Test Review
21 important questions on Test Review
Financial statements are required to be produced by
- Tax Law
- Generally accepted accounting principles
- The Canada Business Corporations Act and its provincial equivalents
- The accounting equation
The ratio of operating income to total assets is
- Always 2:1 or more
- A cash flow concept
- Part of the income statement
- A profitability ratio
- None of the above
The accounting concept most relevant to reporting sales revenue is
- Matching
- Historic cost
- Recognition
- Periodicity
- None of the above
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A project with a positive net present value is
- Economically feasible
- One with a short payback period
- One with a return on investment of 15% or more
- It has a high level of risk
- None of the above
Pearl’s Pizza has cash of $5,000, inventory of $100,000, and accounts receivable of $45,000. Current liabilities are $50,000 and long-term liabilities are $25,000. Pearl’s Pizza’s quick ratio is
- 3:1 (45+100 = 550:50)
- 2:1 (50:25)
- 1.25 (5+45 = 50:25)
- 1:1 (5+45=50:50)
Pearl’s Pizza is financed from $75,000 of debt and $175,000 of equity. Its debt-to-assets ratio is.
- 50.0%
- 42.9%
- 25.0%
- None of the above
- 30.0% (75K / (75K+175K=250K))
Orion Co. is financed by $200,000 of debt carrying 6% interest, $100,000 of 8% preference shares, and $500,000 of equity. Operating profit was $100,000, and Orion Co. pays tax on profits (after interest) at the rate of 40%. How much did the preference shareholders get in dividends?
- None of the answers below
- $12,000
- $ 8,000, plus the same dividend as the common shareholders
- 60%
- $ 8,000 (100K*8%)
The cash flow statement.
- Is stated “at a point in time”
- Is a voluntary additional report
- Is a required report
- Measures the company’s efficiency
- None of the above
Mississauga Mining Co. made a net income of $25 million in 2015, after the deduction of amortization expense of $8 million, the interest of $5 million and taxes of $10 million. During 2015, it sold mining equipment for $2 million and bought a new computer system for $3 million. During 2015, it issued new shares for $15 million and used the proceeds to repay loans of $10 million; the remainder went into the bank’s current account. The cash from operations was ($ million).
- $17 m 4
- $25 m
- $27 m
- $33 m ($25+$8)
Production and sales volumes are linked through.
a) Changes in inventories of finished goods
b) Changes in inventories of raw materials
c) Changes in competitors actions
d) Changes in the weather
Sales at Monica’s Mantles last year were $2,400,000. Assume that the sales occurred evenly throughout the year. Assume also that customers owed $200,000 at the start of the year, and that all customers took one month to pay. There were no bad debts or late payers. Cash collection from customers in the year was.
a) $2,000,000
b) $2,200,000
c) $2,400,000
d) $2,500,000
Comparing actual results with planned results and taking appropriate action is the functions of.
a) Budgeting
b) The budget committee
c) The balanced scorecard
d) Budgetary control
The difference between actual results and planned results is called.
a) Management by objectives 5
b) A variance
c) A disaster
d) The master budget
Which of the following is an example of a fixed cost?
a) Supervisory salaries
b) Direct labour
c) Raw materials used
d) Commission on sales
The "make or buy" type of decision is about.
a) Activity-based management
b) Break-even analysis
c) Outsourcing vs. internal production
d) Human resource management
B Company has a machine shop that can process 25,000 units of product per month, but it is only processing 17,500 units per month. The rent of the premises is a.
a) Fixed cost
b) Sunk cost
c) Variable cost
d) (a) & (b), but not (c)
e) (a), (b) & (c)
An amount paid to shareholders out of profits is referred to as.
a) Interest
b) Preference dividend
c) Preferred share capital
d) Dividend
e) None of the above
Shuttleworth Co. has $100,000 of assets, financed entirely by common shares and retained earnings. The operating profit was $40,000, and tax was paid on the profits at the rate of 25%. The return on assets was.
a) 30%
b) 25%
c) 12.5%
d) 40% ($40K/$100K)
e) None of
Alberta Inc. is considering buying new computer software that will help the company's inefficient production planning and cost reduction. The cost is $100,000. The benefit will be an additional cash inflow of $40,000 for five years, at which point the software will need replacing with a more modern version. Alberta Inc.’s cost of capital is 10%. The net present value of the project is.
a) $50,000
b) $25,935
c) $51,632 ($40K*3.7908=$151,632 - $100K)
d) $15,887.50
Minden Co. is considering buying new computer software that will assist customers in their product choices. The cost is $50,000. The benefit will be an additional cash inflow of $25,000 for four years, at which point the software will need replacing with a more modern version. The payback is.
a) 1 year
b) 3 years
c) 4 years
d) 2 years ($50K/$25K)
The standard cost of product 999 includes 2 units of direct materials at $5.85 per unit. During August, the company bought 28,100 units of materials at $6.05 and used those materials to produce 14,550 units. Calculate the total, price, and quantity variances for materials.
Total Price =
Price =
Quantity =
- 230
- (28,100 × $6.05) – ((14,550 × 2) × $5.85)
- 5620
- (28,100 × 6.05) - (28,100 × $5.85)
- 5850
- (28,100 × $5.85) - (29,100 × $5.85)
- 14,550 * 2 = 29,100
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