1. (TCO 1) Which financial statement is prepared first?

Balance sheet

Income statement

Retained earnings statement

Statement of cash flows

2. (TCO 1) The information needed to determine whether a company is using accounting methods similar to those of its competitors, would be found in which of the following?

auditor’s report

balance sheet

management discussion and analysis section

notes to the financial statements

3. (TCO 4) Using the following balance sheet and income statement data, what is the earnings per share?

Current assets $ 7,000 Net income $ 12,000

Current liabilities 4,000 Stockholders’ equity 27,000

Average assets 40,000 Total liabilities 9,000

Total assets 30,000

Average common shares outstanding was 10,000 (Points : 4)

$3.60

$4.00

$1.20

$0.83

4. (TCO 4) Which measure would a long-term creditor be least interested in reviewing? (Points : 4)

free cash flow

debt to total assets ratio

current ratio

solvency measure

5. (TCO 2) Which pair of the listed accounts follows the rules of debits and credits, in relation to increases and decreases, in the same manner? (Points : 4)

Salary Expense and Notes Payable

Common Stock and Rent Expense

Accounts Receivable and Advertising Expense

Service Revenue and Equipment

6. (TCO 2) The usual sequence of steps in the recording process is which of the following? (Points : 4)

analyze each transaction, enter the transaction in the journal, and transfer the information to the ledger accounts

analyze each transaction, enter the transaction in the ledger, and transfer the information to the journal

analyze each transaction, enter the transaction in the book of accounts, and transfer the information to the journal

analyze each transaction, enter the transaction in the book of original entry, and transfer the information to the journal

7. (TCO 3) Joe is a warehouse custodian, and also maintains the accounting record of the inventory held at the warehouse. An assessment of this situation indicates ______________________ . (Points : 4)

documentation procedures are violated

independent internal verification is violated

segregation of duties is violated

establishment of responsibility is violated

8. (TCO 3) The following information was taken from Mitchell Company cash budget for the month of July:

Beginning cash balance $50,000

Cash receipts 48,000

Cash disbursements 68,000

If the company has a policy of maintaining end of the month cash balance of $50,000, the amount the company would have to borrow is which of the following?

$20,000

$10,000

$30,000

$12,000

9. (TCO 11) Managerial accounting does which of the following?

is concerned with costing products

is governed by generally accepted accounting principles

pertains to the entity as a whole and is highly aggregated

places emphasis on special-purpose information

10. (TCO 11) A manufacturing process requires small amounts of glue. The glue used in the production process is classified as which of the following?

period cost

indirect material

direct material

miscellaneous expense

11. (TCO 11) Sales commissions are classified as which of the following?

overhead costs

period costs

product costs

indirect labor

12. (TCO 11) Ranger Company reported total manufacturing costs of $65,000, manufacturing overhead totaling $13,000, and direct materials totaling $16,000. How much is direct labor cost?

$49,000

$94,000

$29,000

$36,000

13. (TCO 11) Hardigan Manufacturing Company reported the following year-end information:

beginning work in process inventory, $80,000

cost of goods manufactured, $980,000

beginning finished goods inventory, $50,000

ending work in process inventory, $70,000

and ending finished goods inventory, $40,000

How much is Hardigan’s cost of goods sold for the year?

$980,000

$990,000

$970,000

$1,000,000

14. (TCO 5) What effect do changes in activity have on fixed costs per unit? (Points : 4)

No effect. Fixed costs per unit stay the same at every activity level.

An inverse effect.

A directly proportional effect.

It depends on the particular level of activity.

15. (TCO 5) Which one of the following is not an assumption of CVP analysis? (Points : 4)

All units produced are sold.

Cost classifications are reasonably accurate.

Factors other than changes in activity may affect costs.

The sales mix remains constant.

1. (TCO 5) A company has total fixed costs of $180,000 and a contribution margin ratio of 30%. How much sales are necessary to break even?

$540,000

$600,000

$54,000

$126,000

2. (TCO 5) How much sales are required to earn a target income of $70,000, if total fixed costs are $100,000 and the contribution margin ratio is 40%?

$400,000

$200,000

$330,000

$425,000

3. (TCO 6) For which one of the following budgeting aspects does the budget committee generally have the responsibility? (Points : 4)

Setting company goals.

Expressing the budget in financial terms.

Enforcing the budget.

Serves as a review board where managers can defend budget goals and requests.

4. (TCO 6) Which one of the following would most likely cause an unrealistic budget to result? (Points : 4)

All levels of management contributed to its development.

The budget has been developed in a participative approach.

The budget has been developed in a top down fashion.

The budget was developed after considerable planning.

5. (TCO 6) What three differences exist between long-range planning and budgeting? (Points : 4)

Amount of detail, content, and emphasis

Time periods involved, amount of detail, and content

Content, emphasis, and amount of detail

Emphasis, time periods involved, and amount of detail

6. (TCO 6) Which one of the following is a source of information used to prepare the budgeted income statement? (Points : 4)

Cash budget

Budgeted balance sheet

Selling and administrative expense budget

Capital expenditure budget

7. (TCO 7) When is a static budget most appropriate in evaluating a manager’s performance? (Points : 4)

When actual costs incurred equal the amounts on the budget.

When the actual activity level is less than the master budget activity.

The static budget is not appropriate for evaluating managers.

When the company performed at the same activity level as the static budget level.

8. (TCO 7) Which type of center is the toy department in a Wal-Mart store? (Points : 4)

An exception center

A profit center

A cost center

An investment center

9. (TCO 7) For which of the following is an investment center manager responsible? (Points : 4)

Invested assets, sales, and costs

Sales, profits, and invested assets

Sales, invested assets, and assets

Revenues and costs

10. (TCO 7) An investment center generated a contribution margin of $200,000, controllable fixed costs of $100,000 and sales of $1,000,000. The center’s average operating assets were $400,000. How much is the return on investment? (Points : 4)

25%

175%

50%

75%

11. (TCO 11) A manufacturing company makes the products that it sells. Briefly identify and define the cost elements that are incurred in making a product. After product cost elements are identified, how is the cost of goods manufactured for a period determined?

12. (TCO 4) Are short-term creditors, long-term creditors, and stockholders primarily interested in the same characteristics of a company? Explain.

13. (TCO 5) Keller Company estimates that variable costs will be 60% of sales and fixed costs will total $1,920,000. The selling price of the product is $10, and 600,000 units will be sold.