

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10
Q

Which situation should result in revenue recognition on the income statement for the year ending 12/31/14 if the firm is using accrual-basis accounting?
A. In 2014, a company enters into a contract whereby it agrees to provide services to a customer next year (2015)
B. In 2014, a company collects cash from a customer for services it will provide next year (2015).
C. In 2014, a company provides services to a customer for which cash will be collected the next year (2015)
D. In 2014, a company collects cash from a customer for services it provided in the previous year (2013).

A

C. In 2014, a company provides services to a customer for which cash will be collected the next year (2015).

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11
Q

Which category on the statement of cash flows summarizes cash receipts and payments to owners and creditors of the company?
A. Cash flows from investing activities
B. Cash flows from operating activities
C. Cash flows from business activities
D. Cash flows from financing activities

A

D. Cash flows from financing activities

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12
Q

Where would an investor find a summary of a company’s significant accounting policies?

A

In the notes of the financial statement

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13
Q

Which assurance does an external audit report provide for its readers?
A. The company will be a good credit risk
B. The company will generate net income
C. The company’s financial statements fairly reflect its financial positions
D. The company will generate positive cash flows

A

C. The company’s financial statements fairly reflect its financial positions

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14
Q

Information that can be verified

A

Reliable

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15
Q

Information having to do with the matter at hand

A

Relevant

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16
Q

Information that is important enough to make a difference

A

Material

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17
Q

Information related to recognizing losses as they occur

A

Conservatism

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18
Q

List the steps in the decision cycle from 1 - 5

A

Prepare financial statements
Analyze Financial Statements
Gather Information
Make Decision
Implement Decision

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19
Q

Partial financial information for a company is as follows:
Current assets: $36,543
Total assets: $58,719
Current Liabilities: $24,824
Total Liabilities: $48,561
Stockholder’s Equity: $10,158
Sales: $46,997
Net Income: $3,761
Market Value of Shares:$41,316

What is the price earning (PE) ratio for this company?

A

11.0

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20
Q

What does it mean if a company has a debt ratio of 101.5%?

A

The company has 1.5% more total liabilities than total assets

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21
Q

What is consistent with a continual decline in gross profit if the firm’s costs of goods sold remains the same?

A

Continual decrease in sales

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22
Q

Which two cash flow adequacy ratios represent a cash cow?
A. $4510/$4932
B. $6991/$5486
C. $8091/$9374
D. $5220/$1875
E. $7589/$9210

A

B.$6991/$5486 and D. $5220/$1875

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23
Q

Which formula yields a cash times interest earned ratio of 11?
A. Cash before interest and taxes of $11,000/cash paid for income taxes of $1,000
B. Cash Before interest and taxes of $11,000/ Cash paid for interest of $1000
C. Cash before interest and taxes of $11,000/cash from operations of $1,000
D. Cash before interest and taxes of $11,000/ cash paid for acquisitions of $1,000

A

B. Cash before interest and taxes of $11,000/ Cash paid for interest of $1,000

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24
Q

Which form of debt should be reported in the long term liability category?
A. Unearned revenue that will be earned in 9 months
B. Notes payable expected to be paid in 18 months
C. Accounts payable due in 30 days
D. Salaries payable due in 2 weeks

A

B. Notes payable expected to be paid in 18 months

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25
Q

In January of year 1, a company began doing business as a corporation in order to sell technology-related accessories and services. During its first month of operations, the following events occurred:
January 5: The corporation purchased equipment to be used in the business for $200,000 cash.
What will be the impact of this event on the company’s balance sheet?

A

Equipment will increase $200,000 and cash will decrease $200,000

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26
Q

In January of year 1, a company began doing business as a corporation in order to sell technology-related accessories and services. During its first month of operations, the following events occurred:
January 31:
The corporation paid $6,000 cash for a one-year insurance policy. The policy will begin on February 1, year 1.
What will be the impact on the January 31 event on the company’s balance sheet

A

Prepaid insurance will increase $6000 and cash will decrease $6000

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27
Q

Which two values affect the measurement of net income:
Dividends Paid
Stockholder contributions
Operating Expenses
Ordinary gains and losses

A

Operating Expenses and Ordinary Gains and Losses

28
Q

Which two items’ subtotals are included in a multi-step income statement?
Gross Profit
Total Assets
Current Liabilities
Income from operations

A

Gross profit and income from operations

29
Q

A furniture company using accrual accounting purchased 20 sofas in November 11. In December 11, 8 of the 200 sofas were sold to customers. The customers all signed contracts agreeing to pay half the amount owed in February 2012 and the remaining half in March 2012. At the time of the sale, the company was reasonably sure the customers would pay the amount owed.
The furniture company pays its salespeople a commission on each sofa sold, with commissions for December 2011 sales paid in January 2012.
The furniture company paid $3000 for advertising that ran in the local newspaper in November 2011.
In which month should advertising costs be expensed?

A

November 2011

30
Q

On May 1, 2011, a company using accrual accounting purchased equipment costing $500,000. It expects the equipment to have a useful life of 5 years. At the time of the purchase, the company also purchased a one-year insurance policy on this equipment, which cost $6,000.
How much insurance expense should the company have recognized for the year ending in 2011?

A

$4,000

31
Q

In January of year 1, a company began doing business as a corporation in order to sell technology-related accessories and services. During its first month of operations, it focused on obtaining the financing needed to start its operations. In February of year 1, the company sold inventory costing $25000 for $75000 cash.
In February of year 1, the company provided technology related services worth $10000. Customers paid a total of $4000 in cash for these services and promised to pay the reminder the following month.
What will be the total impact of those services provided on the company’s balance sheet other than an increase in cash of $4000?

A

Accounts receivable will increase $6000, Retained earning will increase $10000.

32
Q

What was the 2012 net profit amount if the 2013 pro-forma net profit of $187,000 was based on a 22% increase?

A

$153,279

33
Q

What is a common category in a statement of cash flows

A

Cash from investing activities

34
Q

Which cash flow category would include “cash received from investors?”

A

Cash from financing activities

35
Q

Which item is an investing activity?
A. Cash receipts from dividend revenue
B. Cash receipts from issuance of stock
C. Cash payments for dividends
D. Cash payments for purchase of plant assets

A

D. Cash payments for purchase of plant assets

36
Q

What impact does the sale of equipment have on the statement of cash flows

A

Increase in cash from investing activities

37
Q

What is known about the direct and indirect methods of preparing statements of cash flow

A

The indirect method is more popular among large U.S. companies

38
Q

A company’s statement of cash flows includes the following cash transaction:
Sales 1.25 mil
Inventory purchase -750k
Property and Equipment Purchase -270k
Interest payment on long term debt -25k
Payment of Wages - 315k
Payment of rent -40k
Borrowing long tem debt +200k
Payment of Cash Dividends -15k
Repurchase of treasury stock - 40k
Total cash flows - 5k

Assuming the company uses US GAAP standards, what is the total cash flow from financing activities?

A

$145000

39
Q

What two examples represent financial statement errors?

A

The accounting dept miscalculates the payroll tax at year end resulting in an inaccurate liability and the accountant unintentionally records amounts as revenurethat were prepaid by customers but not yet earned

40
Q

Which internal control is intended to ensure that a company does not mistakenly pay a supplier for an invoice that includes more items than were actually received

A

The inventory department counts and inspects items as received and forwards the receiving record to accounts payable

41
Q

What are two common reasons for managers to manipulate reported earnings?

A

They are feeling pressured to meet internal sales goals, and they are preparing to qualify for a bank loan

42
Q

Which two requirements must accounting firms that audit public companies meet under the Sarbanes-Oxley Act

A

Firms must not provide certain non-audit services to audit clients, such as management functions or legal services. Firms must report to and be retained by the audit committee rather than the CFO or other company management

43
Q

Which two requirements must management of public companies meet under the Sarbanes-Oxley Act

A

They must provide an assessment of the effectiveness of internal controls with each annual report. They must support a stronger board and audit committee

44
Q

Which two actions do internal auditors perform to assist in maintaining the integrity of financial statements?

A

They search for and investigate fraud. They review financial records and internal controls

45
Q

What is a significant role of the U.S. Securities and Exchange Commission (SEC) in financial reporting?

A

They ensure that financial statement users are provided with reliable information to use in decision making

46
Q

What does management accounting provide

A

The insight management needs so the business can perform effectively and the detailed data that managers need to make decisions that will give the business a competitive edge

47
Q

How does management accounting differ from financial accounting

A

Management accounting is used primarily for internal planning, control, and evaluation

48
Q

Which account is seen on the balance sheet of a manufacturing company but not on the balance sheet of a service-oriented company?

A

Inventory

49
Q

What is a cost that will change in the future based upon the decision made

A

Differential Cost

50
Q

What are two examples of period costs?

A

Administrative expenses and selling expenses

51
Q

A company manufactures custom built wooden bookshelves. Which two costs would the company classify as period costs?

A

Salary cost of the receptionist and Advertising Cost

52
Q

What role do ethical standards have in management accounting?

A

To guide the resolution to possible ethical dilemmas that the managerial accountant may encounter

53
Q

During its first month of operations, a manufacturer incurs the following costs in dollars related to activities within its factory:
Direct Material Costs $5000
Indirect Materials $2000
Direct Labor $15000
Indirect Labor $3000
Factory Rent $10000
Depreciation on equip $8000

What are the manufacturers total product costs for the month?

A

$43000

54
Q

During its first month of operations, a manufacturer incurs the following costs related to activities within its factory
Direct materials $15,000
Direct labor $30,000
Manufact. OH $40,000
What amount should be reported as cost of goods sold on the income statement is 5000 units are produced and 4000 are sold?

A

$68,000

55
Q

Which two costs are included when calculating inventory costs?

A

Direct Labor and Overhead

56
Q

Which scenario would activity-based costs be more appropriate than traditional costing?

A

A company produces five different products. The products are highly differentiated and have significantly different demands for their use of overhead costs

57
Q

Which category of ABC activities are machine setup and material movement costs associated with?

A

Batch-level activities

58
Q

The director of a marathon race wants to assign the cost of having police officers along the race route to manage crowd control. What consideration is an appropriate cost driver?

A

The number of race participants and spectators

59
Q

A manufacturer produces 3 products: A, B, and C.
The company uses the following information to determine activity rates for each pool:
Cost pool Costs Total Act.
1 $300000 20k hrs
2 $20000 500 lbs
3 $10000 100 moves
Total $330000

Cost Driver A B C
hrs 10k 7.5k 2.5k
lbs 150 250 100
moves 20 30 50

What is the total amount of overhead applied to product a?

A

$158,000

60
Q

Given the following information:
Pairs of shoes expected to be produced: 1,950,000
Pairs of shoes produced: 2,500,000
Overhead rate: .75
What is the amount of applied overhead

A

$1,875,000

61
Q

Company A calculated the following information under traditional and activity-based costing for the production and sale of 1,000 units of product b
Trad. ABC
sales $100000 $100000
COGs $70000 $110000
Gross marg $30k ($10k)

Which decision should be made about the selling of product b?

A

The price of product b should be increased

62
Q

Which two concepts are studied in cost-volume-profit analysis

A

profits and level of activity

63
Q

What are 2 impacts on costs as sales volume increases

A

Total fixed costs will stay the same and fixed costs per unit will increase

64
Q

A company manufacture and sells widgets.
Each widget sells for $100
Variable cost per widget is $50
Total fixed costs per month are $300k
How many widgets do the company need to sell to break even

A

6000

65
Q

A company is experiencing an increase in their bad debt expense. Which change in credit policy would cause this increase

A

Credit limits were increased for all customers

66
Q
A

C213 - Accounting (13 decks)

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