Deck 2: Business Processes and Accounting Information

Question 1

A bookcase manufacturer purchases brackets to install on the bookcases in production.This is an example of a(n):

A)financing activity
B)investing activity
C)planning activity
D)operating activity

Answer 1

operating activity

Question 2

A delivery service purchases a new truck for $130,000.This is an example of a(n):

A)operating activity
B)planning activity
C)investing activity
D)financing activity

Answer 2

investing activity

Question 3

An law firm purchases a $100,000 computer system for its accounting department.This is an example of a(n):

A)financing activity
B)investing activity
C)operating activity
D)planning activity

Answer 3

investing activity

Question 4

A jet ski manufacturer pays $6,000 for six months insurance.This is an example of a(n):

A)operating activity
B)investing activity
C)financing activity
D)planning activity

Question 5

Chili Willi,a restaurant serving southwestern cuisine,purchases a new chili pot for $25,000.This is an example of a(n):

A)financing activity
B)operating activity
C)planning activity
D)investing activity

Question 6

Extreme Enterprises,which manufactures mountain climbing tools,engaged in the following activities.Identify the subprocess in operating process the following activities are associated with.Use (MS)for marketing/sales/collection/customer service,(P)for purchase/human resources/payment,and (C)for conversion.
______ Purchased raw materials for production.
______ Factory employees worked in production.
______ Sold $10,000 of its product to EMS on account,terms 2/10,n/30.
______ Clips were installed on belts in the production process.
______ Paid $5,000 for an advertisement in a trade journal.
______ Requisitioned raw materials for production.
______ .
______ Belts were finished and sent to the warehouse.
______ Paid the cost to repair a machine used in production.
______ Paid the president's salary.

Question 7

A fitness center repays $10,000 it borrowed from the bank to purchase an exercise machine.This is an example of a(n):

A)investing activity
B)financing activity
C)operating activity
D)planning activity

Question 8

Activities involving obtaining necessary funds to purchase long-term assets,repay existing obligations,and provide a return for owners are referred to as:

A)financing activities
B)operating activities
C)investing activities
D)planning activities

Question 9

A health-food retailer buys food for resale.This is an example of a(n):

A)financing activity
B)operating activity
C)investing activity
D)planning activity

Question 10

The profit making activities of an enterprise are referred to as:

A)financing activities
B)planning activities
C)operating activities
D)investing activities

Question 11

Riga Corp borrowed $1,000,000 to buy a new manufacturing plant is part of their

A)operating activities
B)financing activities
C)investing activities
D)planning activities

Question 12

Metal Fabricators,Inc.manufactures file cabinets.Some of the company's activities are listed below.Identify the phase of the management cycle in which each activity occurs.Use (PL)for planning,(PR)for performing,and (E)for evaluating.
______ Management sets a goal of obtaining a 22% share of the total market.
______ A new customer purchases 3,000 file cabinets.
______ Based on less than expected sales volume,production of a four-drawer file
cabinet is discontinued.
______ The building of a new warehouse is being considered.
______ Management decides to add desks to the product line.
______ Raw materials are purchased for production.
______ A review of customers' payment schedules reveals several
requiring corrective action.
______ Executive salaries are paid.
______ The company decides a distribution center in Alabama is unnecessary,so it
will be closed.
______ Payment is received from a customer.

Question 13

Morland Corp purchased a building that will house its new manufacturing plant.This is part of Morland's

A)operating activities
B)investing Activities
C)financing Activities
D.planning Activities

Question 14

A corporation borrows $1,500,000 in cash from a bank to acquire a new building.This is an example of a(n).

A)operating activity
B)investing activity
C)financing activity
D)planning activity

Question 15

A sporting-goods store sells a set of golf clubs to a customer for cash.This is an example of a(n):

A)planning activity
B)investing activity
C)financing activity
D)operating activity

Question 16

Eastwood Company pays its employees every Friday.This is an example of a(n):

A)investing activity
B)planning activity
C)operating activity
D)financing activity

Question 17

Fit for Fun,Inc.sells fitness equipment.The company has 75 stores located in malls throughout the country.The company recently engaged in the following activities.Identify each activity as part of the (B)Business Organization and Strategy Process (O)operating process,(CR)capital resources process (P)Performance Measurement and Management
______ Purchased 300 treadmills for resale.
______ Borrowed $50,000 from the bank.
______ Sold 45 stepping machines.
______ Purchased 10 new cash registers.
______ Made a $4,000 payment on the mortgage.
______ Purchased office supplies for cash.
______ Paid employees' salaries.
______ Developed operating budget.
______ Calculated ratio analysis.
______ The owners invested an additional $100,000 into the business.

Question 18

Activities involving the purchase and sale of long-term assets as well as other major items used in a business's operation are referred to as:

A)operating activities
B)investing activities
C)financing activities
D)planning activities

Question 19

When a manufacturing plant of Hays Corporation ships its finished goods the company's retail stores this is part of its

A)financing activities
B)operating activities
C)investing activities
D)planning activites

Question 20

An accounting firm provides services for a client and sends the client a bill.This is an example of a(n):

A)operating activity
B)investing activity
C)financing activity
D)planning activity

Question 21

Which of the following is not considered a subprocess of the Operating Process?

A)Conversion
B)Performance
C)Marketing/sales/collection/customer service
D)Purchasing/human resources/payment

Question 22

Which of the following combination of quality measurement cost are incurred voluntarily?

A)Prevention cost and External failure cost
B)Appraisal cost and Internal failure cost
C)External failure cost and Internal failure cost
D)Prevention cost and Appraisal cost

Question 23

The process responsible for updating the information technology of a business is:

A)Capital Resources Process
B)Operating Process
C)Investing Process
D)Learning and Growth Process

Question 24

When a company operates in an uncertain environment that has rapidly changing products it is more likely to have an

A)Mechanistic organizational structure with an efficiency strategy
B)Organic organizational structure with a flexible strategy
C)Holistic organizational structure with an organic strategy
D)Synthetic organizational structure with an decentralized strategy

Question 25

Identify the item below that is considered non-value added time.

A)Time it takes for customer to order goods.
B)Time it takes to process an order
C)Time it takes to ship the order
D)All of the above are non-value added time

Question 26

When a company operates in a more certain environment it tends to focus inward and have a

A)Flexible strategy
B)Rigid strategy
C)Loose strategy
D)Efficiency strategy

Question 27

Which of the following is not one of the four business processes?

A)Performance Measurement and Management Process
B)Capital Resources Process
C)Internal Control Process
D)Business organization and Strategy Process

Question 28

The profitability generated by the net assets (assets-liability)of a corporation would be best measured by the:

A)Quick Ratio
B)Return on Investment
C)Return on Owners' Equity
D)Gross Margin Ratio

Question 29

The Capital Resources Process features which of the following pairs of activities?

A)Operating and Investing Activities
B)Financing and Investing Activities
C)Reporting and Operating Activities
D)Financing and Planning Activities

Question 30

Which of the following ratios is not part if the Internal Perspective?

A)Accounts Receivable Turnover
B)Inventory Turnover
C)Quick Ratio
D)Accounts Payable Turnover

Question 31

Which of the following strategies focuses mainly on developing new products to meet rapidly changing consumer demand?

A)Flexible strategy
B)Organic strategy
C)Efficiency strategy
D)Decentralized strategy

Question 32

The Gross Margin Ratio measures which of the following?

A)The profitability of the firm's debt.
B)The liquidity of the firm's profit.
C)The percent of each dollar of sales that can cover the firm's operating expenses.
D)The percent of the assets that generate profit for the firm and that covers operating and financing expenses.

Question 33

A law firm signs a $700,000 mortgage note with a local bank for the purchase of an office building.This is an example of a(n):

A)financing activity
B)planning activity
C)operating activity
D)investing activity

Question 34

Which of the following is considered value added time?

A)Order response time
B)Production time
C)Queue time
D)Shipping time

Question 35

Which one of the following processes is responsible for purchase and sale of long-term investments?

A)Capital Resources Process
B)Operating Process
C)Investing Process
D)Business Organization and strategy Process

Question 36

Which of the following strategies focuses mainly on reduction of cost?

A)Flexible strategy
B)Organic strategy
C)Decentralized strategy
D)Efficiency Strategy

Question 37

Which of the following measures the liquidity of a company?

A)Return on Owners' Equity
B)Gross Margin Ratio
C)Return on Investment
D)Quick Ratio

Question 38

Which of the following ratios measures the profitability of the money invested in the firm's assets?

A)Quick Ratio
B)Return on Owners' Equity
C)Gross Margin Ratio
D)Return on Investment

Question 39

The owners of a pizzeria invest $90,000 into the business for expansion purposes.This is an example of a(n):

A)operating activity
B)investing activity
C)planning activity
D)financing activity

Question 40

The Balanced Scorecard Approach is part of which of the following processes?

A)Operating process
B)Capital Resources Process
C)Performance Measurement and Management Process
D)Business Organization and Strategy Process

Question 41

Identify which of the following is not considered a cost to insure quality?

A)Internal failure cost
B)Appraisal cost
C)Maintenance cost
D)Prevention Cost

Question 42

Identify the ratio below that does not monitor non-value added time.

A)Quick Ratio
B)Inventory Turnover
C)Accounts Payable Turnover
D)Accounts Receivable Turnover

Question 43

The balanced scorecard approach has four perspectives,which of the following is not one of those perspectives?

A)Financial Perspective
B)Learning and Growth Perspective
C)Internal Control Perspective
D)Customer Perspective

Question 44

The cost and effectiveness of research and development is part of which of the following balanced scorecard perspectives?

A)Financial Perspective
B)Learning and Growth Perspective
C)Customer Perspective
D)Internal Perspective

Question 45

The bookkeeper who records cash receipts also deposits daily cash receipts at the bank on his way home from work.This is a violation of which of the following characteristics of good internal control:

A)requiring proper authorization
B)maintaining adequate documents and records
C)physically controlling assets and documents
D)separating incompatible duties

Question 46

All the checks used by Graphics,Inc.to pay its bills are prenumbered.This is an application of which of the following internal controls:

A)maintaining adequate documents and records
B)physically controlling assets and documents
C)requiring proper authorization
D)separating incompatible duties

Question 47

Plans showing business activities intended to accomplish objectives during the next year are referred to as:

A)operating plans
B)strategic plans
C)evaluating plans
D)development plans

Question 48

Which of the following businesses would have the shortest customer response time?

A)Dell Computers
B)Ford Motor Company
C)Construction Company
D)Wheat Farmer

Question 49

Which of the following businesses would have the longest customer response time?

A)Dell Computers
B)General Motors Company
C)Furniture Manufacturer
D)Apple Grower

Question 50

Customer response time is part of which of the following balanced scorecard perspectives?

A)Financial Perspective
B)Learning and Growth Perspective
C)Customer Perspective
D)Internal Perspective

Question 51

Which of the following would be part of the capital resources process?

A)issuance of stock
B)preparation of operating budget
C)calculating financial ratios
D)selling products on credit to customers

Question 52

Which is not part of the operating process?

A)purchase of a bulldozer by a construction company
B)purchase of a computer by an electronics store for resale
C)sale of stock by a stock broker
D)sale of merchandise

Question 53

A burger shop requires employees to ring up sales and place all cash receipts in the cash register.This is an application of which of the following internal controls:

A)requiring proper authorization
B)separating incompatible duties
C)physically controlling assets and documents
D)maintaining adequate documents and records

Question 54

The controller of Allitron,Inc.is one of two individuals in the company allowed to sign checks.This is an application of which of the following internal controls:

A)separating incompatible duties
B)maintaining adequate documents and records
C)requiring proper authorization
D)physically controlling assets and documents

Question 55

Identifying incompatible duties is divided into four phases,which of the following is not one of the four phases?

A)Scrutiny
B)Approval
C)Execution
D)Custody

Question 56

Which of the following would not be part of the capital resources process?

A)collection of a loan
B)acquisition of equipment
C)purchase and sale of inventory
D)sale of stock in another company

Question 57

Which of the following are the three phases of a business?

A)start-up,development and decline
B)operating,investing and financing
C)planning,performing and evaluating
D)revenue,expenditure and conversion

Question 58

Internal failure cost occurs when:

A)A company repairs a product before it is sold to the customer.
B)A company repairs a product after it is sold to the customer.
C)A company hires someone to inspect material before production takes place.
D)A company pays an engineer to insure the production line is free of faulty machines.

Question 59

Which of the following is not part of an internal control system?

A)Providing independent checks
B)Separating incompatible duties
C)Physically controlling assets
D)Designing produce that meet the customers needs

Question 60

Which of the following is part of the operating process?

A)sale of a warehouse
B)purchase of machinery
C)purchase of inventory
D)sale of common stock of another firm

Question 61

Which is an example of an event that takes place in the operating process?

A)purchase of a bulldozer by a construction company
B)purchase of a computer by an accounting firm
C)payment of dividends
D)payment of wages

Question 62

Toccata Corporation purchased raw materials,transformed them into finished goods,and sold these goods to customers on account.Describe how the subprocesses of the operating process are impacted by these events.

Question 63

Which of the following is part of the conversion subprocess?

A)purchase of merchandise for resale
B)payment of wages to sales people
C)purchase of building
D)requisition of raw materials

Question 64

Using the financial statements from the (instructor supplies the income statement and balance sheet of a company and insert name here)calculate each of the following ratios and briefly describe what the results indicate.
Return on Investment
Quick Ratio
Gross Margin Ratio
Current Ratio
Return on Sales Ratio
Debt to Equity Ratio
Return on Owners' Equity

Question 65

Ethan Fromme is the Purchaser for Hardware Hut,a company with several hardware stores.He prepares purchase orders for merchandise and places the orders with manufacturers.Although he does not physically receive the merchandise,he is responsible for checking the invoice against the purchase order and authorizing payment of the invoice.Describe internal control this arrangement causes.

Question 66

On a bank reconciliation,which of the following will reduce the company's cash balance?

A)Outstanding check
B)Deposit in transit
C)Non-sufficient funds check
D)Bank error

Question 67

Using the financial statements from the (instructor supplies the income statement and balance sheet of a company and insert name here)calculate each of the following ratios and briefly describe what the results indicate.
Current Ratio
Quick Ratio
Gross Margin Ratio
Return on Sales Ratio
Debt to Equity Ratio
Return on Investment Ratio
Return on Owners' Equity
Accounts Receivable Turnover
Inventory Turnover
Accounts Payable Turnover

Question 68

Scherzo Company purchased equipment from Rondo Corporation for $20,000.Scherzo paid no cash at the time of purchase.Instead Rondo permitted Scherzo to pay for the equipment by making four annual payments of $5,000.For Scherzo and for Rondo what processes are being used by these events? Explain your answer.

Question 69

Which of the following reflects a weakness in the internal control for cash?

A)Cash register generates receipt that documents the cash sale which is given to the customer.
B)Two employees have access to the same cash register in order to reduce chance of theft.
C)Person making out a check must get authorization before the check is sent.
D)The person receiving cash in the mail can not make entries into the accounting records.

Question 70

At July 31,Sonata Company had a general ledger cash balance of $5,900.Deposits in transit amounted to $1,200 and there was a service charge of $20.Outstanding checks totaled $1,500.What is the balance shown on the bank statement at the end of July?

A)$5,580
B)$5,880
C)$6,180
D)unable to determine from the information given

Question 71

Which of the following will not require an adjustment to the company's cash balance?

A)Bank Service Charge
B)Non sufficient funds check
C)Bank recorded a check for the wrong amount
D)All will require the company's cash balance to be adjusted.

Question 72

At May 31,Allegro Company had a general ledger cash balance of $7,400.At the end of May,the bank statement had a balance of $7,500.Deposits in transit amounted to $1,000 and there was a service charge of $10.Outstanding checks totaled $1,110.What is the correct amount of cash?

A)$7,390
B)$7,000
C)$6,390
D)$6,380

Question 73

A bank reconciliation will identify all of the following except?

A)Unrecorded bank service charges
B)Double Payment of a bill
C)Outstanding Check
D)Deposits in Transit

Question 74

Given the formula for each of the following ratios and then explain what each ratio measures.
a.Return on Investment
b.Quick Ratio
c.Gross Margin Ratio
d.Return on Owners' Equity

Question 75

Which of the following will required the cash on the books of the company to be adjusted?

A)Outstanding checks
B)Deposits in transit
C)Bank errors
D)Bank Service Charges

Question 76

Billing customers is part of which of the following?

A)Capital Resources Process
B)Marketing/sales/collection/customer service subprocess
C)Conversion subprocess
D)Credit Sales Process

Question 77

For each of the items below,explain how it would be handled in preparing a bank statement reconciliation and why it would be handled in that way.
(

A)deposits in transit
(b)outstanding checks
(c)a check for $300 was erroneously recorded in the accounts as $500

Question 78

Which of the following bank reconciliation items would require the cash on the company's books to be reduced?

A)Outstanding check
B)Deposit in transit
C)Non-sufficient funds check
D)Bank error

Question 79

On a bank reconciliation,which of the following will reduce the bank's cash balance?

A)Outstanding check
B)Deposit in transit
C)Non-sufficient funds check
D)Failure of the company to record the correct amount of the check on the company's records.

Question 80

Which of the following is not a factor in getting bank and book balances to reconcile?

A)Outstanding checks
B)Deposits for cash
C)Deposits in transit
D)Bank service charges