C213 Accounting for Decision Makers-Module Answers-XO

Good management accounting is motivated by: - correct answer Management's desire to improve. (Module 9.1) The process of making decisions about future operations is called: - correct answer Planning (Module 9.2) Accounting information helps management to: - correct answer Decide how to control operations, Decide how to market products, Decide what prices to charge (Module 9.2) Identifying problems and opportunities is a product of which process? - correct answer Evaluating (Module 9.2) Variances which result from a comparison of actual performance against expected results would be used in which management function? - correct answer Evaluating (Module 9.2) The first step in management planning is: - correct answer Defining the problem (Module 9.2) Advertising, insurance, and executives' salaries are all examples of: - correct answer Fixed costs (Module 9.3) Materials used in production are classified as "direct materials" if they are: - correct answer Traceable to specific products (Module 9.3) The product costs of a software development company would NOT include: - correct answer Salary of the CEO (Module 9.3) The product costs of a software development company would include: - correct answer Computer programmers' salaries, Computer lease, Supplies used by programmers (Module 9.3) Zodiac Company's total costs are the same at all levels of activity. The company's cost structure must have all: - correct answer Fixed costs (Module 9.3) If total cost stays the same, even though the production level has risen, the cost is a(n): - correct answer Fixed cost (Module 9.3) The top accountant in most large organizations is usually called the: - correct answer Controller (Module 9.4) Which one of the following is NOT an ethical guideline that the Institute of Management Accountants (IMA) requires its members to follow? - correct answer Not disclose confidential information, Maintain objectivity when communicating information to decision makers, Act with both actual and apparent integrity in all situation (Module 9.4) What is the first step a business professional should take when confronted with a situation that may involve an ethical conflict? - correct answer Discuss the problem with the immediate supervisor. (Module 9.4) Which of the following is NOT a key component of the definition of accounting? - correct answer Qualitative (Module 1.1) Which of the following is NOT typically true of accounting information? - correct answer The information relates to future time periods. (Module 1.1) Businesses use accounting systems to - correct answer Analyze transactions, Evaluate the performance and health of the business, Handle routine bookkeeping tasks (Module 1.1) Which of the following is NOT a function of accounting? - correct answer Executing sales transactions for organizations (Module 1.1) Which of the following is a function of accounting? - correct answer Accumulating economic information about organizations, Measuring economic information about organizations, Communicating economic information about organizations (Module 1.1) Which of the following is typically true of accounting information? - correct answer The information relates to specific accounting entities, The information is quantitative in nature, The information is primarily financial in nature. (Module 1.1) Which of the following is a key component of the definition of accounting? - correct answer Decision-oriented, Useful, Financial (Module 1.1) Which of the following is the most correct definition of accounting? - correct answer A system for providing quantitative information, primarily financial in nature, about economic entities that is intended to be useful in making economic decisions. (Module 1.1) Which of the following is NOT one of the three primary financial statements? - correct answer Statement of retained earnings (Module 1.2) What are the three primary financial statements? - correct answer Balance sheet, Statement of cash flows, Income statement (Module 1.2) Which of the following financial statements reports a company's resources, obligations, and owner's equity? - correct answer Balance sheet (Module 1.2) Which of the following financial statements reports the excess of a company's revenues over its expenses? - correct answer Income statement (Module 1.2) Which of the following financial statements reports the amount of cash collected and paid out by a company? - correct answer Statement of cash flows (Module 1.2) The emphasis in financial accounting is on which of the following external user groups? - correct answer Investors and creditors (Module 1.3) The primary internal group that uses accounting information is - correct answer Management (Module 1.3) Internal reports are generally used by - correct answer Management (Module 1.3) Which of the following is NOT an external user of financial information? - correct answer Management (Module 1.3) Which of the following is an external user of financial information? - correct answer Suppliers, Competitors, Customers (Module 1.3) Which of the following is NOT true of the Financial Accounting Standards Board (FASB)? - correct answer It is a government Agency (Module 1.4) Which of the following is true of the Financial Accounting Standards Board (FASB)? - correct answer It consists of seven full-time members, It seeks consistency for its proposed standards, It has no legal power to enforce the standards it sets (Module 1.4) Generally accepted accounting principles are - correct answer Developed by accounting rule makers (Module 1.4) The initials GAAP stand for - correct answer Generally Accepted Accounting Principles (Module 1.4) The current standard-setting board for accounting in the private sector is the - correct answer Financial Accounting Standards Board (FASB) (Module 1.4) Which of the following organizations has specific legal authority to establish accounting standards for publicly held companies? - correct answer Securities and Exchange Commission (SEC) (Module 1.5) Standards established by the International Accounting Standards Board are referred to as - correct answer International Financial Reporting Standards (Module 1.5) Which of the following is NOT a service typically provided by large public accounting firms? - correct answer Making management decisions (Module 1.5) Which of the following is a service typically provided by large public accounting firms? - correct answer Redesigning operating procedures, Performing audits, Establishing accounting systems (Module 1.5) Which of the following is the government agency that stipulates the rules and regulations that govern the collection of taxes in the United States? - correct answer Internal Revenue Service (Module 1.5) The organization that develops worldwide accounting standards is the - correct answer International Accounting Standards Board (IASB) (Module 1.5) Which of the following is NOT a reason for the integration of worldwide accounting standards? - correct answer the theoretical necessity of a common set of accounting standards (Module 1.6) Which of the following is a reason for the integration of worldwide accounting standards? - correct answer the increased efficiency of financial markets, the integration of the global economy, the need to evaluate investments across the world (Module 1.6) The International Accounting Standards Board (IASB) is charged with developing worldwide accounting practices? - correct answer TRUE (Module 1.6) With the current state of information technology, investors outside a company are now allowed access to a company's internal database of financial information and do their own customized analysis of a firm's performance. - correct answer FALSE: While the technology may be available, companies are still not allowing outsiders access to their internal accounting records. (Module 1.6) Increased federal oversight of the audit process resulted from the passage of the following act of Congress - - correct answer Sarbanes-Oxley Act (Module 1.6) A borrower benefits from providing financial information regarding income and expenses in the form of a lower interest rate on the loan because of reduced uncertainty for the lender with regard to repayment. - correct answer TRUE (Module 2.1) Which of the following is NOT one of the three primary financial statements? - correct answer The Statement of Retained Earnings (Module 2.1) Which of the following is one of the three primary financial statements? - correct answer Balance sheet, Statement of cash flows, Income statement (Module 2.1) One reason for a company's preparing and providing financial statements is to reduce uncertainty for an investor regarding the firm's future financial performance. - correct answer TRUE (Module 2.1) Which of the following financial statements provides a picture of the enterprise at a particular point in time? - correct answer Balance Sheet (Module 2.2) Markanich Company purchased land for $90,000 in 2010. In 2013, the land is valued at $115,000. The land would appear on the company's books in 2013 at - correct answer $90,000 (Module 2.2) Which of the following is true of the balance sheet? - correct answer It identifies a company's assets and liabilities as of a specific date. (Module 2.2) The basic accounting equation is - correct answer Assets = Liabilities + Owners' Equity (Module 2.2) Which of the following is the reason that the accounting equation is true by definition? - correct answer Liabilities and owner's equity are the sources that fund the purchase of assets (Module 2.2) Revenues cause - correct answer An increase in net assets (Module 2.3) Expenses generally cause - correct answer A decrease in net assets (Module 2.3) The financial statement that presents a summary of the revenues and expenses of a business for a specific period of time, such as a month or a year, is called a(n) - correct answer Income Statement (Module 2.3) Costs that are incurred during the normal operations of a business to generate revenues are called - correct answer Expenses (Module 2.3) Resource increases from the sale of goods or services are called - correct answer Revenues (Module 2.3) Which of the following activities would be classified as a financing activity? - correct answer Repayment of a loan (Module 2.4) Which of the following financial statements shows an entity's cash receipts and payments? - correct answer The statement of cash flows (Module 2.4) Which of the following classifications does NOT appear on the Statement of Cash Flows? - correct answer Borrowing (Module 2.4) Which of the following classifications does appear on the Statement of Cash Flows? - correct answer Investing, Operating, Financing (Module 2.4) During the month, Meridian Company had the following cash transactions: Cash collected from customers=$12,500 Cash received from a loan=$8,000 Cash paid for wages payable=($5,750) Cash paid for the purchase of a building= ($15,000) Cash received for the issuance of new shares of stock=$2,600 Cash received from sale of land=$6,400 Cash paid for rent=($2,500) Cash paid for dividends=($1,500) Given the above information, compute cash flow from financing activities. - correct answer $9,100 Financing activities: $8,000 + $2,600 - $1,500 = $9,100 (Module 2.4) Which of the following is a primary use of cash? - correct answer Operating expenses (Module 2.4) Vital information that CANNOT be captured solely by dollar amounts is reported in a firm's - correct answer Notes to financial statements (Module 2.5) Which of the following is NOT one of the four general types of financial statement notes? - correct answer Supplementary information required by the Internal Revenue Service (Module 2.5) The following is four general types of financial statement notes - correct answer Additional information about the summary totals found in the financial statements, Summary of significant accounting policies, Disclosure of important information that is not recognized in the financial statements, Supplementary information required by the Financial Accounting Standards Board (FASB) or the Securities and Exchange Commission (SEC) (Module 2.5) Which of the following is an example of a significant accounting policy that would be explained in the notes to the financial statements? - correct answer The method used to estimate depreciation on a piece of equipment (Module 2.5) Which of the following is an example of a disclosure of information NOT recognized that would be explained in the notes to the financial statements? - correct answer The disclosure of the uncertain, potential outcome of a lawsuit (Module 2.5) Which of the following is an example of a disclosure of information recognized that would be explained in the notes to the financial statements? - correct answer The disclosure of quarterly financial information, The description of all the individual items that comprise notes payable, the method used to estimate depreciation on a piece of equipment (Module 2.5) Which of the following is an example of additional information about summary totals that would be explained in the notes to the financial statements? - correct answer The description of all the individual items that comprise notes payable (Module 2.5) An independent audit report is usually issued by - correct answer A certified public accountant (Module 2.6) In completing an audit of a company's financial statements, auditors - correct answer Provide some assurance that the financial statements are not misleading (Module 2.6) The accuracy of the information contained in the financial statements is the responsibility of the - correct answer Management (Module 2.6) Which of the following are the two economic factors that enable us to trust an independent auditor despite the fact that the auditor was hired by the company being audited? - correct answer Reputation of auditor and risk of lawsuits (Module 2.6) The idea that certain figures on an operating statement help to explain changes in figures on comparative balance sheets is referred to as - correct answer Articulation (Module 2.7) The idea that information becomes more useful when it can be related to a benchmark or a standard is referred to as - correct answer Comparability (Module 2.7) The notion that when doubt exists concerning two or more reporting alternatives, users should select the alternative with the least favorable impact on reported income, assets, and liabilities is referred to as - correct answer Conservatism (Module 2.7) Whether an item is big enough that proper accounting will make a difference to users of accounting information is referred to as - correct answer Materiality (Module 2.7) The notion that information will be more useful if it will impact a decision is referred to as - correct answer Relevance (Module 2.7) Which of the following is one of the purposes of financial statement analysis? - correct answer Both diagnosis and prognosis (3.1) Which of the following statements best describes financial statement analysis? - correct answer Financial statement analysis involves relationships and trends. (3.1) Financial statement analysis is greatly enhanced when financial ratios are compared with - correct answer Both past values and values for other firms in the same industry (3.1) External users of financial statements use financial statement analysis for - correct answer Investing decisions (3.1) Relationships between financial statement amounts are called - correct answer Financial ratios (3.1) The balance sheet at the end of the first year of operations indicates the following: 2012 Total current assets $600,000 Total investments 85,000 Total property, plant, and equipment 900,000 Total current liabilities 250,000 Total long-term liabilities 350,000 Common stock, $10 par 600,000 Paid-in capital in excess of par-common stock 60,000 Retained earnings 325,000 What is the debt ratio for 2012 (rounded to one decimal places)? - correct answer 37.9% Debt Ratio: ($250,000 + $350,000) / ($600,000 + $85,000 + $900,000) = 37.9% (3.2) Which of the following ratios is a comparison of a financial statement number to a market value number? - correct answer Price-earnings ratio (3.2) Which of the following transactions could increase a firm's current ratio? - correct answer Payment of accounts payable (3.2) What ratio is used to measure a firm's liquidity? - correct answer Current ratio (3.2) Which of the following ratios is calculated using only income statement numbers? - correct answer Return on sales (3.2) When using common-size statements - correct answer Data may be selected for the same business as of different dates, or for two or more businesses as of the same date (3.3) In a common-size balance sheet, using the percent of sales method, each item on the balance sheet is typically expressed as a percentage of - correct answer Sales revenue (3.3) In a common-size income statement, each item on the statement is expressed as a percentage of - correct answer Revenue (3.3) Selected information for Alastair Company is as follows: 2012 Current assets $450,000 Total assets 725,000 Cost of goods sold 700,000 Sales revenue 915,000 Net income 145,000 What is the percentage that would be given to sales revenue on a common-size income statement (round to the nearest percent)? - correct answer 100 percent Sales revenue: $915,000 / $915,000 = 100% (3.3) Selected information for Alastair Company is as follows 2012 Current assets $450,000 Total assets 725,000 Cost of goods sold 700,000 Sales revenue 915,000 Net income 145,000 What is the percentage that would be given to current assets on a common-size balance sheet using the percent of sales method (round to the nearest percent)? - correct answer 49 percent Sales revenue: $450,000 / $915,000 = 49% (3.3) When analyzing a company's debt-to-equity ratio, if the ratio has a value that is equal to one, then the company has - correct answer Equal amounts of debt and equity (3.4) Which ratio represents how many times a company replenishes its inventory during the year? - correct answer Inventory turnover (3.4) Which ratio represents how a company is managing its property, plant, and equipment? - correct answer Property, plant, and equipment turnover (3.4) Which of the following ratios is used to measure a firm's leverage? - correct answer Assets ÷ Equity (3.4) The ratio that reflects the mix of sources of financing for a company is the - correct answer Debt-to-equity ratio (3.4) In general, most companies have significant noncash expenses that reduce net income and also cause the cash flow-to-net income ratio to be - correct answer Greater than 1 (3.5) The following data came from the financial statements of the Green Company: Cash from operations $900,000 Cash from investing activities 350,000 Cash from financing activities 220,000 Cash paid for capital expenditures 55,000 Net income 425,000 Compute the cash flow-to-net income ratio - correct answer 2.12 Cash flow-to-net income: $900,000 / $425,000 = 2.12 (3.5) The cash flow adequacy ratio is computed as - correct answer Cash from operations ÷ Cash for investing activities (3.5) Which cash flow ratio reflects the extent to which accrual accounting adjustments and assumptions have been included in net income? - correct answer Cash flow-to-net income (3.5) The following data came from the financial statements of the Green Company: Cash from operations $900,000 Total assets 350,000 Cash from financing activities 220,000 Cash paid for investing activities 55,000 Net income 425,000 Comput