Accounting principles MCQs

1. The convention of consistency refers to consistent use of accounting principles:

among firmswithin industriesamong accounting periodsthroughout the accounting period

2. Jayadev Athreya has started his first job. He will invest $5,000 at the end of each year for the next 45 years in a fund that will earn a return of 10 percent. How much will Jayadev have at the end of 45 years?

$2,667,904$3,594,524$1,745,600$5,233,442

3. Variance reports are:

SEC financial reportsinternal reports for managementexternal financial reportsall of these

4. Horizontal analysis is also known as:

linear analysisvertical analysiscommon size analysistrend analysis

5. Turnbull Corp. had an EBIT of $247 million in the last fiscal year. Its depreciation and amortization expenses amounted to $84 million. The firm has 135 million shares outstanding and a share price of $12.80. A competing firm that is very similar to Turnbull has an enterprise value/EBITDA multiple of 5.40.

What is the enterprise value of Turnbull Corp.? Round to the nearest million dollars.

$1,787 million$1,344 million$1,315 million$453.6 million

6. Regatta, Inc., has six-year bonds outstanding that pay a 8.25 percent coupon rate. Investors buying the bond today can expect to earn a yield to maturity of 6.875 percent. What should the company’s bonds be priced at today? Assume annual coupon payments. (Round to the nearest dollar.)

$1,066$923$1014$972

7. How firms estimate their cost of capital: The WACC for a firm is 13.00 percent. You know that the firm’s cost of debt capital is 10 percent and the cost of equity capital is 20% What proportion of the firm is financed with debt?

33%50%70%30%

8. The cash conversion cycle?

estimates how long it takes on average for the firm to collect its outstanding accounts receivables balance.

begins when the firm uses its cash to purchase raw materials and ends when the firm collects cash payments on its credit sales.

begins when the firm invests cash to purchase the raw materials that would be used to produce the goods that the firm manufactures.

shows how long the firm keeps its inventory before selling it.

9. The accumulation of accounting data on the basis of the individual manager who has the authority to make day-to-day decisions about activities in an area is called:

responsibility accountingflexible accountingmaster budgetingstatic reporting

10. Which of the following financial statements is concerned with the company at a point in time?

balance sheetstatement of cash flowsincome statementretained earnings statement

11. The major element in budgetary control is:

the approval of the budget by the stockholdersthe comparison of actual results with planned objectives.the preparation of long-term plansthe valuation of inventories

12. The group of users of accounting information charged with achieving the goals of the business is its:

creditorsinvestorsmanagersauditors

13. Which of the following is an advantage of corporations relative to partnerships and sole proprietorships?

most common form of organizationreduced legal liability for investorslower taxesharder to transfer ownership

14. Teakap, Inc. has current assets of $1,456,312 and total assets of $4,812,369 for the year ending September 30, 2006. It also has current liabilities of $1,041,012, common equity of $1,500,000 and retained earnings of $1,468,347. How much long-term debt does the firm have?

$1,844,022$803,010$2,303,010$2,123,612

15. Gateway, Corp. has an inventory turnover of 5.6. What is the firm’s days’s sales in inventory?

65.257.961.764.3

16. An activity that has a direct cause-effect relationship with the resources consumed is a(n):

product activitycost driver

cost pooloverhead rate

17. The process of evaluating financial data that change under alternative courses of action is called:

cost-benefit analysisdouble entry analysiscontribution margin analysisincremental analysis

18. An unrealistic budget is more likely to result when it:

is developed with performance appraisal usages in mind.has been developed in a top down fashion.has been developed by all levels of management.has been developed in a bottom up fashion.

19. Serox stock was selling for $20 two years ago. The stock sold for $25 one year ago, and it is currently selling for $28. Serox pays a $1.10 dividend per year. What was the rate of return for owning Serox in the most recent year? (Round to the nearest percent.)

12%40%32%16%

20. Which of the following is considered a hybrid organizational form?

partnershipsole proprietorshiplimited liability partnershipcorporation

21. A cost which remains constant per unit at various levels of activity is a:

manufacturing costmixed costfixed costvariable cost