1. What has had the most significant impact on account- Information tech- ing practices? 2. What two items of information are revealed on the balance
... [Show More] sheet? Choose 2 answers Ownership ,Debt, Expenses Revenues Costs 3. Which situation should result in revenue recognition on the income statement for the year ending 12/31/14 if the firm is using accrual-basis accounting? -In 2014, a company enters into a contract whereby it agrees to provide services to a customer next year (2015). -In 2014, a company collects cash from a customer for services it will provide next year (2015). -In 2014, a company provides services to a customer for which cash will be collected the next year (2015). nology Ownership and Debt -In 2014, a com- pany provides ser- vices to a cus- tomer for which cash will be col- lected the next year (2015). 4. cost pool collection of costs to be assigned to the cost objects 5. cost driver An activity that af- fects a particular cost is a(n): A factor, such as ma- chine-hours, beds occupied, com- puter time, or flight-hours, that causes overhead costs. 6. Accrual Accounting accounting method that records revenues and expenses when they occur, not necessarily when cash actually changes hands. a company provides services to a customer for which cash will be collected the next year 7. Which term is defined as the residual interest in the net assets of a company? Owner's equity 8. cash flow from financing activities The section of the statement of cash receipts, payments, repay- ing, cash flows from transactions affecting the equi- ty and debt of the business. 9. cash receipts The money that a business collects, e.g., business in- come. It is cash flow from financ- ing activities. 10. Which category on the statement of cash flows sum- marizes cash receipts and payments to owners and creditors of the company? Cash flows from fi- nancing activities 11. cash flows from financing activities cash inflows and outflows cash re- ceipts and pay- ments to owners and creditors. re- lated to external sources of financ- ing (owners and creditors) for the enterprise 12. cash flow from investing activities involves any cash in or out for the purchase of land, equipment, build- ings or of the com- pany due to invest- ment in or dispos- al of fixed assets. 13. equity Residual interest in the assets of an entity that re- mains after de- ducting its liabili- ties. In a business enterprise, the eq- uity is the owner- ship interest. What is left over if all liabilities r paid off 14. Order the steps in the decision cycle from first (1) to last (5). Prepare financial statements 2 Analyze finan- cial statements 3 Gather informa- tion 4 Make decision 5 Implement deci- sion 15. Balance Sheet A financial state- ment that reports assets, liabilities, and owner's equi- ty on a specific date. Assets equal Ownership and debt 16. Owners' equity Which term is de- fined as the resid- ual interest in the net assets of a company? 17. A corporation has total liabilities of $300 million, total owners' equity of $100 million, and current assets of $50 million. What is the value of the firm's long-term assets? 18. On May 1, 2011, a company using accrual accounting purchased equipment costing $500,000. It expects the equipment to have a useful life of five years. At the time of purchase, the company also purchased a one-year insurance policy on this equipment, which cost $6,000. How much insurance expense should the company have recognized for the year ending in 2011? 19. Which situation should result in revenue recognition on the income statement for the year ending 12/31/14 if the firm is using accrual-basis accounting? A. In 2014, a company provides services to a cus- tomer for which cash will be collected the next year (2015). x t 50 = 300 plus 100 x= 350 $4,000 Divide the cost $6,000 by 12 months. count the months May-Dec = 8 months x $6,000 = $4,000. In 2014, a com- pany provides ser- vices to a cus- tomer for which cash will be col- lected the next year (2015). B. In 2014, a company collects cash from a customer for services it provided in the previous year (2013). 20. Decision Cycle Prepare financial statements -Analyze financial statements -Gather informa- tion -Make decision -Implement deci- sion 21. Where would an investor find a summary of a compa- ny's significant accounting policies? 22. price-earnings (PE) ratio In the Notes to Financial State- ments 23. Debt Ratio total liabilities/total assets 24. What does it mean if a company has a debt ratio of 101.5%? - The company has 1.5% more total liabilities than total assets. The company has 1.5% more total liabili- ties than current assets. The company has 1.5% more total liabilities than net income. - The company has 1.5% more to- tal liabilities than total assets. 25. Sarbanes-Oxley Act (SOX) Firms must not provide certain non-audit services to audit clients, such as manage- ment functions or legal services. -Firms must report to and be retained by the audit com- mittee rather than the CFO or oth- er company man- agement. law that requires publicly traded companies to maintain ade- quate systems of internal control 26. Which two requirements must management of pub- lic companies meet under the Sarbanes-Oxley Act? Choose 2 answers They must provide an assessment of the effectiveness of internal controls with each annual report. -They must sup- port a stronger board and audit committee. 27. Sarbanes-Oxley Act (SOX law that re- quires publicly traded companies to maintain ade- quate systems of internal control 28. Which assurance does an external audit report pro- vide for its readers? The company's financial state- ments fairly reflect its financial posi- tion. 29. Cash Flow Adequacy Ratio Cash from oper- ations divided by expenditures for fixed asset addi- tions and acquisi- tions of new busi- nesses. larger high market share/ low growth opportunity 30. Cash Cows (Growth Share Matrix) larger/ smaller is a cash cow high market share over/ low growth opportunity 31. Cash Times Interest Earned Ratio A measure used to indicate a company's inter- est-paying ability; -computed as pre- tax cash before interest and tax divided/ by cash paid for interest. 32. Net Income Statement Revenues - Ex- penses eg. Ordinary gains and losses ,Oper- ating expenses. 33. Multi-Step Income Statement Gross profit and Income from oper- ations. calculates income by grouping cer- tain revenues and expenses togeth- er and calculat- ing several subto- tals of income 34. Which formula yields a cash times interest earned ratio of 11? a. Cash before interest and taxes of $11,000 / cash paid for interest of $1,000 b. Cash before interest and taxes of $11,000 / cash from operations of $1,000 Cash before in- terest and taxes of $11,000 / cash paid for interest of $1,000 35. advertising costs period cost is ex- pensed the month that it is incurred 36. capital stock (stock) is the general term applied to the shares of owner- ship of a corpora- tion. 37. Accounts Receivable The total amount of money owed to a business. an asset 38. In February of year 1, the company provided tech- nology-related services worth $10,000. Customers paid a total of $4,000 in cash for these services and promised to pay the remainder the following month. What will be the total impact of these services pro- vided on the company's balance sheet other than an increase in cash of $4,000? Accounts receivable will increase $6,000. Retained earnings will increase $10,000. Accounts receiv- able will increase $6,000. Retained earnings will in- crease $10,000. 39. retained earnings the amount of net income retained in the corporation, An amount earned by a corporation and not yet distrib- uted to stockhold- ers. stockholders equity 40. Relevant? Information hav- ing to do with the matter at hand 41. Material? Information that is important enough to make a differ- ence 42. Reliable? Information that can be verified 43. Conservatism? Information relat- ed to recognizing losses as they oc- cur 44. Steps in the decision cycle? 1. Prepare finan- cial statements 2. Analyze finan- cial statements 3. gather informa- tion 4. Make decision 5. implement deci- sion 45. Price-earnings ratio? Market value of shares / net in- come 46. What is consistent with a continual decline in gross profit if the firms cost of goods remains the same? 47. What two values affect the measurement of net in- come? Continual de- crease in sales Operating expens- es ordinary gains and losses 48. pro forma financial statements What the future could look like. Statements that show the effects of proposed transac- tions and events as if they had oc- curred. or if occur in the future 49. What was the 2012 net profit amount if the 2013 pro-forma net profit of $187,000 was based on a 22% increase? 50. Which two items subtotals are included in a mul- ti-step income statement? $153,279 x 22per- cent=187,000 Income from oper- ations gross profit 51. When are advertising costs expensed? immediately 52. Which benefit does a corporation gain by following Generally Accepted Accounting Principles (GAAP)? A decrease in its income tax obligations B. A de- crease in the amount of net income it reports C. An increase in its comparability to other companies 53. Which body regulates a certified public accounting firm's audit practices when the firm is auditing a large publicly traded company? The Public Company Accounting Oversight Board (PCAOB) B. The Financial Accounting Standards Board (FASB) 54. PCAOB (Public Company Accounting Oversight Board) An increase in its comparability to other companies The Public Com- pany Accounting Oversight Board (PCAOB) A five-member body created by an act of Con- gress in 2002 to set auditing stan- dards -regulates a cer- tified public ac- counting firm's au- dit practices when the firm is audit- ing a large publicly traded company 55. Which report summarizes cash collections and cash expenditures from operating, investing, and financ- ing activities over a period of time? 56. What is a common category in a statement of cash flows? 57. Which cash flow category would include "cash re- ceived from investors", Payment of Cash Dividends, Repurchase of Treasury Stock , Borrowing long term debt 58. A company's statement of cash flows includes the following cash transactions: Sales 1,250,000 Inventory Purchase -750,000 Prop- erty and Equipment Purchase -270,000 Interest Pay- ment on Long-Term Debt -25,000 Payment of Wages -315,000 Payment of Rent -40,000 Borrowing Long-Term Debt 200,000 Payment of Cash Dividends -15,000 Repurchase of Treasury Stock -40,000 Total Cash Flows -5,000 Assuming the company uses US GAAP standards, what is the total cash flow from financing activities? statement of cash flows cash from Invest- ing, Operating or Financing cash from Financ- ing activities Borrowing Long-Term Debt 200,000 Payment of Cash Dividends -15,000 Repurchase of Treasury Stock -40,000 Total Cash Flows 59. What impact does the sale of equipment or long term assets have on the statement of cash flows? -5,000 =$145,000 Increase in cash from investing ac- tivities 60. Direct cash flow statement Used in the US Begins with cash provided by the sales from which cash paid for oper- ating expenses is deducted to arrive at the net cash flow from operat- ing activities. 61. What is know about the direct and indirect methods of preparing statements of cash flows? 62. What are two common reasons for managers to ma- nipulate reported earnings? 63. What two requirements must accounting firms that audit public companies meet under the Sarbanes-Ox- ley Act? The direct method is more popular among large U.S. companies 1. they are prepar- ing to qualify for a bank loan 2. They are feeling pressured to meet internal sales goals 1. Firms must not provide certain nonaudit services to audit clients, 64. which two requirements must management of public companies meet under the Sarbanes-Oxley Act? 65. Which two actions to internal auditors perform to assist in maintaining the integrity of financial state- ments? 66. What is a significant role of the SEC in financial re- porting? 67. What does management accounting provide? such as manage- ment functions or legal services 2. Firms must re- port to and be re- tained by the audit committee rather than the CFO or other company management. 1. They must sup- port a stronger board and audit company 2. They must pro- vide an assess- ment of the effec- tiveness of inter- nal controls with each annual re- port. 1. They review financial records and internal con- trols. 2. They search for and investigate fraud They ensure that financial state- ment users are provided with re- liable information to use in decision making. 1. The insight that management needs so the busi- ness can perform more effectively. 2. The detailed data that man- agers need to make decisions that will give the business a com- petitive edge 68. Prepaid Insurance asset 69. January 31 The corporation paid $6,000 cash for a one-year insurance policy. The policy period will be- gin on February 1, year 1. What will be the impact of the January 31 event on the company's balance sheet on that date? Cash will decrease $6,000, and paid-in capital will decrease $6,000. B. Prepaid insurance will increase $6,000, and cash will decrease $6,000. 70. Which account is seen on the balance sheet of a manufacturing company but not on the balance sheet of a service-orientated company? Prepaid insur- ance will in- crease $6,000, and cash will de- crease $6,000. Inventory 71. differential cost A future cost that differs be- tween any two al- ternatives. 72. What is a cost that will change in the future based upon the decision made? Differential cost 73. opportunity cost whatever must be given up to obtain some item 74. Which are two examples of period costs? 1. Administrative expenses 2. Selling expens- es 75. Period Costs all costs that are not product costs 76. Period costs are not involved in the production process 77. A company manufactures custom-built wooden bookshelves. Which are two cost the company clas- sify as period costs? 78. What role do ethical standard have in management accounting? 1. Advertising costs 2. Salary cost of the receptionist To guide the res- olution to possi- ble ethical dilem- mas that the man- agerial accountant may encounter. 79. Product Costs direct materials, direct labor, man- ufacturing over- head 80. How is total product costs determined? The sum of all ac- tivities within the factory 81. One situation in which activity based costing would be more appropriate than traditional costing? 82. Which category of ABC activities are machine setup and material movement costs associated with? 83. The director of a marathon race wants to assign the cost of having police officers along the race route to manage crowd control. Which consideration is an appropriate cost driver? 84. 84. A company pro- duces five dif- ferent products. The products are highly differentiat- ed and have sig- nificantly different demand for their use of overhead costs. Bath-level activi- ties a. The amount of hours the director spends on orga- nizing the race b. The amount of the registration fee c. The number of race participants and spectators** d. The cost of lia- bility insurance for the race What are two impacts on costs as sales volume in- creases? 85. A company is experiencing an increase in their bad debt expense. Which change in credit policy would cause this increase? 86. What two items of information are revealed on the balance sheet? 87. What are two costs included when calculating inven- tory costs? 1. Total fixed cost will stay the same 2. Fixed costs per unit will decrease Credit limits were increased for all customers 1. Ownership 2. Debt Overhead direct labor 88. What does accounting focus on? The impact a busi- ness's activities have on its over- all financial perfor- mance 89. Which report summarizes cash Collections and cash Expenditures from Operating, Investing and Financ- ing activities over period of time? 90. Which users would have a primary concern with an organization's ability to provide healthcare benefits? 91. Which benefit does a corporation gain by following Generally Accepted Accounting Principles (GAAP)? 92. Which situation should result in revenue recognition on the income statement for the year ending 12/31/14 if the firm is using accrual-basis accounting? Statement of Cash Flows Employees An increase in Comparability to other companies In 2014, a com- pany provides ser- vices to a cus- tomer for which cash will be col- lected the next year (2015) 93. Accrual Basis Accounting? Revenues are re- ported on in- come statement when earned. Ex- penses matched with related rev- enues and report- ed when expense occurs, NOT when the cash is paid. 94. (PE) Price-earnings ratio? Market value of shares / Net in- come = PE ratio 95. What does it mean if a company has a debt ratio of 101.5%? 96. Which two cash flow adequacy ratios represent a cash cow? 97. Which formula yield a Times Cash Interest Earned Ratio of 11? The company has 1.5% more total Li- abilities than total Assets. Debt ratio = To- tal Liabilities / Total Assets Anything above "1" Cash Flow Ad- equacy Ratio = (cash flow from ops) / longterm debt+fixed as- sets+cash) $6,991/$5,486 = 1.27 CFAR $5220/$1875 = 2.78 CFAR Cash Before In- terest and Taxes of $11,000 / Cash 98. Which form of debt should be reported in the Long-Term Liability category? 99. Jan. 5 corp purchased equipment to be used in busi- ness for $200k cash. What will be impact of the Jan. 5 event on companies balance sheet on that date? 100. Jan. 31 Corp paid $6k cash for one-year insurance policy. Policy begins Feb. 1, year 1. What will be impact of Jan. 31 event on company's balance sheet on that date? 101. Company paid $3k in advertising on Nov. 2011. Which month should advertising costs be expensed? Paid for Interest of $1,000. Formu- la is: Earnings before interest and taxes / Interest expense Notes payable ex- pected to be paid in 18 months (Those that take over one year to pay). Equip will IN- CREASE $200k, and cash will DE- CREASE $200k Prepaid insurance will INCREASE $6k, and cash will DECREASE $6k Nov. 2011. When are adver- tising costs ex- pensed? Immedi- ately. 102. Retained Earnings? Portion of net in- come a corp RE- TAINS rather than distribute to share- holders as divi- dends 103. What was the 2012 net profit amount if 2013 pro-forma net profit of $187k was based on 22% increase? $145,860 $187k X .22 = $41,140 - ($187,000) = $145,860 104. Which item is an investing activity? Cash payments for purchase of plant assets 105. Cash flow from Financing Activities are? Sale of stock Repurchase of company stock Issuance of debt, such as bonds Repayment of debt Payment of divi- dends Donor contribu- tions 106. Examples of financial statement errors? Accountant unin- tentionally records amounts as rev- enue... Accountant dept. miscalculates pay- roll tax due at year end... 107. Which internal control is intended to ensure a com- pany does not mistakenly pay supplier for an in- voice that includes more items than were actually received? 108. How does management accounting differ from finan- cial accounting? The inventory dept. counts and inspects items as received and for- wards the receiv- ing record to ac- counts payable Management ac- counting = used for internal plan- ning, control, and evaluation 109. Cost of Goods Sold? (Beginning Inven- tory + Inventory Purchases) - End Inventory = COGS 110. What two concepts are studied in Cost-Volume Analy- sis? 1. Inventory 2. Profits, and 3. Sales volume 3. Mix of products 4. Resulting profits 5. Fixed and vari- able costs 111. Break Even Point? Sales Revenue - Variable Costs - Fixed Cos [Show Less]