Exam 1: Accounting As a Form of Communication

The purchase of inventory for cash will cause the current ratio to decrease.

Provided below is a list of important users of accounting information. Below the list are descriptions of a major need of each of the various users. Fill in the blank with the one user group that is most likely to have the need described to the right of the blank. Some user groups may be used more than once or not at all. -The financial status of a company issuing securities to the public for the first time.

Which one of the following statements is true?

Use Rizwi Corporation's list of accounts at December 31, 2015 to answer the following question. Rizwi Corporation List of Accounts at December 31, 2015 What is Rizwi Corp.'s current ratio?

In preparing financial statements, accountants should consider all of the following except:

Which of the following terms characterizes the time period between the investment of cash in merchandise and the collection of cash from the sale of that merchandise?

In 2014, you invested $12,000 along with 5 other investors in a new theatre, Rock-On, that offers Broadway play productions. Because you live out of state, you have not been actively involved in the daily affairs of the theatre. On January 10, 2015, you are excited because you received $12,000 as a dividend after the end of the 1st year of the theatre's existence. Included with your $12,000 check are financial statements and some supplemental information regarding the accounting. The supplemental information explains: 1 During the last three months of 2014, an aggressive advertising campaign resulted in the sale of 600 season tickets for the 2015 productions. Each season ticket cost $120 and the resulting $72,000 was included in 2014 income. 2 Along with the advertising campaign, the general manager was able to secure pledges of $7,500 for advertising by local merchants in the playbills for the first two productions for 2015. This amount is included as advertising revenue in the 2014 financial statements. REQUIRED: Are there any problems related to the supplementary disclosures? If so, explain and indicate what effects over- or understatements these items will have on the financial statements.

The term used to refer to an asset's original cost is "historical cost."

Assume that you have received copies of the financial statements for PepsiCo for the years ending December 31, 2014 and 2013. Answer the following questions: A If you were a banker, why would you need information from PepsiCo's financial statements? B If you were a potential investor in PepsiCo stock, what information would you want from their financial statements? C If you were a labor negotiator for a union that represents a group of PepsiCo's employees, which financial statement would provide you with the most useful information?

Oreo Company has current assets of $20,000, current liabilities of $8,000, and long-term liabilities of $3,000. Oreo wants to buy new equipment. How much of its existing cash can Oreo use to acquire equipment without allowing its current ratio to decline below 2.0 to 1?

Which financial statement would you analyze to determine if a company distributed any of its profits to its shareholders?

An accountant is uncertain about the best estimate of an amount for a business transaction. If two amounts are about equally likely, the amount least likely to overstate assets and income is selected. Which of the following qualities is characterized by this action?

The quality of accounting information that allows a user to analyze two or more companies and look for similarities and differences is known as understandability.

Calvin Corp. was organized on January 1 to operate a taxi service. For each of the following business activities, please indicate whether it is a financing F, investing I or operating O activity. A. Issued shares of stock to each of the five owners. B. Purchased five automobiles to use as taxis. C. Paid the first month's rent for a garage. D. Obtained a loan from the bank. E. Received cash from a customer for a 10-mile taxi ride. F. Paid the drivers wages for the first week. G. Purchased a fueling station to install at the garage includes a 500 gallon tank. H. Declared and paid cash dividends to the owners after the first month's operations. I. Paid cash to repair the brakes on one of the taxis. J Bought land for a future taxi office.

Read the information for Canyon Corporation. Using good form, prepare an income statement for Canyon Corporation.

Which one of the following items is reported as a current asset on a classified balance sheet?

The statement of retained earnings accomplishes which of the following?

Which of the following items will be found in a corporate annual report?

Which one of the following is a financing activity of a business?

Business entities generally carry on: