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Preassessment for FNC1

On which financial statement is the accounts payable balance reported

balance sheet

The adjustments for the month caused the revenue account to increase by $5,000 and the salaries expense account to increase by $3,000. How will the $5,000 net income based on the trial balance be affected?

trial balance-5000
add revenue of 5,000
subtract expense of 3000 trial balance increases by 2000

Net income was incorrectly understated by $6,000 on the year-end income statement.
How will the statement of cash flows reflect correction of this error?

Decrease of $6,000 in operating activities

A company shows common size comparisons for two years on balance sheets. There is almost a two-fold increase in cash and equivalents, a 3% decrease in inventories, a small decrease in net property and equipment, and a large increase in retained earnings. What does this data indicate about the company

Its financial strength has improved.

Given Data: This year Last year

Income Taxes Payable $22,000 $25,000
Accounts Payable $32,000 $28,000
Accounts Receivable $55,000 $60,000
The statement of cash flows has been prepared using the indirect method.
What is the effect on net cash provided by operating activities for the year?

ITP- Decrease in cash 3,000
AP- Increase in cash 4,000
AR- Increase in cash 5,000
Increase by 6,000

Sales $500,000
Direct Material $80,000
Direct Labor $160,000
Overhead (50% fixed) $200,000
Sales Salaries Expense $180,000
What is the contribution margin

contribution margin= sales - variable costs
500,000-80,000-160,000-(200,000*.50) salary is fixed

The following information is taken from a company's operating activities on the statement of cash flows prepared using the indirect method.
Net Income $21,000
Depreciation Expense $8,000
Accounts Payable $2,000 increase
Net Cash Provided by Operating Activites $26,000
What is the change in current assets based on the data shown above

An increase in Current Assets is subtracted from net income.
A decrease in Current Assets is added to net income.

increase of 5,000

Selected Financial Data:

This year Last year

Cash $155,000 $175,000
Accounts Receivable $139,000 $145,000
Accounts Payable $60,000 $44,000
Merchandise Inventory $120,000 $73,000
Sales $600,000 $510,000

Which statement is correct, based on a horizontal analysis of the given data?

cash-11% decrease
AR-4% decrease
AP-36% increase
S-18% increase
Sales to inventory is strong and cash to sales is weak

Partial Balance Sheet Data:
This year Last year
Cash $285,000 $260,000
Accounts Receivable $250,000 $275,000
Merchandise Inventory $280,000 $310,000
Property, Plant, and Equipment (net)
$600,000 $750,000
Total Assets $1,500,000 $1,900,000
Current Liabilities $260,000 $244,000
Long-term Liabilites $850,000 $980,000
Assuming a vertical analysis of balance sheets, which statement is correct

cash-19% 13%
AR-16% 14%
MI-18.6% 16%
PPE-40% 39.4%
CL-17.3% 13%
LL-56.6% 51.5%
Accounts receivable percentage was higher this year.

Income Statement Data:
This year Last year
Revenue $150,000 $120,000
Cost of Goods Sold $90,000 $60,000
Operating Income $10,000 $5,000
Income Tax Expense $1,800 $500
Based on a horizontal analysis of the data, which statement correctly identifies the company's performance
this year?

Operating income improved at a greater percentage than revenue.

Which statement is true regarding accounting and time frames

Time frames are significant when performing adjusting entries.

A company purchased $150,000 worth of production equipment on April 1. Management decided to depreciate the equipment over four years using straight line depreciation. The salvage value is $30,000. The company uses a calendar year as its fiscal year.
What is the impact on the financial statements for fiscal year 2 from this purchase

Purchase Price(150,000) minus salvage value(30,000) divided years(4)
Depreciation expense will be $30,000

Budgeted sales for July (units) 2,600
Ratio of inventory to sales 60%
Budgeted ending inventory (units), June 30 1,560
Budgeted sales (units) for June 2, 800
Required units of inventory 4,360
Beginning inventory (units),June 1 1,900
Units to be purchased 2,460
Budgeted cost per unit $10
Budgeted cost of purchases $24,600
Why will 2,460 units need to be purchased in June

To satisfy the ratio of inventory to budgeted cost of purchases

Cash Budget for April:
Beginning Cash Balance $18,000
Cash Receipts from Customers $76,000
Cash Disbursements:
Payments for Inventory $41,000
Sales Commissions $7,600
Salaries $8,400
Supplies and Utilities $1,000
Equipment Purchase $23,000
If a minimum cash balance of $20,000 is required, how much cash must be borrowed from the bank during April?

Add Cash income subtract expenses
$7,000 is needed

Which type of ratio is return on total assets an example of


Which ratio is used to measure solvency

Current ratio-
( current assets / current liabilities )

What is an example of a market prospects ratio

Price earnings ratio
Market Price per share divided by annual earnings per share

Price-earnings ratio of a single stock = 20.3
Industry average price-earnings ratio = 11.7
Dividend yield = 10.06%
Industry average dividend yield = 3.1%
Which statement is true of this stock

Current stockholders would expect a larger dividend payout than the industry average

Partial financial data for a company:
Current ratio = 1.28 to 1
Debt-to-equity ratio = 2.9
Times interest earned = 0.8
Industry average data:
Current ratio = 2.1 to 1
Debt-to-equity ratio = 2.9
Viewing this data from the perspective of a mortgage lender, which statement would be true

This company would not be a better credit risk than the industry average.
company has less assets to liabilities then industry average

. Partial financial data for a company:
Total current assets = $400,000
Current ratio = 4.0 to 1
Times interest earned = 6.7
Industry average data:
Current ratio = 1.9 to 1
Viewing this data from the perspective of a short-term creditor being asked for a one-year loan of
$100,000, which statement is true?

This company has enough working capital to cover the loan amount, making it a good credit risk.

How should manufacturing costs that can be traced to a single cost objective be classified?

Direct costs

A company produces an item and sells it for $100 per unit. Total fixed costs last month were $20,000, and variable costs were $60 per unit.
What is the breakeven point in units

Fixed = $20,000
Variable = $60/unit
$20,000 / $60 = 333.33 units rounded to 333 units

A company purchased new machines for its manufacturing department three years ago. The machines have not yet been fully depreciated but, because they are very specialized, the machines have no salvage value. The company is considering a new venture that would result in discarding the three-year-old
Which cost identifies how management should view the value of the machines

sunk cost

The manufacturing materials variance report shows a large unfavorable quantity variance.
What would be the cause of this variance

Paying higher-than-expected material prices
If you payed lower than budgeted it would be favorable

A company produces two products. It takes two hours of machine time to produce Product A and four hours to produce Product B. The company produces 20,000 units of Product A and 30,000 units of Product B. Overhead is $480,000 for the year and is allocated based on the total machine hours.
What is the per unit overhead cost allocated to Product B

A=20,000 units* 2 hrs= 40,000units
B=30,000 units*4 hrs -120,000 units=160,000 units total
overhead cost is 480,000/160,000=$3/per hr
overhead cost per unit $3*4 hrs= answer $12. per unit

A company produces various products that consume different amounts of indirect resources. Which cost system should be used to accurately allocate costs to cost drivers?

Activity-based cost system

When would a process cost system be more suitable than a job order cost system for measuring production costs?

When the measurement focus is on the standardized units produced

What is a characteristic of a debenture bond

It involves greater risk than a secured bond

A $50 million bond is issued and matures at a rate of $5 million each year for years 11 to 20. Which type of bond issue is this?

term bond

A bond has a contract rate of 7% and the market interest rate is 6%.
Which statement is true about this bond

It will sell at a premium.

A $100,000 bond has a contract rate of 6% and the current market rate of interest is 7%.
Which statement would be true?

The price of the bond would be lower than $100,000

Why would a company sell preferred stock rather than common stock to raise capital

Preferred stock can be issued with no voting rights

How are bond ratings determined

Credit worthiness of the issuer

Which statement about operating leverage is true

Companies with low fixed costs have low operating leverage

Which factor is considered when determining a dividend policy

Maintaining a minimum level of treasury stock

There are several basic strategies for business uses of information technology.
What is an appropriate use of information technology (IT) if a company wants to develop a competitive innovation strategy?

Using IT to diversify and integrate into other products

A large retail business whose primary customers are the end-users of their products wants to reach international customers with their products and services.
How could this business use Internet technologies to create the greatest strategic advantage?

Implement an e-commerce solution and use Web sites for promoting the sales of products and services with interactive service and support.

A company completes employee performance reviews once per year and relies on management to give each employee a fair and accurate appraisal. The company has implemented a new enterprise system that has a human resource (HR) module.
By re-engineering the employee performance processes, how should the company most effectively use the new HR module?

To track performance goals, measure employee performance, and provide quarterly results against goals

How can creating a virtual company provide a company with competitive advantage

By creating flexible and adaptable alliances and exploiting fast-changing business opportunities.

How does establishing a Knowledge Management System provide a competitive advantage for a company?

It streamlines administrative reporting.

A hacker creates hidden ways to access a network in case the original entry point is discovered.
Which type of security risk is this?

Back Door

What would be used to defend against Denial of Service attacks?

Use encryption software to protect data that resides on company servers as well as information transmitted over the Internet.

Which security measure would defeat a potential Internet-based attack to a company's computer system?

Instituting a policy to limit access to databases by Database Administrators

Which type of system would provide the most effective disaster recovery method for a hospital's patient information system?

Fault Tolerant System

What are indications that a company has experienced a denial of service attack?

The company experienced a high volume of calls and e-mails from its customers who were being inappropriately denied access based on their passwords.

Why is file retention an important aspect of security measures?

network resources

Wireless technology is part of which type of resource of an information system?
Which information systems activity could support a Human Resources Department by calculating employee pay, taxes, and other payroll deductions?


Who has primary responsibility for information technology planning and deployment as opposed to aligning information technology with business strategy?

Chief Technology Officer

A manager has been charged with defining the strategic role that IT will play in the company and then determining the level of funding needed to achieve the IT objectives. The manager must align the strategic business goals of the company with the information technology strategies.

Which type of manager is this?

Strategic Systems Manager

Who has the responsibility of managing the development and implementation of new information technology applications to meet business needs?

CEO and key business representative

What would enable the user to communicate and collaborate with others in real time?

A company has a corporate office with a data center where all information is stored and processed, including highly secure and confidential company information. The company also has 200 distributed locations that supply information and need access to the information at the data center.

Which type of network access would offer the most advantages to meet the needs at the distributed locations?

How could businesses use a knowledge management system to improve customer relationships?

By ensuring that customer support representatives capture customer information when contacting customers directly

What is an enterprise system that deals with the distribution of materials from a source to the retailer?

Supply chain management system

Which types of functions do executive information systems provide?

Decision support, e-mail, and Web browsing

A company wants to provide its supplier with access to specific information.

Which type of access should be included on the information portal to ensure the correct use of information by the supplier?

The company's purchase orders for the vendor

A coworker asks for access to the source code for company purchased software.

In which way is this an ethical consideration for IT professionals?

Protecting intellectual property rights

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