Which of the following is not a step in the accounting process?
A.
identification.
B.
verification.
C.
recording.
D.
communication.
2.
Which of the following statements about users of accounting information is incorrect?
A.
Management is an internal user.
B.
Taxing authorities are external users.
C.
Present creditors are external users.
D.
Regulatory authorities are internal users.
3.
Services provided by a public accountant include:
A.
auditing, taxation, and management consulting.
B.
auditing, budgeting, and management consulting.
C.
auditing, budgeting, and cost accounting.
D.
internal auditing, budgeting, and management consulting.
4.
The cost principle states that:
A.
assets should be initially recorded at cost and adjusted when the market value changes.
B.
activities of an entity are to be kept separate and distinct from its owner.
C.
assets should be recorded at their cost.
D.
only transaction data capable of being expressed in terms of money be included in the accounting records.
5.
Which of the following statements about basic assumptions is incorrect?
A.
Basic assumptions are the same as accounting principles.
B.
The economic entity assumption states that there should be a particular unit of
accountability.
C.
The monetary unit assumption enables accounting to measure economic events.
D.
An important part of the monetary unit assumption is the stable monetary unit assumption.
6.
Net income will result during a time period when:
A.
assets exceed liabilities.
B.
assets exceed revenues.
C.
expenses exceed revenues.
D.
revenues exceed expenses.
7.
Performing services on account will have the following effects on the components of the basic accounting equation:
A.
increase assets and decrease owner's equity.
B.
increase assets and increase owner's equity.
C.
increase assets and increase liabilities.
D.
increase liabilities and increase owner's equity.
8.
As of December 31, 2005 Stoneland Company has assets of $3,500 and owner's equity of $2,000. What are the liabilities for Stoneland Company as of December 31, 2005?
A.
$1,500.
B.
$1,000.
C.
$2,500.
D.
$2,000.
9.
On the last day of the period, Jim Otto Company buys a $900 machine on credit. This transaction will affect the:
A.
income statement only.
B.
balance sheet only.
C.
income statement and owner's equity statement only.
D.
income statement, owner's equity statement, and balance sheet.
10.
The financial statement that reports assets, liabilities, and owner's equity is the:
A.
income statement.
B.
owner's equity statement.
C.
balance sheet.
D.
statement of cash flow.
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Chapter 27
1.
Three of the steps in management's decision process are: (1) Review results of decision. (2) Develop data relevant to each course of action. (3) Make the decision. The steps are prepared in the following order.
A.
(1), (2), (3).
B.
(3), (2), (1).
C.
(2), (1), (3).
D.
(2), (3), (1).
2.
Incremental analysis is the process of identifying the financial data that:
A.
do not change under alternative courses of action.
B.
change under alternative courses of action.
C.
are mixed under alternative courses of action.
D.
No correct answer is given.
3.
It costs a company $14 of variable costs and $6 of fixed costs to produce product A that sells for $30. A foreign buyer offers to purchase 3,000 units at $18 each. If the special offer is accepted and produced with unused capacity, net income will:
A.
decrease $6,000.
B.
increase $6,000.
C.
increase $12,000.
D.
increase $9,000.
4.
In a make-or-buy decision, relevant costs are:
A.
manufacturing costs that will be saved.
B.
the purchase price of the units.
C.
opportunity costs.
D.
all of the above.
5.
The decision rule in a sell-or-process-further decision is: Process further as long as the incremental revenue from such processing exceeds:
A.
incremental processing costs.
B.
variable processing costs.
C.
fixed processing costs.
D.
No correct answer is given.
6.
In a decision to retain or replace equipment, the book value of the old equipment is a(n):
A.
opportunity cost.
B.
sunk cost.
C.
incremental cost.
D.
marginal cost.
7.
If an unprofitable segment is eliminated:
A.
net income will always increase.
B.
variable expenses of the eliminated segment will have to be absorbed by other segments
C.
fixed expenses allocated to the eliminated segment will have to be absorbed by other
segments.
D.
net income will always decrease.
8.
If the contribution margin per unit is $15 and it takes 3.0 machine hours to produce the unit, the contribution margin per unit of limited resource is:
A.
$25.
B.
$5.
C.
$45.
D.
No correct answer is given.
9.
Which of the following is incorrect about the annual rate of return technique?
A.
The calculation is simple.
B.
The accounting terms used are familiar to management.
C.
The timing of the cash inflows is not considered.
D.
The time value of money is considered.
10.
A positive net present value means that the:
A.
project's rate of return is less than the cutoff rate.
B.
project's rate of return exceeds the required rate of return.
C.
project's rate of return equals the required rate of return.
D.
project is unacceptable.
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