Fall 2007 - ASEC - Accounting Students Education Contribution Fund

By Amanda Ellis,2014-06-17 08:06
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Fall 2007 - ASEC - Accounting Students Education Contribution Fund ...

    University of Waterloo

    School of Accountancy

    AFM 131

    Mid-Term Examination

    Fall 2007

    1. Lucinda recently left a large insurance firm and opened a home-based business preparing medical transcriptions for doctors. Based on recent statistics, she can expect: A) a negative reaction from friends and family who wonder when she will get a “real”


    B) that affordable computer technology will allow her to compete with larger firms. C) the government will discourage her attempts to create a new business. D) to find security, routine and a paycheck from her new enterprise.

2. As his college graduation nears, Manny has focused his attention on finding full time

    employment. He has decided to narrow his job search to jobs with a major

    corporation. His job search strategy:

    A) makes sense because managerial skills are best developed by working for big firms. B) is smart because major corporations represent the most important source of

    employment growth in Canada.

    C) indicates that Manny's passion is to fulfill his dream of owning his own business. D) will likely limit his job prospects since most new jobs are with small businesses.

    3. A review of small business successes and failures indicates that the: A) businesses that are easiest to start offer the greatest potential for long term growth

    and profits.

    B) restaurant industry offers the least risk for entrepreneurs.

    C) businesses with the potential of high profit levels tend to be difficult to start and

    hard to keep going.

    D) reason the service sector is rapidly growing is that these firms are easy to start and

    keep going, and offer high levels of security and growth potential.

    Page 1

4. Motivated by his desire to operate his own business, Caleb is considering the purchase

    an existing business. As he carefully weights this option, he is likely to find that: A) very few owners of small businesses have any interest in selling. B) his potential for success would greatly improve if he started his own new firm. C) the value of an existing business is determined by what the business owns, what it

    earns, and what makes it unique.

    D) any entrepreneur willing to sell their business is experiencing serious financial


    5. Lamont wants to improve his chances to be a successful entrepreneur and so he has written a business plan. One advantage of developing this plan is that it: A) meets federal reporting requirements of Revenue Canada.

    B) insures financing will be available from the venture capitalists. C) forces Lamont to think carefully about all aspects of his planned business. D) will enable him to switch from a sole proprietorship to a corporation without any

    further paperwork.

    6. Which of the following statements best describes the theory of comparative advantage? A) The best way for a nation to ensure full employment is to be totally self-sufficient

    rather than relying on other nations to obtain goods and services. B) Each nation should produce those goods that it can produce more efficiently than

    other nations, and buy the goods it can not produce efficiently from other nations. C) The nation that has the largest reserves of gold and other natural resources will

    enjoy a position of comparative advantage in trade relationships. D) A nation should produce those goods for which domestic demand is comparatively

    strong, and should import those goods for which domestic demand is comparatively


7. Both the federal and provincial governments have provided incentives for Toyota to

    locate a new manufacturing facility in Woodstock Ontario because, A) Toyota makes significant political contributions.

    B) Canada is trying to establish an auto industry.

    C) this new facility will export all of its output to Japan.

    D) the auto industry is critical to the Canadian economy.

    Page 2

8. There are many ways in which an organization may participate in global trade. Which

    of the following strategies has the most amount of commitment, control, risk, and profit

    potential associated with it?

    A) exporting

    B) foreign direct investment

    C) international joint venture and strategic alliances D) licensing

9. In the article, "Let's make a deal, Western-style", the trade agreement signed between

    Alberta and British Columbia will,

    A) foster greater trade between Alberta and British Columbia with the Far East.

    B) force Alberta and British Columbia to increase the amount of trade between the two


    C) allow businesses in either province to buy goods or services from anywhere in

    Alberta or British Columbia without the added cost of tariffs. D) impose trade barriers between every other province and the combined provinces of

    Alberta and British Columbia.

    10. Active Learning implies,

    A) coming to every lecture during the term.

    B) buying all of the course resources identified in the course outline. C) memorizing all the definitions and formulas in a course. D) doing and thinking about what you are doing in a course.

    11. Governments throughout Canada are privatizing services that they have traditionally

    offered in response to:

    A) an opportunity to realize huge ongoing profits from royalties they will collect from

    private companies who acquire these services. B) new laws and regulations that have been passed mandating that these services be


    C) as a means to lower costs and improve efficiencies associated with the provision of

    these services.

    D) as a means of increasing the scope of their involvement in the economy.

    Page 3

    12. Ralph owns a small business. Some friends have suggested that he should switch from

    his current manual accounting system to one that is computerized. Ralph is not certain

    he wants to use computers in his small firm's accounting system. He is concerned

    about the time it would take in learning the system, and wonders whether the benefits

    will justify the costs of setting up the system. As a small business owner, Ralph would

    probably find that:

    A) computer software tends to be very helpful to small business owners who lack

    strong accounting support within their companies. B) today's accounting software tends to be very complex, so only people with

    extensive accounting experience can understand its features and use it effectively.

    C) even though it is not yet cost effective, he should go ahead and adopt a

    computerized system, because government regulations will require most business

    functions to be computerized in the near future. D) such systems actually reduce costs, because they eliminate the need to ever consult

    with an accountant.

    13. Our Gang Transfer Company has shown consistent profits over the past five years.

    However, the company has recently found itself in financial trouble due to cash

    shortages. This indicates that:

    A) an accounting profit does not guarantee a positive cash flow. B) it's not always important to prepare financial statements. C) the accountants apparently made a mistake when they prepared the trial balance.

    D) the state of the economy is less important than financial control techniques.

    14. If a firm can reduce its cost of goods sold and continue to sell its product for the same

    price, we would expect the firm to enjoy an increase in its ________. A) revenue

    B) liabilities