ACCOUNTING

 Question Completion Status:

  Question 1

1 points  

Save  

The tendency of the rate earned on stockholders' equity to vary disproportionately from the rate earned on total assets is sometimes referred to as

  Question 2

1 points  

Save  

The independent auditor's report does which of the following?

  Question 3

1 points  

Save  

The relationship of 120 to 100 can be expressed as 1.2, 1.2:1, or 120%.

  Question 4

1 points  

Save  

The terms acid-test ratio and quick ratio refer to the same ratio--the instant debt-paying ability of a company.

  Question 5

1 points  

Save  

The percentage analysis of increases and decreases in corresponding items in comparative financial statements is referred to as vertical analysis.

  Question 6

1 points  

Save  

The relationship of each asset item as a percent of total assets is an example of horizontal analysis.

  Question 7

1 points  

Save  

A balance sheet shows cash, $75,000; marketable securities, $110,000; receivables, $90,000; and $225,000 of inventories. Current liabilities are $200,000. The current ratio is 1.375 to 1.

  Question 8

1 points  

Save  

What type of analysis is indicated by the following?

  Question 9

1 points  

Save  

Current position analysis indicates a company's ability to liquidate current liabilities.

  Question 10

1 points  

Save  

Which of the following is NOT included in the computation of the quick ratio?

  Question 11

1 points  

Save  

Based on the following data for the current year, what is the number of days' sales in inventory (rounded to the nearest whole day)?

  Question 12

1 points  

Save  

Based on the following data for the current year, what is the inventory turnover?

  Question 13

1 points  

Save  

Thomson Company reported the following on its income statement:

An analysis of the income statement revealed that interest expense was $40,000. Thomson Company's number of times interest charges are earned was

  Question 14

1 points  

Save  

The rate earned on total assets is one of the measures of profitability.

  Question 15

1 points  

Save  

Solvency analysis focuses on the ability of a business to make a profit.

  Question 16

1 points  

Save  

An increase in the ratio of stockholders' equity to liabilities indicates an improvement in the margin of safety for creditors.

  Question 17

1 points  

Save  

Based on the following data for the current year, what is the inventory turnover?

  Question 18

1 points  

Save  

Which of the following is NOT an analysis used in assessing solvency?

  Question 19

1 points  

Save  

The effects of differences in accounting methods are of little importance when analyzing comparable data from competing businesses.

  Question 20

1 points  

Save  

Based on the following data, what is the quick ratio, rounded to one decimal place?

  Question 21

1 points  

Save  

Balance sheet and income statement data indicate the following:

Based on the data presented above, what is the number of times interest charges were earned (rounded to one decimal place)?

  Question 22

1 points  

Save  

If a firm has an quick ratio of 1, the subsequent payment of an account payable will cause the ratio to increase.

  Question 23

1 points  

Save  

Profitability refers to the ability of the business to

  Question 24

1 points  

Save  

For most profitable companies, the rate earned on total assets will be less than

  Question 25

1 points  

Save  

Statements in which all items are expressed in relative terms are called common-size statements.

  Question 26

1 points  

Save  

The purpose of an audit is to

  Question 27

1 points  

Save  

The number of times interest charges are earned is computed as

  Question 28

1 points  

Save  

“Working capital” is another term for the current ratio.

  Question 29

1 points  

Save  

The percent of fixed assets to total assets is an example of

  Question 30

1 points  

Save  

If the accounts receivable turnover for the current year has decreased when compared with the ratio for the preceding year, there has been an acceleration in the collection of receivables.

  Question 31

1 points  

Save  

An acceleration in the collection of receivables will tend to cause the accounts receivable turnover to

  Question 32

1 points  

Save  

The percentage analysis of increases and decreases in corresponding items in comparative financial statements is referred to as horizontal analysis.

  Question 33

1 points  

Save  

The comparison of the financial data of a single company for two or more years is called horizontal analysis.

  Question 34

1 points  

Save  

Which of the following conditions would cause the break-even point to decrease?

  Question 35

1 points  

Save  

Assume that Crowson Co. sold 8,000 units of Product A and 2,000 units of Product B during the past year. The unit contribution margins for Products A and B are $20 and $45, respectively. Crowson has fixed costs of $350,000. The break-even point in units is

  Question 36

1 points  

Save  

Snower Corporation sells product G for $150 per unit, the variable cost per unit is $105, the fixed costs are $720,000, and Snower is in the 25% corporate tax bracket. What are the sales (in dollars) required to earn a net income (after tax) of $40,000?

  Question 37

1 points  

Save  

If the contribution margin ratio for Harrison Company is 38%, sales were $425,000. and fixed costs were $100,000, what was the income from operations?

  Question 38

1 points  

Save  

If sales total $2,000,000, fixed costs total $800,000, and variable costs are 60% of sales, the contribution margin ratio is 40%.

  Question 39

1 points  

Save  

If variable costs per unit increased because of an increase in hourly wage rates, the break-even point would

  Question 40

1 points  

Save  

Cost-volume-profit analysis CANNOT be used if which of the following occurs?

  Question 41

1 points  

Save  

If fixed costs are $220,000 and the unit contribution margin is $25, the sales necessary to earn an operating income of $30,000 are 10,000 units.

  Question 42

1 points  

Save  

If the property tax rates are increased, this change in fixed costs will result in an increase in the break-even point.

  Question 43

1 points  

Save  

As production increases, what should happen to the variable costs per unit?

  Question 44

1 points  

Save  

Which of the following graphs illustrates the nature of a mixed cost?

  Question 45

1 points  

Save  

Kennedy Co. sells two products, Arks and Bins. Last year, Kennedy sold 32,000 units of Arks and 18,000 units of Bins. Related data are:

Assuming that last year's fixed costs totaled $910,000, what was Kennedy Co.'s break-even point in units?

  Question 46

1 points  

Save  

Costs that vary in total in direct proportion to changes in an activity level are called

  Question 47

1 points  

Save  

DeGiaimo Co. has an operating leverage of 5. If next year's sales are expected to increase by 10%, then the company's operating income will increase by 50%.

  Question 48

1 points  

Save  

The point where the sales line and the total costs line intersect on the cost-volume-profit chart represents

  Question 49

1 points  

Save  

Total variable costs change as the level of activity changes.

  Question 50

1 points  

Save  

If a business had sales of $4,000,000, fixed costs of $1,200,000, a margin of safety of 25%, and a contribution margin ratio of 40%, what was the break-even point?

  Question 51

1 points  

Save  

If fixed costs are $450,000 and the unit contribution margin is $50, the sales necessary to earn an operating income of $30,000 are 14,000 units.

  Question 52

1 points  

Save  

Winston Co. manufactures office furniture. During the most productive month of the year, 3,500 desks were manufactured at a total cost of $84,400. In its slowest month, the company made 1,100 desks at a cost of $46,000. Using the high-low method of cost estimation, total fixed costs are

  Question 53

1 points  

Save  

The relevant range is useful for analyzing cost behavior for management decision-making purposes.

  Question 54

1 points  

Save  

If fixed costs are $600,000 and the unit contribution margin is $12, what amount of units must be sold in order to realize an operating income of $100,000?

  Question 55

1 points  

Save  

If sales are $300,000, variable costs are 60% of sales, and operating income is $40,000, what is the operating leverage?

  Question 56

1 points  

Save  

Direct materials cost that varies with the number of units produced is an example of a fixed cost of production.

  Question 57

1 points  

Save  

Cost behavior refers to the methods used to estimate costs for use in managerial decision making.

  Question 58

1 points  

Save  

Total fixed costs remain constant as the level of activity changes.

  Question 59

1 points  

Save  

Kennedy Co. sells two products, Arks and Bins. Last year, Kennedy sold 32,000 units of Arks and 18,000 units of Bins. Related data are:

What was Kennedy Co.'s sales mix last year?

  Question 60

1 points  

Save  

If fixed costs are $350,000, the unit selling price is $75, and the unit variable costs are $30, what is the break-even sales (in units)?

  Question 61

1 points  

Save  

Which of the following graphs illustrates the behavior of a total fixed cost?

  Question 62

1 points  

Save  

Given the following cost and activity observations for Merritt Company’s utilities, use the high-low method to calculate Merritt’s fixed costs per month.

  Question 63

1 points  

Save  

The dollars available from each unit of sales to cover fixed cost and profit is the contribution margin per unit.

  Question 64

1 points  

Save  

A firm operated at 90% of capacity for the past year during which fixed costs were $320,000, variable costs were 60% of sales, and sales were $1,200,000. Operating profit was

  Question 65

1 points  

Save  

The difference between the current sales revenue and the sales at the break-even point is called the

  Question 66

1 points  

Save  

Which of the following costs is a mixed cost?

  Question 67

1 points  

Save  

If the minimum acceptable rate of return for investments exceeds the average rate of return on an asset, the asset should be purchased.

  Question 68

1 points  

Save  

Average rate of return equals estimated average annual income divided by average investment.

  Question 69

1 points  

Save  

If a proposed expenditure of $80,000 for a fixed asset with a 4-year life has an annual expected net cash flow and net income of $32,000 and $12,000, respectively, the cash payback period is 2.5 years.

  Question 70

1 points  

Save  

The methods of evaluating capital investment proposals can be grouped into two general categories that can be referred to as (1) methods that ignore present value and (2) present values methods.

  Question 71

1 points  

Save  

The anticipated purchase of a fixed asset for $400,000, with a useful life of 5 years and a $40,000 residual value, is expected to yield total net income of $200,000 for the 5 years. The expected average rate of return on investment is 18.2%.

  Question 72

1 points  

Save  

In net present value analysis for a proposed capital investment, the expected future net cash flows are reduced to their present values.

  Question 73

1 points  

Save  

One issue to consider when investing in assets in foreign countries is

  Question 74

1 points  

Save  

The excess of the cash flowing in from revenues over the cash flowing out for expenses is termed net cash flow.

  Question 75

1 points  

Save  

The process by which management plans, evaluates, and controls long-term investment decisions involving fixed assets is called

  Question 76

1 points  

Save  

Which of the following provisions of the Internal Revenue Code can be used to reduce the amount of the income tax expense arising from capital investment projects?

  Question 77

1 points  

Save  

Qualitative considerations are best evaluated using present value methods such as internal rate of return.

  Question 78

1 points  

Save  

In general, present value methods of analyzing capital investments are more desirable than methods ignoring present value because

  Question 79

1 points  

Save  

The anticipated purchase of a fixed asset for $400,000, with a useful life of 5 years and no residual value, is expected to yield total net income of $200,000 for the 5 years. The expected average rate of return on investment is 20%.

  Question 80

1 points  

Save  

An analysis of a proposal by the net present value method indicated that the present value exceeded the amount to be invested. Which of the following statements best describes the results of this analysis?

  Question 81

1 points  

Save  

The rate of earnings is 10% and the cash to be received in two years is $10,000. Determine the present value amount, using the following partial table of present value of $1 at compound interest.

  Question 82

1 points  

Save  

Mars Corp. is choosing between two different capital investment proposals. Machine A has a useful life of 4 years, and Machine B has a useful life of 6 years. Each proposal requires an initial investment of $200,000, and the company desires a rate of return of 10%. Although Machine B has a useful life of 6 years, it could be sold at the end of 4 years for $35,000.

Machine A will generate net cash flow of $70,000 in each of the four years. Machine B will generate $80,000 in year 1, $70,000 in year 2, $60,000 in year 3, and $40,000 per year for the remaining 3 years of its useful life. Which of the following statements portrays the most accurate analysis between the two proposals?

  Question 83

1 points  

Save  

The management of Hence Corporation is considering the purchase of a new machine costing $200,000. The company's desired rate of return is 10%. The present value factors for $1 at compound interest of 10% for 1 through 5 years are 0.909, 0.826, 0.751, 0.683, and 0.621, respectively. In addition to the foregoing information, use the following data in determining the acceptability in this situation:

The cash payback period for this investment is

  Question 84

1 points  

Save  

Crane Company is considering the acquisition of a machine that costs $60,000. The machine is expected to have a useful life of 5 years, a negligible residual value, an annual cash flow of $15,000, and annual operating income of $15,000. What is the estimated cash payback period for the machine?

  Question 85

1 points  

Save  

The present value index is computed using which of the following formulas?

  Question 86

1 points  

Save  

Capital rationing is the process by which management allocates funds among competing capital investment proposals.

  Question 87

1 points  

Save  

Average rate of return equals average investment divided by estimated average annual income.

  Question 88

1 points  

Save  

When evaluating a proposal by use of the net present value method, if there is an excess of the present value of future cash inflows over the amount to be invested, the rate of return on the proposal exceeds the rate used in the analysis.

  Question 89

1 points  

Save  

When evaluating a proposal by use of the net present value method, if there is an excess of present value over the amount to be invested, the rate of return on the proposal is more than the rate used in the analysis.

  Question 90

1 points  

Save  

Which of the following are present value methods of analyzing capital investment proposals?

  Question 91

1 points  

Save  

The process by which management allocates available investment funds among competing capital investment proposals is termed present value analysis.

  Question 92

1 points  

Save  

All of the following qualitative considerations may impact upon capital investments analysis EXCEPT

  Question 93

1 points  

Save  

The rate of earnings is 6%, and the cash to be received in one year is $10,000. Determine the present value amount, using the following partial table of present value of $1 at compound interest.

  Question 94

1 points  

Save  

The management of London Corporation is considering the purchase of a new machine costing $750,000. The company's desired rate of return is 6%. The present value factor for an annuity of $1 at interest of 6% for 5 years is 4.212. In addition to the this information, use the following data in determining the acceptability in this situation:

The present value index for this investment is

  Question 95

1 points  

Save  

The methods of evaluating capital investment proposals can be grouped into two general categories that can be referred to as (1) average rate of return and (2) cash payback methods.