Question 1

Dylan is a supervisory manager in the production department of a tea manufacturing company. Each year, he actively participates in the budgeting process of the company. His input is valued by the top management as he is able to identify the issues in his department. In this scenario, it can be said that Dylan's company follows the _____ to budgeting.

Accepted Answer

A)  top-down approach
B)  incremental approach
C)  bottom-up approach
D)  zero-based approach

Question 2

The three kinds of basic financial statements that are prepared in financial accounting are:

Accepted Answer

A)  statement of debts, letter of credit, and articles of incorporation.
B)  comfort letter, master budget, and credit statement.
C)  balance sheet, income statement, and statement of cash flows.
D)  pro forma report, request for proposal, and articles of incorporation.

Question 3

Fiona, the external auditor reviewing a telecommunications company's accounts, finds that the company's internal accountants have entered false data in the company records. Instead of stating the actual figures, which would reveal the poor performance of the company, the accountants have overstated the company's earnings. In this case, she will most likely offer a(n)  _____ in the independent auditor's report.

Accepted Answer

A)  qualified opinion
B)  unqualified opinion
C)  adverse opinion
D)  concurring opinion

Question 4

Daryl is an accountant in Vansert Inc., a multinational healthcare company. He is responsible for providing analysis, preparing financial statements, and reporting the financial transactions of the company to the deputy chairman of the company. In this scenario, Daryl is most likely a _____.

Accepted Answer

A)  forensic accountant
B)  government accountant
C)  public accountant
D)  management accountant

Question 5

Harold, a financial accountant at an automobile company, is asked to calculate the net income of the company for a given period. He deducts the cost of goods sold from the revenue earned during that period. Before deducting the company's operating expenses from the gross profit, he deducts the rent and the insurance premium paid by the company during that period. In the given scenario, Harold deducted the company's _____ from the company's operating expenses.

Accepted Answer

A)  testamentary expenses
B)  selling expenses
C)  administrative expenses
D)  accrued expenses

Question 6

In the context of budget preparation, the master budget of a firm organizes the _____ into a unified whole.

Accepted Answer

A)  static budget and the cash flow budget
B)  static budget and the financial budget
C)  cash flow budget and the operating budget
D)  financial budget and the operating budget

Question 7

A famous musician sells the copyright of one of his songs to a record company for $2 million. In this scenario, the sale of the copyright of the song exemplifies the sale of a(n)  _____.

Accepted Answer

A)  current liability
B)  operating liability
C)  tangible asset
D)  intangible asset

Question 8

In the context of budgeting, a flexible budget:

Accepted Answer

A)  is based on a single assumed level of sales.
B)  is designed to show the appropriate budgeted level of costs for each different level of sales.
C)  is the budget that is prepared before a static budget.
D)  cannot be used by companies for evaluation and comparisons involving real-world sales situations.

Question 9

In the context of balance sheets, the accounting equation tells us that the value of a firm's assets must be:

Accepted Answer

A)  greater than the amount of financing provided by owners plus the amount provided by creditors to purchase those assets.
B)  equal to the amount of financing provided by owners plus the amount provided by creditors to purchase those assets.
C)  negligible when compared to the amount of financing provided by owners plus the amount provided by creditors to purchase those assets.
D)  less than the amount of financing provided by owners plus the amount provided by creditors to purchase those assets.

Question 10

In the context of budget preparation, which of the following is an advantage of using bottom-up budgeting?

Accepted Answer

A)  It is less time consuming than the top-down approach.
B)  It eliminates the possibility of budgetary slack.
C)  Middle managers are likely to be highly motivated to achieve budgetary goals.
D)  Supervisory managers are likely to know the long-term strategic needs of a company.

Question 11

David, a financial accountant at a multinational company, is asked to study the comparative financial statements of a prospective partner firm. He uses comparative income statements to determine the changes in the assets and liabilities of the firm and whether the net income of the firm has increased or decreased over the past five years. In this scenario, David is most likely using _____.

Accepted Answer

A)  activity-based costing
B)  horizontal analysis
C)  a statistical syllogism
D)  static analysis

Question 12

Sigborne Corp., a food and beverage company, commences its budgeting process by requesting the middle managers of the company to collect data from their respective departments and submit a consolidated report stating the needs of their departments. Harold, the manager of the packaging department, overstates the needs of his department. In this scenario, Harold is guilty of _____.

Accepted Answer

A)  outwrestling
B)  budgetary slack
C)  extortion
D)  budget maximization

Question 13

Ashley, a manager at a toy manufacturing company, needs to create a financial document for the company that would show how the company's operating, investing, and financing activities are expected to affect the asset, liability, and owners' equity accounts. To prepare this document, Ashley needs to collect data from:

Accepted Answer

A)  the static budget, the cash budget, and the budgeted income statement.
B)  the production budget, the capital expenditure budget, and the sales budget.
C)  the sales budget, the cash budget, and the budgeted income statement.
D)  the budgeted income statement, the capital expenditure budget, and the cash budget.

Question 14

To preserve independence and impartiality, the Financial Accounting Standards Board (FASB)  members are required to:

Accepted Answer

A)  serve the board until their retirement.
B)  sever all ties with any firms or institutions they served prior to joining the board.
C)  sign a non-disclosure agreement and hand over all information of their previous companies to the board.
D)  pass a rigorous two-day, four-part examination on major accounting concepts.

Question 15

In the context of budget preparation, which of the following is a disadvantage of participatory budgeting?

Accepted Answer

A)  It can lead to budgetary slack.
B)  It fails to motivate middle and first-line managers.
C)  It results in an inadequate representation of the issues faced by individual departments.
D)  It fails to identify the resources needed to achieve goals.

Question 16

John and Elizabeth evaluate three telecommunication companies to determine the best company to invest in. A horizontal analysis will enable them to make comparisons of financial statements of the three companies over the past several years and help in the determination of the increase in their profits.

Accepted Answer

A) True 
 B)False

Question 17

Andrew is performing an audit of the financial statements of a cosmetics company. While analyzing the financial statements, he identifies some minor concerns. However, he believes that on balance the company's statements are accurate and its accounting methods are consistent with the generally accepted accounting principles. In this scenario, the independent auditor's report will most likely offer a(n)  _____.

Accepted Answer

A)  qualified opinion
B)  unqualified opinion
C)  adverse opinion
D)  concurring opinion

Question 18

Colin, the manager of the production department in an apparel manufacturing company, is accused of budgetary slack by a senior manager in his company. Colin is accused of budgetary slack because he:

Accepted Answer

A)  did not create the company's budget in a timely and consistent manner.
B)  made errors in the budgeting process, which resulted in operational problems.
C)  did not include the minor expenses incurred by his department in the budget.
D)  overstated the needs of his department in the budget.

Question 19

In the context of owners' equity, which of the following is true of retained earnings?

Accepted Answer

A)  They refer to a firm's additional profits that are used for paying executive salary.
B)  They are accumulated earnings reinvested in a company rather than being paid to the owners.
C)  They are a firm's earnings that are kept aside for crisis management situations.
D)  They refer to salaries that are withheld in case an employee is involved in fraudulent activities.

Question 20

In the context of balance sheets, retained earnings are a major component of the _____ section.

Accepted Answer

A)  owners' equity
B)  statement of cash flows
C)  company's liabilities
D)  articles of incorporation

Exam 8: Accounting: Decision Making by the Numbers

In the context of budget preparation, the master budget of a firm organizes the _____ into a unified whole.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Daryl is an accountant in Vansert Inc., a multinational healthcare company. He is responsible for providing analysis, preparing financial statements, and reporting the financial transactions of the company to the deputy chairman of the company. In this scenario, Daryl is most likely a _____.

Correct Answer
verified

In the context of balance sheets, retained earnings are a major component of the _____ section.

Correct Answer
verified

In the context of budget preparation, which of the following is an advantage of using bottom-up budgeting?

Correct Answer
verified

To preserve independence and impartiality, the Financial Accounting Standards Board (FASB) members are required to:

Correct Answer
verified

Correct Answer
verified

The three kinds of basic financial statements that are prepared in financial accounting are:

Correct Answer
verified

Correct Answer
verified

In the context of budget preparation, which of the following is a disadvantage of participatory budgeting?

Correct Answer
verified

In the context of owners' equity, which of the following is true of retained earnings?

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

A famous musician sells the copyright of one of his songs to a record company for $2 million. In this scenario, the sale of the copyright of the song exemplifies the sale of a(n) _____.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

In the context of budgeting, a flexible budget:

Correct Answer
verified

Colin, the manager of the production department in an apparel manufacturing company, is accused of budgetary slack by a senior manager in his company. Colin is accused of budgetary slack because he:

Correct Answer
verified

In the context of balance sheets, the accounting equation tells us that the value of a firm's assets must be:

Correct Answer
verified

Exam 8: Accounting: Decision Making by the Numbers

In the context of budget preparation, the master budget of a firm organizes the _____ into a unified whole.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Daryl is an accountant in Vansert Inc., a multinational healthcare company. He is responsible for providing analysis, preparing financial statements, and reporting the financial transactions of the company to the deputy chairman of the company. In this scenario, Daryl is most likely a _____.

Correct AnswerverifiedShow Answer

In the context of balance sheets, retained earnings are a major component of the _____ section.

Correct AnswerverifiedShow Answer

In the context of budget preparation, which of the following is an advantage of using bottom-up budgeting?

Correct AnswerverifiedShow Answer

To preserve independence and impartiality, the Financial Accounting Standards Board (FASB) members are required to:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The three kinds of basic financial statements that are prepared in financial accounting are:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In the context of budget preparation, which of the following is a disadvantage of participatory budgeting?

Correct AnswerverifiedShow Answer

In the context of owners' equity, which of the following is true of retained earnings?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A famous musician sells the copyright of one of his songs to a record company for $2 million. In this scenario, the sale of the copyright of the song exemplifies the sale of a(n) _____.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In the context of budgeting, a flexible budget:

Correct AnswerverifiedShow Answer

Colin, the manager of the production department in an apparel manufacturing company, is accused of budgetary slack by a senior manager in his company. Colin is accused of budgetary slack because he:

Correct AnswerverifiedShow Answer

In the context of balance sheets, the accounting equation tells us that the value of a firm's assets must be:

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified