Question 1

Becky Hunter is an accountant employed by FAF Enterprises.Recently she has spent much of her time working on defining measures of costs for the production department and checking to ensure that various departments are staying within their budgets.Becky is a:

Accepted Answer

A)   Public accountant whose work is mainly concerned with auditing.
B)   Public accountant whose work is mainly concerned with financial accounting.
C)   Private accountant whose work is mainly concerned with managerial accounting.
D)   Private accountant whose work is mainly concerned with financial accounting.E) A) and B)
F) A) and C)

Question 2

During a period of rising prices,using FIFO (first in,first out) inventory valuation method will result in ________ net income figures than would LIFO (last in,first out) .

Accepted Answer

A)   higher
B)   lower
C)   the same
D)   less accurateE) B) and C)
F) A) and D)

Question 3

The Barkley Company's balance sheet shows: what the business owns,minus what the business owes,equals the book value (or,net worth)of the business.

Accepted Answer

A) True 
 B)False

Question 4

The three important financial statements prepared by accountants are:

Accepted Answer

A)   Ledger,journal,and trial balance.
B)   Cash budget,capital budget,and master budget.
C)   Revenue summary,expense summary,and consolidation statement.
D)   Balance sheet,income statement,and statement of cash flows.E) C) and D)
F) B) and C)

Question 5

Leverage ratios are concerned with the extent to which a firm relies on borrowed funds in its operations.

Accepted Answer

A) True 
 B)False

Question 6

The _______ ratio helps determine the ability of a firm to repay its short-term debts even if it has difficulty selling its inventory.

Accepted Answer

A)   acid-test
B)   cash flow
C)   diluted current asset
D)   required reserveE) A) and B)
F) C) and D)

Question 7

The income statement computes net income by subtracting liabilities from assets.

Accepted Answer

A) True 
 B)False

Question 8

Carole Grand and Bonnie Lamore run a shuttle service from Western Illinois to the busy Chicago O'Hare airport.Last month,they recorded the following: If 25% of their net income is paid to the government in taxes,what is their net income after taxes?

Accepted Answer

A)   $1410.00
B)   $1160.00
C)   $682.00
D)   $870.00E) B) and C)
F) A) and B)

Question 9

Bookkeeping is part of the accounting cycle,but accounting goes far beyond the activities involved in bookkeeping.

Accepted Answer

A) True 
 B)False

Question 10

Preferred Pet Care,Inc. ,has recorded the following on its income statement for the period ending,December 31,2014:
The return on sales = 34%.This return is outstanding and there is no need to compare this return to competitors in the veterinary services industry.

Accepted Answer

A) True 
 B)False

Question 11

The fundamental accounting equation is as follows: Assets = Liabilities + Owners' equity.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following is an example of a financial transaction?

Accepted Answer

A)   A firm purchases a fire insurance policy.
B)   An internal auditor discovers an error in a firm's inventory valuation.
C)   A potential customer accesses a firm's Web page.
D)   A manager reviews the financial statements prepared by an accountant.E) C) and D)
F) B) and D)

Question 13

The acid-test ratio emphasizes the ability to convert inventory quickly into cash.

Accepted Answer

A) True 
 B)False

Question 14

A(n) _________ is a yearly published statement of the financial condition,progress and expectations of an organization.

Accepted Answer

A)   balance sheet
B)   independent audit
C)   mission statement
D)   annual reportE) A) and B)
F) A) and C)

Question 15

Liquidity refers to how fast an asset can be converted to cash.

Accepted Answer

A) True 
 B)False

Question 16

Although managers who work for large firms must know something about accounting,people who run small businesses only need to know the basics of bookkeeping.

Accepted Answer

A) True 
 B)False

Question 17

The income statement reports the difference between a firm's assets and its liabilities as of a certain date.

Accepted Answer

A) True 
 B)False

Question 18

Benjamin works in the accounting department for a textbook publishing firm preparing budgets and reporting production costs.He is a:

Accepted Answer

A)   Managerial accountant.
B)   Financial accountant.
C)   Tax accountant
D)   Auditor.E) None of the above
F) A) and B)

Question 19

A firm's financial statements represent a health report regarding the condition of the firm.

Accepted Answer

A) True 
 B)False

Question 20

Although a firm may use different inventory valuation methods,generally accepted accounting principles (GAAP)states that these methods must produce the same dollar value for the cost of goods sold.

Accepted Answer

A) True 
 B)False

Exam 17: Understanding Accounting and Financial Information

Preferred Pet Care,Inc. ,has recorded the following on its income statement for the period ending,December 31,2014: The return on sales = 34%.This return is outstanding and there is no need to compare this return to competitors in the veterinary services industry.

Correct AnswerverifiedShow Answer

A firm's financial statements represent a health report regarding the condition of the firm.

Correct AnswerverifiedShow Answer

Which of the following is an example of a financial transaction?

Correct AnswerverifiedShow Answer

Carole Grand and Bonnie Lamore run a shuttle service from Western Illinois to the busy Chicago O'Hare airport.Last month,they recorded the following: If 25% of their net income is paid to the government in taxes,what is their net income after taxes?

Correct AnswerverifiedShow Answer

The acid-test ratio emphasizes the ability to convert inventory quickly into cash.

Correct AnswerverifiedShow Answer

Although managers who work for large firms must know something about accounting,people who run small businesses only need to know the basics of bookkeeping.

Correct AnswerverifiedShow Answer

Liquidity refers to how fast an asset can be converted to cash.

Correct AnswerverifiedShow Answer

Benjamin works in the accounting department for a textbook publishing firm preparing budgets and reporting production costs.He is a:

Correct AnswerverifiedShow Answer

Although a firm may use different inventory valuation methods,generally accepted accounting principles (GAAP)states that these methods must produce the same dollar value for the cost of goods sold.

Correct AnswerverifiedShow Answer

The fundamental accounting equation is as follows: Assets = Liabilities + Owners' equity.

Correct AnswerverifiedShow Answer

The _______ ratio helps determine the ability of a firm to repay its short-term debts even if it has difficulty selling its inventory.

Correct AnswerverifiedShow Answer

The income statement reports the difference between a firm's assets and its liabilities as of a certain date.

Correct AnswerverifiedShow Answer

A(n) _________ is a yearly published statement of the financial condition,progress and expectations of an organization.

Correct AnswerverifiedShow Answer

Becky Hunter is an accountant employed by FAF Enterprises.Recently she has spent much of her time working on defining measures of costs for the production department and checking to ensure that various departments are staying within their budgets.Becky is a:

Correct AnswerverifiedShow Answer

The income statement computes net income by subtracting liabilities from assets.

Correct AnswerverifiedShow Answer

During a period of rising prices,using FIFO (first in,first out) inventory valuation method will result in ________ net income figures than would LIFO (last in,first out) .

Correct AnswerverifiedShow Answer

The Barkley Company's balance sheet shows: what the business owns,minus what the business owes,equals the book value (or,net worth)of the business.

Correct AnswerverifiedShow Answer

Bookkeeping is part of the accounting cycle,but accounting goes far beyond the activities involved in bookkeeping.

Correct AnswerverifiedShow Answer

Leverage ratios are concerned with the extent to which a firm relies on borrowed funds in its operations.

Correct AnswerverifiedShow Answer

The three important financial statements prepared by accountants are:

Correct AnswerverifiedShow Answer

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