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PRE-ASSESSMENT: ACCOUNTING FOR DECISION MAKERS
(PVAC)
Attempt # Status: Not Passed
- What does accounting focus on? YOUR ANSWER
CORRECT ANSWER
The impact a business's activities have on its relationships with customers
The impact a business's activities have on the environment
The impact a business's activities have on its public image
The impact a business's activities have on its overall financial performance
- Which report summarizes cash collections and cash expenditures from operating, investing, and financing activities over a period of time? YOUR ANSWER
CORRECT ANSWER
Cash receipts and disbursements sheet
Cash flow schedule
Summary of cash receipts
Statement of cash flows
- Which users would have a primary concern with an organization’s ability to provide healthcare benefits? YOUR ANSWER
CORRECT ANSWER
Competitors
Employees
Vendors
ANSWER ANSWER
Suppliers
- Which benefit does a corporation gain by following Generally Accepted Accounting Principles (GAAP)? YOUR ANSWER
CORRECT ANSWER
A decrease in its income tax obligations
A decrease in the amount of net income it reports
An increase in its comparability to other companies
An increase in the amount of assets it reports
- Which body regulates a certified public accounting firm’s audit practices when the firm is auditing a large publicly traded company? YOUR ANSWER
CORRECT ANSWER
The Public Company Accounting Oversight Board (PCAOB)
The Financial Accounting Standards Board (FASB)
Another certified public accounting (CPA) firm
The Internal Revenue Service (IRS)
- What has had the most significant impact on accounting practices? YOUR ANSWER
CORRECT ANSWER
Certification requirements
New product innovations
Information technology
Mobile computing
- What two items of information are revealed on the balance sheet?
Choose 2 answers
ANSWER ANSWER
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).
In 2014, a company collects cash from a customer for services it provided in the previous year (2013).
- Which category on the statement of cash flows summarizes cash receipts and payments to owners and creditors of the company? YOUR ANSWER
CORRECT ANSWER
Cash flows from investing activities
Cash flows from operating activities
Cash flows from business activities
Cash flows from financing activities
- Where would an investor find a summary of a company’s significant accounting policies? YOUR ANSWER
CORRECT ANSWER
In the balance sheet
In the income statement
In the statement of cash flows
In the notes to financial statements
- Which assurance does an external audit report provide for its readers? YOUR ANSWER
CORRECT ANSWER
The company will be a good credit risk
The company will generate net income (^) Accessibility Policy Accessibility Settings
ANSWER ANSWER
The company’s financial statements fairly reflect its financial position
The company will generate positive cash flows
- Match each accounting term with its definition.
Answer options may be used more than once or not at all.
YOUR ANSWER
CORRECT ANSWER
Reliable Information that can be verified
Information that can be verified
Relevant Information having to do with the matter at hand
Information having to do with the matter at hand
Material Information related to recognizing losses as they occur
Information that is important enough to make a difference
Conservatism Information that is important enough to make a difference
Information related to recognizing losses as they occur
- Order the steps in the decision cycle from first (1) to last (5).
Select your answers from the pull-down list.
YOUR ANSWER
CORRECT ANSWER
1 Gather information Prepare financial statements
2 Prepare financial statements
Analyze financial statements
3 Analyze financial statements
Gather information
4 Make decision Make decision
ANSWER ANSWER
Continual increase in interest
Continual increase in taxes
Continual decrease in sales
- Which two cash flow adequacy ratios represent a cash cow?
Choose 2 answers
YOUR ANSWER
CORRECT ANSWER
$4,510 / $4,
- Which formula yields a cash times interest earned ratio of 11? YOUR ANSWER
CORRECT ANSWER
Cash before interest and taxes of $11,000 / cash paid for income taxes of $1,
Cash before interest and taxes of $11,000 / cash paid for interest of $1,
Cash before interest and taxes of $11,000 / cash from operations of $1,
Cash before interest and taxes of $11,000 / cash paid for acquisitions of $1,
- Which form of debt should be reported in the long-term liability category? YOUR ANSWER
CORRECT ANSWER
Unearned revenue that will be earned in 9 months
ANSWER ANSWER
Notes payable expected to be paid in 18 months
Accounts payable due in 30 days
Salaries payable due in 2 weeks
- In January of year 1, a company began doing business as a corporation in order to sell technology- related accessories and services. During its first month of operations, the following events occurred:
January 1 The corporation received $1,000,000 in cash in exchange for stock issued to stockholders.
January 3 The corporation borrowed $250,000 from bank. The loan is a four-year loan with an interest rate of 12 percent, payable each year on January 1 beginning in year 2.
January 5 The corporation purchased equipment to be used in the business for $200,000 cash.
January 8 The corporation purchased inventory costing $200,000 by paying $120,000 in cash. The remainder was put on credit accounts with suppliers.
January 15 The corporation hired five employees. Each employee will be paid $1,000 at the end of each month.
January 30 The corporation paid $6,000 cash for a one-year insurance policy. The policy period will begin on February 1, year 1.
What will be the impact of the January 5 event on the company’s balance sheet on that date? YOUR ANSWER
CORRECT ANSWER
Equipment will increase $200,000, and cash will decrease $200,000.
Cash will decrease $200,000, and paid-in-capital will decrease $200,000.
Equipment will increase $200,000, and retained earnings will decrease $200,000.
Cash will decrease $200,000, and loan payable will decrease $200,000.
ANSWER ANSWER
Stockholder contributions
Operating expenses
Ordinary gains and losses
- Which two items’ subtotals are included in a multi-step income statement?
Choose 2 answers
YOUR ANSWER
CORRECT ANSWER
Gross profit
Total assets
Current liabilities
Income from operations
- A furniture company using accrual accounting purchased 20 sofas in November 2011. In December 2011, 8 of the 20 sofas were sold to customers. The customers all signed contracts agreeing to pay half the amount owed in February 2012 and the remaining half in March 2012. At the time of sale, the company was reasonably sure the customers would pay the amount owed.
The furniture company pays its salespeople a commission on each sofa sold, with commissions for December 2011 sales paid in January 2012.
The furniture company paid $3,000 for advertising that ran in the local newspaper in November 2011.
In which month should advertising costs be expensed? YOUR ANSWER
CORRECT ANSWER
February 2012
January 2012
December 2011
November 2011
- 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? YOUR ANSWER
CORRECT ANSWER
$3,
- In January of year 1, a company began doing business as a corporation in order to sell technology- related accessories and services. During its first month of operations, it focused on obtaining the financing needed to start its operations. In February of year 1, the company sold inventory costing $25,000 for $75,000 cash.
In February of year 1, the company provided technology-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 provided on the company’s balance sheet other than an increase in cash of $4,000?
Choose 2 answers
YOUR ANSWER
CORRECT ANSWER
Accounts receivable will increase $6,000.
Retained earnings will increase $10,000.
Retained earnings will decrease $2,000.
Retained earnings will increase $6,000.
Accounts receivable will decrease $6,000.
- What was the 2012 net profit amount if the 2013 pro-forma net profit of $187,000 was based on a 22% increase?
- What impact does the sale of equipment have on the statement of cash flows? YOUR ANSWER
CORRECT ANSWER
Increase in cash from investing activities
Increase in cash from operating activities
Increase in cash from financing activities
Decrease in cash from operating activities
- What is known about the direct and indirect methods of preparing statements of cash flow? YOUR ANSWER
CORRECT ANSWER
The direct method is more popular among large U.S. companies
The indirect method is more popular among large U.S. companies
Both methods have the same popularity among large U.S. companies
Neither method is very popular among large U.S. companies
- A company's statement of cash flows includes the following cash transactions:
Sales 1,250, Inventory Purchase -750, Property and Equipment Purchase -270, Interest Payment on Long-Term Debt -25, Payment of Wages -315, Payment of Rent -40, Borrowing Long-Term Debt 200, Payment of Cash Dividends -15, Repurchase of Treasury Stock -40,
Total Cash Flows -5,
Assuming the company uses US GAAP standards, what is the total cash flow from financing activities?
ANSWER ANSWER
$175,
- Which two examples represent financial statement errors?
Choose 2 answers
YOUR ANSWER
CORRECT ANSWER
An accounting employee overpays a supplier and receives a portion of the excess as a kickback
The accounting department miscalculates the payroll tax due at year-end, resulting in an inaccurate liability
The outside auditor disagrees with the amount reported as an allowance for uncollectible accounts receivable
The accountant unintentionally records amounts as revenue that were prepaid by customers but not yet earned
- Which internal control is intended to ensure that a company does not mistakenly pay a supplier for an invoice that includes more items than were actually received? YOUR ANSWER
CORRECT ANSWER
The purchasing department authorizes the order of all items before they occur.
The company requires two signatures on each check in order for a payment to be sent.
The inventory department counts and inspects items as received and forwards the receiving record to accounts payable.
The accounts payable department utilizes prenumbered checks in the payment of supplier invoices.
ANSWER ANSWER
They must be rotated every five years.
They must authorize any loans to members of the board of directors.
- Which two actions do internal auditors perform to assist in maintaining the integrity of financial statements?
Choose 2 answers
YOUR ANSWER
CORRECT ANSWER
They search for and investigate fraud.
They review financial records and internal controls.
They perform the initial accounting for various transactions.
They issue opinions regarding whether financial statements align with Generally Accepted Accounting Principles (GAAP).
- What is a significant role of the U.S. Securities and Exchange Commission (SEC) in financial reporting? YOUR ANSWER
CORRECT ANSWER
They ensure that financial statement users are provided with reliable information to use in decision making.
They ensure that auditors have the resources and information necessary to provide valuable professional services.
They support company management and boards of directors in the effective discharge of their responsibilities.
They provide representation and training to controllers of public companies.
- What does management accounting provide?
Choose 2 answers
ANSWER ANSWER
The insight that management needs so the business can perform more effectively
The insight that outside stakeholders need to choose a company that has a competitive advantage over competitors
The detailed data that managers need to make decisions that will give the business a competitive edge
The information needed by the IRS to decide if a company should have a tax audit performed
- How does management accounting differ from financial accounting? YOUR ANSWER
CORRECT ANSWER
Management accounting presents an unbiased view of a company’s economic performance.
Management accounting is used primarily for internal planning, control, and evaluation.
Management accounting is restricted to providing financial rather than nonfinancial data.
Management accounting is not used to gain a competitive advantage in the marketplace.
- Which account is seen on the balance sheet of a manufacturing company but not on the balance sheet of a service-oriented company? YOUR ANSWER
CORRECT ANSWER
Equipment
Accounts receivable
Inventory
Cash
- What is a cost that will change in the future based upon the decision made?
ANSWER ANSWER
To prevent all unethical behavior of anyone the management accountant may work with
To provide the management accountant with the ability to know if a person will act ethically or not
To guide the resolution to possible ethical dilemmas that the managerial accountant may encounter
To provide the management accountant with the ability to work with only companies that follow strict ethical principles
- During its first month of operations, a manufacturer incurs the following costs in dollars related to activities within its factory:
Direct materials costs $5, Indirect materials $2, Direct labor $15, Indirect labor $3, Factory rent $10, Depreciation on factory equipment $8,
What are the manufacturer’s total product costs for the month? YOUR ANSWER
CORRECT ANSWER
$20,
- During its first month of operations, a manufacturer incurs the following costs (in dollars) related to activities within its factory:
Direct materials $15, Direct labor $30, Manufacturing overhead $40,
What amount should be reported as cost of goods sold on the income statement if 5,000 units are produced and 4,000 are sold? Accessibility Policy^ Accessibility Settings
ANSWER ANSWER
$56,
- Which two costs are included when calculating inventory costs?
Choose 2 answers
YOUR ANSWER
CORRECT ANSWER
Selling
Direct labor
Overhead
Legal
- In which scenario would activity-based costing be more appropriate than traditional costing? YOUR ANSWER
CORRECT ANSWER
Direct labor and direct materials are the major costs associated with a company's two products. The small overhead cost is closely associated with the products' use of direct labor hours.
A company produces one product line. All of the overhead is, therefore, allocated to that product line.
A company produces several different products. The products have very similar requirements for their production and have minimal variation between them.
A company produces five different products. The products are highly differentiated and have significantly different demands for their use of overhead costs.
- Which category of ABC activities are machine setup and material movement costs associated with?
