accounts mcq bank

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1) Britannia Company has two investment opportunities. A cash flow schedule for the investments is provided below:
Year Investment A Investment B
Year 0 ($5,000) ($6,000)
Year 1 2,000 3,000
Year 2 2,000 2,000
Year 3 2,000 2,000
Year 4 2,000 1,000

Assuming capital rationing is used, which of the following techniques would be most appropriate for choosing between Investment A and Investment B?

A. Payback technique

B. Present value index

C. Net present value technique

D. None of these techniques apply

2) Chartreuse Company has two investment opportunities. Both investments cost $5,000 and will provide the following net cash flows:
Year Investment A Investment B
Year 1 3,000 3,000
Year 2 3,000 4,000
Year 3 3,000 2,000
Year 4 3,000 1,000

The total present value of Investment A’s cash inflows assuming a 10% minimum rate of return is (round to the nearest whole dollar):
[ ( 3000/(1.10)^4) + ( 3000/(1.10)^3) + ( 3000/(1.10)^2) + ( 3000/(1.10)^1)]

A. $10,628

B. $3,452

C. $9,510

D. $3,000

3) An investment that costs $30,000 will produce annual cash flows of $10,000 for a period of 4 years. Given a desired rate of return of 8%, the investment will generate a (round your answer to the nearest whole dollar).
30000 – [ ( 10000/(1.08)^4) + ( 10000/(1.08)^3) + ( 10000/(1.08)^2) + ( 10000/(1.08)^1)]

A. positive net present value of $33,121

B. negative net present value of $33,121

C. positive net present value of $3,121

D. negative net present value of $3,121

4) Which of the following is not a factor in explaining why the present value of a future dollar is less than one dollar?

A. Inflation

B. Historical cost

C. Interest

D. Risk of failure to collect

5) Select the incorrect statement concerning the internal rate of return (IRR) method of evaluating capital projects.

A. The higher the IRR the better.

B. If a project has a positive net present value then its IRR will exceed the hurdle rate.

C. A project whose IRR is less than the cost of capital should be rejected.

D. The internal rate of return is that rate that makes the present value of the initial outlay equal to zero.

6) A capital budget tool that includes the assumption that all cash inflows are reinvested at the firms cost of capital is:

A. The unadjusted rate of return

B. The Net Present Value

C. The accounting rate of return

D. The Modified Internal Rate of Return

7) Cash outflows can be categorized into all of the following groups except

A. opportunity costs associated with selecting a specific capital project.

B. working capital commitments.

C. outflows associated with the initial investment.

D. increases in operating expenses.

8) An investment that cost $48,000 provided annual cash inflows of $9,000 per year for six years. The desired rate of return is 10%. The actual return from the investment was

A. less than the desired rate of return.

B. greater than the desired rate of return.

C. equal to the desired rate of return.

D. the answer cannot be determined from the information provided.

9) An investment that costs $5,000 will produce annual cash flows of $2,000 for a period of 4 years. Given a desired rate of return of 10%, the investment will generate a present value index of

A. 0.789.

B. 1.268.

C. 2.500.

D. 7.745.

10) Yoplait Company employs material handling employees who move materials between production divisions at a labor cost of $160,000 a year. It is estimated that these employees move 75,000 pounds of material per year. If 6,000 pounds are moved in March, how much of the material handling cost should be assigned to products made in March?

A. $12,000

B. $12,800

C. $26,666

D. $75,000

11) Perrot Company has three divisions. For Perrot, a cost should be considered a direct cost if

A. it meets certain guidelines imposed by generally accepted accounting principles.

B. it can be allocated to a division using an volume-based cost driver.

C. it can be traced to a division in a cost-effective manner.

D. it is a fixed cost.

12) Joint products A and B emerge from common processing that costs $80,000 and yields 5,000 units of Product A and 4,000 units of Product B. Product A can be sold for $100 per unit. Product B can be sold for $80 per unit. What amount of the joint costs will be assigned to Product A if joint costs are allocated on the basis of number of units produced?

A. $35,556

B. $48,780

C. $31,220

D. $44,444

13) The Ragan Corporation uses a process cost system. The company started March with 2,300 units in Work in Process–Dept. A. During the month 4,000 units were started. At the end of the month there were 3,200 units in ending Work in Process–Dept. A inventory that were 30% complete. The beginning work in process balance was $240,540 and total manufacturing cost for the period was $608,000. Based on this information, the amount of cost transferred from Work in Process–Dept. A to Work in Process–Dept. B was

A. $200,640.

B. $254,562.

C. $543,233.

D. $647,900.

14) The Work in Process account for Monty’s Company contained the following entries:
Work in Process Account
Debit of $40,000 for direct raw materials
Debit of $60,000 for direct labor
Debit of $30,000 for manufacturing overhead
Ending balance, $42,000 associated with Job #2

The company uses a job-order cost system. Work was only performed on two jobs during the period.

What was the cost of Job # 1?

A. $88,000

B. $74,000

C. $66,000

D. $90,000

15) Congress Manufacturing is currently working on two jobs. The job order cost sheets for Job 101 and Job 102 showed the following information:
Job 101 Job 102
Direct Materials $12,000 $15,000
Direct Labor $24,000 $45,000

If overhead is applied to jobs at $.80 per direct labor dollar, the total manufacturing cost for the company would be

A. $96,000.

B. $151,200.

C. $55,200.

D. $162,000.

16) Brumlow Company has a contribution margin ratio of 25%. The company is considering a proposal that will increase sales by $100,000. What increase in profit can be expected assuming total fixed costs increase by $20,000?

A. $5,000

B. $20,000

C. $25,000

D. $15,000

17) A product has a contribution margin of $6 per unit and selling price of $20 per unit. Fixed costs are $18,000. Assuming new technology doubles the unit contribution margin but increases total fixed costs by $15,000, what is the breakeven point in units?

A. 1,250 units

B. 2,750 units

C. 4,000 units

D. 5,500 units

18) Select the incorrect break-even equation from the following:

A. Total contribution margin = total fixed costs

B. Total contribution margin = total variable costs

C. Total fixed costs / contribution margin ratio

D. Total revenue = total costs

19) Which of the following would represent the order in which most master budgets are prepared?

A. Sales, Purchases, Cash, Income Statement
B. Purchases, Cash, Sales, Income Statement
C. Purchases, Sales, Cash, Income Statement
D. Income Statement, Cash, Sales, Purchases

20) Which of the following items would be least useful in preparing a schedule of cash receipts?

A. Expected revenue from cash sales.

B. Past accounts receivable collection experience.

C. Service charges for credit card sales.

D. Number of units expected to be purchased.

21) Select the incorrect statement about the master budget.

A. The master budget is a group of detailed budgets and schedules representing the company’s operating and financial plans for the past accounting period.
B. Preparing the master budget begins with the sales forecast.

C. The master budget usually includes operating budgets, capital budgets and pro forma financial statements.
D. The budgeting process usually begins with preparing the operating budgets.

22) When would a variance be labeled as unfavorable?

A. When standard costs are more than actual costs
B. none of the these

C. When expected sales are more than actual sales

D. When actual sales are equal to expected sales

23) Gonzalez Company makes a product that is expected to use 1.2 pounds of material per unit of product. The material has a standard cost of $2 per pound. Gonzalez actually used 1.25 pounds of material per unit of product made in January. The actual cost of material was $1.95 per pound. Based on this information alone, the condition of the variances for the January production would be

A. unfavorable for price and unfavorable for usage.

B. favorable for price and favorable for usage.

C. unfavorable for price and favorable for usage.

D. favorable for price and unfavorable for usage.

24) Huntsville Company reported a $4,000 unfavorable direct labor price variance and a $1,500 favorable direct labor usage variance. Select the incorrect statement from the following.

A. The standard direct labor rate must have exceeded the actual direct labor rate.

B. It is possible that the supervisor attempted to use more highly skilled (and paid) employees than allowed for by the direct labor standards.
C. It took the employees less time to produce the outputs than expected.

D. The total direct labor variance is $2,500 unfavorable.

25) You are considering an investment in IBM Company stock and wish to assess the firm’s short-term debt-paying ability. All of the following ratios are used to assess liquidity except:

A. Quick ratio

B. Accounts receivable turnover

C. Inventory turnover

D. Debt to equity ratio

26) Jekyll Company collected $500 on account. What impact will this transaction have on the firm’s current ratio?

A. Increase it

B. Not enough information is provided to answer the question.
C. Decrease it

D. No impact

27) You are considering an investment in Delta Airlines stock and wish to assess the firm’s ability to generate earnings. All of the following ratios can be used to assess profitability except:

A. Net margin

B. Average days to collect receivables

C. Asset turnover

D. Return on investment

28) In monitoring process quality we might use which of the following statistics?

A. Absolute values

B. Logarithmic control intervals

C. Percentage deviation from tolerance centers

D. “k” values for the sample mean

E. Difference between the highest and lowest value in a sample

29) Sometimes employees will deliberately overstate the amount of materials and/or labor that should be required to complete a job. The difference between inflated and realistic standards is known as

A. lowballing.

B. making the numbers.

C. budget slack.

D. cooking the books.

30) Which manager is usually held responsible for materials usage variances?

A. plant manager

B. production supervisor

C. purchasing agent

D. marketing manager

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accounts mcq bank

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11. Typical Inc. is a typical large publicly traded corporation that was incorporated in 1990. Which of the following individuals is most likely employed by Typical Inc. to manage its day-to-day affairs?

a. Typical Inc.’s President
b. Typical Inc.’s Incorporator
c. Typical Inc.’s Outside Director
d. Typical Inc.’s Registered Agent

12. Assume the facts stated in the prior question. Typical Inc.’s current directors were most likely elected by its:

a. Incorporators
b. Registered Agents
c. Officers
d. Shareholders

13. Cool Ventures Inc. was incorporated in the state of South Carolina. In Florida, Cool Ventures Inc. is referred to as:

a. A reciprocal corporation
b. A domestic corporation
c. A foreign corporation
d. An alien corporation

14. Which of the following is MOST ACCURATE considering ORX Resources, Inc. v. MBW Exploration, LLC?

a. Business owners are never personally liable if the entity in question was formed as a Corporation (instead of an LLC)
b. Members of an LLC can be personally liable if a court pierces the “LLC veil” to prevent the use of the LLC form to default creditors
c. Members of an LLC are never personally liable
d. Members of an LLC are always personally liable

15. Which of the following documents is most likely NOT filed with a SOS?

a. An LLC’s Operating Agreement
b. An LLC’s Articles of Organization
c. A corporation’s Articles of Incorporation
d. A limited partnership’s Certificate of Limited Partnership

16. Which of the following is MOST ACCURATE considering Meinhard v. Salmon?

a. Unlike partners, joint adventurers do not owe one another a duty of loyalty
b. Joint adventurers are always entitled to equal pay for equal work
c. The duty of loyalty can be breached when a partner takes an opportunity for herself (without first disclosing the opportunity to the other partners)
d. All of the above
17. Which of the following actions will most likely to require shareholder approval:

a. Issuing common stock that has previously been authorized
b. Hiring a new person to run the marketing department of a services company
c. Increasing the number of authorized shares of stock
d. Increasing the price of a frequently sold product

18. Which of the following is MOST ACCURATE considering Guth v. Loft, Inc. (the Pepsi case)?

a. Directors and officers are free to use a corporation’s assets for their personal uses (so long as such assets would otherwise be sitting idle)
b. Fiduciary duties are sometimes breached when a director pursues an opportunity (i.e., in her individual capacity) without first offering that opportunity to the corporation she is serving
c. Unless they agree in writing, corporate officers and directors owe no fiduciary duties to the corporations they serve
d. Directors and officers are free to pursue whatever personal interests they desire – so long as they do so after business hours (i.e., after 6:30 PM)

19. Which of the following is MOST ACCURATE about the Business Judgment Rule?

a. It allows directors and officers to avoid liability to corporations and shareholders for honest mistakes of judgment
b. It will never protect directors from bad business decisions
c. It will never protect officers from bad business decisions
d. All of the above

20. Which of the following is MOST ACCURATE considering SEC v. Texas Gulf Sulphur Co. (the insider trading case)?

a. Information relating to an initial test, or sample, is never sufficient to be considered a “material” under Rule 10b-5
b. The SEC brought its action because Texas Gulf Sulphur Co. was raising more than $5,000,000 as part of the stock issuance in question
c. Texas Gulf Sulphur Co. was liable because the shares in question were not registered with the SEC and such shares did not fit within an exemption from registration
d. Courts may consider what insiders actually did with information when determining whether such information is a “material” under Rule 10b-5

Background Information for the Next TWO Questions
The following companies plan to raise capital by issuing shares of stock as follows:
Company: Make-it-Happen Inc. Mover Inc. World Shaker, Inc.
Shares being offered : 1,100,000 250,000 800,000
Price per share: $1.00 $1.50 $0.50
Total amount of offering: $1,100,000 $375,000 $400,000

21. Which company is LEAST likely to rely on Rule 504 (of Regulation D) for its exemption from registration under the Securities Act of 1933 (ignore the recently passed Crowdfund Act)?

a. Mover Inc.
b. Make-it-Happen Inc.
c. World Shaker, Inc.
d. Each of the above companies may rely on Rule 504 for its exemption from registration

22. For this question only, assume that each company will rely on a Regulation D exemption from registration. Assume further that each company will issue shares of its stock to unaccredited investors as part of its offering. Which company MUST prepare an “offering document” in connection with its offering (again, ignore the recently passed Crowdfund Act)?

a. Mover Inc.
b. Make-it-Happen Inc.
c. World Shaker, Inc.
d. Each of the above companies must issue an offering document or private placement memorandum in connection with its offering

23. Barack and Mitt recently started a for-profit fitness center (i.e., gym/club). They are co-owners of the business. No documents were ever filed with the SOS on behalf of the business. Which of the following is TRUE:

a. The business is a partnership
b. Barack and Mitt should consider obtaining insurance to reduce certain risks related to the business
c. Barack and Mitt Should consider using contracts to reduce certain risks related to the business
d. All of the above

24. Britney’s sole proprietorship enters into a joint venture with Crazy Inc. (a Delaware corporation). Britney’s personal liability for the joint venture’s activities is:
a. Limited to the amount of her investment in the joint venture
b. Limited to the amount of her investment in the joint venture and any profits
c. Limited by state statute (and the specific amount varies from state to state)
d. Unlimited
25. Assume that Julie properly forms a corporation “S Inc.” S Inc. then enters into a partnership with Cash Capital Inc. Julie’s liability exposure for the partnership’s activities is most likely:

a. Limited to the amount of S Inc.’s investment in the partnership.
b. Limited to the amount of her investment in S Inc. (that is to say, S Inc.’s liability is unlimited with regards to the partnership’s activities but Julie’s liability is limited with regards to S Inc.’s activities).
c. Limited to the one-half of the amount of S Inc.’s investment in the partnership.
d. Unlimited.

26. Charlene and Karla form a consulting firm called “C & K Partners.” For federal tax purposes, C & K Partners most likely:

a. Is a separate tax-paying entity.
b. Needs to file an informational tax return with the IRS but is not a separate tax-paying entity.
c. Pays ½ of the taxes if there are two partners.
d. Never files an informational tax return or pays any taxes.

27. Yan and Lazara, both U.S. citizens, want to market a new computer game. They wish to form a business entity that avoids U.S. income taxes at the entity level (they want the tax obligations to pass through to their individual returns). Which of the following entities could help Yan and Lazara achieve their goal:

a. IT Inc. (a Delaware corporation that has successfully elected to be taxed as an S Corporation).
b. IT Partners (a Delaware partnership)
c. IT LLC (a Delaware limited liability company)
d. Each of the above entities could help Yan and Lazara achieve their goal of avoiding U.S. income taxes at the entity level.

28. Anthony is an Officer of Toy Inc. (a large corporation). Without informing Toy Inc. or Play Inc., Anthony has taken an additional position as an Officer of Play Inc. Play Inc. is in direct competition with Toys Inc. Thus, Anthony is an Officer of both corporations and has not disclosed this fact to either corporation. By taking these actions, Anthony most likely:

a. Has NOT breached any duty because he has not made any misstatement of fact
b. Has breached his duty of loyalty to Toy Inc.
c. Has breached his duty of loyalty to Play Inc.
d. Both “b” and “c”

29. Co-founders Max, Grinch, and Cindy-Lou have written a business plan and are now launching the startup company in Illinois. Max and Grinch agree with Cindy-Lou when she says:

“If we waste time and worry about forming an entity and drawing up agreements with each other, our business will lose paying customers and the three of us will lose profits. That’s just dumb. After 3 or 4 years of solid sales, we can find an attorney to draw up the papers and incorporate us as either an LLC or Corporation.”

Over the next TWO years, which of the following laws will most likely govern the Max, Grinch, and Cindy-Lou business relationship?

a. Illinois’s partnership laws
b. Illinois’s corporation laws
c. Illinois’s limited liability company laws
d. Both Illinois’s corporation and limited liability company laws

30. Kendra, an employee of Big Company, files a sexual harassment suit against Archie, her supervisor. Kendra wins against Archie. Big Company, however, would also most likely be liable if it had harassment policies and complaint procedures in place:
a. But Kendra failed to follow such policies and procedures
b. And Kendra followed such polices and procures but Archie’s discrimination persisted
c. But Archie failed to follow such policies and procedures
d. But Big Company seldom gives its employee of the month awards to its female employees

31. Which of the following statements is MOST ACCURATE?
a. There are statutory and public policy exceptions to the at-will employment doctrine
b. There are NO exceptions to the at-will employment doctrine
c. The at-will employment doctrine is no longer applicable
d. There are only statutory exceptions to the at-will employment doctrine (i.e., public policy by itself is never sufficient to create an exception)

32. Which of the following is MOST ACCURATE considering Mims v. Starbucks Corp.?
a. Once an employee becomes a manager, she no longer desires overtime pay
b. In order for an employee to be considered a manager (and thus not entitled to overtime), she must spend more than 50% of her time performing management duties
c. When an employee spends only 30% of her time performing management duties, management may still be considered her primary duty
d. When determining whether or not employees are managers (and thus not entitled to overtime), courts will only consider official job titles (i.e., courts will not consider the tasks actually performed by the employees)
33. Alan is bringing a lawsuit under the Age Discrimination in Employment Act of 1967. Which of the following items is Alan NOT required to show in order to establish a prima facie case?

a. That he was a member of protected age group
b. That he was qualified for position from which he was discharged
c. That he was discharged under circumstances giving rise to inference of discrimination (e.g., age-related comments)
d. That he was not materially late for work on the date he was terminated

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