WGU D774 Intro to Business Accounting QUESTIONS WITH CORRECT ANSWERS | BRAND NEW!
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70 Terms
In which country was the double-entry accounting system developed in the 15th century?
Italy
3 multiple choice options
Which major economic event followed soon after the Stock Market Crash of 1929?
Great Depression
3 multiple choice options
Which economic event immediately preceded and led to the passage of the Sarbanes-Oxley Act of 2002?
Dot-com bubble
3 multiple choice options
Why are there no standardized regulations relating to the production of managerial accounting information?
Company managers can generate any information they want to help them make better decisions, so no outside regulation is needed.
3 multiple choice options
What is a common use of managerial accounting information?
Making better planning, operating, and evaluating decisions inside a company
3 multiple choice options
Which report is one of the three primary financial statements?
Income statement
3 multiple choice options
Who performs external audits of financial statements?
Certified Public Accountant (CPA)
3 multiple choice options
Who selects a corporation’s board of directors?
Shareholders of the corporation
3 multiple choice options
What is an advantage of structuring a business as a corporation?
Legal existence separated from that of the shareholders
3 multiple choice options
What is one of the characteristics of a corporation?
Ease of transfer of ownership
3 multiple choice options
What is contained in Securities and Exchange Commission Form 10-K?
Annual audited financial statements
3 multiple choice options
Why would a company's employees be directly interested in the company's income statement?
To assess the current profitability of the company, its performance, and its liquidity
3 multiple choice options
Which information is contained in the reported amount of net income?
The amount by which revenues exceed expenses
3 multiple choice options
Which measurement is highlighted in the multi-step format for the income statement?
Operating income
3 multiple choice options
Which label refers to the costs of buying or making the products a company sells?
Cost of sales
3 multiple choice options
Which item is listed first on the income statement?
Revenues
3 multiple choice options
Which item is reported in an income statement?
Revenues
3 multiple choice options
In which situation does a company report revenue?
When products or services are sold
3 multiple choice options
Which item should be reported as revenue in the income statement?
Amount earned from customers for the sale of goods
3 multiple choice options
Alliah Company is preparing to do an initial public offering (IPO) of its shares next year. Alliah knows that investors use a company’s net income in their valuation models to determine how much an IPO company’s shares are worth. Alliah’s founders are eager for this IPO to do well so that their many years of work will be validated in the stock market. Here are some data from Alliah Company’s financial statements:Inventory
Accounts Payable
Expenses
Capital Stock (also called Paid-in Capital)
Accounts Receivable
Cash
Retained Earnings
Revenue
Building
Loans Payable
Which items are used to compute Alliah’s net income?
Revenue and expenses
3 multiple choice options
The financial records for Freedom Rock Bicycles contain the following accounts.
Salary expense
Cash
Sales
Inventory
Income tax expense
Accounts receivable
Which items should be used to compute Freedom Rock’s net income?
Sales, salary expense, and income tax expense
3 multiple choice options
The amount of a company’s assets and the amount of the company’s liabilities are known. Which computation should be performed to determine the company’s owners’ equity amount according to the accounting equation?
Assets minus liabilities
3 multiple choice options
Alliah Company’s financial records include these accounts at the end of the year.
Land
Accounts Receivable
Buildings
Inventory
Loans Payable
Accounts Payable
Retained Earnings
Capital Stock (also called Paid-in Capital)
Cash
Which set of items is a complete listing of Alliah’s current assets?
Cash, accounts receivable, and inventory
3 multiple choice options
How does capital stock differ from inventory?
Capital stock is equity; inventory is an asset.
3 multiple choice options
Endothon Company has these accounts in its financial records at the end of the year.
Land
Retained Earnings
Accounts Receivable
Loans Payable
Accounts Payable
Capital Stock (also called Paid-in Capital)
Cash
Which of these accounts are assets?
Cash, accounts receivable, and land
3 multiple choice options
Kretsmart has these accounts in its financial records at the end of the year.
Land
Retained Earnings
Accounts Receivable
Loans Payable
Accounts Payable
Capital Stock (also called Paid-in Capital)
Cash
Unearned Revenue
Which of these accounts are liabilities?
Accounts payable, loans payable, and unearned revenue
3 multiple choice options
How does a comparative balance sheet provide information that is useful to a decision maker?
It compares last year's balance sheet to this year's balance sheet, allowing for the easy identification of changes.
3 multiple choice options
Which description is a characteristic of owners’ equity?
Residual amount representing the net assets of a company
3 multiple choice options
Which action is a use of cash in an investing activity?
Buying a machine
3 multiple choice options
Which statement describes investing activities?
Purchasing and selling property, plant, and equipment
3 multiple choice options
Consider these three cash flows:
Cash paid to repay a loan
Cash paid for purchase of a building for use in operations
Cash paid for inventory purchases
Which sequence represents the correct categorization of these three cash flows?
Loan repayment—financing; building purchase—investing; inventory purchase—operating
3 multiple choice options
Which section of the statement of cash flows is the income statement directly connected to?
Operating
3 multiple choice options
Which type of cash collection is an operating activity?
Collecting cash from customers
3 multiple choice options
Which item is a source of cash from a financing activity?
Borrowing money
3 multiple choice options
Whole Pine Inc. manufactures custom-made wood furniture. The company has a full-time chief financial officer (CFO) who oversees the company’s financing activities. Which item is a financing activity for Whole Pine Inc.?
Obtained a new bank loan
3 multiple choice options
How are dividends included in the computations that impact the articulation of the balance sheet, the income statement, and the statement of cash flows?
Dividends impact ending retained earnings.
3 multiple choice options
How does the change in the cash balance for the year impact the computation of the ending retained earnings balance?
It is ignored.
3 multiple choice options
Which primary financial statement provides a detailed report explaining one component in the year-to-year change in the retained earnings balance?
Income statement
3 multiple choice options
Which balance sheet account is directly impacted by net income?
Retained Earnings
3 multiple choice options
How do the budgets of manufacturing companies, such as airplane parts manufacturers, differ from those of retail companies, such as clothing stores?
Manufacturing company budgets include production and product cost budgets.
3 multiple choice options
What is a common use of a cash budget?
To identify the need for external financing
3 multiple choice options
Endothon Company, a recreational vehicle dealer, has prepared a set of company budgets for next year based on a sales forecast that assumes that the competitive environment next year will be the same as it was this year. A competitor has just announced that it will open a new dealership right across the street from Endothon Company. This represents a major change in Endothon’s competitive environment. What is an appropriate first response for Endothon with respect to its budgets for next year?
Modify the sales budget.
3 multiple choice options
Which statement represents a major disadvantage of an incremental budget?
It requires the assumption that this period is very similar to last period.
3 multiple choice options
Which two budgets must precede the creation of the materials cost budget in a production company?
Sales and production
3 multiple choice options
What is a way that budgeting assists in operating a company?
Aligns management decisions with the company's goals and objectives
3 multiple choice options
Which question about strategy must be answered when using zero-based budgeting?
Have there been any significant strategy changes that should cause a reallocation of budgeted funds?
3 multiple choice options
Which characteristic is an advantage of zero-based budgeting?
Requires that every cost be justified
3 multiple choice options
What is the starting point when using zero-based budgeting?
The amount of each expense is zero.
3 multiple choice options
Which problem can be caused by the small annual increases (2% or 3%) that are routinely approved with incremental budgeting?
They get compounded each year and can become significant over time.
3 multiple choice options
Quiet Flag Industries has reported these budget and actual data for the most recent quarter:
ActualBudgetTotal Revenue$400,000$390,000Total Operating Cost(200,000)(220,000)Total Selling Cost(30,000)(40,000)Total Administrative Cost(140,000)(60,000)Profit$30,000$70,000
Favorable operating cost variance
3 multiple choice options
Which two measures are different ways to examine variances?
Dollar amounts and percentages
3 multiple choice options
Which question can be answered by looking at trends in cost variances?
Do variances exhibit systematic differences, or are they random?
3 multiple choice options
When does a favorable revenue variance exist?
When actual revenues are higher than budgeted revenues
3 multiple choice options
How is a cost variance computed?
Subtract the budgeted cost amount from the actual cost amount.
3 multiple choice options
Which variances are caused by volume differences?
Both revenue and cost
3 multiple choice options
Which information can be learned by looking at trends in variances?
Which specific costs, expenses, and revenues are getting better or worse
3 multiple choice options
Which factor must be considered when responsibilities are assigned to managers?
Managers should be held responsible for only those costs, revenues, profits, and assets over which they have substantial control.
3 multiple choice options
Which items does a profit center manager have responsibility over?
Costs, revenues, and profits
3 multiple choice options
A chief financial officer (CFO) has determined that a profit center is losing money. The profit center manager suspects that the CFO’s calculations are heavily influenced by subtracting company headquarters costs from the profit center’s computed profit. These company headquarters costs primarily reflect the salaries and benefits for the people working in the company headquarters building. What mistake is the CFO making?
Including costs in the performance evaluation measure of the profit center that cannot be controlled by the profit center manager
3 multiple choice options
Which measure is one of the most common activity levels used when trying to understand how costs change in relation to changes in activity level?
Number of units produced
3 multiple choice options
Synesthor manufactures music headphones. Which cost is a product cost for Synesthor?
Wages paid to the headphone assemblers who work on the production line
3 multiple choice options
Which category is one of the three categories of product costs in a firm that makes cars?
Manufacturing overhead
3 multiple choice options
What is the final step in the sequence of the flow of costs through a manufacturing operation?
Sell goods and transfer cost to cost of goods sold
3 multiple choice options
Which setting is appropriate for the use of an ABC overhead allocation system?
Operations involve a variety of different products and processes.
3 multiple choice options
Where in a manufacturing business is work-in-process inventory located?
Production facility
3 multiple choice options
When is it appropriate for a company to use process costing?
When the company produces a large volume of products using a series of uniform processes
3 multiple choice options
Which condition is associated with a company’s break-even point?
The company has no profit and has no loss.
3 multiple choice options
Which cost components are included in a mixed cost?
Fixed cost and variable cost
3 multiple choice options
Which cost is an example of a fixed cost?
Rent on the factory building
3 multiple choice options
Jaunty Coffee Co. currently has a level of sales that results in the company being below its break-even point. Which set of actions can be taken to help Jaunty Coffee Co. reach its break-even point?
Raise the price per unit, lower the variable cost per unit, lower fixed costs
3 multiple choice options