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1. What can be determined when a firm performs an external audit of a company's financial statements?
A) Whether a company's financial statements indicate that the company has to pay income taxes
B) Whether a company's financial statements were prepared by a trained bookkeeper
C) Whether a company's financial statements fairly reflect its financial position
D) Whether a company's financial statements indicate it made a profit
2. Which two examples represent financial statement errors?
Choose 2 answers.
A) An outside auditor disagrees with the amount reported as an allowance for uncollectible accounts receivable
B) An accounting employee overpays a supplier and receives a portion of the excess as a kickback
C) An accounting department miscalculates the payroll tax due at year-end, resulting in an inaccurate liability
D) An accountant unintentionally records amounts as revenue that were prepaid by customers but not yet earned
3. Which balance sheet category reflects what a company owns that can be turned into cash or used to generate cash?
A) Assets
B) Owners' equity
C) Liabilities
D) Revenues
4. Match each accounting term with its definition.
Answer options may be used more than once or not at all.
Select your answer from the pull-down list.
5. A company presently uses traditional volume-based costing to allocate overhead to its products.
The following table provides information on two of the company's products:
Product A
Product B
Selling price
$8
$12
Direct material
$2
$3
Direct labor
$1
$2
Applied overhead
$3
$4
Gross margin
$2
$3
Overhead that would be applied to Product A would increase to $8 per unit after identifying cost pools and cost drivers, and the overhead applied to Product B would drop to $2 per unit .
How would this change in the way overhead is allocated affect the selling price of both products?
A) The price of neither product would change
B) The price of Product A would increase, and the price of Product B would decrease
C) The price of Product A would decrease, and the price of Product B would increase
D) The price of Product A would increase, and the price of Product B would increase
Solutions:
| Question # 1 Answer: C | Question # 2 Answer: C,D | Question # 3 Answer: A | Question # 4 Answer: Only visible for members | Question # 5 Answer: B |
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