Expert Answers

The copper content of a plating bath is measured four times per day, and the results are reported in parts per million. The table gives the daily sample mean daily sample standard deviation s. Note that E(s) = cσ , where  = 0.92 and σ is the
true standard deviation.

Give the upper control limit (UCL) and lower control limit (LCL) for a 3-sigma control chart.

Is the process in control? (Y/N) If so, explain why. If not, for which day(s) was it out of control?


Multiple Choice Answers

1. Accountants refer to an economic event as a a. purchase. b. sale. c. transaction. d. change in ownership.

2. The use of computers in recording business events a. has made the recording process more efficient. b. does not use the same principles as manual accounting systems. c. has greatly impacted the identification stage of the accounting process. d. is economical only for large businesses.

3. Which of the following is an external user of accounting information? a. Labor unions b. Finance directors c. Company officers d. Managers

4. The origins of accounting are generally attributed to the work of a. Christopher Columbus. b. Abner Doubleday. c. Luca Pacioli. d. Leonardo da Vinci.

5. Generally accepted accounting principles are a. income tax regulations of the Internal Revenue Service. b. standards that indicate how to report economic events. c. theories that are based on physical laws of the universe. d. principles that have been proven correct by academic researchers.

6. Which one of the following is not a part of an account? a. Credit side b. Trial balance c. Debit side d. Title

7. Credits a. decrease both assets and liabilities. b. decrease assets and increase liabilities. c. increase both assets and liabilities. d. increase assets and decrease liabilities.

8. A debit to an asset account indicates a. an error. b. a credit was made to a liability account. c. a decrease in the asset. d. an increase in the asset.

9. The normal balance of any account is the a. left side. b. right side. c. side which increases that account. d. side which decreases that account.

10. The double-entry system requires that each transaction must be recorded a. in at least two different accounts. b. in two sets of books. c. in a journal and in a ledger. d. first as a revenue and then as an expense.

11. An accounting time period that is one year in length, but does not begin on January 1, is referred to as a. a fiscal year. b. an interim period. c. the time period assumption. d. a reporting period.

12. Management usually desires ________ financial statements and the IRS requires all businesses to file _________ tax returns. a. annual, annual b. monthly, annual c. quarterly, monthly d. monthly, monthly

13. Which of the following time periods would not be referred to as an interim period? a. Monthly b. Quarterly c. Semi-annually d. Annually

14. Which of the following are in accordance with generally accepted accounting principles? a. Accrual basis accounting b. Cash basis accounting c. Both accrual basis and cash basis accounting d. Neither accrual basis nor cash basis accounting 1

15. The matching principle states that expenses should be matched with revenues. Another way of stating the principle is to say that a. assets should be matched with liabilities. b. efforts should be matched with accomplishments. c. dividends to stockholders should be matched with stockholders’ investments. d. cash payments should be matched with cash receipts.

16. The information for preparing a trial balance on a worksheet is obtained from a. financial statements. b. general ledger accounts. c. general journal entries. d. business documents.

17. Closing entries are necessary for a. permanent accounts only. b. temporary accounts only. c. both permanent and temporary accounts. d. permanent or real accounts only.

18. A post-closing trial balance will show a. only permanent account balances. b. only temporary account balances. c. zero balances for all accounts. d. the amount of net income (or loss) for the period.

19. The step in the accounting cycle that is performed on a periodic basis (i.e., monthly, quarterly) is a. analyzing transactions. b. journalizing and posting adjusting entries. c. preparing a post-closing trial balance. d. posting to ledger accounts.

20. A current asset is a. the last asset purchased by a business. b. an asset which is currently being used to produce a product or service. c. usually found as a separate classification in the income statement. d. an asset that a company expects to convert to cash or use up within one year.

21. The standards and rules that are recognized as a general guide for financial reporting are called a. generally accepted accounting standards. b. generally accepted accounting principles. c. operating guidelines. d. standards of financial reporting.

22. “Generally accepted” in the phrase generally accepted accounting principles means that the principles a. are proven theories of accounting. b. have substantial authoritative support. c. have been approved by the Internal Revenue Service. d. have been approved for use by the managements of business firms.

23. The conceptual framework developed by the Financial Accounting Standards Board a. was approved by a vote of all accountants. b. are rules that all accountants must follow. c. is viewed as providing a constitution for setting accounting standards for financial reporting. d. is legally binding on all accountants.

24. Accounting principles must be a. proven and tested. b. hypothesized and theorized. c. developed or decreed. d. universally accepted.

25. FASB has had the responsibility for developing accounting principles since the early a. 1900s. b. 1920s. c. 1940s. d. 1970s.

26. Which one of the following is primarily interested in the liquidity of a company? a. Federal government b. Stockholders c. Long-term creditors d. Short-term creditors

27 Which one of the following is not a characteristic generally evaluated in analyzing financial statements? a. Liquidity b. Profitability c. Marketability d. Solvency

28. In analyzing the financial statements of a company, a single item on the financial statements a. should be reported in bold-face type. b. is more meaningful if compared to other financial information. c. is significant only if it is large. d. should be accompanied by a footnote.

29. Short-term creditors are usually most interested in evaluating a. solvency. b. liquidity. c. marketability. d. profitability.

30. Long-term creditors are usually most interested in evaluating a. liquidity and solvency. b. solvency and marketability. c. liquidity and profitability. d. profitability and solvency

Multiple Choice Answers

Which of the following is considered to be a spontaneous source of financing? A. Inventory B. Operating leases C. Accounts receivable D. Accounts payable

Which of the following is NOT considered a permanent source of financing? A. Preferred stock B. Corporate bonds C. Common stock D. Commercial paper

A toy manufacturer following the hedging principle will generally finance seasonal inventory build-up prior to the Christmas season with: A. trade credit. B. common stock. C. selling equipment. D. preferred stock.

For the NPV criteria, a project is acceptable if the NPV is __________, while for the profitability index, a project is acceptable if the profitability index is __________. A. greater than one, greater than zero B. less than zero, greater than the required return C. greater than zero, greater than one D. greater than zero, less than one

Compute the payback period for a project with the following cash flows, if the company’s discount rate is 12%. Initial outlay = $450 Cash flows: Year 1 = $325 Year 2 = $ 65 Year 3 = $100 A. 2.88 years B. 3.43 years C. 3.17 years D. 2.6 years

We compute the profitability index of a capital-budgeting proposal by: A. dividing the present value of the annual after-tax cash flows by the cost of the project. B. multiplying the IRR by the cost of capital. C. dividing the present value of the annual after-tax cash flows by the cost of capital. D. multiplying the cash inflow by the IRR.

Which of the following statements about the MIRR is false? A. The MIRR has the same reinvestment assumption as the NPV. B. The MIRR has the same reinvestment assumption as the IRR. C. If a project’s MIRR exceeds the firm’s discount rate, the project is acceptable. D. A project’s MIRR could be lower than a project’s IRR.

Many firms today continue to use the payback method but employ the NPV or IRR methods as secondary decision methods of control for risk. A. True B. False

You have been asked to analyze a capital investment proposal. The project’s cost is $2,775,000. Cash inflows are projected to be $925,000 in Year 1; $1,000,000 in Year 2; $1,000,000 in Year 3; $1,000,000 in Year 4; and $1,225,000 in Year 5. Assume that your firm discounts capital projects at 15.5%. What is the project’s MIRR? A. 16.73% B. 12.62% C. 10.44% D. 19.99%

ABC Service can purchase a new assembler for $15,052 that will provide an annual net cash flow of $6,000 per year for five years. Calculate the NPV of the assembler if the required rate of return is 12%. (Round your answer to the nearest $1.) A. $6,577 B. $4,568 C. $7,621 D. $1,056

The NPV assumes cash flows are reinvested at the: A. cost of capital. B. NPV. C. real rate of return. D. IRR.

The firm should accept independent projects if: A. the NPV is greater than the discounted payback. B. the profitability index is greater than 1.0. C. the IRR is positive. D. the payback is less than the IRR.

Multiple Choice Answers

Northwest Bank pays a quoted annual (nominal) interest rate of 4.75%. However, it pays interest (compouned) daily using a 365-day year. What is the effective annual rate of return (APY)? A. 4.75% B. 4.86% C. 5.02% D. 3.61%

You have $10,000 to invest. You do not want to take any risk, so you will put the funds in a savings account at the local bank. Of the following choices, which one will produce the largest sum at the end of 22 years? A. An account that compounds interest annually B. An account that compounds interest monthly C. An account that compounds interest daily D. An account that compounds interest quarterly

When George Washington was president of the United States in 1797, his salary was $25,000. If you assume an annual rate of inflation of 2.5%, how much would his salary have been in 1997? A. $1,025,000 B. $3,489,097 C. $954,719 D. $4,085,920 E. $2,525,548

Which of the following is NOT a basic function of a budget? A. Budgets indicate the need for future financing. B. Budgets allow for performance evaluation. C. Budgets provide the basis for corrective action when actual figures differ from the budgeted figures. D. Budgets compare historical costs of the firm with its current cost performance.

Which of the following statements about the percent-of-sales method of financial forecasting is true? A. It is the least commonly used method of financial forecasting. B. It projects all liabilities as a fixed percentage of sales. C. It is a much more precise method of financial forecasting than a cash budget would be. D. It involves estimating the level of an expense, asset, or liability for a future period as a percent of the forecast for sales revenues.

The primary purpose of a cash budget is to: A. determine the level of investment in current and fixed assets. B. determine the estimated income tax for the year. C. determine accounts payable. D. provide a detailed plan of future cash flows.

The break-even model enables the manager of a firm to: A. calculate the minimum price of common stock for certain situations. B. determine the optimal amount of debt financing to use. C. set appropriate equilibrium thresholds. D. determine the quantity of output that must be sold to cover all operating costs.

Which of the following is a non-cash expense? A. Depreciation expenses B. Administrative salaries C. Interest expense D. Packaging costs

A plant can remain operating when sales are depressed: A. if the selling price per unit exceeds the variable cost per unit. B. unless variable costs are zero when production is zero. C. to help the local economy. D. in an effort to cover at least some of the variable cost.

At what rate must $400 be compounded annually for it to grow to $716.40 in 10 years? A. 7% B. 6% C. 5% D. 8%

How long will it take $750 to double at 8% compounded annually? A. 9 years B. 6.5 years C. 48 months D. 12 years

The present value of a single future sum: A. depends upon the number of discount periods. B. increases as the number of discount periods increas. C. is generally larger than the future sum. D. increases as the discount rate increases