1.
Current financial reporting standards assume that users of accounting
information:
A) have a reasonably informed knowledge of
business.
B) have only minimal knowledge of business.
C) have an expert’s understanding of economic
and financial events and conditions.
D) have widely differing levels of knowledge
about business, and that financial reporting must meet these differing needs.
2.
Financial statement analysis involves forms of comparison including:
A) comparing changes in the same item over a
number of periods.
B) comparing key relationships within the same
year.
C) comparing key items to industry averages.
D) all of the above.
3.
Select the incorrect statement regarding horizontal analysis.
A) Percentage analysis involves establishing the
relationship of one amount to another.
B) In doing horizontal analysis, an account is
expressed as a percentage of the previous balance of the same account.
C) Percentage analysis attempts to eliminate the
materiality problem of comparing firms of different sizes.
D) A
horizontal analysis of cost of goods sold on the income statement would involve
dividing cost of goods sold by total sales revenue.
4.
Select the incorrect statement regarding ratio analysis.
A) Ratio analysis is a specific form of
horizontal analysis.
B) Ratio analysis involves making comparisons
between different accounts in the same set of financial statements.
C)
There are many different ratios available for evaluating a firm’s performance.
D)
Some ratios involve an account from the balance sheet and one from the income
statement.
5.
All of the following are considered to be measures of a company’s short-term
debt-paying ability except:
A)
the current ratio.
B) inventory
turnover.
C) earnings per share.
D)
the average number of days to collect receivables.
6.
Otteman Company reported net income of $16,700 on gross sales of $80,000. The
company has average total assets of $115,200, of which $100,000 is property,
plant and equipment. What is the company’s return on investment?
A)
69.4%
B) 18.0%
C) 14.5%
D)
12.5%
7. The
return on investment measure is also referred to as:
A) net margin.
B) return on equity.
C) return on assets.
D) return on debt.
8.
Sliefert Company provided the following information from its financial records:
|
Net |
$200,000 |
Total |
$800,000 |
|
Preferred |
$10,000 |
Common |
120,000 |
|
Preferred |
$150,000 |
What
is the company’s book value per share?
A)
$1.67
B)$6.67
C)
$5.42
D)$1.58
9.
Which of the following is a potential limitation of financial statement
analysis?
A) Lack of comparability of firms in different
industries
B)
The impact of changing economic conditions
C)
The impact of having more than one acceptable alternative accounting principle
for accounting for a given transaction or economic event
D)
All of the above
10.
You are considering an investment in Ingram Company stock and wish to assess
the company’s position in the stock market. All of the following ratios can be
used for this purpose except:
A)
current ratio.
B) earnings per share.
C)
dividend yield.
D)
price-earnings ratio.
11.
Choose the answer that is not a distinguishing characteristic of financial
accounting information.
A) It is global information that reflects the
performance of the whole company.
B) Its time horizon is the present and future.
C)
It is more concerned with financial data than physical or economic data.
D) It is more highly regulated than managerial
accounting information.
12.
Which of the following most exemplifies the value-added principle?
A)
An ongoing process where continuous improvement is the goal
B) A
competitive management program that emphasizes quality
C)
Information gathering and reporting activities that are restricted to those
activities that add value in excess of their cost
D)
Managerial accounting information is measured in economic, physical, and
financial terms
13.
For a manufacturing company, product costs include all of the following except:
A)
direct material costs.
B)
direct labor costs.
C)
research and development costs.
D) overhead costs.
14.
Which of the following should not be recorded as an expense?
A) Paid office salaries
B)
Paid factory maintenance costs
C)
Paid product advertising costs
D) Paid sales commissions
15.
During its first year of operations, Martin Company paid $4,000 for direct
materials and $8,500 for production workers’ wages. Lease payments and
utilities on the production facilities amounted to $7,500 while general,
selling, and administrative expenses totaled $3,000. The company produced 5,000
units and sold 4,000 units at a price of $7.50 a unit. What is the amount of
gross margin for the first year?
A)
$20,000
B)
$12,000
C)
$7,500
D) $14,000
16.
Costs such as transportation-out, sales commissions, uncollectible accounts
receivable, and packaging are sometimes called:
A) upstream costs.
B) indirect costs.
C)
direct costs.
D)
downstream costs.
17.
Howard Lumber Company mistakenly classified as an expense a product cost that
totaled $20,000. The company produced 2,000 units of product and sold 1,000 of
them during the year. Management is paid a bonus equal to 2%of net
income. In the year in which the mistake was made:
A)
product costs were overstated.
B) management bonuses were overstated.
C)
the company’s income statement portrayed a more favorable position than
actually existed.
D)
the company’s net income was understated.
18.
Which of following practices is considered an effective means of re-engineering
business systems?
A) Identifying the best practices used by
world-class competitors
B)
Improving the accuracy of cost allocations
C)
Eliminating non-value added activities
D)
All of the above
19.
As a Certified Management Accountant, Zandra is bound by the standards of
ethical conduct issued by the Institute of Management Accountants. During the
course of business, Zandra learned that her company has decided to discontinue
a major product line. If she mentions this fact to her brother, who is a
stockbroker, Zandra could be in violation of the:
A)
competence standard.
B)
confidentiality standard.
C)
integrity standard.
D)
objectivity standard.
20.
Which of the following is not one of the four Standards of Ethical Conduct for
Management Accountants?
A)
competence
B)
confidentiality
C)
integrity
D) education
