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Multiple Choices 20. Items could cause the recognition of accrued liabilities
- C. Salaries, rent, and insurance
1. Basic Financial Statements provided in annual report
- D. Statement of FS, IS, Cash Flow and Changes in Equity 21. Items need not be disclosed separately in the I.S.
- B. Salary expense
2. Function of the cash flow statement
- D. Both a and b 22. The I.S. measure for a firm
- C. Results of operation for a period
3. Items included in the notes of F.S.
- D. All of the above 23. Two F.S. are frequently combined for presentation
purposes
4. “Unqualified” auditor’s report indicates - A. The income and retained earnings
- B. The F.S. presents fairly the Financial Position, results of
operation and changes in cash flow. 24. Three profit measures calculated from the I.S.
- B. Gross profit margin, COGS percentage and EBIT
5. Who hires the auditor
- A. The firm which is audited 25. The figure for operating profit important
- A. Provides a basis for assessing the success of a
6. Allocation of the cost of fixes assets called? company apart from its financing and investment activities
- B. Depreciation and separate from its tax status
7. Depreciation expense be considered a discretionary item 26. Statement of C.S. segregates cash inflows and outflows
- D. All of the above - D. Operating, Financing and Investing activities
8. Choices and estimates relating to depreciation effect 27. Short term securities be classified in the statement of C.F.
- C. Net Fixed Assets on the statement of F.P. and - B. Cash
depreciation expense in I.S.
28. Payments for taxes be classified in the Statement of C.F.
9. Which statement is true - B. Operating outflow
- B. Published F.S. may be prepared according to either
accrual or cash basis of accounting 29. The repayment of debt principal be classified in the
statement of C.F.
10. Firms present two figures for earnings per share- basic and - D. Financing Outflows
diluted
- C. The firm has complex capital structure with convertible 30. Type of accounts are notes payable and current maturities
securities, stock options and warrants which presents “dilution” of long term debt
- C. Financing accounts
11. Statement of F.P. account used to reconcile the difference
that arise because of temporary differences in tax actually paid 31. Type of firm generally has the highest proportion of
to BIR and income tax expense reported in the I.S inventory to total assets
- B. Deferred taxes - B. Retailers
12. The use of accelerated depreciation rather than straight line 32. Assets will not be depreciated over its service life
depreciation produces earnings of higher quality - D. land
- C. Both a and b
33. Cause a change in the retained earnings
13. Methods by which management can manipulate earnings and - D. All of the above
possibly lower the quality of reported earnings
- D. All of the above 34. Largest expense item for most firms
- D. COGS
14. True during the period of inflation
- A. Depreciation expense tends to be understated 35. What does the cash accounts include
- C. Both a and b
15. Information can be ignored when analyzing F.S.
- D. None of the above 36. Which statement is false
- A. Deferred taxes arise from the use of the same method
16. Statement of F.P. summarize for a business of depreciation for tax and reporting purposes
- A. F.P. at point of time
37. Revenue from sales of goods and services be classified in
17. Group of times would most likely be included in the other the Statement of Cash Flows
assets account on the statement of F.P. - A. Operating Inflow
- A. land held for investment, start up cost, long term-
payment 38. The sale of a building be classified in the Statement of
Cash Flows
18. Difference between notes payable- bank and current - C. Investing inflow
maturities of long term debt
- B. Note payable- banks are short term obligations,
while current maturities of long term are the proportion of long
term debt that will be repaid for the upcoming year.
Chapter 4- Financial Statements Analysis- I Multiple Choices
2. Percentage changes usually are computed by use of the 3. “Trading on the equity” (financial leverage) is likely to be a
amounts for the latest accounting period as a base good financial strategy for shareholders of corporation with
- False - A. Rapidly growing amount of net income
3. Peso amount of change during an accounting period of an item 4. Select one with CORRECT statement
appearing in F.S. is less significant than the change measured as - B. Increase in the rate of operating earnings as a
percentage percentage of sale may accompany a decrease in operating
- True earnings measured in absolute pesos
4. Business enterprise earnings performance and its financial 5. Comparing performance with industry norms is complicated
condition are the two primary concerns of the financial analyst by:
- True - D. All of the above
5. Increase in sales volume generally is accompanied by a 6. Would probably not be found in a company’s annual report
proportionate increase in net income - C. Interim financial report
- False
7. First step in an analysis of F.S.
6. On a common size I.S. net income is given an equivalent 100% - C. Specify the objective of the analysis
- False
8. Creditor’s objective in performing an analysis of F.S
7. Peso amount of change during in a certain item appearing in - A. Decide whether the borrower has the ability to repay
F.S. is probably less significant than the change measured as interest and principal on borrowed funds
percentage
- True 9. Investor’s objective in F.S. analysis
-D. To determine whether an investment is warranted by
8. Percentage changes are usually computed using the latest estimating a company’s future earnings stream
figure as a base
- False 10. Not a tool or technique used by a F.S. analyst
- C. Random sampling analysis
9. It is possible that a decrease in gross profit rate may be offset
by a decrease in expenses, thus resulting in an increase in net 11. (A problem) These relationship suggest (indicate all correct
income answer)
3. If the amount of current assets exceeds the amount of 4. Most widely used liquidity ratio
current liabilities, a decrease in current assets with a - B. Current ratio
corresponding decrease in current liabilities increases the
current ratio. 5. Limitation common to both the current and quick ratio
4. Number of days sales in receivable at the end of an accounting 6. Quick ratio a more rigorous test of short-run solvency than
period is a better measure of the quality of receivable than the the current ratio.
receivable turnover rate - D. The quick ratio eliminates inventories from the
-False numerator
5. Window dressing is a violation of financial reporting standards 7. Increasing collection period for accounts receivable
8. Horizontal analysis is possible for both an income statement 10. Asset turnover ratio measure
9. Common size F.S. show peso change in specific items from one 11. Ratio should not be used to measure the extent of a firm’s
10. Company with 2.0 current ratio will experience a decline in 12. Amount of debt in a company’s capital structure
the current ratio when a short-term liability is paid important to the financial analyst
29. Firm’s current ratio at the end of any given accounting period 2. True for gains and losses from capital asset sales
- D. All of the above are true -C. They are included in cash flows from investing
activities
30. Company has current ratio of 2 to 1 at the end of year 1.
Which of the following transactions will increase this ratio? 3. Assets is included in the adjustment of net income to
- A. Sale of bonds payable at a discount obtain cash flow from operating activities
- D. All of the above
31. Investors generally will be least concerned with potential
increase in: 4. Current liability accounts is included in the adjustment of
- C. The quick ratio expenses to obtain cash flow from operating activities
-D. Both a and b
32. Conversion of a company’s short term note payable into long
term note payable would 5. Possible for a firm to be profitable and still go bankrupt
- D. Increase both working capital and the current ratio -B. The firm has positive net income but has failed to
generate cash from operations
33. A company has a current ratio of 2 to 1. This ratio will
decrease if the company 6. Cash flow from operations become increasingly important
one year to the next might indicate - C. An increase in accounts payable represents
36. Its book value per share and earnings per share would be 8. Following could lead to cash flow problems
-C. Both book value and EPS increase easing of credit of suppliers
Chapter 7- Business Planning Chapter 8- Basic Cost management Concepts
7. The sales forecast should be primarily based on 7. Manufacturing- sector companies except
-B. Input from sales managers and sales representative - C. Direct materials inventory, work-in process,
inventory and finished goods inventory accounts
8. Sales forecast is influenced by
-D. All of the above 8. For a manufacturing company, direct materials cost may be
included in
9. Sales forecast is -D. D.M. inventory, WIP inventory and F.G. inventory
- A. Often the outcome of elaborate information gathering accounts
and discussions among sales managers
9. For a manufacturing company, direct labor cost may be
10. Budget production depends on included in
- C. Budgeted sales and expected changes in inventory levels -C. Both WIP inventory and F.G. inventory
11. Budget manufacturing overhead costs include all types of 10. For a manufacturing company, indirect manufacturing
factory expenses except cost may be included in
-D. Direct labor and direct materials - C. Both WIP inventory and F.G. inventory
23. COG manufactured will usually include 1. In activity-based costing, facility level costs should not be
-C. Some costs incurred during the prior period as well as included in product cost for internal management reports
costs incurred during the current period that are used for decisions making. However companies
frequently include facility-level costs in product cost in
24. Example of a fixed cost that would be considered a direct order to meet external reporting requirements
cost is -True
-C. A production supervisors’ salary when the cost objective
is the production department 2. Batch level activities are performed each time a batch of
goods is handled or processed
26. Cost associated with idle time should be -True
-B. Treated as part of manufacturing overhead
3. When there is automation, product diversity, and little
27. A D.L. overtime premium should be charged to a specific job correlation between overhead cost and direct labor, a plant
when the overtime is caused by the wide overhead rate based on D.L. is most appropriate
-B. Customer’s requirement for early completion of the job -False
28. Costs which are inventoriable are 4. In activity-based costing, a separate overhead rate is
-A. Manufacturing costs incurred to produce units of computed for each activity center by dividing the estimated
output overhead cost in the activity center by the total expected
activity for the activity center
29. For external reporting -True
-A. Costs are classified as either inventoriable or period cost
5. In activity-based costing system there is no overhead over
or under applied because the costing system is much more
accurate
-False
21. Which of the following levels of costs should not be included Multiple Choices
in product costs for internal management report that are used
for decision making 1. Cost behavior refers to
-D. Facility-level activities -A. How costs react to a change in the level of
activity
22. Machining a part for a product is an example of a
-A. Unit-level activity 2. Understanding of the underlying behavior of costs helps in
all of the following EXCEPT
23. Production order processing is an example of a - D. Sales volume can be better estimated
- B. Batch-level activity
3. Fixed costs depend on
24. The power costs associated with running machines is an -B. The amount of resources required
example of a cost that can be traced to a
-A. Unit-level activity center 4. A fixed cot in an automobile manufacturing plant
- A. Administrative salaries
25. labor setup cost is an example of a cost that can be traced to
a 5. Each furnace required a hose that costs P20 and 2,000
-B. Batch-level activity center furnaces are produced for the month, the total costs for
hoses is
26. The plant manager’s salary is an example of a cost that would - B. Considered to be direct variable cost
be traced to a
-D. Facility-level activity center 6. Statement is FALSE
- B. Fixed costs have cost driver over the short run
Fill in the Blanks
7. Within the relevant range, if there is a change in the level
1. A single overhead rate used throughout an entire plant of the cost driver then
operation is known as Plantwide overhead rate -C. Total fixed cost will remain the same and total
variable cost will change
2. The major problem with using direct labor- hours or machine-
hours as the bases for assigning overhead cost to products is 8. Within the relevant range, if there is a change in the level
that these bases rely on volume as the sole factor in overhead of the cost driver then
cost assignment - D. Fixed costs per unit will change and variable
costs per unit will remain the same
3. ABC involves a two stage allocation process, in which the first
stage assigns overhead costs to activity centers and the second 16. The contribution approach to the income statement
stage assigns overhead costs from activity centers to products -C. Is particularly helpful to the managers in planning
and services and decision making
4. Process value analysis which involves a systematic analysis of 17. Which of the following is unlikely to be classified as a
the activities required to make a product or perform a service is fixed cost with respect to the number of units produced
the beginning point in ABC and sold
-D. Production supplies
5. Unit level activities, such as the consumption of power are
performed each time a unit is produced and arise as a result of 18. Multiple regression analysis is used when
the total volume of production going through a facility -B. There is more than one activity that drives the
variable component of a mixed cost
6. Batch Level activities, which are performed each time a batch
of goods is handled or processed, include tasks such as 35. A regression equation
placement of a purchase order -A. Estimates the dependent variables
7. Product Level activities, which are performed as needed to 36. Correlation is a term frequently used in conjunction with
support the production of a particular product, include tasks regression analysis and is measured by the value of the
such as maintaining parts inventories coefficient of correlation, r. The best explanation of r is
- D. is a measure of the relative relationship between
8. Facility Level activities just sustain a facility’s general two variables
manufacturing process and include items such as insurance or
general factory management
1. A calculation uses in CVP analysis is the breakeven point. Once 1. Under variable costing, fixed manufacturing overhead is
the breakeven point has been reached operating income will -D. Immediately charged against sales a s a period
increase by cost
- B. Contribution margin per unit for each additional unit
sold 2. Which of the following statements is true for affirm that
uses variable costing
2. In working on a CVP analysis, the accountant is unsure of the - D. Product costs include variable administration
exact result and or assumption under which to operate. What can costs
accountant do to help management in this CVP decision?
- B. Ascertain the probabilities of various outcomes and work 3. Principal difference between variable costing and
reference to the CVP decision -B. Whether fixed manufacturing costs should be
included as product costs
3. Margin of safety is a key concept of CVP analysis. The margin
of safety is 4. Under variable costing
- B. The difference between budgeted contribution margin - B. Inventory costs will always be lower than under
4. One of the margin assumptions limiting the reliability of 5. When sales are constant, but the production level
breakeven analysis is that fluctuates, net income determined by the variable costing
- C. Total fixed costs will remain unchanged over the relevant method will
5. When used in CVP analysis, sensitivity analysis 6. Costing method that treats all fixed costs as period costs
the impact on profit of various predictions of future events -C. Job-order costing
6. Which of the following will result in raising the breakeven point 7. Under absorption costing, fixed factory overhead costs
- B. An increase in the semi variable cost per unit - A. Are deferred in inventory when production
exceeds sales
7. The equal percentage changes in selling price and variable cost
per unit will cause the breakeven point in sales pesos to 8. The absorption costing net income was greater than the
-D. Remain unchanged variable costing net income. This fact suggest that
-B. More units were produced during the year than
8. Which of the following is a characteristic of a contribution were sold
income statement
-B. Fixed expenses are listed separately from variable 9. Net income computed using variable costing would exceed
-A. A 15% decrease in selling price fluctuates, net income determined by the absorption costing
method will
- A. Tend to fluctuate in the same direction as
fluctuations in the level of production
Chapter 14- Standard cost and Operating Performance 6. When performing input output analysis in standard costing,
Measures “standard hours allowed” is a means of measuring
- B. Actual output at standard hours
Matching Type
7. The operating capacity that is required to satisfy
1. Total Variable overhead anticipated sales demand is
-E. The sum of variable overhead spending variance and the - C. Practical capacity
variable overhead efficiency variance
8. If the actual amount of direct materials used in a process
2. Overhead Efficiency exceeded the standard amount of materials, there was
- G. Difference between actual hours worked and the hours - C. An unfavorable materials quantity variance
that should have been worked at the level of production, times
the standard variable overhead rate 9. When computing variances from standard costs the
difference between actual and standard price multiplied by
3. Variable overhead spending variance actual quantity yields a
- C. Difference between the actual variable overhead -B. Price variance
incurred and a performance budget for variable overhead
10. In a standard cost system the materials price variance is
4. Labor efficiency variance obtained by multiplying
- H. Difference between actual hours worked and the hours -B. Actual quantity purchased by the difference
that should have been worked and at the level of production between actual price and standard price
times the standard wage rate
11. Suppose a standard cost system is being used. What do
5. Labor rate variance you call the variations in the use of materials which can be
- A. Difference between the actual hours worked times the calculated by comparing the record of materials withdrawn
standard wage rate and the actual payroll with the standard consumption
-B. Quantity Variance
6. Material usage variance
- D. measure of how well materials were utilized in the 12. What type of direct materials variances for price and
production process usage will arise if the actual number of pounds of materials
used exceeds standard pounds allowed but actual cost was
7. Material price variance
less than standard cost
- J. Difference between the actual price and the standard
-A. Usage- Unfavorable/ Price- Favorable
price, times the actual quantity of material purchases
13. How should a usage variance that is significant in amount
8. Expected actual variance
be treated at the end of an accounting period
-B. An estimate of what will happen
- B Allocated among work in process inventory,
9. Normal standard finished goods inventory and COGS
-I- What should achieve with normal workers in a normal
14. What would be the appropriate time to isolate and
setting
recognize a direct material price variance
10. Ideal standard -C. When a material is purchased
-F. What should achieved if all conditions are perfect
15. An unfavorable price variance occurs because of
-A. Price increases on raw materials
4. Which of the following best characterized a standard cost 19. Excess direct labor wages variance resulting from
system overtime premium will be disclosed in which type of variance
- B. Standards can pinpoint responsibility and can help -D. Labor rate
motivate employees
20. How is a labor rate variance computed
5. Standard costing will produce the same results or conventional -B. Difference between standard and actual rate
costing when standard cost variances are distributed to multiplied by actual hours
-A. COGS and inventories
Chapter 15- Functional and Activity-based Budgeting 8. Purpose of flexible budget is to
- C. Compare actual and budgeted results at
Matching Type virtually any level of production
1. Sales Forecast 9. When using a flexible budget what will occur to fixed cost
-C. The most important input for budget preparation. All as production increased within the relevant range
estimates of activity depend upon this information - A. Fixed cost per unit will decrease
2. Management by exception 10. A budget that identifies revenues and costs with an
-H. The practice of focusing attention on those activities individual controlling their incurrence is
where the actual performance differs significantly from planned - D. Responsibility budget
performance
11. In preparing quarterly budget estimates, who should be
3. Responsibility Accounting responsible for the cash budget
- E. A system that relates cost to organizational structure -C. Finance manager
10. Goals
-G. Set of statements providing broad direction for the firm
Multiple Choices
7. A flexible budget
- D. Appropriate for nay level of activity
Chapter 18- Relevant cost for Non Routine Decision Making Chapter 19- Capital Budgeting Decisions
1. Cost that do not appear in accounting records and that do not 1. Economic Life
require peso outlays but do involve a foregone opportunity by the -A. Period within which returns are expected
entity whose costs are being measured are
-C. Imputed costs 2. Direct Costing
- C. The assignment of direct material, direct labor,
2. The low margin item should be produced if it can be sold for and variable factory overhead costs to products
more than its
-C. Variable cost plus any opportunity cost of the idle 3. Incremental analysis
5. In the development of accounting data for decision- making 5. Average cost of capital
purpose, relevant cost are defined as -I. The cost of financing the company’s activities
- A. Future costs which will differ under each alternative
course of action 6. Accounting rate of return method
- H. The capital budgeting method that divides a
6. Which of the following costs are always irrelevant in decision proposed project’s net income by the average investment
making? cost
-B. Sunk Costs
7. Payback period
7. Which of the following statement does not represent a step in -D. Capital Budgeting method that determines the
identifying the relevant costs in a decision problem? minimum length of time it would take to recover the initial
- C. Eliminate those costs that differ between alternatives investment in an asset
8. Acceptance of a special order will improve overall net operating 8. Present value method
income so long as the revenue from the special order exceeds -G. Capital budgeting method that discounts all net
-B. The incremental costs associated with the order cash inflows to the present
15. Indicate hazards to a firm that arise from being vertically 4. A depreciation tax shield is
integrated -B. A reduction in income taxes
-D. A firm that decides to produce its own parts runs the risk
of destroying long-run relationships with suppliers and Changing 5. The concept most relevant to the evaluation of the lease
more costly than buying them from the outside -A. The present value of an annuity due
7. Of the following decisions, capital budgeting techniques Chapter 20 – Responsibility Accounting and Transfer Pricing
would least likely to be used in evaluating the
-D. Adoption of a new method of allocating nontraceable Multiple Choices
8. The length of time required to recover the initial cash outlay center, but not for the entire company. From the overall
of a capital project is determined by using the company viewpoint, this decision could lead to action
-A. Does not consider the time value of money operations of the business are broken down into cost
centers and the control function of a foreman, sales
11. The payback reciprocal can be used to approximate a projects manager or supervisor is emphasized
-D. internal rate of return if the cash flow pattern is relatively -A. Responsibility accounting
stable
4. Which of the following items of cost would be least likely
12. The bailout payback method to appear in a performance report based on responsibility
-D. Measures the risk if a project is terminated accounting techniques for the supervisor of an assembly line
in a large manufacturing situation
13. When evaluating projects, breakeven time (discounted payback - A. Supervisor’s salary
period) is best describes as
-D. The point at which discounted cumulative cash inflows on 5. If a cost cannot be allocated to certain segments of an
a project equal discounted total cash outflows organization it should be
- C. Included in it but not allocated
14. The NPV method of investment project analysis assumes that
the project’s cash flows are reinvested at the 6. A profit center is any subunit or segment of an
-C. Discount rate of return in the NPV calculation organization that is assigned
- A. Both revenues and expenses
15. The proper discount rate to use in calculating certainty
equivalent net present value is the 7. Which of the following is not true abut a responsibility
-C. Risk free rate accounting system
-D. It holds management equally responsible for all
16. The rankings of mutually exclusive investments determined costs
using the internal rate of return method (IRR) and the NPV may
be different when 8. In designing a responsibility accounting system, one should
- D. Multiple projects have unequal lives and the size of the be keep in mind a certain characteristics of each cost. This
investment for each project is different characteristic is
- A. Increasing sales revenue and operating expenses
18. When determining NPV in an inflationary environment by the same peso amount
adjustments should made to
- B. Increase the estimated cash inflows and increase the 9. A company that has a profit can increase its return on
discount rate investment by
- C. Increasing sales revenue and operating assets
and sales by the same percentage
15. Transfer prices based on actual cost of the selling divisions as 1. A good example of a common cost which normally could
-B. Often decline to provide the selling division with statement except on an arbitrary basis would be
16. In transfer pricing if the selling division does not meet all bona 2. All other things being equal if a divisions traceable fixed
-C. The buying divisions should be free to purchase outside -C. The divisions segment margin will decrease
13. A problem with utilizing residual income is that 36. What critical performance indicator is concerned with
-C. A corporation with a larger peso amount of assets is outcomes?
likely to have a higher residual income than a corporation with a -B. Reflection of the customer’s validation
smaller peso amount of assets
37. What critical performance indicator uses performance
14. A company which favors the residual income approach measures as warning and diagnostic signals?
-A. Wants managers to concentrate on maximizing an -D. Provision of feedback
absolute amount of pesos
creditors is Compensation
29. Teams are used and the members have the added 6. Which of the following is an extrinsic reward
encouragement of -D. All of the above
-D. Team incentives
7. Which of the following is NOT an attribute of effective
30. Designers of executive compensation plans emphasize of the performance measurement system
following factors -D. The pay for performance systems base rewards
-D. All of the above are emphasized on only net income
31. Rate of sales growth and number of customers are two 8. Systems base rewards on achieving or exceeding some
examples of critical performance indicators for which of the measured performance
following critical success factors -A. Pay for performance
-A. Service
9. Which of the following is NOT an attribute of effective
32. Customer focused performance measures help organization performance measurement systems
members manage activities by concentrating their attention on -D. Incentive compensation are rewards system that
improving what matters to the customers pa only an hourly wage for hours worked
-A. Reflection of the customer’s perspective
10. Under the independent wage policy guideline for
33. Performance measures should be external, rather than effective incentive compensation policy for senior
internal and should reflect an understanding of the difference management should be developed by
between the output and outcome of activities -B. A board of director’s compensation committee
-B. Reflection of the customer’s validation
34. When a firm discovers that sales have been declining because
of poor service and slow delivery schedules, they are receiving a
-A. Diagnostic signal
11. Which of the following is true about the independent wage Chapter 26 – Management Accounting in Changing
policy for effective incentive systems Environment
-C. A board of director’s compensation committee should
design the incentive compensation plan for senior management Multiple Choices
12. Which of the following is true about the participation 1. Implementation of total quality management (TQM) in a
-B. Many experts believe that all employees should -C. Takes from 3-5 years
14. A group incentive compensation plan focused on rewarding quality conformance like
15. Also called lump-sum rewards, pay for performance and merit -C. An upstream cost
pay
4. Typically as prevention costs increase other costs of
-A. Cash bonuses
quality
16. The right to purchase a unit of the organization’s stock at a -D. Decrease
specified price
5. Examples of quality cost of prevention include all of the
-D. A stock option
following except
17. Which of the following would not be a advantage for -D. An annual award for lowest work rate
18. Which of the following would not be a advantage for -A. Reduce error or prevent recurrence of error