Exam 11: Understanding Accounting

________ are amounts due from customers who have purchased goods on credit. Accounts owed Accounts receivable Accounts forwarded Accounts payable Account balances

Peter, an accountant, enters every transaction in the journal to reflect its impact on assets and its impact on liabilities and owners' equity. He is using a double entry accounting system. a balance sheet. a financial ratio. breakeven analysis. a financial statement.

The most important of all financial ratios is earnings per share.

Short-term solvency ratios are used to measure the profitability of a business firm.

The debt-to-equity ratio is calculated by dividing current liabilities by owners' equity. total liabilities by owners' equity. long-term liabilities by retained earnings. total liabilities by retained earnings. long-term liabilities by owners' equity.

Meredith recently bought a business. But she paid more for the business than the total of its current and fixed assets. What did she pay extra for? Land the company owns Equipment in the company's factory Goodwill The franchise fee Accounts receivable that are on the company's books

What is a budget? The estimated number of people required to complete a manufacturing project An estimate of costs submitted to a buyer in order to make a sale An estimate of the cash balance for the year A detailed estimate of receipts and expenditures for a given period of time An estimate of research and development costs

Streeter & Sons is a regional service company that has been in business for a few years, but has not employed a controller or anyone else full-time to keep track of its financial state. The company needs to take a good look at its financial state to determine whether it needs to make any changes in its practices, in order to prevent possible financial meltdown. Which of the following questions would a balance sheet NOT be able to help answer about the current state of Streeter & Sons? Is it a good time for the business to grow? Can the company survive a season of low revenues? Does the company have too many employees? Can the company take on more debt? What is the value of the company's assets?

What purpose does the balance sheet serve? It shows the stock price of the firm during the last year and how much fluctuation there have been in the stock price. It shows short- and long-term liquidity ratios, profitability ratios, and activity ratios. It shows a firm's financial condition on a particular date in terms of its assets, liabilities, and owners' equity. It shows investors how much profit the firm made during the last year. It shows a firm's sources and uses of cash.

Paid-in capital is a debt that must be paid within the year. the process of distributing the cost of an asset over its useful life. the amount paid for an existing business above the value of its other assets. a debt that is not due for at least one year. additional money, above proceeds from a stock sale, paid directly to a firm by its owners.

What is a budget? Who uses a budget?

Marla is a private accountant who uses a six-step process to develop and analyze a company's financial reports. The first step in the process is to do a trial balance.

What is a controller?

The debt-to-owners' equity ratio measures a firm's ability to meet dividend payments. long-term liabilities. interest payments. short-term liabilities. all liabilities.

Janice is a private accountant. The first thing she must do when working through the accounting cycle is to record transactions in a journal. do a trial balance. analyze transaction documents. analyze the financial statements using ratio analysis. transfer entries from the journal to the ledger.

Julie, a recent college graduate, is interested in business and is considering pursuing a career in accounting. Her parents are supportive, with her mother recommending that Julie become a public accountant and her father recommending that she become a private accountant. Which of the following, if true, supports the mother's position? Julie has said that she wants to work for one of the accounting services firms like Ernst & Young. The demand for government accountants is expected to grow in the near future. Two other recent grads in Julie's class chose to pursue public accounting. A recent survey showed that about 45 percent of new accountants chose public accounting. Julie has said that she wants to work as an in-house accountant for a large public interest group like Sierra Club or Greenpeace.

Managerial accounting is a field of accounting that serves internal users of a company's financial information. the rules and procedures governing the content and form of financial reports. the field of accounting concerned with external users of a company's financial information. a systematic examination of a company's accounting system to determine whether its financial reports fairly represent its operations. a bookkeeping system that balances the accounting equation by recording the dual effects of every financial transaction.

What is the primary thing the inventory turnover ratio says about a business? How profitable it is How risky it is How much inventory it has How much average inventory it has How often new merchandise replaces old merchandise

Define the term current assets as found on a balance sheet.

What is the fundamental purpose of strong ethical standards in accounting?