Test Bank – Accounting, 30th Edition by Carl Warren, Jones & Tayler

TEST BANK




** All Chapters included
** ** True/False, ** MCQs, Short QAs

,Table of Contents are given below




Chapter 1. Introduction to Accounting and Business
Chapter 2. Analyzing Transactions
Chapter 3. The Adjusting Process
Chapter 4. Completing the Accounting Cycle
Chapter 5. Accounting for Merchandising Businesses
Chapter 6. Inventories
Chapter 7. Internal Control and Cash
Chapter 8. Receivables
Chapter 9. Long-Term Operating Assets
Chapter 10. Liabilities: Current, Notes, and Contingencies
Chapter 11. Liabilities: Bonds Payable
Chapter 12. Accounting for Partnerships and Limited Liability Companies
Chapter 13. Corporations: Organization, Stock Transactions, and Dividends
Chapter 14. Statement of Cash Flows
Chapter 15. Financial Statement Analysis
Chapter 16. Introduction to Managerial Accounting
Chapter 17. Job Order Costing
Chapter 18. Process Costing
Chapter 19. Activity-Based Costing
Chapter 20. Cost-Volume-Profit Analysis
Chapter 21. Budgeting
Chapter 22. Evaluating Variances from Standard Costs
Chapter 23. Differential Analysis and Product Pricing
Chapter 24. Capital Investment Analysis

,The test bank is organized in reverse order, with the last chapter displayed first, to ensure that all chapters
are included in this document. (Complete Chapters included Ch24-1)

Chapter 24 30e - Warren

Indicate whether the statement is true or false.
1. The methods of evaluating capital investment proposals can be grouped into two general categories referred to
as (1) the average rate of return and (2) the cash payback methods.
a. True
b. False

ANSWER: False

2. With expected value analysis, incorporating the probabilities of various outcomes allows uncertainty to be
completely eliminated.
a. True
b. False

ANSWER: False

3. If in evaluating a proposal by use of the net present value method there is an excess of the present value of
future cash inflows over the amount to be invested, the rate of return on the proposal is less than the rate used
in the analysis.
a. True
b. False

ANSWER: False

4. For Years 1–5, a proposed expenditure of $500,000 for a fixed asset with a 5-year life is expected to generate
operating income of $40,000, $35,000, $25,000, $25,000, and $25,000, respectively, and net cash inflows of
$90,000, $85,000, $75,000, $75,000, and $75,000, respectively. The cash payback period is 5 years.
a. True
b. False

ANSWER: False

5. A company is considering purchasing a machine for $21,000. The machine will generate operating income of
$2,000; annual net cash inflows from the machine will be $3,500. The cash payback period for the new machine
is 10.5 years.
a. True
b. False

ANSWER: False

6. The excess of the cash flowing in from revenues over the cash flowing out for expenses is termed net cash
flow.
a. True
b. False

ANSWER: True



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, Chapter 24 30e - Warren

7. A qualitative characteristic that may influence capital investment analysis is the investment proposal’s impact on
employee morale.
a. True
b. False

ANSWER: True

8. The method of analyzing capital investment proposals in which the estimated average annual income is divided
by the average investment is the average rate of return method.
a. True
b. False

ANSWER: True

9. A company is considering the purchase of a new machine for $48,000. Management expects that the machine
can produce sales of $16,000 each year for the next 10 years. Expenses are expected to include direct
materials, direct labor, and factory overhead totaling $8,000 per year plus depreciation of $4,000 per year. All
revenues and expenses except depreciation are on a cash basis. The payback period for the machine is 6 years.
a. True
b. False

ANSWER: True

10. If in evaluating a proposal by use of the net present value method there is an excess of the present value of
future cash inflows over the amount to be invested, the rate of return on the proposal exceeds the rate used in
the analysis.
a. True
b. False

ANSWER: True

11. In net present value analysis for a proposed capital investment, the expected future net cash flows are reduced
to their present values.
a. True
b. False

ANSWER: True

12. The expected period of time between the date of an investment and the recovery in cash of the amount invested
is called the discount period.
a. True
b. False

ANSWER: False




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