ACCT 301 Week 8 Final Exam Solutions

1. (TCO 1) What is the accounting equation? Suppose your company sold $12,000 in merchandise to a customer for cash. How does this transaction impact the accounting equation? (Points : 17)
2. (TCO 2) What are the four basic financial statements? Describe the balance sheet, and explain why it is important
3. What is the Sarbanes-Oxley Act? Do you think this act has more importance for the accounting profession or for investors? Why
4. What is horizontal analysis of financial statements? How does horizontal analysis differ from vertical analysis?
5. (TCO 8) Why is capital budgeting important? What is the IRR method? How is it calculated? (Points : 26)
6. (TCO 9) What are five different types of decisions that could use incremental analysis? What are the relevant costs in a make-or-buy decision? (Points : 26)
7. (TCO 10) How is a transfer price determined? Describe the cost-based method. Do you think it is better than the market-based method? (Points : 26)
8. (TCO 11) What are direct materials? Give an example of a direct material. How do direct materials differ from indirect materials? Give an example of an indirect material. (Points : 26)
9. (TCO 5) What is CVP analysis? Why is this an important analysis for a company to perform? (Points : 26)
10. (TCO 6) What is an operating budget? What does it result in? What is the first step in completing an operating budget? (Points : 26)
11. (TCO 7) What is responsibility accounting? What is a cost center? How does a cost center differ from a profit center? (Points : 26)

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