Deck 14: Using Financial Information and Accounting

Question 1

The income statement is a snapshot of the firm's financial position at a certain point in time.

Answer 1

False

Question 2

The postage stamps and petty cash in the architect's drawer as well as his drawing table, his office furniture, and money owed to him by clients are all examples of assets.

Answer 2

True

Question 3

The Sarbanes-Oxley Act redefines the public corporation-auditor relationship and restricts the types of services auditors can provide to clients.

Answer 3

True

Question 4

All publicly held companies must include a statement of cash flows in their financial reports to stockholders.

Question 5

An accounting system should generate both internal and external reports.

Question 6

The usual expression of the accounting equation is Assets = Liabilities + Owners' Equity.

Question 7

Independent accountants who serve organizations and individuals on a fee basis are called public accountants.

Question 8

The $350 charged to the homeowner for electrical work performed one month ago is an example of a note receivable.

Question 9

The five-step process that takes a transaction from being mere raw financial data to its being summarized in the financial statements is called the accounting cycle.

Question 10

In a statement of cash flow, the cash flow from investment activities would include special promotions used to sell extra inventory.

Question 11

The final figure or bottom line on an income statement is called the net revenue.

Question 12

An example of an intangible asset is accounts receivable because the firm does not see or feel it until it is paid in full.

Question 13

Administrative accounting is the term given to the internal workings of the company, such as budgets, sales reports, and analyses of how well marketing strategies are working.

Question 14

The ratio of current assets to current liabilities is called the ownership ratio.

Question 15

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

Question 16

Revenues are the dollar amount of sales plus any other income received from sources like interest, dividends, and rent.

Question 17

Profitability ratios measure how well a firm uses its assets.

Question 18

Retained earnings are the amounts left over from profitable operations since the firm's beginning.They are equal to total profits minus all dividends paid to stockholders.

Question 19

The balance sheet summarizes a firm's financial position over a period of time, for instance 3 months or a year.

Question 20

A current asset is one that can or will be converted into cash within one year.

Question 21

An accountant who has a bachelor's degree, passes a test prepared by the professional organization AICPA, and has a certain number of years of on-the-job training becomes a:

A)certified public accountant
B)certified private accountant
C)professional accountant
D)financial analyst
E)certified tax specialist

Question 22

Accountants employed within organizations are called:

A)public accountants
B)public auditors
C)private auditors
D)private accountants
E)tax consultants

Question 23

Which of the following statements about the accounting profession is true?

A)Most CPAs first work for public accounting firms and later become private accountants or financial managers.
B)Managerial accountants become a certified management accountant when they meet the requirements of the professional certification program.
C)Public accountants serve individuals and organizations on a fee basis.
D)Private accountants are also called corporate accountants.
E)All of the above statement about the accounting profession are true.

Question 24

Recent legislation has decreased the roles of the chief audit executive (CAE).

Question 25

In the accounting field, CMA stands for:

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

Question 26

Managerial accounting provides all of the following financial information EXCEPT:

A)production reports
B)payroll summaries
C)income statements
D)budgets
E)monthly sales records

Question 27

Managerial accounting provides information that would probably be most beneficial to:

A)the IRS
B)financial analysts
C)a lending officer of the bank
D)a middle manager of the company
E)shareholders

Question 28

Accounting provides a framework for looking at:

A)past performance
B)current financial health
C)possible future performance
D)financial performances of different firms
E)all of the above

Question 29

Which of the following statements about the accounting profession is true?

A)Accountants are typically classified as private or public accountants.
B)Accountants cannot legally offer management consulting services.
C)Private accountants serve individuals and organizations on a fee basis.
D)Public accountants work for local, state, and national agencies.
E)All of the above statement about the accounting profession are true.

Question 30

_____ are independent accountants who serve organizations and individuals on a fee basis.

A)Public auditors
B)Tax reviewers
C)Financial strategists
D)Private accountants
E)Public accountants

Question 31

A(n) _____ 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)trial balance
B)firm summary
C)annual report
D)earnings report
E)financial analysis

Question 32

_____ is the system used to record a firm's financial transactions in a routine and clerical process.

A)Accounting
B)Record keeping
C)Bookkeeping
D)Auditing
E)Financial management

Question 33

Accounting involves the _____ of the financial activities for firms.

A)delegating
B)summarizing
C)creation
D)empowering
E)planning

Question 34

Earnings per share (EPS) is the dollar amount earned by each share, not the actual amount given to stockholders in the form of dividends.

Question 35

International accounting standards:

A)make it easy for an international marketer to rely on global balance sheets and income statements
B)are supervised by a special agency of the United Nations
C)all follow GAAP regulations
D)are required for successful international trade
E)do not exist

Question 36

_____ deals with reporting to outsiders._____ accounting deals with the internal operations of the firm.

A)Bookkeeping; Financial accounting
B)Financial accounting; Auditing
C)Auditing; Managerial accounting
D)External accounting; Internal accounting
E)Financial accounting; Managerial accounting

Question 37

Sarbanes-Oxley allowed accountants to serve as both auditors and advisors for their clients

Question 38

The Sarbanes-Oxley Act:

A)set national requirements for becoming a practicing CPA
B)restricts the types of nonaudit services auditors can provide audit clients
C)dealt with accounting issues relevant to NAFTA members
D)mandated the use of international accounting standards
E)made fraudulent financial reporting illegal

Question 39

The Financial Accounting Standards Board (FASB) is a:

A)private organization that is responsible for establishing financial accounting standards in the United States
B)federal government agency that is responsible for establishing financial accounting standards in the United States
C)United Nations organization that is responsible for establishing financial accounting standards globally
D)federal government agency that is responsible for establishing managerial accounting standards for NAFTA members
E)federal government agency that mediates disputes between accountants and the companies they work for

Question 40

To ensure accuracy and consistency in the way financial information is reported, accountants follow rules known as:

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

Question 41

The last step in the accounting cycle is to:

A)analyze business transaction documents
B)prepare financial statements
C)analyze financial statements and management reports
D)prepare trial balance
E)post entries to ledger

Question 42

_____ are temporary investments of excess cash in bonds and stocks that can readily be converted into cash.

A)Accounts receivable
B)Owners' net contribution margins
C)Notes payable
D)Marketable securities
E)Marketable receivables

Question 43

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

A)money owed to them by a do-it-yourself superstore chain
B)a patent on titanium lock mechanism
C)a machine for forming the locks out of sheet metal
D)a warehouse for storing locks
E)an office for company CEO

Question 44

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

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

Question 45

Which of the following is an example of a liability that might be owned by an antique mall?

A)an expensive Chinese urn with a small crack
B)the sales prices paid by customers
C)promotional signs
D)money owed to utility companies
E)accounting and inventory software

Question 46

In accounting, every transaction must be recorded as two entries.This system is called:

A)accounting-cycle bookkeeping
B)double-entry bookkeeping
C)dual-notation bookkeeping
D)double-decker bookkeeping
E)tandem record keeping

Question 47

Current assets, such as marketable securities and inventory, usually are expected to be turned into cash within:

A)one month
B)five years
C)one year
D)eighteen months
E)two years

Question 48

The first step in the accounting cycle is to:

A)analyze business transaction documents
B)prepare financial statements
C)analyze financial statements
D)prepare trial balance
E)post entries to ledger

Question 49

Things of value owned by a firm are called its:

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

Question 50

Computers can enhance accounting by:

A)preparing tax returns
B)handling general ledger functions
C)controlling purchase orders
D)providing a means to control inventory
E)doing all of these

Question 51

Which of the following is an example of an asset that might be owned by a minor league baseball team?

A)salaries owed to its players
B)the cost of getting tickets printed
C)reputation as a winning team
D)the price made for advertising on local radio
E)all of these

Question 52

Which of the following is NOT one of the six steps in the accounting cycle?

A)analyzing business transaction documents
B)recording business transactions in journal
C)preparing a trial balance
D)paying accounts payable
E)preparing the financial statements

Question 53

The _____ summarizes an organization's financial status at the end of an accounting period.

A)trial balance
B)income statement
C)cash flow statement
D)balance sheet
E)accounts payable ledger

Question 54

Which of the following is the BEST example of a current asset for a university bookstore?

A)the building in which the store is located
B)accounting software used to control store's inventory
C)credit card charges by book buyers
D)money paid for rent and utilities
E)salary paid to student employees

Question 55

Fixed assets are property and buildings that a firm expects to use for more than:

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

Question 56

_____ is the company's ability to expense fixed assets over their useful life.

A)Amortization
B)Acceleration
C)Depreciation
D)Capital budgeting
E)Maturation

Question 57

_____ is the process of distributing the original cost of a long-term asset over the years of its useful life.

A)Depreciation
B)Appreciation
C)Accountable life
D)Cost distribution
E)Amortization

Question 58

Another term for owners' equity is:

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

Question 59

Which of the following assets is NOT an example of a fixed asset for a manufacturer of road building equipment?

A)employee parking lot
B)production equipment for assembling engines
C)shipping area for finished goods and receiving area for component parts
D)cans of yellow paint for refurbishing equipment
E)warehouse building for storing finished equipment

Question 60

Amounts owed to the firm by customers who bought goods and services on credit are called:

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

Question 61

The sporting goods store sold $75,000 worth of merchandise in June.The retailer gave no discounts and had no returns.Which of the following statements accurately describes the information seen on the company's income statement?

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

Question 62

Ennis Worth has a six-month loan for $7,500 that he used to refurbish the fishing boat he uses to earn his living.This loan is an example of:

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

Question 63

The dollar amount of sales plus any other income received from sources like interest and dividends is called:

A)equities
B)intangible assets
C)capital
D)revenues
E)gross profit

Question 64

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

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

Question 65

In 2006, the retail industry voted the Bike Gallery as one of the top 100 bicycle retailers in the United States.It recently purchased a truckload of Thule brand bike racks from the manufacturer.Until the Bike Gallery pays the bill, the purchase will be carried on Thule's books as a(n):

A)account receivable
B)intangible asset
C)account payable
D)current asset
E)fixed liability

Question 66

Toys "R" Us was founded in 1948.The iconic mascot Geoffrey the Giraffe was introduced in February 1960.Geoffrey used in all ads and promotions used by the retail toy chain is an example of a(n) _____ because it does not have a physical existence.

A)tangible expense
B)hidden asset
C)retained asset
D)intangible asset
E)intangible revenue

Question 67

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

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

Question 68

Gross sales for Nevada Silver, a retailer of silver jewelry was $120,000 for the month of May.Sales discounts amounted to $18,000.There were no returns.The difference, $102,000, is Nevada Silver's:

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

Question 69

A(n) _____ is a summary of what a company has earned and spent over a given period.

A)balance sheet
B)trial balance
C)income statement
D)cash flow statement
E)annual stockholders' report

Question 70

Trademarks, franchises, patents, and copyrights are carried on the company's books as:

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

Question 71

The difference between net sales and cost of goods sold is:

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

Question 72

There are two types of expenses recorded on the income statement.They are:

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

Question 73

_____ are bills that have accumulated and must be paid at a specified future date within the year although no bill has been received by the firm.

A)Accounts payable
B)Marketable securities
C)Notes receivable
D)Accounts receivable
E)Accrued expenses

Question 74

In manufacturing, all costs directly related to production including raw materials, labor, and factory overhead are classified as:

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

Question 75

Net sales:

A)is determined by adding total sales for the accounting period
B)is calculated once profit after all expenses are paid
C)is determined once profit after cost of goods sold is deducted
D)deducts sales discount and returns and allowances from gross sales deducting sales discount and returns and allowances from gross sales
E)is calculated by deducting revenues from gross sales

Question 76

Which of the following is NOT an example of a cost of goods sold for a manufacturer of electric fans?

A)housing in which to put the fan motors
B)overtime hours needed to fill a large summer order
C)wood and glass for barometers
D)factory utilities
E)sales commissions

Question 77

Haley Optics manufactures lens used in cameras, binoculars, and scientific equipment.It had sales of $300,000 during the last quarter.Its gross profit sold was $120,000.On an income statement, an accountant would classify the remaining $180,000 as:

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

Question 78

A short-term loan from a bank, supplier, or others that must be repaid within a year is a(n):

A)account payable
B)note payable
C)account receivable
D)note receivable
E)prepaid payable

Question 79

Sullins Cleaning Service has purchased a new pressure washer for $18,000.Sullins Cleaning is allowed to charge a portion of the company's cost during its useful life against the profits it generates.This practice is called:

A)amortization
B)deceleration
C)acceleration
D)depreciation
E)appreciation

Question 80

_____ are debts that are to be paid within twelve months.

A)Fixed liabilities
B)Current assets
C)Fixed assets
D)Current liabilities
E)Intangible liabilities