Multiple choice

1. The fixed overhead rate is computed as_____. 

 a. budgeted fixed manufacturing overhead / expected volume of production 

 b. actual fixed manufacturing overhead / actual volume of production 

 c. budgeted fixed manufacturing overhead / actual volume of production 

 d. actual fixed manufacturing overhead / expected volume of production 

2.  The _____ discloses the economic resources of the organization and the claims against these resources. 

a. balance sheet 

b. income statement 

c. statement of cash flows 

d. statement of retained earnings 

3.Identify which one of the following statements is false. 

a. Owners’ equity solely represents the profits made by an organization in the current period. 

b. Assets are economic resources that are expected to benefit future cash inflows or reduce future cash outflows. 

c. Liabilities are economic obligations or claims against the assets of an organization by outsiders. 

d. Assets must always equal the sum of liabilities and owners’ equity. 

4. The accrual basis of accounting recognizes the impact of transactions on the financial statements in the period when _____. 

a. revenues are earned and expenses are incurred 

b. cash is received or disbursed 

c. the transaction occurs 

d. the accounting equation is decreased