Question 1

Depreciation is a systematic write-off of the cost of a tangible asset that is listed on

Accepted Answer

A)  the statement of cash flows. 
B)  the balance sheet. 
C)  the income statement. 
D)  the statement of retained earnings. 
A)  the statement of cash flows. 
B)  the balance sheet. 
C)  the income statement. 
D)  the statement of retained earnings.

Question 2

________ is the monetary value that is received for goods sold, services rendered, and money received from other sources.

Accepted Answer

A)  Revenue 
B)  Gross margin 
C)  Net income 
D)  Cost of goods sold 
A)  Revenue 
B)  Gross margin 
C)  Net income 
D)  Cost of goods sold

Question 3

Portable Pet Care, Inc., a mobile veterinary care clinic, has more appointments than it ever expected to have when it first hit the road. Each week it orders more vaccines, antibiotics, and preventive care supplies from a major veterinary supplier, with the understanding that it will pay for these supplies in one month's time. Most of the company's clients are elderly and on fixed incomes, and often do not pay for services for two or more months. This is not a problem because as long as the company continues to increase its appointments, it will create profits and growth.

Accepted Answer

A) True 
 B)False

Question 4

The acid-test ratio is found by dividing inventory by cost of goods sold.

Accepted Answer

A) True 
 B)False

Question 5

A(n) ________ is an evaluation and unbiased opinion about the accuracy of a firm's financial statements.

Accepted Answer

A)  internal audit 
B)  annual report 
C)  independent audit 
D)  certified audit 
A)  internal audit 
B)  annual report 
C)  independent audit 
D)  certified audit

Question 6

You have just calculated the acid-test ratio for Peak Performance Sporting Goods [acid test ratio = 1.0]. As a loan officer for the local bank, you are called into your boss's office to interpret the results of this ratio. Which of the following statements best reflects an understanding of these results?

Accepted Answer

A)  A company with an acid-test ratio = 1.0 demonstrates the ability to operate very conservatively. The bank should anticipate that this firm will always be able to meet its short-term liabilities. 
B)  This company is already having problems meeting its short-term liabilities. 
C)  An acid-test ratio = 1.0 means that this firm has $1.00 in current assets for every $2.00 in current liabilities. Peak Performance is a well-run operation, as long as it can continue to sell off its inventory. 
D)  An acid-test ratio = 1.0 tells us that without adequate inventory turnover, this company may represent a higher risk. Peak Performance's acid-test ratio shows that the firm maintains $1.00 in current assets for every $1.00 in current liabilities. 
A)  A company with an acid-test ratio = 1.0 demonstrates the ability to operate very conservatively. The bank should anticipate that this firm will always be able to meet its short-term liabilities. 
B)  This company is already having problems meeting its short-term liabilities. 
C)  An acid-test ratio = 1.0 means that this firm has $1.00 in current assets for every $2.00 in current liabilities. Peak Performance is a well-run operation, as long as it can continue to sell off its inventory. 
D)  An acid-test ratio = 1.0 tells us that without adequate inventory turnover, this company may represent a higher risk. Peak Performance's acid-test ratio shows that the firm maintains $1.00 in current assets for every $1.00 in current liabilities.

Question 7

Terry is opening a small sports store in his town. At the advice of a friend who is a bookkeeper, he keeps the receipts of everything he purchases for the business in the bottom drawer of his desk, along with all other business expenses, such as his retail license, his rent expense, and insurance expense. You suggest that ________.

Accepted Answer

A)  Terry continue with this procedure, but only until the store opens, at which time he will need an additional drawer for his sales transactions. 
B)  Terry invest some time in exploring an accounting system that will make it easier to classify and summarize accounting information. 
C)  Terry continue with this procedure because there is very little difference between one expense and another. 
D)  Terry stop wasting valuable time saving the receipts because accountants only record sales transactions. 
A)  Terry continue with this procedure, but only until the store opens, at which time he will need an additional drawer for his sales transactions. 
B)  Terry invest some time in exploring an accounting system that will make it easier to classify and summarize accounting information. 
C)  Terry continue with this procedure because there is very little difference between one expense and another. 
D)  Terry stop wasting valuable time saving the receipts because accountants only record sales transactions.

Question 8

Accounting provides information about the financial condition and operating performance of a firm.

Accepted Answer

A) True 
 B)False

Question 9

What is the difference between a journal and a ledger? How are journals and ledgers incorporated into the accounting cycle?

Accepted Answer

A journal is a record book or computer p

Question 10

FIFO and LIFO are two common methods used to compute the depreciation of tangible assets.

Accepted Answer

A) True 
 B)False

Question 11

Similar to the example of FIFO and LIFO inventory accounting methods in the text, a college store purchased sweatshirts for the upcoming fall semester. Using the following data, where a total of 100 sweatshirts were purchased by the store and placed in inventory, select the correct statement from the following choices.

Accepted Answer

A)  FIFO would provide the least profit. 
B)  FIFO would provide the most profit. 
C)  LIFO or FIFO will produce the same amount of profit. 
D)  LIFO would provide the most profit. 
A)  FIFO would provide the least profit. 
B)  FIFO would provide the most profit. 
C)  LIFO or FIFO will produce the same amount of profit. 
D)  LIFO would provide the most profit.

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

Cash revenues from the sale of new cars at Five Star Autos would be listed as a cash inflow from operations on Five Star's statement of cash flows.

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

The use of computerized accounting systems ________.

Accepted Answer

A)  makes it possible for most firms to operate without the expense of hiring or consulting with accountants. 
B)  reduces the pressure on managers in making financial decisions. 
C)  allows firms to generate financial information almost instantly and whenever the organization needs it. 
D)  creates an environment in which accounting has become nothing more than glorified bookkeeping, as all accountants are required to do is enter data into the system and monitor the results the program generates. 
A)  makes it possible for most firms to operate without the expense of hiring or consulting with accountants. 
B)  reduces the pressure on managers in making financial decisions. 
C)  allows firms to generate financial information almost instantly and whenever the organization needs it. 
D)  creates an environment in which accounting has become nothing more than glorified bookkeeping, as all accountants are required to do is enter data into the system and monitor the results the program generates.

Question 16

The ________ is an accounting statement that reports the financial condition of a firm at a specific point in time.

Accepted Answer

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

Question 17

Coverall Insurance Corporation's internal accountants can prepare an audit for the company.

Accepted Answer

A) True 
 B)False

Question 18

The bottom line of the Cooper Corporation's income statement is equal to the net worth of the firm.

Accepted Answer

A) True 
 B)False

Question 19

A balance sheet lists assets in order of their ________.

Accepted Answer

A)  dollar value, from smallest to largest 
B)  date of acquisition, with the most recently acquired assets listed first 
C)  liquidity, with the most liquid assets listed first 
D)  income generating ability 
A)  dollar value, from smallest to largest 
B)  date of acquisition, with the most recently acquired assets listed first 
C)  liquidity, with the most liquid assets listed first 
D)  income generating ability

Question 20

Mini-Case
Minnie A. Wright-Hoff works as an accountant for Double Entry Doors, Inc. Her company sells and installs oversized garage doors needed by large vehicles. Most of Minnie's work involves helping department heads and other decision makers by measuring and reporting costs for their departments, and by identifying areas where departments are exceeding their budgets. However, as one of only three accountants employed by Double Entry Doors, Minnie is something of a "jill-of-all-trades" in terms of her accounting assignments. For example, she recently spent several hours summarizing all of the financial data in account ledgers to see if the information was correct and balanced. Her efforts revealed no problems, so she is now ready to start working on the firm's financial statements. Minnie is interested in this part of the accounting cycle because she likes to be one of the first to know the "bottom line" her company will report. She knows that she and the other accountants who work on these statements can influence the results by the choices they make about the way they report certain items.
-The last major task Minnie completed before getting ready to prepare the firm's financial statements was the preparation of the

Accepted Answer

A)  cash budget. 
B)  master budget. 
C)  trial balance. 
D)  internal audit. 
A)  cash budget. 
B)  master budget. 
C)  trial balance. 
D)  internal audit.

Depreciation is a systematic write-off of the cost of a tangible asset that is listed on

________ is the monetary value that is received for goods sold, services rendered, and money received from other sources.

The acid-test ratio is found by dividing inventory by cost of goods sold.

A(n) ________ is an evaluation and unbiased opinion about the accuracy of a firm's financial statements.

Accounting provides information about the financial condition and operating performance of a firm.

What is the difference between a journal and a ledger? How are journals and ledgers incorporated into the accounting cycle?

FIFO and LIFO are two common methods used to compute the depreciation of tangible assets.

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

Cash revenues from the sale of new cars at Five Star Autos would be listed as a cash inflow from operations on Five Star's statement of cash flows.

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

The use of computerized accounting systems ________.

The ________ is an accounting statement that reports the financial condition of a firm at a specific point in time.

Coverall Insurance Corporation's internal accountants can prepare an audit for the company.

The bottom line of the Cooper Corporation's income statement is equal to the net worth of the firm.

A balance sheet lists assets in order of their ________.

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

Filters

Exam 17: Understanding Accounting and Financial Information

Depreciation is a systematic write-off of the cost of a tangible asset that is listed on

________ is the monetary value that is received for goods sold, services rendered, and money received from other sources.

The acid-test ratio is found by dividing inventory by cost of goods sold.

A(n) ________ is an evaluation and unbiased opinion about the accuracy of a firm's financial statements.

Accounting provides information about the financial condition and operating performance of a firm.

What is the difference between a journal and a ledger? How are journals and ledgers incorporated into the accounting cycle?

FIFO and LIFO are two common methods used to compute the depreciation of tangible assets.

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

Cash revenues from the sale of new cars at Five Star Autos would be listed as a cash inflow from operations on Five Star's statement of cash flows.

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

The use of computerized accounting systems ________.

The ________ is an accounting statement that reports the financial condition of a firm at a specific point in time.

Coverall Insurance Corporation's internal accountants can prepare an audit for the company.

The bottom line of the Cooper Corporation's income statement is equal to the net worth of the firm.

A balance sheet lists assets in order of their ________.

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

Filters