1 Which of the following is not one of the 5 questions of transaction analysis? A What's going on? B Which accounts are affected? C Is this an accrual? D Does the balance sheet balance? E Does my analysis make sense? 2 Which of the following is not an example of a decision or informed judgment that a potential employee could make from accounting information? A Personnel turnover statistics (i.e., hiring and terminations). B Probability of the company's ability to make profit sharing plan contributions in the future. C Assessment of the risk that the company may become bankrupt in the near future. D The extent of the company's commitment to a research program. 3 On January 31, an entity's balance sheet showed net assets of $1,025 and liabilities of $225 Owners' equity on January 31 was: A 800 B 1025 C 1250 D 225 4 Prepaid expenses classified as current assets represent: A current year expenses that have been accrued. B current year disbursements that will be matched against revenues of the next year. C cash that has been segregated to pay for future expenses. D expenses of the current year that have been paid in advance. 5 Gains differ from revenues because gains: A are not a result of the entity's ongoing, central operations. B do not have to be realized. C are reported as income from operating activities. D do not involve any offsetting costs or expenses. 6 Under most circumstances, in order to recognize revenue: A cash must have been received. B the entity must expect to receive cash in the future. C the entity must have paid for all expenses incurred in generating the revenue. D the revenue must be realized or realizable, and earned. 7 Most entities satisfy the accounting criteria for recognizing revenue when: A an order is received from a customer. B cash is received from a customer. C an unearned revenue account is credited. D a product is delivered or a service is provided. 8 The gross profit ratio is useful to the manager for each of the following purposes except that: A it can be used to determine the selling price to set for an item. B it can be used to estimate the amount of inventory lost in a fire. C it can be used to determine the amount available from a given amount of revenue to cover operating expenses. D it can be used to estimate the amount of operating expenses for a period. Analyzing Financial Statements 9 Which of the following is not a category of financial statement ratios? A Financial leverage. B Liquidity. C Profitability. D Prospectus. 10 An individual interested in making a judgment about the profitability of a company should: A review the trend of working capital for several years. B calculate the company's ROI for the most recent year. C review the trend of the company's ROI for several years. D compare the company's ROI for the most recent year with the industry average ROI for the most recent year. 11 A potential creditor's judgment about granting credit would be most influenced by the potential customer's: A current ratio at the end of the prior fiscal year. B most recent acid-test ratio. C trend of acid-test ratio over the past three years. D practice with respect to taking cash discounts offered by current suppliers. 12 The inventory turnover calculation: A is wrong unless cost of goods sold is used in the numerator. B is wrong unless sales is used in the numerator. C is an alternative way of expressing the number of days' sales in inventory. D requires knowledge of the inventory cost flow assumption being used. 13 Asset turnover calculations: A are made by dividing the average asset balance during the year by the sales for the year. B are made by dividing sales for the year by the asset balance at the end of the year. C communicate information about how promptly the entity pays its bills. D should be evaluated by observing the turnover trend over a period of time. Managerial Accounting 14 The cost of a single unit of production in excess of the breakeven point in units is: A its fixed cost and variable cost. B its fixed cost only. C its variable cost only. D none of the above. 15 To which function of management is CVP analysis most applicable? A Planning. B Organizing. C Directing. D Controlling. 16 An example of a product cost is: A advertising expense for the product. B a portion of the president's travel expenses. C interest expense on a loan to finance inventory. D production line maintenance costs. 17 The production cost of a single unit of a manufactured product is determined by: A dividing total direct materials and direct labor for a production run by the number of units made. B dividing total direct materials, direct labor, and manufacturing overhead for a production run by the number of units made. C dividing total direct materials, direct labor, manufacturing overhead and selling expenses for a production run by the number of units made. D dividing the selling price by the gross profit ratio. 18 An example of a cost likely to have a fixed behavior pattern is: A sales force commission. B raw material costs. C advertising costs. D electricity costs for packaging equipment. 19 The budgeting process that most likely creates an attitude supportive of achieving organization goals is: A top-down approach. B zero based approach. C proportionate increase approach. D participative approach. 20 Operating expenses are best budgeted on the basis of knowledge about: A cost behavior patterns. B relevant range. C prior period actual expenses. D current period budget amounts. 21 Which of the following costs are included in the cost classification that is based on the relationship between total cost and volume of activity? A Variable cost and fixed cost. B Direct cost and indirect cost. C Product cost and period cost. D Committed cost and discretionary cost. 22 Once standard costs for products or services have been developed: A they must be updated monthly to be useful. B they can be used for more than planning and control purposes. C they need not be revised unless the product or service is modified. D performance reports must be issued if the standards are to be useful