Exam 15: Using Accounting Information

Christine's First Job Christine has just earned her undergraduate degree in accounting and has successfully completed the CPA exam.She recently interviewed with a relatively small and new company and was offered a job.The offer sounded very promising; the job had opportunities to grow with the company and provided diverse challenges.Christine accepted the job. Once Christine started working, she realized that the owners and employees did not have a general understanding of accounting.She had to teach them the steps in an accounting cycle so they would be able to understand how she was going to create reports.When she talked about the statement of financial position, they had no idea what she was talking about.She was the qualified individual responsible for accounting.No one else working with her had much knowledge.They did not even know the different financial ratios that someone could use to understand the financial standing of a company.Christine knows it will be a challenge to keep everyone on the same page when it comes to numbers and reports. -Refer to Christine's First Job.To help the owners understand how effectively the firm is transforming sales into profits, Christine should address which of the following ratios?

Clockwise, Inc., wants to design an entire system for providing accurate financial information.Who will provide this service?

Ridgley, Cooper, and Ross (RCR) Katie is the CEO of Ridgley, Cooper, and Ross (RCR), a regional accounting firm.RCR offers services in most areas of accounting, including auditing and consulting services.The firm must follow the GAAP rules, just like any other accounting firm.If there are information gaps that are not addressed and resolved by the firm, RCR could be considered a violator of the Sarbanes-Oxley Act.Katie understands what must be done and wants every employee of the firm to understand that they have to follow all the rules and regulations.Like any other industry, accounting is a competitive industry and employees of accounting firms must be productive, progressive, and well trained. -Refer to Ridgley, Cooper, and Ross.What does GAAP stand for?

Christine's First Job Christine has just earned her undergraduate degree in accounting and has successfully completed the CPA exam.She recently interviewed with a relatively small and new company and was offered a job.The offer sounded very promising; the job had opportunities to grow with the company and provided diverse challenges.Christine accepted the job. Once Christine started working, she realized that the owners and employees did not have a general understanding of accounting.She had to teach them the steps in an accounting cycle so they would be able to understand how she was going to create reports.When she talked about the statement of financial position, they had no idea what she was talking about.She was the qualified individual responsible for accounting.No one else working with her had much knowledge.They did not even know the different financial ratios that someone could use to understand the financial standing of a company.Christine knows it will be a challenge to keep everyone on the same page when it comes to numbers and reports. -Refer to Christine's First Job.When Christine explained the steps in the accounting cycle, she identified which of the following as the first step in the accounting cycle?

There is added protection for whistle-blowers who report violations of the Sarbanes-Oxley Act.

Sarah has just completed journalizing the day's entries in the general journal for her housecleaning business.The next step she must take in the accounting cycle will be

Energizer offers its customers a reduction in price if they pay for their shipments of batteries within ten days of receiving them.This is a(n) _____.

The mortgage on Prudential Insurance's local facility will be paid off over the next 30 years.The majority of this mortgage would be classified on Prudential's balance sheet as a(n) _____.

The balance sheet is composed of

Intel decides to issue new stock in order to build a new facility and expand its operations.The receipt of cash from this stock issue would appear in the ____ section of the statement of cash flows.

The ratio that is sometimes referred to as the quick ratio is the _____.

Which of the following statements is false?

Rich wants to measure the profitability of his business.Which of the following pairs of ratios would you recommend for this?

The value of goods on hand for sale to customers is called _____.

Which section of the statement of cash flows would show Wendy's payments for food ingredients and wages paid to employees?

The resources owned by David's Spa and Salon total $148,000.The total amount of debt that it owes to others is $87,000.Which of the following is correct?

It is not necessary to audit a firm's financial statements if the firm has used generally accepted accounting principles.

Define a balance sheet (also called a statement of financial position).

While a firm's managers are the primary users of accounting information, lenders, suppliers, stockholders, and government agencies are also interested in a firm's accounting information.

Audited financial statements guarantee that a firm has not "cooked" the books.