Exam 17: Understanding Accounting and Financial Information

At present, accounting software packages have proven to be too complex and expensive to be useful for owners of small businesses.

Peak Performance Sporting Goods Company has collected the following information about itself and its competitors: Which of the following statements explains the importance of this information?

Bark Three Times Pet Store established a line of credit with its local banker and used (borrowed) $85,000 against it to purchase its first year's inventory. Since it is required to repay the money before the end of its fiscal year, the company's accountant lists this liability with the current liabilities on the balance sheet.

Martha is a member of a conservative political group that wants to identify and publicize examples of wasteful government spending. The type of accounting information Martha and her group will follow most closely is provided by certified public accountants.

The preparation of financial statements for people outside the firm (creditors, unions, suppliers, and others) is the goal of:

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

An independent audit is an evaluation and unbiased opinion about the accuracy of a company's financial statements.

A firm's balance sheet reports its financial condition on a specific date.

One of the problems with current accounting procedures is that there is no way for firms to systematically write off the costs of property and equipment over time.

10th Generation Electronics had two transformers in its inventory, one purchased in February for $11,800 and the other acquired in September for $13,300. In December, they sold one of the transformers to Ram Enterprises for $16,400 and reported a gross profit of $3,100. 10th Generation Electronics evidently uses the inventory valuation method.

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

The Barkley Company has several automobiles that are used in the business. Recently, the owners were told that even though the government permits the firm to depreciate the vehicles, it is not a deductible expense on the income statement.

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 from its Balance Sheet: Peak Performance's current ratio is:

Olivia is a public accountant. She prepares monthly financial statements for her client, Chick's Auto Body Shop. Presently, though, she must summarize the data in the accounting ledgers to determine if the figures are correct and balanced. Olivia will prepare a statement of cash flows in order to complete this step of the cycle.

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).

It is impossible to run a company effectively without the ability to read and understand basic accounting reports and financial statements.

Which of the following agencies would have the greatest impact on the methods used to record, classify, summarize, and interpret accounting information for the State of Kentucky's Department of Transportation?

Accounting software has proven to be especially helpful for small business owners.

Budget preparation is one aspect of managerial accounting.

Resources that a firm owns are called: