Course Introduction
Accounting Theory Test
Preparation
Accounting Theory examines the fundamental concepts, principles, and frameworks that underpin the practice and regulation of accounting. This course explores the historical development of accounting thought, the rationale for various accounting standards, and the role of ethics, measurement, and decision usefulness in financial reporting. Key topics include positive and normative accounting theories, stakeholder and agency perspectives, standard-setting processes, and the impact of globalization on accounting regulation. By critically analyzing accounting frameworks and current debates, students develop a deeper understanding of how theory informs practice and shapes the evolution of the accounting profession.
Recommended Textbook
Accounting 9th Canadian Edition Volumer II by Charles T. Horngren
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13 Chapters
2103 Verified Questions
2103 Flashcards
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Page 2
Chapter 12: Corporations: Paid-In Capital and the Balance Sheet
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167 Verified Questions
167 Flashcards
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Sample Questions
Q1) Which of the following is an advantage of preferred stock?
A) Preferred shareholders generally receive a fixed amount of dividends before common stockholders do.
B) Preferred shareholders are guaranteed that they will not take a loss on their investment.
C) Preferred shareholders have higher voting rights than common shareholders.
D) Preferred shareholders may sell their shares for a price higher than that of common stock.
Q2) What authority determines how many shares of stock a corporation may issue?
A) A vote by the board of directors
B) The rules of GAAP
C) Regulations of the Securities and Exchange Commission
D) The government laws in the state where the business is incorporated
Q3) A corporation declares a dividend of $.75 per share on 12,500 shares of common stock. Which of the following would be included in the entry to record the declaration?
A) Retained earnings would be debited for $9,375.
B) Paid-in capital in excess of par would be credited for $9,375.
C) Retained earnings would be credited for $9,375.
D) Dividends payable would be debited for $9,375.
Page 3
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Chapter 13: Corporations: Effects on Retained Earnings and the Income Statement
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164 Verified Questions
164 Flashcards
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Sample Questions
Q1) If a company retires preferred stock, which of the following is TRUE?
A) Total equity will decrease.
B) Total equity will increase.
C) The company can record a gain or loss on retirement of stock.
D) The number of outstanding shares will go up.
Q2) The corporation purchases 15,000 shares of its common stock at $9.50 per share. Which of the following is the number of common shares issued and the number of common shares outstanding?
A) There are 50,000 shares issued and 65,000 shares outstanding.
B) There are 50,000 shares issued and 35,000 shares outstanding.
C) There are 50,000 shares issued and 50,000 shares outstanding.
D) There are 65,000 shares issued and 50,000 shares outstanding.
Q3) If Peartree resold 800 shares of treasury stock for $15 per share, which of the following statements would be TRUE?
A) The Treasury stock account would go down by $12,000.
B) The Paid-in capital account would go up by $4,000.
C) The Treasury stock account would go down by $16,000.
D) The Retained earnings account would go up by $4.000.
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Chapter 14: The Statement of Cash Flows
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157 Verified Questions
157 Flashcards
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Sample Questions
Q1) Which of the following sections from the statement of cash flows includes activities that affect current assets and current liabilities on the balance sheet?
A) The investing section
B) The financing section
C) The operating section
D) The noncash investing and financing section
Q2) Investors and management use the statement of cash flows to evaluate a firm's profitability.
A)True
B)False
Q3) The change in accrued liabilities will be shown as a positive cash flow in the adjustments to Net income.
A)True
B)False
Q4) If the beginning cash balance is $18,000, what would the ending cash balance be?
A) $21,000
B) $18,000
C) $3,000
D) $15,000
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Chapter 15: Financial Statement Analysis
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161 Verified Questions
161 Flashcards
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Sample Questions
Q1) How much is the accounts receivable turnover for 2014?
A) 7.27
B) 0.76
C) 1.55
D) 7.07
Q2) The asset turnover rate is a way to evaluate how well a company can pay its short-term liabilities.
A)True
B)False
Q3) How much was the dividend yield for one share of common stock?
A) $0.067
B) $0.167
C) $0.071
D) $0.385
Q4) If an analyst wishes to see how gross profit of a company has changed from one year to the next, vertical analysis would be the best approach.
A)True
B)False
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Page 6
Chapter 16: Introduction to Management Accounting
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161 Verified Questions
161 Flashcards
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Sample Questions
Q1) Based on the data shown here, what was the amount of the cost of goods sold?
A) $598,500
B) $591,000
C) $42,000
D) $7,500
Q2) Cost of goods manufactured includes direct materials, direct labor, and manufacturing overhead.
A)True
B)False
Q3) Which of the following properly describes the accounting for indirect labor costs?
A) Indirect labor costs are product costs and are expensed as incurred.
B) Indirect labor costs are period costs and are expensed as incurred.
C) Indirect labor costs are product costs and are expensed when the manufactured product is sold.
D) Indirect labor costs are period costs and are expensed when the manufactured product is sold.
Q4) Indirect materials costs like lubes and cleaning fluids are product costs.
A)True
B)False
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Chapter 17: Job Order and Process Costing
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168 Verified Questions
168 Flashcards
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Sample Questions
Q1) Haverhill Products just completed job number 440. In addition to direct labor and direct materials cost, Haverhill allocated $450 of manufacturing overhead to the job. Please provide the journal entry for the allocation of overhead. \(\begin{array}{|l|l|l|}
\hline\quad \quad\quad \quad\quad \quad \quad \quad \quad \quad \quad \quad \quad &\quad \quad \quad & \quad \quad \quad \\ \hline \text { } & \text { } & \text { }\\ \hline \end{array}\)
Q2) Altina Company just finished job A40. It included $400 of direct materials, and $3,600 of direct labor. Altina uses a predetermined manufacturing overhead rate based on a percentage of direct labor costs. That rate is 40%. The entry to record the completion of the job should be a:
A) debit to Finished goods $5,440, and a credit to Materials inventory $5,440.
B) debit to Cost of goods sold $5,440, and a credit to Finished goods $5,440.
C) debit to Finished goods $5,440, and a credit to Work in process $5,440.
D) debit to Work in process $5,440, and a credit to Finished goods $5,440.
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Chapter 18: Activity-Based Costing and Other Cost Management Tools
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160 Verified Questions
160 Flashcards
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Sample Questions
Q1) What is the activity rate for the material handling activity?
A) $1.25 per kg
B) $4.40 per kg
C) $2.50 per kg
D) $0.80 per kg
Q2) What amount is the target price? (Please round all amounts to the nearest whole dollar.)
A) $1,820
B) $1,550
C) $2,000
D) $1,760
Q3) The cost of warranty work comes under which of the following cost categories?
A) Appraisal cost
B) Internal failure cost
C) External failure cost
D) Prevention cost
Q4) Activity-based costing focuses on a single predetermined overhead rate for cost analysis.
A)True B)False
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Chapter 19: Cost-Volume-Profit Analysis
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163 Verified Questions
163 Flashcards
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Sample Questions
Q1) Peterson Company has both fixed and variable costs. If the volume doubles, the total variable costs will double.
A)True
B)False
Q2) A 15% increase in production volume will result in a:
A) 15% increase in the variable cost per unit.
B) 15% increase in total mixed costs.
C) 15% increase in total manufacturing costs.
D) 15% increase in total variable costs.
Q3) Axelrod Company has fixed costs of $250,000. Highest production volume this year was in January when there were 100,000 units produced and total costs of $550,000. In June, the company produced only 60,000 units. How much was the total cost in June?
A) $378,000
B) $430,000
C) $330,000
D) $414,500
Q4) Contribution margin is defined as the sales revenue minus the fixed costs.
A)True
B)False
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Chapter 20: Short-Term Business Decisions
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164 Verified Questions
164 Flashcards
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Sample Questions
Q1) Perfect Time Company manufactures and sells watches for $36 each. Great Products Company has offered Perfect Time $21 per watch for a one time order of 5,000 watches. The total manufacturing cost per watch, using standard absorption costing, is $24 per unit, and consists of variable costs of $18 per watch and fixed overhead costs of $6 per watch. Assume that Perfect Time has excess capacity and that the special order would not adversely impact regular sales. What is the change in operating income that would result from accepting the special sales order?
A) Increase of $15,000
B) Decrease of $15,000
C) Increase of $105,000
D) Decrease of $60,000
Q2) Assuming the Football Helmet line is dropped, total fixed costs remain unchanged, and the space formerly used to produce the Football Helmet line is used to double the production of Baseball Helmets, how will operating income be affected?
A) Operating income will increase $37,000.
B) Operating income will increase $45,000.
C) Operating income will decrease $37,000.
D) Operating income will decrease $45,000.
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11
Chapter 21: Capital Investment Decisions and the Time
Value of Money
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152 Verified Questions
152 Flashcards
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Sample Questions
Q1) Clapton Corporation is considering an investment in new equipment costing $900,000. The equipment will be depreciated on a straight-line basis over a ten-year life and is expected to have a salvage value of $90,000. The equipment is expected to generate net cash flows of $140,000 for each of the first five years and $100,000 for each of the last five years. What is the accounting rate of return associated with the equipment investment?
A) 12.1%
B) 7.9%
C) 17.3%
D) 9.7%
Q2) Compound interest used in discounted cash flow calculations assumes that companies will reinvest future cash flows when they are received.
A)True
B)False
Q3) When projecting the cash flows of an investment, the inflows are netted against the outflows.
A)True
B)False
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Chapter 22: The Master Budget and Responsibility Accounting
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155 Flashcards
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Sample Questions
Q1) A goal of the budgeting process is to assist managers with coordinating and implementing the business plan.
A)True
B)False
Q2) What amount should be shown in the cash budget for the cash balance at the end of July?
A) $19,100
B) $8,800
C) $9,050
D) $2,200
Q3) Based on the above data, what is the projected cash balance at the end of June?
A) $22,000
B) $21,900
C) $23,700
D) $22,400
Q4) How much is the net operating income/(loss) in December?
A) $6,200
B) $11,700
C) $7,480
D) $8,950
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Chapter 23: Flexible Budgets and Standard Costs
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165 Flashcards
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Sample Questions
Q1) During the first quarter, Faas produced 5,000 units of this product. Actual direct materials costs were $29,750. Actual direct labor costs were $184,800. For purposes of preparing the flexible budget, what is the total standard direct labor cost at a production volume of 5,000 units?
A) $180,000
B) $184,800
C) $182,345
D) $179,975
Q2) Efficiency Variance = (Standard Price x Actual Quantity) - (Standard Price x Standard Quantity).
A)True
B)False
Q3) A favorable variance reflects an increase in operating income. A)True
B)False
Q4) At the end of the year, the efficiency variance for variable overhead costs was unfavorable.
A)True B)False
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Chapter 24: Performance Evaluation and the Balanced Scorecard
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166 Verified Questions
166 Flashcards
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Sample Questions
Q1) Which of the following statements is TRUE about the weighted average cost of capital (WACC)?
A) If a business has a high risk level, the WACC will be higher.
B) If a business has a high risk level, the WACC will be lower.
C) The WACC represents the corporation's internal return targets.
D) The WACC is the same as a business's ROI.
Q2) Managers of profit centers are responsible for generating revenue and controlling costs, so their performance reports include both revenues and expenses.
A)True
B)False
Q3) Performance evaluation systems provide top management with a framework for maintaining control over the organization.
A)True
B)False
Q4) A company that uses a balanced scorecard has established a KPI for employee turnover. If the KPI is negative, that implies a very low rate of employee turnover.
A)True
B)False
15
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