Multiple Choice Answers

1) The standards and rules that are recognized as a general guide for financial reporting are called __________. A. standards of financial reporting B. generally accepted accounting principles C. operating guidelines D. generally accepted accounting standards

2) Sam’s Used Cars uses the specific identification method of costing inventory. During March, Sam purchased three cars for $6,000, $7,500, and $9,750, respectively. During March, two cars are sold for $9,000 each. Sam determines that at March 31, the $9,750 car is still on hand. What is Sam’s gross profit for March? A. $8,250 B. $4,500 C. $750 D. $5,250  ((9,000X2) – (6,000+7,500))

3) Which one of the following items is not generally used in preparing a statement of cash flows? A. Additional information B. Comparative balance sheets C. Current income statement D. Adjusted trial balance

4) The cost principle requires that when assets are acquired, they be recorded at __________. A. list price B. exchange price paid C. selling price D. appraisal value

5) What is the preparation of reports for each level of responsibility in the company’s organization chart called? A. Master budgeting analysis B. Responsibility reporting C. Exception reporting D. Static reporting

6) The cost principle is the basis for preparing financial statements because it is __________. A. the most accurate measure of purchasing power B. an international accounting standard C. relevant and objectively measured, and verifiable D. a conservative value

7) Which list below best describes the major services performed by public accountants? A. Cost accounting, production scheduling, recruiting B. Auditing, taxation, management consulting C. Employee training, auditing, bookkeeping D. Bookkeeping, mergers, budgets

8) A well-designed activity-based costing system starts with __________. A. analyzing the activities performed to manufacture a product B. assigning manufacturing overhead costs for each activity cost pool to products C. computing the activity-based overhead rate D. identifying the activity-cost pools

9) The income statement and balance sheet columns of Pine Company’s worksheet reflects the following totals: Income Statement Balance Sheet Dr. Cr. Dr. Cr. Totals $58,000 $48,000 $34,000 $44,000 Closing entries are necessary for __________. A. permanent or real accounts only B. both permanent and temporary accounts C. temporary accounts only D. permanent accounts only

10) What exists when budgeted costs exceed actual results? A. An excess profit B. An unfavorable difference C. A favorable difference D. A budgeting error

11) Multinational corporations __________. A. are U.S. companies that trade their securities on the exchanges in other countries B. are firms that conduct their operations in more than one country through subsidiaries, divisions, or branches in foreign countries C. are U.S. companies that sell goods and services in other countries D. are required to use international accounting standards

12) The major reporting standard for management accounts is __________. A. generally accepted accounting principles B. relevance to decisions C. the Sarbanes-Oxley Act of 2002 D. the Standards of Ethical Conduct for Practitioners of Management Accounting and Financial Management

13) The primary purpose of the statement of cash flows is to __________. A. facilitate banking relationships B. provide information about the investing and financing activities during a period C. prove that revenues exceed expenses if there is a net income D. provide information about the cash receipts and cash payments during a period

14) As Plant Controller, you are trying to determine which costs over which you have the most control on a day to day basis. Your goal is to achieve better profitability. The Plant Operations Manager suggests that overhead is the easiest area to directly reduce costs. Which of the following items would be classified as manufacturing overhead? A. The western division’s vice president’s salary B. Factory janitor C. General corporate liability insurance D. Cost of landscaping the corporate office