Documenti di Didattica
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Documenti di Cultura
Dissolution
Question 1
Answer 1
Correct answer is A
Question 2
Answer 2
Correct answer is C
A I only is correct.
B II only is correct
C I and II only are correct
D I, II and III are correct.
Articles of Incorporation
Question 1
Answer 1
Correct answer is A
A I only
B II only
C I and II are both correct.
D Neither I nor II is correct.
Question 2
Answer 2
Correct answer is A
A I only
B II only
C I and II are both correct.
D Neither I nor II is correct.
Question 3
Answer 3
Correct answer is C
Question 4
Answer 4
Correct answer is C
A I only is correct.
B II only is correct.
C Both I and II are correct.
D Neither I nor II is correct.
General considerations
Question 1
Answer 1
Correct answer is D
Question 2
Answer 2
Correct answer is C
Business Environment & Concepts > Corporations > Business judgment rule
Answer 1
Correct answer is C
Bylaws
Question 1
Answer 1
Correct answer is B
Stock
Question 1
Answer 1
Correct answer is C
The Model Business Corporation Act permits the
authorization of stocks with varying degrees of
dividend rights, voting rights, and rights to assets
on dissolution.
A I only
B II only
C Both I and II are correct
D Neither I nor II is correct
Question 2
A stockholder of the Chaplin Corporation received each of the
following items. All of them are considered asset or capital
distributions, except:
A a stock split of 300 previously unissued shares of
the companys stock
B a distribution of three acres of land
C a dividend of $3,000 based on the profits of the
company
D a dividend of $2,000 in cash that is deemed to be
a liquidating dividend
Answer 2
Correct answer is A
A stock split is a type of stock dividend that neither
reduces the assets of the business nor increases
the stockholders percentage of the ownership. It
is not viewed as a distribution but rather as an
attempt by the company to reduce the market price
of the companys stock by increasing the supply. It
is not viewed as an asset or capital distribution.
The business is no worse off and the stockholder
is no better off.
Derivative suits
Question 1
Answer 1
Correct answer is C
Extraordinary transactions
Question 1
Answer 1
Correct answer is A
Directors, shareholders
Question 1
Answer 1
Correct answer is B
Question 2
Answer 2
Correct answer is C
Meetings
Question 1
Answer 1
Correct answer is C
Proxies
Question 1
Answer 1
Correct answer is B
Dividend Payments
Question 1
Answer 1
Correct answer is D
Question 2
Answer 2
Correct answer is B
Officers
Question 1
Answer 1
Correct answer is B
Business Environment & Concepts > Corporations > Piercing the veil
Answer 1
Correct answer is B
Question 2
Answer 2
Peter and Paul Maxwell are brothers and are president and
CFO, respectively, of Maxwell Corporation. Rocky Bank, a
creditor of Maxwell Corporation, seeks to pierce the corporate
veil of Maxwell Corporation and hold the Maxwell brothers
personally liable for the business's debt to the bank. Which of
the following would be least persuasive in convincing a court to
pierce the corporate veil?
Correct answer is A
S Corporation
Question 1
Answer 1
Correct answer is D
A I only is permitted.
B II only is permitted.
C Both I and II are permitted.
D Neither I nor II is permitted.
Business Environment & Concepts > Corporations > Stock, Par value
Answer 1
Correct answer is C
Business Environment & Concepts > Corporations > Corporations general requirements
Answer 1
Correct answer is C
Business Environment & Concepts > Corporations > Subscriptions before incorporating (6.20)
Answer 1
Correct answer is C
Business Environment & Concepts > Microeconomics > Supply and Demand
Answer 1
Correct answer is C
Question 2
Answer 2
Cool Cola and Sparkle are substitute soft drinks. Which of the
following would occur if the price of Cool Cola increased?
Correct answer is A
Question 3
Answer 3
Correct answer is D
Business Environment & Concepts > Microeconomics > Supply and Demand
Question 4
Answer 4
Correct answer is D
Question 5
Answer 5
Correct answer is A
Question 6
Answer 6
Correct answer is C
Question 7
Answer 7
Correct answer is C
A Autos
B Recreational vehicles
C Bread
D Furniture
Business Environment & Concepts > Microeconomics > Supply and Demand
Question 8
Answer 8
Correct answer is A
Question 9
Answer 9
Correct answer is D
Question 10
Answer 10
Correct answer is A
Business Environment & Concepts > Microeconomics > Supply and Demand
Question 11
Answer 11
Correct answer is B
Question 12
Answer 12
A federal law sets a price floor for milk. Which of the following
occurs due to a binding price floor?
Correct answer is B
Question 13
Answer 13
Correct answer is A
Business Environment & Concepts > Microeconomics > Supply and Demand
Question 14
Answer 14
Correct answer is C
This case represents an externality where the
manufacturer imposes a cost on other users of the
lake. The externality is "internalized" by making the
manufacturer pay for the added costs imposed on
other users of the lake. This concept is called full
cost accounting. Answer C is correct.
A Price leadership
B Price ceiling
C Full Cost Accounting
D Fixed Cost
Question 15
Answer 15
Correct answer is B
Question 16
Answer 16
Correct answer is B
Question 17
Answer 17
Correct answer is C
A A price ceiling
B A price freeze
C A price floor
D A reduction in an input price
Business Environment & Concepts > Microeconomics > Supply and Demand
Question 18
Answer 18
Correct answer is A
Question 19
Answer 19
Correct answer is B
Question 20
Answer 20
Correct answer is D
Business Environment & Concepts > Microeconomics > Supply and Demand
Question 21
Answer 21
Correct answer is B
Consumer Choice
Question 1
Answer 1
Correct answer is B
Question 2
Answer 2
Correct answer is B
Question 3
Answer 3
Correct answer is D
Question 4
Answer 4
Correct answer is B
A Zero
B Less than Zero
C Greater than Zero
D Greater than 1
Production
Question 1
Answer 1
Correct answer is C
Question 2
Answer 2
Which of the following is true about the short run cost structure
of a firm as the quantity produced increases?
Correct answer is B
Question 3
Answer 3
Correct answer is C
Question 4
Answer 4
Correct answer is A
Question 5
Answer 5
Correct answer is C
Question 6
Answer 6
Correct answer is D
Question 7
Answer 7
Correct answer is C
Question 8
Answer 8
Correct answer is C
A Marginal Revenue
B Marginal Cost
C Marginal Product
D Marginal Revenue Product
Question 9
Answer 9
Correct answer is D
Market Structure
Question 1
Answer 1
You have a plot of land that can be used for farming or for
developing a golf course. You are willing to sell the land for
$400,000 in either case. A developer offers you $1,000,000 for
the land. What does the additional $600,000 represent in this
case?
Correct answer is A
A Economic Rent
B Normal Profit
C Marginal Revenue
D Equilibrium Price
Performance Measures
Question 1
Answer 1
Correct answer is B
Question 2
Answer 2
Correct answer is A
Question 3
Answer 3
Correct answer is C
Question 4
Answer 4
Correct answer is D
Question 5
Answer 5
Correct answer is B
A Frictional unemployment
B Structural unemployment
C Cyclical unemployment
D Full employment
Question 6
Answer 6
Correct answer is D
Question 7
Answer 7
Correct answer is A
Trade
Question 1
Answer 1
Correct answer is B
Question 2
Answer 2
Correct answer is C
A A quota.
B Shift of consumer preference.
C A tariff.
D A substitution strategy.
Question 3
Answer 3
Correct answer is D
Question 4
Which of the following corresponds to interest and dividends
received by residents in the U.S. from investments in other
countries.
A A credit in the capital account
B A credit in the current account.
C A debit in the capital account.
D A debit in the current account.
Answer 4
Correct answer is B
Interest and dividends received in the U.S. from
investments abroad represents a credit. Interest
and dividends represent income recorded in the
current account.
Question 5
Answer 5
Correct answer is B
Management1
Question 1
Answer 1
Correct answer is B
General2
Question 1
Answer 1
Correct answer is D
Question 2
Answer 2
Correct answer is A
Question 3
The advantages of a Limited Liability Company include all of
the following EXCEPT:
A limited liability of members
B unlimited life
C profits flow through to members as to avoid
double taxation
D flexible profit distribution
Question 4
One aspect of the Limited Liability Company (LLC) which
would generally be considered advantageous is
A limited life
B ability to go public
C flexibility of management
D laws regarding LLCs vary from state to state
Answer 3
Correct answer is B
Like a corporation, owners of an LLC enjoy limited
liability. Profits pass through to members, thus
avoiding double taxation (though an LLC can elect
to be taxed as a sole proprietor, partnership, S
corporation or C corporation). The economic
benefits of member interests can be separated and
assigned, giving the assignee the profits (or
losses) similar to a partnership.
Answer 4
Correct answer is C
In general, members of an LLC can establish
governance and protective provisions pursuant to a
contract or operating agreement, giving
management greaster flexibility than a corporation.
Corporations can continue forever, whereas an
LLC may dissolve when a member dies or files for
bankruptcy. Businesses which intend to go public
may be better served by choosing the corporate
form of business. And though it is a very minor
factor, laws governing LLCs vary from state to
state more so than corporation laws.
Business Environment & Concepts > LLCs > LLC and corporation compared
Answer 1
Correct answer is C
Business Environment & Concepts > LLCs > Members as agents (301) and authority via operating agreement
Answer 1
Correct answer is B
A I. only is correct.
B II. only is correct.
C Neither I. nor II. is correct.
D Both I. and II. are correct.
General3
Question 1
Answer 1
Correct answer is D
Fictitious names
Question 1
Answer 1
Correct answer is C
A be deemed a corporation.
B treated as a general partnership,with Hallasz and
Liggan as general partners.
C be considered a sole proprietorship.
D not be in violation of state filing requirements.
Business Environment & Concepts > Proprietorship > Proprietorship - adding a partner
Answer 1
Correct answer is A
Business Environment & Concepts > Financial Environment/Overview > Business Objective
Business Objective
Question 1
Answer 1
Correct answer is D
A Maximize profit
B Maximize EPS
C Maximize their salary
D Maximize shareholder wealth
Question 2
Answer 2
Correct answer is D
Business Environment & Concepts > Financial Environment/Overview > Financial Institutions
Financial Institutions
Question 1
Answer 1
Correct answer is A
A Taxation
B Limited Liability
C Infinite life
D Transferability of ownership
Question 2
Answer 2
Correct answer is D
A Commercial bank
B Pension fund
C Life insurance company
D All of the above are financial intermediaries
Question 3
Answer 3
Correct answer is C
Question 4
Which of the following is not a U.S. government agency?
A Government Employees Insurance Company
B Federal National Mortgage Association (Fannie
Mae)
C Federal Home Loan Mortgage Corporation
(Freddie Mac)
D Federal Housing Administration
Answer 4
Correct answer is A
GEICO is an insurance company. The other three
originate (FHA) or provide the secondary market
(Fannie Mae and Freddie Mac) for mortgages in
the U.S.
Question 5
Answer 5
A fund where investors buy shares from and sell shares to the
fund at the funds net asset value (NAV) is known as what
type of fund?
Correct answer is B
Business Environment & Concepts > Financial Environment/Overview > Financial Institutions
Question 6
Answer 6
Endowment funds
Correct answer is C
Business Environment & Concepts > Financial Environment/Overview > Financial Markets
Financial Markets
Question 1
Answer 1
Correct answer is B
A Primary markets
B Secondary markets
C Futures markets
D Spot markets
Question 2
Answer 2
Correct answer is D
Question 3
Answer 3
Correct answer is C
Question 4
Answer 4
Correct answer is A
A Spot market
B Futures market
C Money market
D Capital market
Question 5
Answer 5
Correct answer is C
A Floor trader
B Commission broker
C Specialist
D Market maker
Business Environment & Concepts > Financial Environment/Overview > Financial Markets
Question 6
Answer 6
Correct answer is B
Business Environment & Concepts > Financial Environment/Overview > Interest Rates
Interest Rates
Question 1
Answer 1
Correct answer is A
A Upward sloping
B Inverted
C Flat
D Humped
Question 2
Answer 2
Correct answer is D
A Nominal rate
B Stated rate
C Annual percentage rate (APR)
D Effective annual rate (EAR)
Question 3
Answer 3
Correct answer is B
A 18%
B 19.60%
C 1.50%
D 21.60%
Question 4
Answer 4
Correct answer is B
Question 5
Answer 5
Correct answer is B
Business Environment & Concepts > Financial Environment/Overview > Interest Rates
Question 6
Assume that the newspaper indicates that the Federal Reserve
has purchased a large quantity of US government securities.
Why was this action likely taken?
A It is a way to increase the monetary supply and,
therefore, put downward pressure on interest rates.
B It restricts the money that can be loaned by the
banks under its jurisdiction.
C It forces investors to find other investments, an
action which often causes a steep rise in the price of
gold.
D It expands the power of the Federal Reserve to
regulate unemployment rates for a short period of time.
Answer 6
Correct answer is A
One method by which the monetary supply can be
regulated is through open-market operations.
Federal Reserve Bank deposits can be used to
buy government securities as a way of raising the
supply of money. When more money is available,
it is easier to obtain and interest rates usually fall.
Business Environment & Concepts > Time Value of Money > Annuities/Perpetuities
Annuities/Perpetuities
Question 1
Answer 1
Correct answer is C
A Annuity
B Annuity due
C Perpetuity
D Consol
Question 2
Answer 2
Correct answer is A
Business Environment & Concepts > Time Value of Money > Present Value of a Future Amount
Answer 1
You are to receive $1,000 per year for the next ten years. You
are better off, in terms of time value of money, receiving the
money
Correct answer is B
Business Environment & Concepts > Time Value of Money > Future Value of an Amount
Answer 1
Correct answer is C
The more often a bank compounds the more
money that will be in your account. Compounding
involves paying interest on principal and previously
credited interest.
A Annual compounding
B Semi-annual compounding
C Quarterly compounding
D No compounding
Question 2
If you deposit $1,000 in a savings account that pays 8%
interest compounded quarterly, how much money will be in the
account at the end of 5 years? Future Value Factors for a
single amount of $1 in five periods is 1.4693 (8%), 1.2167
(4%), and 1.1041 (2 percent). Ten periods is 2.1589 (8%),
1.4802 (4%), and 1.2190 (2%). Twenty periods is 4.6610 (8%),
2.9111 (4%) and 1.4859 (2%)
Answer 2
Correct answer is C
Quarterly compounding requires that you look up
one fourth the interest rate (2%) and four times the
periods (five years is 20 quarterly periods). 2% and
20 periods results in a factor of 1.4859 times
$1,000 or $1,485.90.
A $1,469.30
B $1,480.20
C $1,485.90
D $2,159.90
Question 3
Answer 3
Correct answer is B
A $1,500
B $1,610.50
C $1,000
D $1,755.12
Question 4
Answer 4
Correct answer is B
A 7 yrs
B 9 yrs
C 10 yrs
D 20 yrs
Business Environment & Concepts > Time Value of Money > Future Value of an Amount
Question 5
Answer 5
Correct answer is D
A $4,506.10
B $5,866.60
C $7,335.90
D $6,335.93
Business Environment & Concepts > Time Value of Money > Present Value of a Future Sum
Answer 1
The two factors that determine the present value of a cash flow
are the timing of the cash flow and the discount rate. Which
combination of timing and discount rate will result in the
highest present value.
Correct answer is D
Business Environment & Concepts > Time Value of Money > Loan Amortization
Loan Amortization
Question 1
Answer 1
A client has taken out a 9% five year loan for $5,000. The
annual payment is $1,450. Since only the interest is tax
deductible it is necessary to amortize the loan. What is the
interest amount in year two?
Correct answer is B
A $450
B $360
C $270
D $810
Business Environment & Concepts > Security Valuation > Bond Valuation
Bond Valuation
Question 1
Answer 1
Correct answer is A
Question 2
May Corporation has $100 million of 10 years, AA rated, 8%
coupon (paid semi annually) bonds outstanding. The bonds
have a face value of $1,000 per bond. The current market rate
of interest for 10 years, AA rated bonds is 6%. Calculate the
current market price of a May Corporation bond. The present
value of $1 for various time periods and interest rates for those
periods is as follows: 5 periods: .863 (3 percent), .747 (6
percent), and .702 (8 percent); 10 periods: .744 (3 percent),
.558 (6 percent), and .492 (8 percent); 20 periods: .554 (3
percent), .312 (6 percent), and .239 (8 percent). The present
value of an ordinary annuity of $1 is also listed here for various
time periods and interest rates for those time periods: 5
periods: 4.580 (3 percent), 4.212 (6 percent), and 4.055 (8
percent); 10 periods: 8.530 (3 percent), 7.360 (6 percent), and
7.002; (8 percent); 20 periods: 14.877 (3 percent), 11.470 (6
percent), and 10.565 (8 percent). What does each $1,000
bond sell for?
Answer 2
Correct answer is C
Since the stated coupon rate of interest is greater
than the market rate, the bond will sell at a
premium. Because interest is paid semi-annually,
the yield rate will be 6 percent for a full-year but
only 3 percent for a six-month period. Because a
period of time is six-months and the bond matures
in 10 years, the computation uses 20 periods. The
$1,000 face value times .554 gives the present
value of the face value or $554. The $1,000 face
value times the stated rate of 8 percent for a
half-year period gives you interest payments of
$40. That is an ordinary annuity and should be
multiplied times 14.877 which gives a present
value of $595.08. Add the two present values and
you issue the bond for $1,149.08 ($554.00 plus
$559.08).
A $855.41
B $867.90
C $1,149.08
D $1,165.50
Question 3
Answer 3
Correct answer is D
Business Environment & Concepts > Security Valuation > Bond Valuation
Question 4
Answer 4
Correct answer is C
A 7%
B 9.72%
C 10.45%
D 33%
Question 5
The June Corporation has $100 million of 10 years, AA rated,
7% coupon (paid semi annually) bonds outstanding. The bonds
have a face value of $1,000 per bond. The current market rate
of interest for 10 years, AA rated bonds is 6%. Calculate the
current market price of a May Corporation bond. The present
value of $1 for various time periods and interest rates for those
periods is as follows: 5 periods: .863 (3 percent), .747 (6
percent), and .713 (7 percent); 10 periods: .744 (3 percent),
.558 (6 percent), and .508 (7 percent); 20 periods: .554 (3
percent), .312 (6 percent), and .258 (7 percent). The present
value of an ordinary annuity of $1 is also listed here for various
time periods and interest rates for those time periods: 5
periods: 4.580 (3 percent), 4.212 (6 percent), and 4.100 (7
percent); 10 periods: 8.530 (3 percent), 7.360 (6 percent), and
7.024; (7 percent); 20 periods: 14.877 (3 percent), 11.470 (6
percent), and 10.594 (7 percent). What does each $1,000
bond sell for?
A $684.89
B $713.45
C $990.58
D $1,74.70
Answer 5
Correct answer is D
In this case, you do not actually need to make a
present value computation. Since the stated
coupon rate of interest is greater than the market
rate, the bond will sell at a premium and only one
answer is a number above the face value.
However, because interest is paid semi-annually,
the yield rate will be 6 percent for a full-year but
only 3 percent for a six-month period. Because a
period of time is six-months and the bond matures
in 10 years, the computation uses 20 periods. The
$1,000 face value times .554 gives the present
value of the face value or $554. The $1,000 face
value times the stated rate of 7 percent for a
half-year period gives you interest payments of
$35. That is an ordinary annuity and should be
multiplied times 14.877 which gives a present
value of $520.70. Add the two present values and
you issue the bond for $1,074.70 ($554.00 plus
$520.70).
Business Environment & Concepts > Security Valuation > Risk and Return
Answer 1
XYZ, Inc. has a beta coefficient of 1.5x. The current risk free
rate of return is 4% and the return on the overall stock market
is expected to be 10%. What is the expected return on XYZ's
stock using the capital asset pricing model (CAPM).
Correct answer is D
A 10%
B 15%
C 6%
D 13%
Question 2
Answer 2
Correct answer is D
A Correlation coefficient
B Semi-variance
C Covariance
D Coefficient of variation
Question 3
Answer 3
Correct answer is C
Question 4
Answer 4
Correct answer is D
A Business risk
B Financial risk
C Liquidity risk
D Systematic risk
Question 5
Answer 5
Correct answer is D
Business Environment & Concepts > Security Valuation > Risk and Return
Question 6
Answer 6
Correct answer is C
Question 7
Answer 7
Correct answer is D
A Correlation coefficient
B Semi-variance
C Covariance
D Coefficient of variation
Business Environment & Concepts > Security Valuation > Stock Valuation
Stock Valuation
Question 1
Answer 1
Correct answer is B
Constant growth DDM models state that V=D?
(K-G) Where Di is the dividend 1 period from no D^
=Do (1+G) =1.00(1.06) or $1.06 1.06/(.09-03) =
$35.33
A $33.33
B 35.33
C 11.11
D 16.67
Question 2
ABC Company has 2 million shares of preferred stock
outstanding. The stock pays a $3 annual dividend. Assuming
investors have an 8% required rate of return, what is the value
of a share of ABC's preferred stock?
Answer 2
Correct answer is C
A preferred stock is perpetuity. The value of
perpetuity is calculated by dividing the cash flow
by the required rate of return. $3/.08 = $37.50
A $3
B $24
C $37.50
D Cannot calculate
Question 3
Answer 3
Correct answer is A
A Value increases
B Value decreases
C Value remains unchanged
D The growth rate does not impact valuation
Question 4
Answer 4
Correct answer is B
A Common stock
B Preferred stock
C Bonds
D Convertible bonds
Business Environment & Concepts > Security Valuation > Stock Valuation
Question 5
Answer 5
Correct answer is C
A 10%
B 5%
C 7%
D 3%
Question 6
Answer 6
Correct answer is D
Question 7
Answer 7
Correct answer is B
A 16 percent
B 25 percent
C 28 percent
D 34 percent
Business Environment & Concepts > Security Valuation > Common Stock
Common Stock
Question 1
Answer 1
Correct answer is D
A Multiple of earnings
B Multiple of cash flow
C Multiple of book value
D Super normal growth DDM
Question 2
Answer 2
Correct answer is D
A 4%
B 7%
C 11.50%
D 11%
Question 3
Answer 3
Correct answer is D
A CAPM approach
B Dividend yield plus growth approach (DCF)
C Bond yield plus risk premium approach
D Seat of the pants estimate approach
Business Environment & Concepts > Working Capital Management > Derivatives/Options
Derivatives/Options
Question 1
Answer 1
The right to buy shares at a fixed price for a fixed period of time
is the definition of a(n).
Correct answer is C
A Futures contract
B Forward contract
C Call option
D Put option
Question 2
Answer 2
Correct answer is A
Question 3
Answer 3
Correct answer is D
A Preferred stock
B Put option
C Call option
D Warrant
Question 4
Answer 4
Correct answer is C
Business Environment & Concepts > Working Capital Management > Cash and Marketable Securities
Answer 1
Correct answer is C
A Commercial paper
B Bankers acceptance
C Treasury note
D Negotiable certificate of deposit
Question 2
Answer 2
Correct answer is D
A Transactions balance
B Compensating balance
C Precautionary balance
D Trade balance
Question 3
Answer 3
Correct answer is A
Cash cycle is inventory age plus receivables minus
payables. 75+40-25= 90 days.
A 90 days
B 85 days
C 60 days
D 10 days
Question 4
The Seeger Corporation is considering beginning to use
concentration banking. What does that indicate?
A Seeger will borrow money only from one banking
company in order to get a lower rate.
B Seeger will instruct its customers to mail
payments to a bank in their local area rather than to its
headquarters.
C Seeger will maintain all checking and other
accounts in only one bank in order to gain more interest
income.
D Seeger will begin to serve as its own banker for
most transactions to reduce the amounts paid for service
charges.
Answer 4
Correct answer is B
In managing cash, companies like to receive
payments from customers as quickly as possible.
Mail sent over a long distance can take several
days to arrive. Therefore, some companies have
payments sent by customers directed to local
banks around the country that can electronically
forward the money to the company. That can
speed up cash collection by several days. The
practice is referred to as concentration banking.
Business Environment & Concepts > Working Capital Management > Short Term Credit
Answer 1
Correct answer is D
A Credit period
B Credit standards
C Collection policy
D Aging schedule
Credit policy has 4 components; Credit period when payment is due; Credit standards - criteria to
grant credit; Collection policy- enforcement of the
collection process; Discount - to speed up
payments
Question 2
Answer 2
Correct answer is D
A Flexibility
B Cost
C Speed that funds can be obtained
D Risk
Question 3
Answer 3
Correct answer is B
A Line of credit
B Letter of credit
C Bankers acceptance
D Revolving line of credit
Question 4
Answer 4
Correct answer is A
A Compensating balance
B Letter of credit
C Line of credit
D Loan guarantee
Business Environment & Concepts > Working Capital Management > Inventory2
Inventory2
Question 1
Answer 1
Correct answer is D
Question 2
Answer 2
Correct answer is A
Question 3
Answer 3
Correct answer is C
In the absence of a safety stock, reorder point is
equal to daily usage times the time it takes for a
supplier to deliver. Daily usage is 3,650/365 or 10
x 5 days to deliver (lead time) is equal to 50
engines as a reorder point.
A 10 engines
B 365 engines
C 50 engines
D 730 engines
Question 4
Answer 4
Correct answer is D
Business Environment & Concepts > Working Capital Management > Inventory2
Question 5
Answer 5
Correct answer is B
A 45.8 Days
B 50.9 Days
C 53.2 Days
D 55.7 Days
Business Environment & Concepts > Working Capital Management > Accounts Receivables
Accounts Receivables
Question 1
Answer 1
Correct answer is B
Question 2
Answer 2
Correct answer is C
A Pledging
B Aging
C Factoring
D Discounting
Question 3
Answer 3
Correct answer is A
A 19.2 Days
B 25.4 Days
C 27.6 Days
D 29.8 Days
Business Environment & Concepts > Working Capital Management > Accounts Payable
Accounts Payable
Question 1
Answer 1
Your supplier gives you credit terms of 2/10 net 30. This
means that if you pay within 10 days you take a 2% discount. If
not, the balance is due in full within 30 days. What is the
annual percentage cost to you of not taking the discount and
paying on the 30th day?
Correct answer is B
A 2%
B 37.24%
C 36%
D 24%
Question 2
Answer 2
Correct answer is A
A 18 days
B 49 days
C 53 days
D 80 days
Question 3
Answer 3
Correct answer is B
A 23 days
B 26 days
C 54 days
D 82 days
Business Environment & Concepts > Working Capital Management > Accounts Payable
Question 4
Lenit Corporation recently acquired widgets from a company in
the country of Becktle where the currency is the romtag.
Each romtag is currently worth $.40 and Lenit must pay
100,000 romtags in 60 days (value of $40,000). The
treasurer for Lenit believes that the value of the romtag is going
to go up over the next 60 days so that a more valuable
currency will have to be paid and money will be lost. What
action is the treasurer most likely to take?
A Acquire a forward exchange contract that allows
the company to buy 100,000 romtags in 60 days for
exactly $.41.
B Sell the widgets in the U. S. as quickly as possible
even if they must be sold at a loss.
C Buy the next batch of widgets in some other
country.
D Begin production of widgets in the U. S.
Answer 4
Correct answer is A
The fluctuation of currency values is always a
concern but one that can be managed through a
hedging arrangement. The company has a
100,000 romtag payable. To create a hedge, the
company needs to establish a 100,000 romtag
receivable. The forward exchange contract is set
up here so that the company will get 100,000
romtags in 60 days. That is a receivable. Any
change in the value of the romtag will cause equal
and offsetting changes in the receivable and the
payable. Thus, a gain on one cancels out a loss
on the other. The company does have to pay
$41,000 for the romtags that will be received which
is $1,000 more than the current value of the
liability. That is the cost of establishing the
hedge. The company knows that amount and has
judged it to be more reasonable than the
uncertainty of waiting to see what paying 100,000
romtags will cost the company in 60 days.
Business Environment & Concepts > Capital Budgeting/Financial Modeling > Investment Evaluation Methods
Answer 2
Correct answer is D
Question 3
Answer 3
Correct answer is C
Since the project has a negative NPV, this means
that the projects IRR is less than the firms cost
of capital (9%). Any project that is acceptable
based on NPV is also acceptable based on IRR. If
the NPV is positive, the projects IRR is above the
firms cost of capital.
A Greater than 9%
B Equal to 9%
C Less than 9%
D 12%
Question 4
Answer 4
Correct answer is B
A 0.3
B 1.2
C $200,000
D4
Business Environment & Concepts > Capital Budgeting/Financial Modeling > Investment Evaluation Methods
Question 5
Answer 5
Correct answer is C
A 4 yrs
B 3 yrs
C 3.5 yrs
D 4.5 yrs
Question 6
Answer 6
Correct answer is D
A Payback period
B Net present value
C Internal rate of return (IRR)
D Discounted payback period
Question 7
Answer 7
Correct answer is C
Question 8
Answer 8
Correct answer is D
Business Environment & Concepts > Capital Budgeting/Financial Modeling > Investment Evaluation Methods
Question 9
Josiah Corporation is considering two investments. Investment
A will cost $10,000 today but pay back $14,000 in exactly two
years. Investment B will cost $20,000 today but pay back
$39,000 in exactly three years. The present value of $1
received in two years at a desired annual interest rate of 10
percent is .826. The present value of $1 received in three
years at a desired annual interest of 10 percent is .751. Which
of the following is true?
A Investment A has a positive net present value of
more than $3,600.
B Investment A has a positive net present value of
less than $1,100.
C Investment B has a positive net present value of
more than $9,100.
D Investment B has a positive net present value of
less than $6,500.
Answer 9
Correct answer is C
The net present value technique is a capital
budgeting method used to help evaluate the
wisdom of an acquisition. The present value of
future cash flows is determined at a desired rate
and compared to the initial cost. A positive net
present value means that the present value
exceeds the cost by the specified amount.
Investment A has a present value of $11,564
($14,000 times .826) for a positive net present
value of $1,564 ($11,564 less $10,000).
Investment B has a present value of $29,289
($39,000 times .751) for a positive net present
value of $9,289 ($29,289 less $20,000).
Question 10
Answer 10
Correct answer is D
Business Environment & Concepts > Capital Budgeting/Financial Modeling > Investment Evaluation Methods
Question 11
Answer 11
Correct answer is B
Question 12
Answer 12
Correct answer is B
Business Environment & Concepts > Capital Budgeting/Financial Modeling > Investment Evaluation Methods
Question 13
A company is studying a possible investment opportunity. The
company can spend $22,000 and then get $5,000 in cash at
the end of each of the next 8 years. The company has a target
rate on such investments of 6 percent per year. The present
value of an annuity due of $1 per year at 6 percent annual
interest for 8 years is 6.58. The present value of an ordinary
annuity of $1 per year at 6 percent annual interest for 8 years is
6.21. Which of the following is true?
A Company should buy the investment because it
has a net present value of $9,050.
B Company should buy the investment because it
has a net present value of $10,900.
C Company should buy the investment because the
present value of 6.58 is larger than 6.0.
D Company should buy the investment because the
present value of 6.21 is larger than 6.0.
Answer 13
Correct answer is A
Net present value is one technique used by some
companies to evaluate the wisdom of an
investment. Because payments are made at the
end of each period, this is an ordinary annuity. The
present value of the cash flows is $5,000 times
6.21 or $31,050. Because the cost is $22,000, the
extra amount ($9,050 or $31,050 less $22,000) is
called the net present value. Investments with a
positive net present value are viewed as good
choices.
Business Environment & Concepts > Capital Budgeting/Financial Modeling > Cost of Capital
Cost of Capital
Question 1
Answer 1
Correct answer is B
A 10%
B 12.15%
C 15%
D 6%
Question 2
Answer 2
Correct answer is D
A Book value
B Market value
C Optimal (target) values
D Replacement value
Business Environment & Concepts > Capital Budgeting/Financial Modeling > Calculating Cash Flows
Answer 1
Correct answer is C
Cash flow is equal to: the increase in revenue
($300,000) minus depreciation of the asset
($200,000) or $100,000 change in income. The
$100,000 is taxed at 35% resulting in a $65,000
increase in net income. NI plus depreciation
($65,000 + $200,000) is equal to cash flow.
A $300,000
B $195,000
C $265,000
D $700,000
Question 2
Answer 2
Correct answer is D
A Opportunity cost
B Cannibalization (erosion in cash flow to existing
projects)
C Impact of the project on net working capital
requirements
D Sunk costs
Question 3
Answer 3
Correct answer is C
Business Environment & Concepts > Capital Budgeting/Financial Modeling > Economic Value Added
Answer 1
Correct answer is C
Question 2
Answer 2
Correct answer is A
A $4,000,000
B $6,000,000
C $1,200,000
D 40%
Business Environment & Concepts > Capital Budgeting/Financial Modeling > Return on Invested Capital (ROIC)
Answer 1
Correct answer is C
Question 2
Answer 2
Correct answer is A
A 20%
B 16.66%
C 10%
D 21.82%
Business Environment & Concepts > Long-Term Financing > Fixed Income Securities
Answer 1
Correct answer is D
A Mortgage
B Subordinated
C Senior
D Debenture
Question 2
Answer 2
Correct answer is B
A Bond indenture
B Sinking fund
C Call provision
D Warrant
Question 3
Answer 3
Correct answer is A
A Indenture
B Debenture
C Warrants
D Covenant
Question 4
Answer 4
Correct answer is B
Business Environment & Concepts > Long-Term Financing > Investment Banking
Investment Banking
Question 1
Answer 1
Correct answer is D
Leases
Question 1
Answer 1
Correct answer is C
The correct answer is greater than or equal to 75%
of the assets life.
Question 2
Answer 2
Correct answer is D
A Synthetic lease
B Operating lease
C Capital lease
D Sale and lease back
Business Environment & Concepts > Long-Term Financing > Capital Structure Decisions
Answer 1
Correct answer is C
A Operating leverage
B Operating break-even point
C Financial leverage
D Financial break-even point
Question 2
Answer 2
Correct answer is A
Question 3
Answer 3
Correct answer is D
Best effort means they will sell what they can for a
commission but they take no ownership risk.
Underwrite means they guarantee a price to the
issuer and try to sell it at a higher price to earn a
profit. Private placement means they sell it to a
group of institutional investors.
Question 4
Answer 4
Correct answer is B
Business Environment & Concepts > Long-Term Financing > Dividend Policy
Dividend Policy
Question 1
Answer 1
Correct answer is B
Question 2
Answer 2
Correct answer is C
A Annually
B Monthly
C Quarterly
D Semi-annually
Question 3
Answer 3
Correct answer is B
Business Environment & Concepts > Long-Term Financing > Fixed Income Securities
Business Environment & Concepts > Long-Term Financing > Hybrid Securities
Hybrid Securities
Question 1
Answer 1
Correct answer is B
A Retained earnings
B Preferred stock
C Common stock
D Bond
Business Environment & Concepts > Long-Term Financing > Common Stocks
Common Stocks
Question 1
Answer 1
Correct answer is B
A Proxy right
B Preemptive right
C Founders shares
D Put option
IT Fundamentals
Question 1
Answer 1
Correct answer is A
Question 2
Answer 2
Correct answer is B
Question 3
Answer 3
Correct answer is D
Question 4
Answer 4
Correct answer is A
Question 5
Answer 5
Correct answer is C
Question 6
Answer 6
Correct answer is C
Question 7
Answer 7
Correct answer is B
Question 8
Answer 8
Correct answer is A
Question 9
Answer 9
Correct answer is A
Question 10
Answer 10
Correct answer is D
Question 11
Answer 11
Correct answer is B
Question 12
Answer 12
Correct answer is C
A Bus Circuitry
B RAM and ROM
C Input/Output devices
D Primary and Secondary Storage
Question 13
Answer 13
Correct answer is D
Question 14
Answer 14
Correct answer is C
Question 15
Answer 15
Correct answer is A
Question 16
Answer 16
Correct answer is C
Question 17
Answer 17
Correct answer is C
Question 18
Answer 18
Correct answer is D
Question 19
Answer 19
Correct answer is A
Question 20
Answer 20
Correct answer is B
Question 21
Answer 21
Correct answer is D
Question 22
Answer 22
Correct answer is B
Question 23
Answer 23
Correct answer is A
Question 24
Answer 24
Correct answer is A
Question 25
Answer 25
Correct answer is D
A It is unlimited
B It does not use system resources
C It is located offsite
D It saves time and money
Question 26
Answer 26
Correct answer is B
Question 27
Answer 27
Correct answer is B
Question 28
Answer 28
Correct answer is D
Business Environment & Concepts > IT > Disaster Recovery and Business Continuity
Answer 1
Correct answer is D
Question 2
Answer 2
Correct answer is B
Question 3
Answer 3
Correct answer is A
Business Environment & Concepts > IT > Disaster Recovery and Business Continuity
Question 4
Answer 4
Correct answer is C
Question 5
Answer 5
Correct answer is B
Question 6
Answer 6
Correct answer is A
Business Environment & Concepts > IT > Disaster Recovery and Business Continuity
Question 7
Answer 7
Correct answer is A
Question 8
Answer 8
Correct answer is D
Question 9
Answer 9
Correct answer is B
Business Environment & Concepts > IT > Disaster Recovery and Business Continuity
Question 10
Answer 10
Correct answer is C
Question 11
Answer 11
Correct answer is C
A A Hot Site
B A Reciprocal Agreement
C A combination of the Hot Site, Cold Site,
Reciprocal Agreement and Internal Site
D The Checkpoint approach used in conjunction with
the Rollback Approach
Answer 1
Correct answer is C
Question 2
Answer 2
Correct answer is A
Question 3
Answer 3
Correct answer is B
Question 4
Answer 4
Correct answer is D
Question 5
Answer 5
Correct answer is B
Question 6
Answer 6
Correct answer is B
Question 7
Answer 7
Correct answer is B
Question 8
Answer 8
Correct answer is B
They are basically the same.
Question 9
Answer 9
Correct answer is C
Question 10
Answer 10
Correct answer is A
Question 11
Answer 11
Correct answer is D
Question 12
Answer 12
Correct answer is D
Options A - C are related to AI while D is untrue
Question 13
Answer 13
Correct answer is C
Question 14
Answer 14
Correct answer is C
Question 15
Answer 15
Correct answer is A
Question 16
Answer 16
Correct answer is B
Question 17
Answer 17
Correct answer is C
Question 18
Answer 18
Correct answer is A
A Bit
B Byte
C Character
D Field
Question 19
Answer 19
Correct answer is D
A Bit
B Byte
C Character
D Field
Question 20
Answer 20
Correct answer is D
A Bit
B Byte
C Field
D Character
Question 21
Answer 21
Correct answer is A
A Byte
B Bit
C Character
D Field
Question 22
Answer 22
Correct answer is A
Question 23
A company has seven divisions. The Blue Division is very
slow at sending out invoices so that cash collections are
delayed. The management of the Blue Division looks at the
invoice systems operating within the other six divisions and
discovers that the Green Division has the best practices in this
area of the business. Therefore, where practical, they adopt
some of these practices for use by the Blue Division. What is
this process called?
A Maximization of Time
B Benchmarking
C Quantum Time Theory
D Haglers Theory of Routine Processes
Answer 23
Correct answer is B
Company officials should always be looking for
better ways to do things so that their own
organization is able to become more efficient on a
continuous basis. Comparisons should be made
between the way that activities are executed by the
organization and the procedures carried out by
others, in other divisions and even in other
companies. The process of discovering
weaknesses and using the results obtained from
others to create improvement is known as
benchmarking.
IT Controls
Question 1
Answer 1
Correct answer is A
Question 2
Answer 2
Correct answer is D
All three procedures may control possible software
piracy. Then other answers are unrelated to IT
Security
Question 3
Answer 3
Correct answer is A
Question 4
Answer 4
Correct answer is A
Question 5
Answer 5
Correct answer is D
A Clamps or chains
B Regular backup
C Control over access from outside
D User reconciliations
Question 6
Answer 6
Correct answer is C
Question 7
Answer 7
Correct answer is D
Question 8
Answer 8
Correct answer is A
Question 9
Answer 9
Correct answer is C
Question 10
Answer 10
Correct answer is B
Question 11
Answer 11
Correct answer is D
Question 12
Answer 12
Correct answer is A
Question 13
Answer 13
Correct answer is A
Question 14
Answer 14
Correct answer is B
Question 15
Answer 15
Correct answer is D
A Weather
B Theft
C Disgruntled employees
D Computer based fraud
Question 16
Answer 16
Correct answer is A
A Acts of War
B Unauthorized access to confidential data
C Malicious alteration of files
D Computer based fraud
Question 17
Answer 17
Correct answer is A
Question 18
Answer 18
Correct answer is B
Question 19
Answer 19
Correct answer is C
Question 20
Answer 20
Correct answer is D
Question 21
Answer 21
Correct answer is B
(B) The Confidentiality principle requires that
information designated as confidential is protected
as committed or agreed
Question 22
Answer 22
Correct answer is B
Question 23
Answer 23
Correct answer is A
Question 24
Answer 24
Correct answer is D
Question 25
Answer 25
Correct answer is B
Question 26
Answer 26
Correct answer is B
Question 27
Answer 27
Correct answer is A
Question 28
Answer 28
Correct answer is C
Question 29
Answer 29
Correct answer is A
A Systems Analyst
B Database Administrator
C Systems Programmer
D Applications Programmer
Question 30
Answer 30
Correct answer is C
A PERT Chart
B Gantt Chart
C Systems Flowchart
D Decision Tree
Question 31
Answer 31
Correct answer is C
A Systems Analyst
B Database Administrator
C Systems Programmer
D Applications Programmer
Question 32
Answer 32
Correct answer is D
A Systems Analyst
B Database Administrator
C Systems Programmer
D Applications Programmer
Question 33
Answer 33
Correct answer is B
A Systems Analyst
B Database Administrator
C Systems Programmer
D Applications Programmer
Question 34
Answer 34
Correct answer is A
A Program Flowchart
B Gantt Chart
C Systems Flowchart
D Decision Tree
Question 35
Answer 35
Correct answer is D
A End User
B Systems programmer
C Database Administrator
D Systems Analyst
Question 36
Answer 36
Correct answer is B
A Database Administrator
B End Users
C Systems Programmer
D Data Operations
Question 37
Answer 37
Correct answer is A
A Operator
B Database Administrator
C Systems Analyst
D Systems programmer
Question 38
Answer 38
Correct answer is B
A Operations
B Applications Programmer
C Database Administrator
D End User
Question 39
Answer 39
Correct answer is D
A Applications Programmer
B Database Administrator
C Outsourced Vendors
D Operations
Question 40
Answer 40
Correct answer is B
A Operations
B Librarian
C Data Control
D Database Administrator
Question 41
Answer 41
Correct answer is B
A Librarian
B Data Control
C Database Administrator
D Operations
Question 42
Answer 42
Correct answer is B
Question 43
Answer 43
Correct answer is B
A Web Master
B Web Administrator
C Web Designer
D Web Coordinator
Question 44
Answer 44
Correct answer is A
A Web Master
B Web Administrator
C Web Designer
D Web Coordinator
Question 45
Answer 45
Correct answer is C
A Web Master
B Web Administrator
C Web Designer
D Web Coordinator
Question 46
Answer 46
Correct answer is D
A Web Master
B Web Administrator
C Web Designer
D Web Coordinator
Question 47
Answer 47
Correct answer is C
A Systems Programmer
B Applications Programmer
C Internet Developer
D Intranet/Extranet Developer
Question 48
Answer 48
Correct answer is D
A Systems Programmer
B Applications Programmer
C Internet Developer
D Intranet/Extranet Developer
Question 49
Answer 49
Correct answer is A
Question 50
Answer 50
Correct answer is B
Question 51
Answer 51
Correct answer is A
Question 52
Answer 52
Correct answer is B
Question 53
Answer 53
Correct answer is D
Question 54
Answer 54
Correct answer is B
Question 55
Answer 55
Correct answer is A
Question 56
Answer 56
Correct answer is A
Question 57
Answer 57
Correct answer is C
Question 58
Answer 58
Correct answer is D
Question 59
Answer 59
Correct answer is A
Question 60
Answer 60
Correct answer is B
Question 61
Answer 61
Correct answer is C
Question 62
Answer 62
Correct answer is A
Question 63
Answer 63
Correct answer is B
Question 64
Answer 64
Correct answer is D
Question 65
Answer 65
Correct answer is D
Question 66
Answer 66
Correct answer is B
Question 67
Answer 67
Correct answer is A
Question 68
Answer 68
Correct answer is B
Question 69
Answer 69
Correct answer is C
Question 70
Answer 70
Correct answer is A
Question 71
Answer 71
Correct answer is D
Question 72
Answer 72
Correct answer is B
Question 73
Answer 73
Correct answer is C
Question 74
Answer 74
Correct answer is D
Question 75
Answer 75
Correct answer is A
Question 76
Answer 76
Correct answer is B
Question 77
Answer 77
Correct answer is D
Question 78
User control activities test the completeness and accuracy of
computer processing controls. Which of the following lists is
not an example of a user control activity?
A Checks of computer output aginst source
documents, control totals or other input
B Reviewing computer logs
C Policies and procedures that document authorized
users and receipients of data
D Preprinted forms, check digits, control., batch and
proof totals, hash totals, record counts and limit or
reasonable tests
Answer 78
Correct answer is D
(D) Options A, B and C are all examples of user
control activities. Option D lists examples of input
validation or edit controls.
Question 79
Answer 79
Correct answer is A
Question 80
A company has asked one of its computer programmers to
create a new program to compute and print payroll checks for
each of its 8,000 hourly employees. In writing this program,
the programmer includes a step where an error report must be
produced for any employee who is to receive payment based
on a rate that is below the federal minimum wage rate. What
is this type of control called?
A Legality implementation control
B Minimal control
C Limit test
D Pay incentive test
Answer 80
Correct answer is C
In writing computer programs, programmers often
insert high and low barriers to make sure that any
errors are caught if they are especially large.
These controls are referred to as limit tests
because they place limits around the amounts that
can be entered at certain points. Therefore, the
programmer might well require that additional
processing would be necessary if a paycheck was
(for example) above $50.00 per hour or below the
minimum federal wage rate. Those would be limit
tests.
Business Environment & Concepts > Planning, Control and Analysis > Basic Cost Terminology
Answer 1
Correct answer is A
Prime costs are easily traceable to specific units of
production and include direct labor and direct
materials. In this case, that is $500 plus $400 or
$900.
A $900
B $700
C $1,200
D $500
Question 2
Answer 2
Correct answer is C
A $100
B $200
C $300
D $800
Business Environment & Concepts > Planning, Control and Analysis > Cost-Volume-Profit Analysis
Cost-Volume-Profit Analysis
Question 1
Answer 1
Correct answer is D
Question 2
Answer 2
Correct answer is C
A $420,000
B $540,000
C $600,000
D $660,000
Question 3
Answer 3
Correct answer is C
Question 4
Answer 4
Correct answer is B
Question 5
Answer 5
Correct answer is C
Business Environment & Concepts > Planning, Control and Analysis > Cost-Volume-Profit Analysis
Question 6
Answer 6
Correct answer is A
Question 7
Answer 7
Correct answer is B
Question 8
Answer 8
Correct answer is C
Question 9
Answer 9
Correct answer is D
Business Environment & Concepts > Planning, Control and Analysis > Cost-Volume-Profit Analysis
Question 10
Last year, a company made 100,000 widgets and sold them for
$20 each. The fixed costs were $500,000 and the company
made a profit of $100,000. In the new year, the company
plans to raise the price to $25 per unit but sell only 90,000.
What is the anticipated profit?
A $110,000
B $250,000
C $320,000
D $490,000
Answer 10
Correct answer is D
Last year the company had sales of $2 million
(100,000 times $20 each). Fixed costs were
$500,000 so the amount left over to cover variable
costs and produce a profit was $1.5 million. The
profit was $100,000 so the variable cost must have
been $1.4 million. That is $14 per unit (since it is a
variable cost). This year, sales are $2,250,000
($25 times 90,000) but fixed costs (because they
are fixed) remain at $500,000. Variable cost is $14
per unit or $1,260,000 ($14 times 90,000). The
profit is $490,000 ($2,250,000 less $1,260,000 and
less $500,000).
Business Environment & Concepts > Planning, Control and Analysis > Activity Based Costing
Answer 1
Correct answer is B
Question 2
Answer 2
Correct answer is D
A Conversion Cost
B Marketing Cost
C Cost of Goods Sold
D Overhead Cost
Question 3
Answer 3
Correct answer is C
Business Environment & Concepts > Planning, Control and Analysis > Activity Based Costing
Question 4
Answer 4
Correct answer is C
A Job-order costing
B Process costing
C Activity-based costing
D Just-in-time costing
Business Environment & Concepts > Planning, Control and Analysis > Budgeting and Responsibility Accounting
Answer 1
Correct answer is C
Question 2
Answer 2
Correct answer is D
Question 3
Answer 3
Correct answer is D
A 20,000 pounds
B 30,000 pounds
C 60,000 pounds
D 90,000 pounds
Question 4
A company manufactures widgets. A widget takes 2 pounds
of material at $9 per pound and 3 hours of labor at $16 per
hour. Factory overhead is applied at the rate of $6 per direct
labor hour. The company wants to have a gross profit
percentage of 30 percent. What should the company set as
its sales price for each widget?
A $109.20
B $115.40
C $118.60
D $120.00
Answer 4
Correct answer is D
Each widget has a total cost of $84.00. That is
direct material of $18 (2 times $9), direct labor of
$48 (3 times $16), and factory overhead of $18 (3
times $6). Because the company wants a gross
profit percentage of 30 percent, the sales prices
(SP) should be: SP 84 = .30SP. Or, with
rearrangement: .70 SP = 84. By dividing both
sides by .70, SP = 120. That is the sales price to
get that gross profit percentage.
Business Environment & Concepts > Planning, Control and Analysis > Variable and Absorption (full) costing
Answer 1
Correct answer is A
Variable and absorption costing methods account
for fixed manufacturing overhead in different ways.
Under variable costing, fixed manufacturing
overhead is expensed immediately as a period cost
whereas under absorption costing, such amounts
are treated as a product cost and added to the cost
of inventory. Absorption costing is used for
external reporting purposes. Variable cost is used
for internal decision making purposes.
Question 2
Answer 2
Correct answer is A
Question 3
Answer 3
Correct answer is D
A Depreciation on machines
B Salaries for Direct Labor
C Insurance for factory equipment
D Salaries for sales force
Business Environment & Concepts > Planning, Control and Analysis > Variable and Absorption (full) costing
Question 4
A company begins producing widgets this year and
manufacturers 30,000 and sells 25,000. Direct material cost
$130,000 and direct labor cost $90,000. Factory overhead was
$140,000: $80,000 variable and $60,000 fixed. Selling and
administrative expenses were $200,000: $90,000 variable and
$110,000 fixed. For internal reporting purposes, the company
uses variable (direct) costing. What is the ending amount of
finished goods?
A $48,000
B $50,000
C $60,000
D $65,000
Question 5
What is a scattergraph?
A A method for forecasting product demand on an
X/Y axis.
B A graph to help compute the relationship between
two variables.
C A chart designed to pinpoint unexpected changes
as a result of variable costing.
D A graphed picture created to pick up negative
trends in sales figures over time.
Answer 4
Correct answer is B
Direct (variable) costing only considers variable
manufacturing cost in determining the cost of
inventory. To produce 30,000 units, the variable
manufacturing costs were $300,000 (direct material
of $130,000, direct labor of $90,000, and variable
factory overhead of $80,000). That is $10 per unit.
The company produced 30,000 units but only sold
25,000 so 5,000 units were left. At $10 each, that
is a total cost (according to variable costing) of
$50,000.
Answer 5
Correct answer is B
Business Environment & Concepts > Planning, Control and Analysis > Financial Planning
Financial Planning
Question 1
Answer 1
Mary and Joe are doing financial planning for their small
business, M&J Outfitters. Mary says to Joe, the financial
planning process consist of the following. Mary was right about
the financial planning process except for:
Correct answer is C
Business Environment & Concepts > Cost Accounting > Job and Process Costing
Answer 1
Correct answer is B
The answer is 120%. Based on the solutions
approach we subtract $1,800 (Direct materials =
$800+ Direct labor = $1,000) from the WIP
balance of $3,000. That gives a remainder of
$1,200 of overhead. $1,200/$1,000 equals the
percentage of direct labor costs or 120%.
A 83%.
B 120%.
C 40%.
D 300%.
Question 2
Answer 2
Correct answer is C
Question 3
Answer 3
Correct answer is D
Business Environment & Concepts > Cost Accounting > Job and Process Costing
Question 4
Answer 4
Correct answer is B
A $450,000
B $480,000
C $510,000
D $540,000
Question 5
Answer 5
Correct answer is C
Business Environment & Concepts > Cost Accounting > Job and Process Costing
Question 6
Answer 6
Correct answer is A
Question 7
A company produces bottles of orange juice. This year the
company spent $30,000 to produce 21,000 bottles of orange
juice. However, 1,000 bottles of juice were lost when a valve
on a machine broke. So, only 20,000 bottles of juice were
actually shipped to the stores. Of that amount, 18,000 bottles
were sold and 2,000 bottles remain on the shelf. The
company believes that breakage and loss of up to 10 percent of
the final output is normal. Any breakage and loss of above 10
percent is viewed as abnormal. What is the cost of the
companys ending inventory?
A $2,857
B $2,943
C $2,988
D $3,000
Answer 7
Correct answer is D
The company only lost 5 percent of its output
(1,000 bottles versus 20,000 bottles as final
output). That is within the normal range and is
viewed as a cost of producing the good units. The
cost of lost units is only separated and put into a
loss account if it is viewed as abnormal. Here,
20,000 units cost $30,000 to produce which is
$1.50 per bottle. The company still has 2,000
bottles left. At $1.50 per bottle, that is an ending
inventory of $3,000.
Business Environment & Concepts > Cost Accounting > Job and Process Costing
Question 8
A company spends $200,000 and produces 10,000 pounds of
product X and 20,000 pounds of product Y. The joint cost will
be allocated between these two based on units produced. The
company also produced 1,000 pounds of product Z that can be
sold for $6 per pound after spending $1 per pound to put into
appropriate packages. Product Z is viewed as a by-product
and recorded at net realizable value. What portion of the joint
cost is allocated to product X?
A $60,000
B $64,250
C $65,000
D $66,667
Answer 8
Correct answer is C
The by-product must be handled first. This
company records it at net realizable valuethe net
amount of cash that can be received. Each pound
is sold for $6 after spending $1 so the net
realizable value is $5 per pound or $5,000 for the
entire 1,000 pounds. That part of the $200,000 is
recorded for the by-product. That leaves $195,000
to be split between product X and product Y.
According to the information, the company
allocates this joint cost based on units. One-third
of the units (10,000 pounds out of a total of 30,000
pounds for the two major products) comes from
product X. So, 1/3 of the joint cost or $65,000 (1/3
times $195,000) is assigned to product X.
Business Environment & Concepts > Cost Accounting > Basic Terminology
Basic Terminology
Question 1
Answer 1
Correct answer is C
Business Environment & Concepts > Cost Accounting > Cost Behavior
Cost Behavior
Question 1
Answer 1
Correct answer is B
A There is no difference
B Mixed costs contain a component that does not
vary with the level of activity and a component that does
while variable costs only have one component that
varies with the level of activity
C Mixed costs contain a component that does not
vary with the level of activity and a component that does
while variable costs only have one component that does
not vary with the level of activity
D Mixed costs contain budget and actual costs while
variable costs are based on the budget only
Question 2
Answer 2
Correct answer is B
Question 3
Answer 3
Correct answer is A
A A nonlinear cost
B A fixed cost
C A variable cost
D A joint cost
Business Environment & Concepts > Cost Accounting > Cost of Goods Manufactured
Answer 1
Correct answer is D
A Supplies
B Indirect Labor
C Depreciation
D Materials available for use
Question 2
Answer 2
Correct answer is A
A Income Statement
B Balance Sheet
C Cash Flow Statement
D Statement of retained Earnings
Question 3
Answer 3
Correct answer is D
Business Environment & Concepts > Cost Accounting > Cost of Goods Manufactured
Question 4
Answer 4
Correct answer is A
A $2,970
B $3,025
C $3,118
D $3,234
Overhead
Question 1
Answer 1
Correct answer is C
Question 2
Answer 2
Correct answer is A
Question 3
Answer 3
Correct answer is A
Question 4
Answer 4
Correct answer is B
Question 5
Answer 5
Correct answer is D
Question 6
Answer 6
Correct answer is C
Question 7
Answer 7
Correct answer is D
A Theoretical capacity
B Practical capacity
C Regionally adjusted capacity
D Expected annual capacity
Question 8
Answer 8
Correct answer is D
Business Environment & Concepts > Cost Accounting > Standard Cost Accounting
Answer 1
Correct answer is D
A $14,000 unfavorable
B $14,600 unfavorable
C $15,400 unfavorable
D $20,000 unfavorable
Question 2
Answer 2
Correct answer is A
A $6,000 unfavorable
B $6,600 unfavorable
C $60,000 unfavorable
D $66,000 unfavorable
Question 3
Answer 3
Correct answer is D
A $29,400 unfavorable
B $30,000 unfavorable
C $30,600 unfavorable
D $31,000 unfavorable
Business Environment & Concepts > Cost Accounting > Standard Cost Accounting
Question 4
Answer 4
Correct answer is C
A $15,000 unfavorable
B $16,000 unfavorable
C $24,000 unfavorable
D $25,600 unfavorable
Question 5
Answer 5
Correct answer is B
A $2,200 unfavorable
B $3,000 unfavorable
C $3,600 unfavorable
D $4,000 unfavorable
New partner
Question 1
Answer 1
Correct answer is C
Assignment
Question 1
Answer 1
Correct answer is B
Question 2
Answer 2
Correct answer is D
Death of partner
Question 1
Answer 1
Correct answer is C
Business Environment & Concepts > Partnerships > Profits and Losses
Answer 1
Correct answer is C
A $0
B $30,000
C $45,000
D $90,000
Negligence of partner
Question 1
Answer 1
Correct answer is C
LLLP1
Question 1
Answer 1
Correct answer is A
Limited partnership
Question 1
Answer 1
Correct answer is D
Question 2
Answer 2
Green, Able and Holmes wish to form Able, L.P., and operate
as a limited partnership. Under the provisions of the Uniform
Limited partnership Act (2001), which of the following would
NOT be required of Able, L.P.?
Correct answer is B
Question 3
Answer 3
Correct answer is C
Question 4
Answer 4
Correct answer is D
A I only
B II only
C I and II only
D I, II and III
Question 5
Answer 5
Correct answer is D
Question 6
Answer 6
Correct answer is C
A I only is correct
B II only is correct
C Both I and II are correct.
D Neither I nor II is correct.
Notice
Question 1
Answer 1
Correct answer is B
A I only is correct.
B II only is correct.
C Both I and II are correct.
D Neither I nor II is correct.
Presumption
Question 1
Answer 1
Correct answer is B
Question 2
Answer 2
Correct answer is B
Profits
Question 1
Answer 1
Ben, Skip, Trip and Chad are partners in a retail clothier which
trades as Washington Heights Fashions. Trip works
approximately 80 hours per week, primarily waiting on
customers. Ben works about 20 hours per week stoking
shelves and waiting on customers. Chad's main involvement
is attending trade shows and acting as purchasing agent,
which averages about 20 hours per week. Skip has no
involvement in the day to day business, but financed 100% of
the venture. There is no written agreement as to the division of
profits.
Correct answer is B
Agreement
Question 1
Answer 1
Correct answer is D
Question 2
Answer 2
Correct answer is B
Question 3
Answer 3
Correct answer is C
A I only is correct.
B II only is correct.
C Both I and II are correct.
D Neither I nor II is correct.
Question 4
Answer 4
Correct answer is A
Authority
Question 1
Answer 1
Correct answer is D
Property
Question 1
Answer 1
Correct answer is A
Dissociation, Dissolution
Question 1
Answer 1
Correct answer is C
Dissolution, Winding up
Question 1
Answer 1
Correct answer is A
Question 2
Answer 2
Correct answer is D
Question 3
Answer 3
Correct answer is A
Question 4
Able, Baker, and Cannon are partners. Able gets 70 percent
of the profits and losses and has a capital balance of $100,000.
Baker gets 20 percent of the profits and losses and has a
capital balance of $60,000. Cannon gets 10 percent of the
profits and losses and has a capital balance of $10,000. The
partnership has $170,000 in assets but no liabilities. The
partnership is being liquidated. Assets of $70,000 are sold for
$40,000 in cash. Which of the partners gets this available
cash?
A Able gets $28,000, Baker gets $8,000, and
Cannon gets $4,000
B Able gets $13,333, Baker gets $13,333, and
Cannon gets $13,334
C Able gets $6,667 and Baker gets $33,333
D Able gets $20,000 and Baker gets $20,000
Answer 4
Correct answer is C
The actual sale of these assets created a $30,000
loss ($70,000 less $40,000). That loss is assigned
70 percent to Able ($21,000 bringing the capital
down to $79,000), 20 percent to Baker ($6,000
bringing the capital down to $54,000), and 10
percent to Cannon ($3,000 bringing the capital
down to $7,000). To decide what to do with the
available cash, the partnership must assume that
the remaining $100,000 in assets ($170,000 less
$70,000) are a total loss. In that case, this
$100,000 anticipated loss is assigned 70 percent
to Able ($70,000 bringing the capital down to
$9,000), 20 percent to Baker ($20,000 bringing the
capital down to $34,000), and 10 percent to
Cannon ($10,000 bringing the capital down to a
negative $3,000). Then, finally, the remaining
negative $3,000 balance in Cannons capital must
be divided between Able and Baker based on their
relative profit and loss ratios or 70/90 of the $3,000
to Able or $2,333 and 20/90 of the $3,000 to Baker
or $667. This final allocation reduces Ables
capital from $9,000 to $6,667 and Bakers capital
from $34,000 to $33,333. That is how the
available cash is distributed.
Liability of partners
Question 1
Answer 1
Correct answer is C
Estoppel
Question 1
Answer 1
Correct answer is D
Business Environment & Concepts > Partnerships > partner distribution in kind
Answer 1
Correct answer is B
Business Environment & Concepts > Partnerships > liability of P for other P's contracts
Answer 1
Correct answer is A