Exam 16: Understanding Accounting and Financial Information

On December 31,2001,Saskatoon Laboratories had assets of $235,000 and owners' equity of $84,000.We can conclude that Saskatoon Laboratories must have:

The current ratio is used to evaluate a firm's ability to pay its short-term debts.

FIFO is a method of inventory valuation that assumes that the most recent items received in inventory are sold first.

Which key provision of the Sarbanes-Oxley act should minimize the opportunity for public accountants to minimize conflict of interest?

There is a standard inventory turnover ratio that applies to any company.

The current ratio is a commonly used ________ ratio.

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

According to generally accepted accounting rules,the straight-line method is the only allowable method of depreciating assets for the purposes of computing and reporting net income.

Identify the three key financial statements that corporations are required to prepare,and describe the type of information found on each.

Accounting supports the four functions of management and is designed to assist decision makers-both internal and external.

One advantage of the double-entry method of bookkeeping is that it can help identify mistakes made in recording financial transactions.

The accounting book that provides all the information about a single account in one place is called the ledger.

Rent,amortization,and salaries are all examples of:

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:

Liabilities are reported on the income statement.

The basic earnings per share and the diluted earnings per share would have quite different values for a firm that relied heavily on preferred stock and convertible debt securities to acquire funds.

Different amortization techniques can result in different net income for a firm.

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

Accounting includes _________ information related to financial transactions.

Information contained in a firm's annual report largely represents work done by managerial accountants.