ABC
Company owes XYZ Enterprises $1 million for goods purchased from XYZ over a
year ago. XYZ Enterprises continues to list the $1 million in their accounts
receivable balance and does not record any allowance for doubtful accounts. XYZ
Enterprises is failing to follow
·
Financial Accounting
Standards Board FAS 157
·
SFAS 169
·
Financial Accounting Standards Board Statement No. 5
·
SFAS 101
2
The
bankruptcy of WorldCom in 2002 was due to the company’s actions in
·
recording fictitious
liabilities
·
failing to record revenues
·
classifying expenses as
assets
·
expensing equipment purchases rather than capitalizing
these purchases
3
The
price elasticity of demand coefficient measures
·
buyer responsiveness to price changes
·
the slope of the demand
curve
·
how far business executives
can stretch their fixed costs
·
the extent to which a
demand curve shifts as incomes change
4
Which
of the following is a fundamental characteristic of the market system?
·
Government-set wages and
prices
·
Property rights
·
Central planning by
government
·
Unselfish behavior
5
In
2002, Adelphia Cable filed bankruptcy when it was discovered that
·
bank debt in excess of $2.3 billion was not shown on the
financial statements
·
sales in excess of $72
billion were omitted from the financial statements
·
excess fictitious expenses
of $1 million were added to the income statement
·
assets on the financial
statements were considerably undervalued
6
When
applying for a bank loan or trade credit, one way a company can appear to be in
a healthier financial position would be to
·
overstate its expenses
·
undervalue its assets
·
understate its sales
·
understate its liabilities
7
A
normative statement is one that
·
applies to macroeconomics
·
is based on value judgments
·
applies only to
microeconomics
·
is based on the law of
averages
8
Section
55 of the Principles of Professional Conduct of the AICPA states that
·
members should perform all
professional responsibilities with the highest sense of integrity
·
a member should observe the
profession’s technical and ethical standards, strive continually to improve
competence and quality of services, and discharge professional responsibility
to the best of the member’s ability
·
members should accept the
obligation to act in a way that will serve the public interest, honor the
public trust, and demonstrate commitment to professionalism
·
a member should maintain objectivity and be free of
conflicts of interest in discharging professional responsibilities
9
Four
professional general standards and responsibilities for Certified Public
Accountants are quality control and assurance, professional judgment,
competence, and:
·
knowledge
·
diligence
·
integrity
·
independence
10
When
budgets are used to measure performance, there is a danger that budgetary slack
may occur. This happens when
·
sales budgets are set too low and cost budgets are
set too high
·
sales budgets are set too
high and cost budgets are set too high
·
sales budgets are set too
high and cost budgets are set too low
·
sales budgets are set too
low and cost budgets are set too low
11
Failure
to provide any care in fulfilling a duty owed to another is called
·
gross negligence
·
constructive fraud
·
breach of contract
·
negligence
12
Assuming
an economy has fixed quantities of resources, that economy
·
is able to satisfy all
consumer wants
·
will produce the same
output whether or not resources are used efficiently
·
is more efficient, the larger the amount of goods and
services it produces
·
is able to produce the same
amount of output regardless of the production technologies it chooses
13
When
revenue is recognized and shipment has not been made and the criteria for
recognizing revenue on bill-and-hold transactions set out in SEC Staff
Accounting Bulletin No. 101 have not been met, this is known as
·
premature revenue recognition
·
postrevenue recognition
·
timely revenue recognition
·
conservative revenue
recognition
14
According
to the Agency Theory, in a corporation there are two types of information
consumers known as
·
agents and principals
·
customers and agents
·
principals and vendors
·
vendors and customers
15
The
EU Privacy Directive presents problems for the United States in that
·
several layers of approval
are necessary before any data may be transferred to a non-EU entity
·
data may not be transferred to a non-EU entity unless
guarantees are provided that equal security measures are in place
·
high transfer charges are
required to be paid by the recipient in the currency of the country
transferring the data
·
transferred data may not be
translated into another language
16
Tom
Donaldson and Tom Dunfee are proponents of ethical guidelines related to
technology that are based on differentiating hypernorms from nonhypernorms.
This theory is known as
·
Transparent Ethical Dilemma
Theory
·
Electronic Communications
Privacy Theory
·
Integrative Social Contracts Theory
·
Social Contract Network
Theory
17
If
a conflict of interest arises prior to entering into a business contract, the
parties should
·
commence a cooling-off
period until the conflict is removed
·
determine the type of
conflict and if disclosure of the conflict of interest is sufficient to proceed
with the contract
·
stop negotiations immediately and contact a mediator to
negotiate the terms of the contract
·
cease and desist because
all conflicts of interest are irreconcilable
18
When
evaluating the performance of managers in investment centers, performance
metrics should be based on
·
revenue and costs under
their control
·
only costs under their
control
·
revenues, costs, and investments under their control
·
only investments under
their control
19
Agency
costs arise when agents fail to act in the best interests of the principals.
One example of losses from poor decisions would be
·
increasing the scope of the audit of the financial
statements
·
investing additional funds
in profitable projects
·
prioritizing projects,
according to the best interests of the corporation
·
purchasing inferior
material to earn yearly bonus
20
If
the price of normal good X rises, the income
·
effect will induce the
consumer to buy more of X and the substitution effect will induce him to buy
less
·
and substitution effects
will both induce the consumer to buy less of X
·
and substitution effects will both induce the consumer to
buy more of X
·
effect will induce the
consumer to buy less of X and the substitution will induce him to buy more
21
Suppose
that as the price of Y falls from $2.00 to $1.90 the quantity of Y demanded
increases from 110 to 118. Then, the price elasticity of demand is
·
3.94
·
1.37
·
4.00
·
2.09
22
Many
conflicts of interest in business contracts can be remedied ethically by which
of the following?
·
Camouflage and consent
·
Deception and disclosure
·
Conflicts of interest can
never be remedied ethically
·
Disclosure and consent
23
The
pursuit of self-interest
·
means the same as
selfishness
·
is highly detrimental to
the market system
·
gives direction to the market system
·
is reflected in the
behavior of firms, but not in the behavior of consumers
24
The
concept of economic efficiency is primarily concerned with
·
the limited wants-unlimited
resources dilemma
·
obtaining the maximum output from available
resources
·
the conservation of
irreplaceable natural resources
·
considerations of equity in
the distribution of wealth
25
Other
things equal, an excise tax on a product will
·
increase its supply
·
increase the quantity sold
·
increase its price
·
increase its demand
26
When
the economist says that economic wants are insatiable, this means that
·
these wants are virtually unlimited and therefore
incapable of complete satisfaction
·
economic resources are
valuable only because they can be used to produce consumer goods
·
the structure of consumer
demand varies from time to time and from country to country
·
economic resources—land,
labor, capital, and entrepreneurial ability—are scarce
27
The
income effect indicates that
·
when the price of a product
falls, the lower price will induce the consumer to buy more of that product now
that it is relatively cheaper
·
when the price of a product falls, a consumer will be
able to buy more of it with a specific income
·
consumers should substitute
among various products until the marginal utility from the last unit of each
product purchased is the same
·
a rise in money income will
cause consumers to buy smaller quantities of normal goods
28
In
2003, FASB and IASB met and established four criteria for establishing revenue
recognition. To recognize revenue, which of the following conditions must be
present?
·
Payment for the sale must
be received prior to recognizing the revenue.
·
A promise to deliver has
been established.
·
A change in assets has occurred and can be appropriately
measured.
·
The product or deliverable,
in the case of a service business, has been received by the customer.
29
Productive
efficiency refers to
·
the production of the
product-mix most wanted by society
·
the full employment of all
available resources
·
production at some point
inside of the production possibilities curve
·
the use of the least-cost method of production
30
Which
of the following is a normative statement?
·
It will cool off later this
evening.
·
The humidity is high today.
·
It is too hot to play tennis today.
·
The temperature is high
today.
