Deck 14: Using Financial Information and Accounting

Question 1

In the accounting field,CMA stands for which of the following?

A) certified management accountant
B) centralized managerial accountant
C) certified motivational accountant
D) consolidated monetary auditor

Answer 1

A

Question 2

Which of the following calculations is a formal expression of the accounting equation?

A) assets - owners' equity = liabilities
B) assets = liabilities + owners' equity
C) assets ´ liabilities = retained earnings
D) assets + liabilities = owners' equity

Answer 2

B

Question 3

Which of the following is a yearly document that describes a firm's financial status and usually discusses a firm's financial activities during the past year and its prospects for the future?

A) an earnings report
B) a trial balance
C) an annual report
D) a firm summary

Answer 3

C

Question 4

Which of the following is the BEST example of a current asset for a clinical psychologist?

A) the building in which his clinic is located
B) money he pays for rent and utilities
C) credit card charges by patients
D) his reputation as a compassionate man

Question 5

Which of the following deals with reporting to outsiders?

A) financial accounting
B) auditing
C) bookkeeping
D) internal accounting

Question 6

Which of the following deals with the internal operation of the firm?

A) managerial accounting
B) auditing accounting
C) bookkeeping
D) financial accounting

Question 7

What is the first step in the accounting cycle?

A) Analyze the financial statements.
B) Prepare the financial statements.
C) Analyze the business transaction documents.
D) Prepare the trial balance.

Question 8

To ensure accuracy and consistency in the way financial information is reported,accountants have historically followed which of the following rules?

A) generally accepted accounting principles
B) comparable accounting standards
C) accounting rules and principles
D) principled accounting procedures

Question 9

Which of the following summarizes an organization's financial status at the end of an accounting period?

A) the cash flow statement
B) the balance sheet
C) the trial balance
D) the income statement

Question 10

Which of the following is an example of an intangible asset for a manufacturer of padlocks?

A) a patent on a titanium lock mechanism
B) money owed to the company by a superstore chain
C) a machine for forming the locks out of sheet metal
D) a warehouse for storing locks

Question 11

What are things of value owned by a firm?

A) intangibles
B) assets
C) owners' equity
D) tangibles

Question 12

What is another term for owners' equity?

A) assets
B) gross worth
C) net worth
D) liabilities

Question 13

In accounting,every transaction must be recorded as two entries.This system is known as which of the following?

A) dual-notation bookkeeping
B) double-entry bookkeeping
C) double-decker bookkeeping
D) accounting-cycle bookkeeping

Question 14

Managerial accounting provides which of the following financial information?

A) monthly sales records
B) income statements
C) reports for bankers and other investors
D) reports for shareholders

Question 15

Financial accounting produces financial reports that are important to which of the following groups?

A) Canada Revenue Agency
B) managers
C) supervisors
D) employees

Question 16

Which of the following statements BEST describes the accounting profession?

A) Accountants need a masters degree to obtain their designation.
B) Many CGA's own their own business.
C) Managerial accountants become Certified Management Accountants when they complete a degree and apply to the association.
D) Most CGAs work only in industry.

Question 17

Which of the following is the system used to record a firm's financial transactions in a routine and clerical process?

A) auditing
B) bookkeeping
C) record keeping
D) accounting

Question 18

Which of the following statements BEST describes the accounting profession?

A) Certified Management Accountants work for local,provincial,and national agencies.
B) Accountants do not need a degree to obtain their designation.
C) Accountants are typically classified as one of three professional designations.
D) Accountants need a masters degree to obtain their designation.

Question 19

International Financial Reporting Standards will first be adopted by which of the following in Canada?

A) firms with government loans owing
B) publicly accountable organizations
C) for-profit firms only
D) all firms

Question 20

Which of the following is an example of a liability that might be owed by a discount shoe store?

A) promotional signs
B) money owed to shoe distributors
C) money in the cash register
D) the reduced prices paid by customers

Question 21

What is a short-term loan from a bank,supplier,or others that must be repaid within a year?

A) an account payable
B) a note receivable
C) a note payable
D) an account receivable

Question 22

Allatoona Ceramics recently purchased a new kiln for $49,000.Allatoona Ceramics is allowed to charge a portion of the company's cost during its useful life against the profits it generates.What is this practice called?

A) assetization
B) acceleration
C) deceleration
D) depreciation

Question 23

Which of the following terms equals the total profits of a company minus all dividends (distributions of profits)to shareholders?

A) net earnings
B) net worth
C) retained earnings
D) owners' equity

Question 24

Which of the following is the company's ability to expense fixed assets over their useful life?

A) capital budgeting
B) depreciation
C) acceleration
D) assetization

Question 25

What are amounts owed to the firm by customers who bought goods and services on credit?

A) notes payable
B) owners' equity
C) marketable receivables
D) accounts receivable

Question 26

How soon are current assets,such as marketable securities and inventory,usually expected to be turned into cash?

A) within one year
B) within five years
C) within 18 months
D) within one month

Question 27

Which of the following is a summary of what a company has earned and spent over a given period?

A) the balance sheet
B) the cash flow statement
C) the income statement
D) the trial balance

Question 28

For which of the following assets would a wholesale company use depreciation?

A) its patented computer tracking equipment
B) inventory of unsold merchandise
C) gasoline used to power its delivery trucks
D) its warehouses

Question 29

Trademarks,franchises,patents,and copyrights are carried on the company's books as which of the following?

A) intangible assets
B) owners' equity
C) tangible assets
D) long-term assets

Question 30

Fixed assets are property and buildings that a firm expects to use for more than which of the following periods of time?

A) six months
B) one year
C) one month
D) two years

Question 31

Gross sales for Alfredo Milling Company was $100,000 for the month of May.Sales discounts amounted to $3,000.There were no returns.The difference,$97,000,represents which of the following for Alfredo Milling Company?

A) cost of goods sold
B) gross revenues
C) gross profit
D) net sales

Question 32

Which of the following is the process of distributing the original cost of a long-term asset over the years of its useful life?

A) depreciation
B) accountable life
C) cost distribution
D) appreciation

Question 33

The Jolly Green Giant appears on all packages of frozen and canned vegetables and other dishes sold by the Green Giant Company.Because it does not have a physical existence,what is the Jolly Green Giant?

A) a retained asset
B) a tangible expense
C) an intangible asset
D) a hidden asset

Question 34

Which of the following are debts that are to be paid within 12 months?

A) current assets
B) fixed assets
C) current liabilities
D) fixed liabilities

Question 35

Wehrmann-Longo sells landscape rocks to retailers.It recently purchased a trainload of lava rocks from a mine in Hawaii.Until Wehrmann-Longo pays the bill,the purchase will be carried on the Hawaiian company's books as which of the following?

A) an account payable
B) an account receivable
C) an intangible asset
D) a current asset

Question 36

What is the dollar amount of sales plus any other income received from sources such as interest and dividends?

A) revenues
B) capital
C) intangible assets
D) equities

Question 37

Bert Yelverton has a 20-year mortgage on the building where his office is located.The mortgage is an example of which of the following?

A) a long-term liability
B) a current asset
C) owners' equity
D) a current liability

Question 38

Which of the following is an example of a fixed asset for a manufacturer of road building equipment?

A) patents held on a new type of asphalt
B) shipping area for finished goods and receiving area for component parts
C) computer cartridges
D) cans of yellow paint for painting equipment

Question 39

Which of the following are temporary investments of excess cash in bonds and shares that can readily be converted into cash?

A) marketable securities
B) accounts receivable
C) owners' net contribution margins
D) notes payable

Question 40

What is another term for an operating statement or an earnings statement?

A) a cash flow statement
B) an income statement
C) a balance sheet
D) a transaction ledger

Question 41

Dayton Industries manufactures the motors used in heating and air conditioning systems.It had sales of $300,000 during the last quarter.Its gross profit was $120,000.On an income statement,an accountant would classify the remaining $180,000 as which of the following?

A) cost of production
B) operating expenses
C) cost of goods sold
D) production income

Question 42

Humphrey Mattress Company sold $130,000 worth of merchandise in May.The manufacturer gave no discounts and had no returns.Which of the following statements BEST describes the information seen on the company's income statement?

A) Liabilities equal assets.
B) Gross sales equal net sales.
C) Cost of goods sold exceeds gross sales.
D) Gross sales exceed net sales.

Question 43

On an income statement,operating expenses that cannot be linked to cost of goods sold or to sales are known as which of the following type of expenses?

A) incidental
B) functional
C) miscellaneous
D) general and administrative

Question 44

What are the two main types of operating expenses?

A) production and general and administrative
B) production and selling
C) selling and general and administrative
D) office and selling

Question 45

On an income statement,expenses such as professional salaries,office salaries,office supplies,rent,and insurance,are known as which of the following?

A) miscellaneous expenses
B) managerial expenses
C) functional expenses
D) general and administrative expenses

Question 46

Which of the following are the two types of expenses recorded on the income statement?

A) cost of goods sold and production costs
B) sales expense and administrative expenses`
C) operating expenses and administrative expenses
D) cost of goods sold and operating expenses

Question 47

Which of the following expenses are related to marketing and distributing of a company's products?

A) administrative expenses
B) selling expenses
C) distribution costs
D) functional costs

Question 48

Net sales is BEST described by which of the following?

A) total sales for the accounting period
B) profit after cost of goods sold is deducted
C) amount after deducting sales discount and returns and allowances from gross sales
D) profit after all expenses are paid

Question 49

Which of the following is classification of ratio analysis used by managers to interpret the numbers in financial statements?

A) depreciation ratios
B) assets-use ratios
C) operating ratios
D) liquidity ratios

Question 50

What is the difference between net sales and cost of goods sold?

A) net income
B) general income
C) net revenues
D) gross profit

Question 51

In manufacturing,all costs directly related to production,including raw materials,labour,and factory overhead,are classified as which of the following?

A) cost of goods sold
B) intangible profits
C) operating expenses
D) inventory expenses

Question 52

Which of the following is a summary of the money flowing into and out of a firm?

A) the short-term budget
B) the statement of cash flows
C) the balance sheet
D) the income statement

Question 53

Which of the following is the financial statement used to assess the sources and uses of cash during the year?

A) the trial balance
B) the balance sheet
C) the income statement
D) the statement of cash flows

Question 54

On a statement of cash flows for a manufacturer of digital thermometers,the cash flows from investment activities section would include which of the following?

A) the sale of land adjacent to the manufacturer's administrative office building
B) purchase of new $25,000 copying machine
C) repayment of long-term loan by a wholesaler of weather-related items
D) the money borrowed from the bank to start the company

Question 55

Watts Regulator makes hydroponic pressure valves used in water pumps and water heaters.Watts had $100,000 in net sales for the month.Cost of goods sold was $42,000.On an income statement,how would the remaining $58,000 be classified?

A) as gross profit
B) as net revenues
C) as general income
D) as gross revenues

Question 56

After all expenses have been subtracted from revenues on an income statement,if the final figure is positive,it is known as which of the following?

A) owners' equity
B) net revenue
C) net profit
D) gross profit

Question 57

Which of the following involves calculating and interpreting financial ratios taken from the firm's financial statements in order to assess its condition and performance?

A) organizational performance appraisal
B) ratio analysis
C) performance analysis
D) financial reporting

Question 58

After all expenses have been subtracted from revenues on an income statement,if the final figure is negative,it is known as which of the following?

A) owners' negative equity
B) net loss
C) negative liability
D) net liability

Question 59

On a statement of cash flows for a manufacturer of digital thermometers,the cash flows from operating activities would include which of the following?

A) the sale of land adjacent to the manufacturer's administrative office building
B) repayment of long-term loan by a wholesaler of weather-related items
C) increases in the manufacturer's inventory
D) the money borrowed from the bank to start the company

Question 60

Which of the following is an example of a cost of goods sold for a manufacturer of electric fans?

A) overtime hours needed to fill a large summer order
B) the office phone bill
C) sales commissions
D) factory utilities

Question 61

Which of the following ratios measures the relationship between the amount of debt financing and the amount of equity financing?

A) sales to ownership
B) liability to ownership
C) debt to equity
D) debt to revenue

Question 62

Which of the following is the most significant current trend in accounting in Canada?

A) the importance of knowledge assets
B) the move to IFRS
C) the importance of intellectual capital
D) the expanded role of accountants

Question 63

What do liquidity ratios measure?

A) long-term financial stability
B) earnings per share
C) annual sales and profits
D) short-term financial stability

Question 64

Myriad Canning Company has current assets of $8,000 and current liabilities of $2,000.What is its a current ratio?

A) 25
B) 2.5
C) 8
D) 4

Question 65

By dividing cost of goods sold by the average inventory to measure the speed with which inventory moves through the firm and is turned into sales,which of the following ratios is calculated?

A) the price-earnings ratio
B) the inventory turnover ratio
C) the profitability ratio
D) the sales to inventory ratio

Question 66

What is the ratio of net profit to the number of shares of common share outstanding?

A) equity earnings
B) share-to-earnings ratio
C) earnings for profit
D) earnings per share (EPS)

Question 67

Which of the following classifications of ratios measures the degree and effect of the firm's use of borrowed funds to finance its operations?

A) liquidity
B) debt
C) equity
D) profitability

Question 68

Which of the following ratios is a measure of the firm's ability to pay its current liabilities once inventory is subtracted from current assets?

A) the acid-test ratio
B) the net margin ratio
C) the profitability ratio
D) the inventory ratio

Question 69

The net profit for a company that builds portable oil well exploration rigs was $10,000,000 last year.The firm paid out $4,000,000 in dividends and has 2,000,000 shares of common share outstanding.What is its earnings per share?

A) $4
B) $3.00
C) $2.50
D) $5

Question 70

What are ratios of special interest to the firm's creditors and measure the firm's ability to pay short-term debts as they come due?

A) liquidity ratios
B) earnings ratios
C) profitability ratios
D) current ratios

Question 71

What is the ratio of total current assets to current liabilities called?

A) the activity ratio
B) the profitability ratio
C) the current ratio
D) the net margin ratio

Question 72

Which of the following is often used to measure a firm's overall liquidity even though it is not really a financial ratio?

A) earnings per share
B) return on equity
C) net profit margin
D) net working capital

Question 73

Myriad Canning Company has the following balance sheet figures for the year ending December 31,200X: Cash $1,000
Marketable securities $5,000
Inventory $3,000
Total current assets $9,000
Accounts payable $2,000
Notes payable $1,000
Total current liabilities $3,000
What is its net working capital?

A) $6,000
B) $9,000
C) $1,000
D) $3,000

Question 74

A company that specializes in planning parties for children had $7,000 worth of inventory on January 1,2007,and it had $5,000 worth of inventory on December 31,2007.If its cost of goods sold for that period was $10,000,and its net profit was $9,000,which of the following represents its inventory turnover ratio?

A) 3 times
B) 1.5 times
C) 1.67 times
D) 1 times

Question 75

Accounting is the process of collecting,recording,classifying,summarizing,reporting,and analyzing the financial condition of an organization.

Question 76

The ratio of net profit to total owners' equity is called which of the following?

A) return on inventory
B) return on earnings
C) return on equity
D) return on sales

Question 77

The Kosov School teaches adults how to communicate in a foreign language in a period of weeks.The school's debt-to-equity ratio is 120 percent.Which of the following interpretations is represented by the ratio?

A) The school has surplus retained earnings.
B) The school is very liquid.
C) The school has more debt than equity.
D) The school has high accrued expenses.

Question 78

Which of the following is arrived at by subtracting current liabilities from current assets?

A) owners' equity
B) net margin
C) net working capital
D) net profit

Question 79

What is the acceptable inventory turnover ratio?

A) once every sixty days
B) once per year
C) once every ninety days
D) it is different for each industry

Question 80

Which of the following classification of ratios reflects the speed with which resources are converted to cash or sales?

A) leverage
B) equity
C) activity
D) profitability