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D196 Pre-Assessment |Questions with
100% Correct Answers 2025 \ 2026 Updated &
Verified |
What is the effect of a company's accounting department maintaining high ethical standards?
-The company can report more favorable results in its financial statements.
-The company's accounting information will decrease in value.
-The company can hire fewer accountants to do the same amount of work.
-The company's accounting information will increase in value. - ✔✔The company's accounting information will increase in value.
Why might employees be interested in their company's financial accounting information?
-Financial statement data are used to record long term liabilities.
-Financial statement data provide detailed internal budget information.
-Financial statement data are often used in determining employee bonuses.
-Financial statement data provide item-by-item product cost information. - ✔✔Financial statement data are often used in determining employee bonuses.
Which group establishes financial accounting rules in the United States?
-Internal Revenue Service (IRS)
-American Institute of Certified Public Accountants (AICPA)
-Financial Accounting Standards Board (FASB)
-International Accounting Standards Board (IASB) - ✔✔Financial Accounting Standards Board (FASB)
Which report is one of the three primary financial statements?
-Statement of stakeholder funds
-Statement of cash flows
-Statement of the accounting cycle
-Statement of management accounting - ✔✔Statement of cash flows
A company paid $5,000 cash in advertising costs.
How does this transaction affect the paying company's accounting equation?
-Assets decrease by $5,000; expenses increase by $5,000.
-Assets decrease by $5,000; liabilities increase by $5,000.
-Assets decrease by $5,000; revenues increase by $5,000.
-Assets increase by $5,000; expenses increase by $5,000. - ✔✔Assets decrease by $5,000; expenses increase by $5,000.
What is a transaction?
-Two parties exchanging something of value
-An example of an online business document
-A type of commonly used accounting software
-A category of merchandiser or retailer - ✔✔Two parties exchanging something of value
A company borrowed $80,000 cash from a bank.
How does this transaction affect the accounting equation of the borrowing company?
-Expenses decrease owners' equity.
According to the accounting equation, the amount of liabilities and equity must always be equal to another amount.
What is that other amount?
-Cash
-The sum of expenses and dividends
-Assets
-The sum of revenues and expenses - ✔✔Assets
Which item is an expense item?
-Accounts receivable
-Accounts payable
-Cost of goods sold
-Loans payable - ✔✔Cost of goods sold
How is gross profit computed?
-Sales minus cost of goods sold
-Total revenues minus total expenses
-Accounts receivable minus accounts payable
-Total assets minus total liabilities - ✔✔Sales minus cost of goods sold
Which type of account is retained earnings?
-Liability
-Asset
-Equity
-Revenue - ✔✔Equity
For purposes of cash flow classification in the statement of cash flows, which item is an operating activity?
-Buying equipment
-Paying employees
-Distributing dividends
-Selling bonds - ✔✔Paying employees
How does a classified balance sheet provide useful information to a decision maker?
-It provides data for a period of time instead of as a point in time.
-It distinguishes between current and long-term assets.
-It distinguishes liabilities from expenses.
-It provides data that are not publicly disclosed. - ✔✔It distinguishes between current and long-term assets.
What information does a balance sheet provide to a decision maker?
-Summary of the operating performance of a company at a particular date
-Summary of the operating performance of a company during a period
-Summary of the cash flows of a company during a period
-Summary of the financial position of a company at a particular date - ✔✔Summary of the financial position of a company at a particular date
-Only indirect costs - ✔✔Only controllable costs
In some companies, the performance measures for profit center managers are heavily influenced by cost allocations downward from organizational units (such as company headquarters).
Why is this a mistake?
-Controllable costs should not be included in the performance evaluation measure of a profit center manager.
-Revenues should not be included in the performance evaluation measure of a profit center manager.
-Uncontrollable costs should not be included in the performance evaluation measure of a profit center manager.
-Direct costs should not be included in the performance evaluation measure of a profit center manager.
- ✔✔Uncontrollable costs should not be included in the performance evaluation measure of a profit center manager.
Which budget should include the expected cost of supplies used by the office staff of the corporate headquarters?
-Production budget
-Sales budget
-Direct materials budget
-Administrative expense budget - ✔✔Administrative expense budget
Which items are uncontrollable, external variables that make it difficult to forecast the level of sales?
-Direct labor and advertising expenditures
-Selling price and sales effort
-Inventory level and product management
-Customer tastes and economic conditions - ✔✔Customer tastes and economic conditions
What is the correct sequence of budgets in a manufacturing business?
-Direct materials, sales, production
-Production, direct materials, sales
-Sales, direct materials, production
-Sales, production, direct materials - ✔✔Sales, production, direct materials
Which type of business organization has a major focus on direct materials, direct labor, and overhead?
-Retail
-Merchandising
-Service
-Manufacturing - ✔✔Manufacturing
What are the three primary functions that company managers use managerial accounting information for?
-Planning, controlling, and evaluating
-Operating, investing, and financing
-Reporting, allowing, and negotiating
-Borrowing, repaying, and lending - ✔✔Planning, controlling, and evaluating
What is the proper accounting for a product cost?
-Record as a financing cash flow
How are wages of office staff in a company headquarters building classified?
-Direct labor
-Administrative expense
-Manufacturing overhead
-Indirect labor - ✔✔Administrative expense
Which label is given to the cost of the wood used in the construction of a piece of wooden furniture?
-Manufacturing overhead
-Direct materials
-Direct labor
-Selling and administrative - ✔✔Direct materials
Which label is given to the cost of electricity in a furniture factory?
-Direct materials
-Administrative expenses
-Direct labor
-Manufacturing overhead - ✔✔Manufacturing overhead
What is the sequence of the flow of costs through a manufacturing operation?
-Raw materials, work-in-process, finished goods, cost of goods sold
-Finished goods, cost of goods sold, raw materials, work-in-process
-Cost of goods sold, raw materials, work-in-process, finished goods
-Work-in-process, raw materials, finished goods, cost of goods sold - ✔✔Raw materials, work-in-process, finished goods, cost of goods sold
What is the CVP equation?
Sales - cost of goods sold - fixed costs = profit
Sales - fixed costs - administrative costs = profit
Sales - variable costs - fixed costs = profit
Sales - variable costs - overhead costs = profit - ✔✔Sales - variable costs - fixed costs = profit
Which cost category is not formally tracked in a company's accounting system?
Out-of-pocket costs
Direct costs
Opportunity costs
Indirect costs - ✔✔Opportunity costs
A company reports these data:
Total sales revenue = $250,
Number of units sold = 50,000 units
Variable costs = $100,
If the company is operating at its break-even point, what is the company's total contribution margin?
$100,
$50,
$150,
-The total manufacturing costs other than direct labor - ✔✔The amount of manufacturing overhead that is assigned to the goods produced
What is the label given to the quantity computed as estimated overhead costs divided by estimated level of activity?
-Underapplied overhead rate
-Forecasted overhead rate
-Predetermined overhead rate
-Indirect overhead rate - ✔✔Predetermined overhead rate
In a job order costing system, what is the proper accounting for a product cost?
It is reported as a part of cost of goods sold.
It is reported as a part of general expenses.
It is reported as a part of administrative expenses.
It is reported as an expense when it occurs. - ✔✔It is reported as a part of cost of goods sold.
Which item is a period cost?
Wages of maintenance workers in the factory building
Wages for factory quality control inspectors
Rent on factory robotic equipment in an airplane manufacturer
Utility bills to heat the headquarters building - ✔✔Utility bills to heat the headquarters building
Which statement is true with respect to activity-based costing (ABC) systems?
-Implementing an ABC system requires very little analysis of the factors that create overhead costs.
-An ABC system completely eliminates all overhead costs.
-An ABC system allocates overhead based on multiple activities.
-Implementing an ABC system requires only a careful calculation of total direct labor hours. - ✔✔An ABC system allocates overhead based on multiple activities.
How is overhead allocated in an ABC system?
-Cost pool multiplied by number of cost driver events
-Budgeted overhead multiplied by expected number of direct labor hours
-Sum of materials and labor cost multiplied by number of units
-Activity rate multiplied by number of cost driver events - ✔✔Activity rate multiplied by number of cost driver events
In an ABC system, which name is given to a numerical measure reflecting the amount of a cost associated with a particular overhead cost activity?
Cost metric
Cost pool
Cost system
Cost driver - ✔✔Cost driver
How are production costs treated in a process costing system?
-Costs are assigned to a selling, general, and administrative expense account during the period.
-Costs are assigned to the actual manufacturing overhead account during the period.
-Costs are accumulated by process and averaged over all products made during the period.
Product-line costing - ✔✔Process costing
What is the correct sequence for the flow of costs through a job order costing system?
-Raw materials inventory, finished goods inventory, cost of goods sold, work-in-process inventory
-Raw materials inventory, cost of goods sold, work-in-process inventory, finished goods inventory
-Raw materials inventory, work-in-process inventory, finished goods inventory, cost of goods sold
-Raw materials inventory, work-in-process inventory, cost of goods sold, finished goods inventory -
✔✔Raw materials inventory, work-in-process inventory, finished goods inventory, cost of goods sold
Which type of company cannot use job order costing?
Building construction
Petroleum refining plant
Road construction
Tax accountant for wealthy people - ✔✔Tax accountant for wealthy people
What is an example of direct materials?
Cost of saws and hammers in constructing a house
Cost of robotic equipment in making automobiles
Cost of aluminum in making an airplane
Cost of sandpaper in making wood furniture - ✔✔Cost of aluminum in making an airplane
What is an example of direct labor?
Wages for accounting staff in company headquarters
Wages for marketing staff in company headquarters
Wages for factory quality control inspectors
Wages for furniture assemblers in a wood furniture manufacturer - ✔✔Wages for furniture assemblers in a wood furniture manufacturer
What is an example of manufacturing overhead?
Cost of bricks in making a building
Cost of concrete in making a road
Cost of sandpaper in making wood furniture
Cost of aluminum in making an airplane - ✔✔Cost of sandpaper in making wood furniture
