26 Mar BUSINESS BMAL 590 ALC3 AccountingBUSINESS BMAL 590
BUSINESS BMAL 590 ALC3 AccountingBUSINESS BMAL 590 ALC3 Accounting / ALC 3 Accounting-The percentage analysis of increases and decreases in individual items in comparative financial statements is calledvertical analysissolvency analysisprofitability analysishorizontal analysis-The percent of fixed assets to total assets is an example ofvertical analysissolvency analysisprofitability analysishorizontal analysis-An analysis in which all the components of an income statement are expressed as a percentage of net sales is calledhorizontal analysisliquidity analysisvertical analysiscommon-size analysis-Statements in which all items are expressed only in relative terms (percentages of a common base) arehorizontal statementscommon-size statementspercentage statementsvertical statements-The ability of a business to pay its debts as they come due and to earn a reasonable amount of income is referred to assolvency and leveragesolvency and profitabilitysolvency and liquiditysolvency and equity-Which of the following is NOT an analysis used in assessing solvency?Number of times interest charges are earnedCurrent position analysisRatio of net sales to assetsInventory analysis-The ratio computed by dividing current assets by current liabilities is thecurrent ratioearnings ratioacid-test ratioquick ratio-The ratio of the sum of cash, receivables, and marketable securities to current liabilities is called theprice-earnings ratioearnings ratioquick ratiocurrent ratio-An acceleration in the collection of receivables will tend to cause the accounts receivable turnover toDecreaseremain the sameeither increase or decreaseincrease-Which of the following ratios provides a solvency measure that shows the margin of safety of noteholders or bondholders and also gives an indication of the potential ability of the business to borrow additional funds on a long-term basis?Ratio of fixed assets to long-term liabilitiesRatio of net sales to assetsNumber of days’ sales in receivablesRate earned on stockholders’ equity-The number of times interest charges are earned is computed asnet income plus interest charges divided by interest chargesincome before income tax plus interest charges divided by interest chargesnet income divided by interest chargesincome before income tax divided by interest charges-The blank______________ measures the profitability of total assets, without considering how the assets are financed.price-earnings ratioratio of net sales to assetsrate earned on total assetsdividend yield-For most profitable companies, the rate earned on total assets will be less thanthe rate earned on stockholders’ equitythe rate earned on total liabilities and stockholders’ equitythe rate earned on salescannot be determined without more information-Which one of the following is NOT a characteristic generally evaluated in ratio analysis?LiquidityProfitabilitySolvencyMarketability-Which additional report is required of independent auditors since the passage of the Sarbanes-Oxley Act in 2002?A report assessing the probability that the company will remain in businessA report attesting to management’s assessment of internal controlA report assessing the market value of the company’s current stock priceA report assessing the competency of the company’s board of directors-Decisions to install new equipment, replace old equipment, and purchase or construct a new building are examples ofsales mix analysisvariable cost analysiscapital investment analysisabsorption cost analysis-Which of the following are present value methods of analyzing capital investment proposals?Internal rate of return and average rate of returnAverage rate of return and net present valueNet present value and internal rate of returnNet present value and payback-By converting dollars to be received in the future into current dollars, the present value methods take into consideration that moneyhas an international rate of exchange.is the language of business.Is the measure of assets, liabilities, and stockholders’ equity on financial statements.Has a time value-The primary advantages of the average rate of return method are its ease of computation and the fact thatit is especially useful to managers whose primary concern is liquidity.there is less possibility of loss from changes in economic conditions and obsolescence when the commitment is short-term.it emphasizes the amount of income earned over the life of the proposalrankings of proposals are necessary.-Which of the following can be used to place capital investment proposals involving different amounts of investment on a comparable basis for purposes of net present value analysis?Price-level indexPresent value factorAnnuityPresent value index-An analysis of a proposal by the net present value method indicated that the present value exceeded the amount to be invested. Which of the following statements best describes the results of this analysis?The proposal is desirable and the rate of return expected from the proposal exceeds the minimum rate used for the analysis.The proposal is desirable and the rate of return expected from the proposal is less than the minimum rate used for the analysis.The proposal is undesirable and the rate of return expected from the proposal is less than the minimum rate used for the analysis.The proposal is undesirable and the rate of return expected from the proposal is less than the minimum rate used for the analysis.-In general, present value methods of analyzing capital investments are more desirable than methods ignoring present value becausethe calculations in methods that ignore present value are more complex than those in methods using present value.the present value methods consider that a dollar today is worth more than a dollar in the future due to the potential earning power of that dollar.the calculations in methods that consider present value are less complex than those methods ignoring present value.the present value methods consider that a dollar in the future is worth more than a dollar today due to the potential earning power of that dollar.-Which method of evaluating capital investment proposals uses the concept of present value to compute a rate of return?Average rate of returnAccounting rate of returnCash payback periodInternal rate of return-When several alternative investment proposals of the same amount are being considered, the one with the largest net present value is the most desirable. If the alternative proposals involve different amounts of investment, it is useful to prepare a relative ranking of the proposals by using a(n)average rate of return.consumer price indexpresent value index.price-level index.-Which method of evaluating capital investment proposals uses present value concepts to compute the rate of return from the net cash flows expected from capital investment proposals?Internal rate of returnCash paybackNet present valueAverage rate of return-The present value index is computed using which of the following formulas?Amount to be invested/Average rate of returnTotal present value of net cash flow/Amount to be investedTotal present value of net cash flow/Average rate of returnAmount to be invested/Total present value of net cash flo-Which of the following is a present value method of analyzing capital investment proposals?Average rate of returnCash payback methodAccounting rate of returnNet present value-All of the following are factors that may complicate capital investment analysis EXCEPTthe leasing alternative.changes in price levelssunk cost.the federal income tax.-Which of the following provisions of the Internal Revenue Code can be used to reduce the amount of the income tax expense arising from the capital investment projects?Interest deductionDepreciation deductionMinimum tax provisionCharitable contributions-Periods in time that experience increasing price levels are known as periods ofinflation.recession.depression.deflation.-The process by which management allocates available investment funds among competing investment proposals is calledinvestment capital.investment rationing.cost-volume-profit analysis.capital rationing.-In capital rationing, an initial screening of alternative proposals is usually performed by establishing minimum standards. Which of the following evaluation methods are normally used?Cash payback method and average rate of return methodAverage rate of return method and net present value methodNet present value method and cash payback methodInternal rate of return and net present value methods-In capital rationing, alternative proposals that survive initial and secondary screening are normally evaluated in terms ofnet income.nonfinancial factors.maximum cost.net cash flow-The basic financial statements do NOT include theincome statement.tax return.balance sheet.statement of cash flows.-Which of the following is NOT an element of the financial accounting system?A set of rules for determining the recording of economic eventsA framework for preparing financial statementsA set of rules for the stock exchangeControls to determine whether errors occur during recording-Which of the following accounts is a stockholders’ equity account?CashAccounts PayablePrepaid InsuranceRetained Earnings-The stockholders’ equity will be reduced by which of the following accounts:RevenuesExpensesdividends.all of these.-The gross increases in stockholders’ equity attributable to business activities are calledassets.liabilities.revenues.net income.-A blank__________ is an economic event that under generally accepted accounting principles affects an element of the financial statements and must be recorded.frameworkcontrolset of rulestransaction-The statement of cash flows is integrated with the balance sheet becausethe cash at the beginning of the period plus or minus the cash flows from operating, investing, and financing activities equals the end of period cash reported on the balance sheet.-RST borrowed $25,000 from the bank. Which of the following accurately shows the effects of the transaction?Increase cash $25,000 and decrease notes payable $25,000Increase cash $25,000 and increase notes payable $25,000Decrease cash $25,000 and decrease notes payable $25,000Decrease cash $25,000 and increase notes payable $25,000-Anderson, Inc. paid rent expense of $4,000 for the month of October. How are the accounts affected due to this transaction?Increase in cash $4,000 and increase in retained earnings $4,000ncrease in cash $4,000 and decrease in retained earnings $4,000Decrease in cash $4,000 and decrease in retained earnings $4,000Decrease in cash $4,000 and increase in retained earnings $4,000-Anderson, Inc. receives $5,000 cash for fees earned. What is the effect of this transaction?Total assets remain unchanged.Cash flow from Financing Activities will increase.Net income will increase.Retained earnings will remain unchanged.-Declaring and paying cash dividends affects which balance sheet accounts?Cash onlyStockholders’ equity onlyCash and stockholders’ equityCash and capital stock-If Assets have a balance of $50,000 and Stockholders’ Equity has a balance of $40,000, then Liabilities must have a balance of90000200004000010000-A to Z Corporation engaged in the following transaction “Paid a $10,000 cash dividend.” On the Statement of Cash Flows, the transaction would be classified asCash Flows from Operating Activities.Cash Flows from Investing Activities.Cash Flows from Financing Activities.Noncash transaction-The income statement for August indicates net income of $50,000. The corporation also paid $10,000 in dividends during the same period. If there was no beginning balance in stockholders’ equity, what is the ending balance in stockholders’ equity?40000500001000060000-The first month of operation showed the net cash from operating activities to be $3,760, the net cash from investing activities to be ($5,415), and the ending cash balance to be $2,425. The net cash from financing activities must be$770.00.$4,080.00.($11,600).$11,600.00.-The purpose of the Sarbanes-Oxley Act of 2002 is torestore public confidence and trust in the financial statements of publicly held companies.require all companies to prepare financial statements.protect companies from demands of investors, stockholders, and creditors.do all of these-The Sarbanes-Oxley Act of 2002 requires companies and their independent accountants toreport on the financial activities of the company.report on any fraud and theft detected in the company.report on the state of the economy and likelihood of fraud.report on the effectiveness of the company’s internal controls.-The objectives of internal control are tocontrol the internal organization of the Accounting Department personnel and equipment.provide reasonable assurance that assets are safeguarded, information is processed accurately, and laws and regulations are complied with.prevent fraud and promote the social interest of the company.provide control over “internal-use only” reports and employee internal conduct.-A firm’s internal control environment is influenced byManagement’s operating style.organizational structure.personnel policies.all of these.-When a firm uses internal auditors, it is adhering to which of the following internal control elements?Risk assessmentMonitoringProofs and security measuresSeparating responsibilities for related operations-Which of the following is NOT defined as cash?CoinsChecksMoney ordersCommercial paper-The notification accompanying a check that indicates the specific invoice being paid is called aremittance advice.voucher.debit memorandum.credit memorandum.-EFTmeans Efficient Funds Transfer.can process certain cash transactions at less cost than by using the mail.makes it easier to document purchase and sale transactions.means Effective Funds Transfer.-On the bank’s accounting records, customers’ accounts are normally shown asRevenueExpensesAn asseta liability.-Credit memorandums from the bankdecrease a bank customer’s account.are used to show a bank service charge.show that a company has deposited a customer’s NSF check.show the bank has collected a note receivable for the customer.-A bank reconciliation should be prepared periodically becausethe depositor’s records and the bank’s records are in agreement.the bank has not recorded all of its transactions.any differences between the depositor’s records and the bank’s records should be determined, and any errors made by either party should be discovered and corrected.the bank must make sure that its records are correct.-The amount of the outstanding checks is included on the bank reconciliation as a(n)deduction from the balance per depositor’s records.addition to the balance per bank statement.deduction from the balance per bank statement.addition to the balance per depositor’s records.-A special cash fund used to make small payments that occur frequently is called a(n)operating expenses fund.change fund.market fund.petty cash fund.-Cash equivalents includechecks.coins and currencmoney market accounts and commercial papestocks and short-term bonds-A minimum cash balance required by a bank is calledcash in bank.cash equivalent.compensating balance.EFT.-The budget process involves doing all the following EXCEPTestablishing specific goals.executing plans to achieve the goals.periodically comparing actual results with the goals.dismissing all managers who fail to achieve operational goals specified in the budget.-When department managers plan lower goals than possible in order to build in a cushion for unexpected events, the result isbudgetary slack.zero-based budgetinggoal conflict.flexible budgeting.-The process of developing budget estimates by requiring all levels of management to estimate sales, production, and other operating data as though operations were being initiated for the first time is referred to asflexible budgeting.continuous budgeting.zero-based budgeting.master budgeting.-A variant of fiscal-year budgeting whereby a twelve-month projection into the future is maintained at all times is termedflexible budgeting.continuous budgeting.zero-based budgeting.master budgeting.-The production budgets are used to prepare which of the following budgets?Selling and administrative expensesDirect materials purchases, direct labor cost, factory overhead costSalesCapital expenditures-The first budget customarily prepared as part of an entity’s master budget is theproduction budget.cash budget.sales budget.direct materials purchases.-The budget that summarizes future plans for the acquisition of fixed assets is thedirect materials purchases budget.production budget.sales budget.capital expenditures budget.-Estimated cash payments are planned reductions in cash from all of the following EXCEPTmanufacturing and selling and administrative expenses.capital expenditures.notes and accounts receivable collections.payments for interest or dividends.-Management accountants usually provide for a minimum cash balance in their cash budgets for which of the following reasons?Stockholders demand a minimum cash balance.It is an important way of effectively managing cash.It provides a safety buffer for variations in estimates.It makes funds available for major capital expenditures-Planning for capital expenditures is necessary for all of the following reasons EXCEPTmachinery and other fixed assets wear out.expansion may be necessary to meet increased demand.amounts spent for office equipment may be immaterial.fixed assets may fall below minimum standards of efficiency.-Standards that represent levels of operation that can be attained with reasonable effort are calledtheoretical standards.ideal standards.reasonable standards.normal standards.-Periodic comparisons between planned objectives and actual performance are reported inzero-base reports.budget performance reports.master budgets.budgets.-The standard price and quantity of direct materials are separated becauseGAAP reporting requires this separation.direct materials prices are controlled by the Purchasing Department, and quantity used is controlled by the Production Department.standard quantities are more difficult to estimate than standard prices.standard prices change more frequently than standard quantities.-If the price paid per unit differs from the standard price per unit for direct materials, the variance is termedvariable variance.controllable variance.price variance.volume variance.-If the actual direct labor hours spent producing a commodity differ from the standard hours, the variance is termedtime variance.price variance.quantity variancerate variance-Variances from standard costs are usually reported tosuppliers.stockholders.management.creditors-The use of standards for nonmanufacturing expenses isnot as common as it is for manufacturing costs.as common as it is for manufacturing costs.not useful.impossible.
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