Question 1

When an accountant writes off the cost of a tangible asset over its estimated lifetime, it is called depreciation.

Accepted Answer

A) True 
 B)False

Question 2

The Newport Company balance sheet shows the following items: accounts payable totaling $60,000; salaries payable totaling $85,000; and notes payable totaling $120,000. These are liabilities, or money that the firm owes others.

Accepted Answer

A) True 
 B)False

Question 3

Careful consideration of the use of computers in accounting indicates that computers

Accepted Answer

A)  will soon eliminate all of the accounting functions. 
B)  are tools to help the accountant perform his or her job. 
C)  are of little use to small-business owners that need accounting services. 
D)  have a very limited use in accounting due to inadequate privacy controls. 
A)  will soon eliminate all of the accounting functions. 
B)  are tools to help the accountant perform his or her job. 
C)  are of little use to small-business owners that need accounting services. 
D)  have a very limited use in accounting due to inadequate privacy controls.

Question 4

GAAP refers to a set of standards concerning accounting principles that were established by the Financial Accounting Standards Board.

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

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 accurate 
A)  higher 
B)  lower 
C)  the same 
D)  less accurate

Question 7

Talk Time Communications is considering the purchase of a new satellite. The firm believes the satellite will help generate future earnings. In addition, the firm recognizes the tax benefits of a lower net income provided by the annual ________ of the asset.

Accepted Answer

A)  inventory valuation 
B)  declining balance 
C)  appreciation 
D)  depreciation 
A)  inventory valuation 
B)  declining balance 
C)  appreciation 
D)  depreciation

Question 8

FIFO is a method of inventory valuation that assumes the items most recently purchased are also the items that are sold first.

Accepted Answer

A) True 
 B)False

Question 9

Sun Smarts Solar installs solar panels in large newly constructed buildings. The company employs several expert installers who work on a full-time basis. Although the installation team works every day, the company pays them at the end of the month, for the previous month's work. Employee salaries are recorded as ________ on Sun Smarts's balance sheet.

Accepted Answer

A)  capital cash flows 
B)  current liabilities 
C)  retained earnings 
D)  long-term liabilities 
A)  capital cash flows 
B)  current liabilities 
C)  retained earnings 
D)  long-term liabilities

Question 10

The firm's most valuable assets are listed at the top of its balance sheet.

Accepted Answer

A) True 
 B)False

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

The sixth and final step in the accounting cycle involves

Accepted Answer

A)  performing a trial balance to verify that the accounting statements are internally consistent. 
B)  auditing the books to ensure that they were prepared according to generally accepted accounting principles. 
C)  preparing the income statement. 
D)  analyzing major accounting statements to evaluate the financial condition of the firm. 
A)  performing a trial balance to verify that the accounting statements are internally consistent. 
B)  auditing the books to ensure that they were prepared according to generally accepted accounting principles. 
C)  preparing the income statement. 
D)  analyzing major accounting statements to evaluate the financial condition of the firm.

Question 13

Barkatorium Pet Supplies' owner is concerned with how his business decisions affect the bottom line. This is another way of saying that he is concerned with the impact of his decisions on net income after taxes.

Accepted Answer

A) True 
 B)False

Question 14

The statement of cash flows calculates cash flows from operations, investing activities, and financing activities.

Accepted Answer

A) True 
 B)False

Question 15

Revenue on the income statement represents the dollar amount of what is received for goods sold, services rendered, and/or from other revenue sources.

Accepted Answer

A) True 
 B)False

Question 16

Stockholders of Marshall Manufacturing are concerned about irregularities in the firm's accounting system. One approach to identify problems in the records of the company would be to have a(n) ________ performed.

Accepted Answer

A)  internal audit 
B)  independent audit 
C)  unofficial audit 
D)  GAAP analysis 
A)  internal audit 
B)  independent audit 
C)  unofficial audit 
D)  GAAP analysis

Question 17

Sales receipts, purchase orders, and payroll records are all examples of accounting transactions that would be recorded by a(n)

Accepted Answer

A)  auditor. 
B)  forensic accountant. 
C)  bookkeeper. 
D)  purchasing agent. 
A)  auditor. 
B)  forensic accountant. 
C)  bookkeeper. 
D)  purchasing agent.

Question 18

Which of the following ratios is a liquidity ratio?

Accepted Answer

A)  inventory turnover ratio 
B)  acid-test ratio 
C)  debt to owners' equity ratio 
D)  basic earnings per share 
A)  inventory turnover ratio 
B)  acid-test ratio 
C)  debt to owners' equity ratio 
D)  basic earnings per share

Question 19

Brand names such as Coca-Cola and McDonald's are examples of intangible assets.

Accepted Answer

A) True 
 B)False

Question 20

The Hendry Group wants to know the value of its owners' equity. It will total its assets and subtract its liabilities.

Accepted Answer

A) True 
 B)False

Exam 17: Understanding Accounting and Financial Information

When an accountant writes off the cost of a tangible asset over its estimated lifetime, it is called depreciation.

The Newport Company balance sheet shows the following items: accounts payable totaling $60,000; salaries payable totaling $85,000; and notes payable totaling $120,000. These are liabilities, or money that the firm owes others.

Careful consideration of the use of computers in accounting indicates that computers

GAAP refers to a set of standards concerning accounting principles that were established by the Financial Accounting Standards Board.

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

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).

Talk Time Communications is considering the purchase of a new satellite. The firm believes the satellite will help generate future earnings. In addition, the firm recognizes the tax benefits of a lower net income provided by the annual ________ of the asset.

FIFO is a method of inventory valuation that assumes the items most recently purchased are also the items that are sold first.

The firm's most valuable assets are listed at the top of its balance sheet.

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

The sixth and final step in the accounting cycle involves

Barkatorium Pet Supplies' owner is concerned with how his business decisions affect the bottom line. This is another way of saying that he is concerned with the impact of his decisions on net income after taxes.

The statement of cash flows calculates cash flows from operations, investing activities, and financing activities.

Revenue on the income statement represents the dollar amount of what is received for goods sold, services rendered, and/or from other revenue sources.

Stockholders of Marshall Manufacturing are concerned about irregularities in the firm's accounting system. One approach to identify problems in the records of the company would be to have a(n) ________ performed.

Sales receipts, purchase orders, and payroll records are all examples of accounting transactions that would be recorded by a(n)

Which of the following ratios is a liquidity ratio?

Brand names such as Coca-Cola and McDonald's are examples of intangible assets.

The Hendry Group wants to know the value of its owners' equity. It will total its assets and subtract its liabilities.

Taking Risks and Making Profits Within the Dynamic Business Environment

Understanding Economics and How It Affects Business

Doing Business in Global Markets

Demanding Ethical and Socially Responsible Behavior

How to Form a Business

Entrepreneurship and Starting a Small Business

Management and Leadership

Structuring Organizations for Todays Challenges

Production and Operations Management

Motivating Employees

Human Resource Management: Finding and Keeping the Best Employees

Dealing With Employeemanagement Issues

Marketing: Helping Buyers Buy

Developing and Pricing Goods and Services

Distributing Products

Using Effective Promotions

Financial Management

Using Securities Markets for Financing and Investing Opportunities

Money, Financial Institutions, and the Federal Reserve

Working Within the Legal Environment

Using Technology to Manage Information

Managing Risk

Managing Personal Finances

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