Question 1

Thoroughly describe each of six parts of the accounting cycle.

Accepted Answer

Part 1 requires the bookkeeper or accoun

Question 2

Fairlawn Partners Consulting is a management-consulting firm that provides its expertise to businesses that employ its services. Since it does not hold an inventory of goods or produce any goods itself

Accepted Answer

A)  its revenue will equal its net income. 
B)  its gross profit could be identical to its net revenue. 
C)  it is unlikely to have any operating expenses. 
D)  its balance sheet will not record any current assets. 
A)  its revenue will equal its net income. 
B)  its gross profit could be identical to its net revenue. 
C)  it is unlikely to have any operating expenses. 
D)  its balance sheet will not record any current assets.

Question 3

Explain the meaning of the fundamental accounting equation and its relation to the balance sheet. If it is helpful, create an example using numbers.

Accepted Answer

The fundamental accounting equation is a

Question 4

At this point in time, Barkatorium Pet Supplies' balance sheet shows $100,000 in assets and $90,000 in liabilities. The company's accounting system will show the owners' equity as $190,000.

Accepted Answer

A) True 
 B)False

Question 5

The company controller asked Jade to determine if it could borrow more money for an expansion project. When she calculated a leverage ratio, she determined that the company already had 1.5 times as much debt as equity. Do you agree with her assessment that the company should back off with borrowing more funds at this time?

Accepted Answer

A)  Yes, but if the company would increase sales, it could go ahead with borrowing more funds. 
B)  Not necessarily. She should investigate the debt to equity ratios of other firms in the same industry. 
C)  Yes, but the firm should pursue equity investment until the ratio equals 1:1. 
D)  Not necessarily. In poor economic times, it is good financial strategy for a firm to be highly leveraged. 
A)  Yes, but if the company would increase sales, it could go ahead with borrowing more funds. 
B)  Not necessarily. She should investigate the debt to equity ratios of other firms in the same industry. 
C)  Yes, but the firm should pursue equity investment until the ratio equals 1:1. 
D)  Not necessarily. In poor economic times, it is good financial strategy for a firm to be highly leveraged.

Question 6

As Jaime was packing to return to college after his summer vacation, he realized that he owned many valuable things such as a laptop computer, a speaker system, and a Blu-ray player. An accountant would list all of these as Jaime's

Accepted Answer

A)  assets. 
B)  liabilities. 
C)  owners' equity. 
D)  intangibles. 
A)  assets. 
B)  liabilities. 
C)  owners' equity. 
D)  intangibles.

Question 7

Computerized accounting programs have eliminated the need to prepare a trial balance.

Accepted Answer

A) True 
 B)False

Question 8

Ivan will graduate from Great State University this year. He has accumulated $39,000 in student loans during his four years at college. An accountant would classify the loans as

Accepted Answer

A)  assets. 
B)  liabilities. 
C)  owners' equity. 
D)  intangibles. 
A)  assets. 
B)  liabilities. 
C)  owners' equity. 
D)  intangibles.

Question 9

The balance sheet reflects the fact that assets equal the sum of liabilities and owners' equity.

Accepted Answer

A) True 
 B)False

Question 10

The purpose of the current ratio is to evaluate the firm's ability to

Accepted Answer

A)  generate sales with a given level of current assets. 
B)  utilize current assets profitably. 
C)  pay its bills in the short run. 
D)  effectively use borrowed funds. 
A)  generate sales with a given level of current assets. 
B)  utilize current assets profitably. 
C)  pay its bills in the short run. 
D)  effectively use borrowed funds.

Question 11

Your firm is a supplier to a major chain of discount stores. You have heard rumors that this chain of discount stores is struggling financially. Which financial ratios would indicate the discount store's ability or inability to pay its short-term debts?

Accepted Answer

A)  liquidity ratios 
B)  leverage ratios 
C)  activity ratios 
D)  profitability ratios 
A)  liquidity ratios 
B)  leverage ratios 
C)  activity ratios 
D)  profitability ratios

Question 12

As a bank loan officer, you are considering a loan application by Peak Performance Sporting Goods. The company has provided you with the following information:   Peak Performance's debt to owners' equity ratio (rounded to the nearest tenth of a percent) is:

Accepted Answer

A)  45.4%. 
B)  66.7%. 
C)  112.5%. 
D)  133.3%. 
A)  45.4%. 
B)  66.7%. 
C)  112.5%. 
D)  133.3%.

Question 13

A major part of a bookkeeper's job is to interpret financial data and suggest strategies for improving the firm.

Accepted Answer

A) True 
 B)False

Question 14

In order to understand if the results of ratio calculations indicate a financially strong company, the results

Accepted Answer

A)  should be compared to other firms in the same industry. 
B)  are compared to same size firms in the same geographic region of the country. 
C)  are compared to the norms established by generally accepted accounting principles. 
D)  are compared to the largest firms in the country. 
A)  should be compared to other firms in the same industry. 
B)  are compared to same size firms in the same geographic region of the country. 
C)  are compared to the norms established by generally accepted accounting principles. 
D)  are compared to the largest firms in the country.

Question 15

As a certified public accountant, you would be working in the area of managerial accounting.

Accepted Answer

A) True 
 B)False

Question 16

A ________ provides a summary of cash coming into and money going out of a firm from operations activities, financing activities, and investing activities.

Accepted Answer

A)  income statement 
B)  statement of cash flows 
C)  cash budget 
D)  cash receivables and payables report 
A)  income statement 
B)  statement of cash flows 
C)  cash budget 
D)  cash receivables and payables report

Question 17

The accounting scandals of the early 2000s led many people to question the legitimacy of

Accepted Answer

A)  ratio analysis as a means of evaluating the performance of a firm. 
B)  the five-member Public Company Accounting Oversight Board (PCAO
B)  under the Securities and Exchange Commission (SE
C)  that had been created to oversee the accounting industry. 
C)  publishing financial information about a firm on the Internet. 
D)  allowing an accounting firm to do both consulting and auditing work for the same company. 
A)  ratio analysis as a means of evaluating the performance of a firm. 
B)  the five-member Public Company Accounting Oversight Board (PCAO
B)  under the Securities and Exchange Commission (SE
C)  that had been created to oversee the accounting industry. 
C)  publishing financial information about a firm on the Internet. 
D)  allowing an accounting firm to do both consulting and auditing work for the same company.

Question 18

Audrey works in the accounting department of Colorado Manufacturing. Today she will use the firm's ledger to summarize information that was posted over the most recent time period. Her goal is to determine if the accounts are balanced as required by the double-entry method of bookkeeping. To be sure they are correct, Audrey will prepare a(n)

Accepted Answer

A)  account analysis. 
B)  statement of cash flows. 
C)  balance sheet. 
D)  trial balance. 
A)  account analysis. 
B)  statement of cash flows. 
C)  balance sheet. 
D)  trial balance.

Question 19

In the course of their jobs, bookkeepers

Accepted Answer

A)  interpret accounting data. 
B)  approve decisions about major expenditures. 
C)  record business transactions. 
D)  prepare financial statements. 
A)  interpret accounting data. 
B)  approve decisions about major expenditures. 
C)  record business transactions. 
D)  prepare financial statements.

Question 20

The Barkatorium Pet Supplies accountant has recorded the following: Total current assets = $60,000, including Cash = $24,000; Accounts Receivable = $20,000; and Inventory = $16,000. Total assets = $230,000; Total current liabilities = $48,000; and Total current and long-term liabilities = $98,000. The store's current ratio = 1.25. The store's acid-test ratio = .92

Accepted Answer

A) True 
 B)False

Exam 17: Understanding Accounting and Financial Information

Thoroughly describe each of six parts of the accounting cycle.

Fairlawn Partners Consulting is a management-consulting firm that provides its expertise to businesses that employ its services. Since it does not hold an inventory of goods or produce any goods itself

Explain the meaning of the fundamental accounting equation and its relation to the balance sheet. If it is helpful, create an example using numbers.

At this point in time, Barkatorium Pet Supplies' balance sheet shows $100,000 in assets and $90,000 in liabilities. The company's accounting system will show the owners' equity as $190,000.

As Jaime was packing to return to college after his summer vacation, he realized that he owned many valuable things such as a laptop computer, a speaker system, and a Blu-ray player. An accountant would list all of these as Jaime's

Computerized accounting programs have eliminated the need to prepare a trial balance.

Ivan will graduate from Great State University this year. He has accumulated $39,000 in student loans during his four years at college. An accountant would classify the loans as

The balance sheet reflects the fact that assets equal the sum of liabilities and owners' equity.

The purpose of the current ratio is to evaluate the firm's ability to

Your firm is a supplier to a major chain of discount stores. You have heard rumors that this chain of discount stores is struggling financially. Which financial ratios would indicate the discount store's ability or inability to pay its short-term debts?

As a bank loan officer, you are considering a loan application by Peak Performance Sporting Goods. The company has provided you with the following information: Peak Performance's debt to owners' equity ratio (rounded to the nearest tenth of a percent) is:

A major part of a bookkeeper's job is to interpret financial data and suggest strategies for improving the firm.

In order to understand if the results of ratio calculations indicate a financially strong company, the results

As a certified public accountant, you would be working in the area of managerial accounting.

A ________ provides a summary of cash coming into and money going out of a firm from operations activities, financing activities, and investing activities.

The accounting scandals of the early 2000s led many people to question the legitimacy of

In the course of their jobs, bookkeepers

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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