Question 1

The current ratio is irrelevantin liquidity analysis for service companies because they do not have inventories among their current assets

Accepted Answer

A) True 
 B)False

Question 2

Some analysts properly refer to a company's profit margin as its return on assets.

Accepted Answer

A) True 
 B)False

Question 3

Which one of the following equations represents retained earnings activity?

Accepted Answer

A)  Beginning balance + net income + dividends = profits for the year 
B)  Beginning balance + cash inflows - cash outflows = ending balance 
C)  Beginning balance + dividends - net income = ending balance 
D)  Beginning balance + net income - dividends = ending balance 
A)  Beginning balance + net income + dividends = profits for the year 
B)  Beginning balance + cash inflows - cash outflows = ending balance 
C)  Beginning balance + dividends - net income = ending balance 
D)  Beginning balance + net income - dividends = ending balance

Question 4

Listed below is information from the financial records of Smith Corporation at December 31, 2016: $$\begin{array} { l r l r } 
\text { Retained earnings } & \$ 37,000 & \text { Notes payable } - \text { Due July } 1,2019 & \$ 12,000 \
\text { Accumulated depreciati on } & 13,000 & \text { Interest payable } & 1,000 \
\text { Income taxes payable } & 24,000 & \text { Office supplies } & 2,000 \
\text { Buildings } & 48,000 & \text { Accounts payable } & 46,000 \
\text { Cash } & 11,000 & \text { Inventory } & 33,000 \
\text { Accounts receivable } & 35,000 & \text { Land } & 50,000 \
\text { Capital stock } & 60,000 & \text { Prepaid rent } & 4,000
\end{array}$$ ​
​
-Read the information about Smith Corporation.
​
Required:
Prepare the long-term asset section of Smith Corp.'s balance sheet at December 31, 2016.You may omit the heading.Why are these amounts classified as "long-term"?

Accepted Answer

​ @#IMG-DLM& ​Long-term assets are those that are

Question 5

A bank loaned $62 million to Apex Corporation to finance the construction of a new distribution warehouse.In which section of Apex's statement of cash flows would you be able to determine whether the company repaid any portion of the debt during the year?

Accepted Answer

A)  Operating Activities 
B)  Investing Activities 
C)  Financing Activities 
D)  Profit Activities 
A)  Operating Activities 
B)  Investing Activities 
C)  Financing Activities 
D)  Profit Activities

Question 6

During its fifth year of operations, Bright Creations Company reports a beginning cash balance of $132,000, cash inflows from investing activities of $210,000, cash outflows for financing activities of $79,000, and cash outflows for operating activities of $13,000.What was Bright Creations' cash balance at the end of the fifth year?

Accepted Answer

A)  $ 250,000 
B)  $ 434,000 
C)  $ 276,000 
D)  $ 132,000 
A)  $ 250,000 
B)  $ 434,000 
C)  $ 276,000 
D)  $ 132,000

Question 7

For each item listed, select the section of the balance sheet in which the item would be reported.
-Retained earnings

Accepted Answer

A) Current Assets 
B) Property.Plant, and Equipment 
C) Current Liabilities 
D) Long-term Liabilities 
E) Stockholders' Equity 
A) Current Assets 
B) Property.Plant, and Equipment 
C) Current Liabilities 
D) Long-term Liabilities 
E) Stockholders' Equity

Question 8

The concept of conservatism is the capacity of information to make a difference in a decision.

Accepted Answer

A) True 
 B)False

Question 9

For each item listed, select the section of the balance sheet in which the item would be reported.
-Cash

Accepted Answer

A) Current Assets 
B) Property.Plant, and Equipment 
C) Current Liabilities 
D) Long-term Liabilities 
E) Stockholders' Equity 
A) Current Assets 
B) Property.Plant, and Equipment 
C) Current Liabilities 
D) Long-term Liabilities 
E) Stockholders' Equity

Question 10

Which of the following would not appear on an income statement?

Accepted Answer

A)  Sales revenue 
B)  Cost of goods sold 
C)  Accounts receivable 
D)  Insurance expense 
A)  Sales revenue 
B)  Cost of goods sold 
C)  Accounts receivable 
D)  Insurance expense

Question 11

The qualitative characteristics of accounting data include

Accepted Answer

A)  Assets reported on the balance sheet 
B)  All accounting information 
C)  Cash flows 
D)  Reliability 
A)  Assets reported on the balance sheet 
B)  All accounting information 
C)  Cash flows 
D)  Reliability

Question 12

Match the following characteristics with the statements about each qualitative characteristic's importance.
-Users must be able to compare accounting information of a firm with its prior year information.

Accepted Answer

A) Consistency 
B) Materiality 
C) Conservatism 
D) Comparability 
E) Reliability
F)Relevance
G)Understandability 
A) Consistency 
B) Materiality 
C) Conservatism 
D) Comparability 
E) Reliability
F)Relevance
G)Understandability

Question 13

Information that is material means that an error or alternative method of handling a transaction

Accepted Answer

A)  Would possibly affect the judgment of someone relying on the financial statements 
B)  Would not affect the decisions of users 
C)  Might cause a company to understate its earnings for the accounting period 
D)  Could increase the profitability of a company 
A)  Would possibly affect the judgment of someone relying on the financial statements 
B)  Would not affect the decisions of users 
C)  Might cause a company to understate its earnings for the accounting period 
D)  Could increase the profitability of a company

Question 14

A 12% change in sales will result in a 12% change in net income.

Accepted Answer

A) True 
 B)False

Question 15

Which one of the following sections is least likely to be found in a corporate annual report?

Accepted Answer

A)  Notes to the Financial Statements 
B)  Forecasts of Cash Flows and Earnings 
C)  Report of the Independent Accountants 
D)  Management's Discussion and Analysis 
A)  Notes to the Financial Statements 
B)  Forecasts of Cash Flows and Earnings 
C)  Report of the Independent Accountants 
D)  Management's Discussion and Analysis

Question 16

The balance sheet of Jobston Inc.includes the following items: $$\begin{array} { l r } 
\text { Cash } & \$ 22,400 \
\text { Accounts receivable } & 11,700 \
\text { Inventory } & 23,300 \
\text { Frepaid insurance } & 1,040 \
\text { Land } & 80,000 \
\text { Accounts payable } & 47,500 \
\text { Sal aries payable } & 1,200 \
\text { Capital stock } & 84,040 \
\text { Retained earnings } & 5,700
\end{array}$$ ​
​
-Read the information about Jobston, Inc.What is Jobston's current ratio?

Accepted Answer

A)  0.8 to 1 
B)  1.6 to 1 
C)  1.2 to 1 
D)  2.5 to 1 
A)  0.8 to 1 
B)  1.6 to 1 
C)  1.2 to 1 
D)  2.5 to 1

Question 17

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?

Accepted Answer

A)  Comparability 
B)  Conservatism 
C)  Materiality 
D)  Neutrality 
A)  Comparability 
B)  Conservatism 
C)  Materiality 
D)  Neutrality

Question 18

The following information is taken from Harvey Company's balance sheet at December 31, 2016: $$\begin{array} { l r } 
\text { Cash } & \$ 14,000 \
\text { Retained earnings } & 14,000 \
\text { Inventory } & 8,000 \
\text { Equipment } & 38,000 \
\text { Accounts payable } & 7,000 \
\text { Bonds payable } & 23,000 \
\text { Capital stock } & 26,000
\end{array}$$ ​
Required: Using the information provided for Harvey Company, answer the following questions:
A)How much did creditors provide to Harvey Company?
B)On which financial statement would an investor look to see if any stock was issued during the year?

Accepted Answer

A)$30,000
($7,000 Accounts Payable + $23

Question 19

Match the following characteristics with the statements about each qualitative characteristic's importance.
-This quality allows users to analyze two or more companies and look for similarities and differences.

Accepted Answer

A) Consistency 
B) Materiality 
C) Conservatism 
D) Comparability 
E) Reliability
F)Relevance
G)Understandability 
A) Consistency 
B) Materiality 
C) Conservatism 
D) Comparability 
E) Reliability
F)Relevance
G)Understandability

Question 20

Crystal, Inc.reported $52,000 of net income for 2016.Crystal's balance sheet at December 31, 2016 includes the following amounts: $$\begin{array} { l r l r } 
\text { Wages payable } & \$ 1,000 & \text { Inventory } & \$ 26,000 \
\text { Prepaid rent } & 3,000 & \text { Land } & 40,000 \
\text { Cash } & 15,000 & \text { Accounts receivable } & 22,000 \
\text { Accounts payable } & 25,000 & \text { Capital stock } & 40,000 \
\text { Retained earnings } & 29,000 & \text { Income taxes payable } & 11,000
\end{array}$$ ​
​
-Read the information about Huntington Corporation.
Required:
How much is net income for the year ended December 31, 2017? If Huntington Corporation had used a single-step statement, by how much would net income be different? Explain.

Accepted Answer

Net Income = $290,000
($2,300,000 Servic

The current ratio is irrelevantin liquidity analysis for service companies because they do not have inventories among their current assets

Some analysts properly refer to a company's profit margin as its return on assets.

Which one of the following equations represents retained earnings activity?

A bank loaned $62 million to Apex Corporation to finance the construction of a new distribution warehouse.In which section of Apex's statement of cash flows would you be able to determine whether the company repaid any portion of the debt during the year?

For each item listed, select the section of the balance sheet in which the item would be reported. -Retained earnings

The concept of conservatism is the capacity of information to make a difference in a decision.

For each item listed, select the section of the balance sheet in which the item would be reported. -Cash

Which of the following would not appear on an income statement?

The qualitative characteristics of accounting data include

Match the following characteristics with the statements about each qualitative characteristic's importance. -Users must be able to compare accounting information of a firm with its prior year information.

Information that is material means that an error or alternative method of handling a transaction

A 12% change in sales will result in a 12% change in net income.

Which one of the following sections is least likely to be found in a corporate annual report?

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?

Match the following characteristics with the statements about each qualitative characteristic's importance. -This quality allows users to analyze two or more companies and look for similarities and differences.

Accounting As a Form of Communication

Processing Accounting Information

Income Measurement and Accrual Accounting

Inventories and Cost of Goods Sold

Cash and Internal Control

Receivables and Investments

Operating Assets: Property, Plant and Equipment, and Intangibles

Current Liabilities, Contingencies, and the True Value of Money

Long-Term Liabilities

Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

Exploring Accounting Standards and Differences around the World

Filters

Exam 2: Financial Statements and the Annual Report

The current ratio is irrelevantin liquidity analysis for service companies because they do not have inventories among their current assets

Some analysts properly refer to a company's profit margin as its return on assets.

Which one of the following equations represents retained earnings activity?

A bank loaned $62 million to Apex Corporation to finance the construction of a new distribution warehouse.In which section of Apex's statement of cash flows would you be able to determine whether the company repaid any portion of the debt during the year?

For each item listed, select the section of the balance sheet in which the item would be reported. -Retained earnings

The concept of conservatism is the capacity of information to make a difference in a decision.

For each item listed, select the section of the balance sheet in which the item would be reported. -Cash

Which of the following would not appear on an income statement?

The qualitative characteristics of accounting data include

Match the following characteristics with the statements about each qualitative characteristic's importance. -Users must be able to compare accounting information of a firm with its prior year information.

Information that is material means that an error or alternative method of handling a transaction

A 12% change in sales will result in a 12% change in net income.

Which one of the following sections is least likely to be found in a corporate annual report?

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?

Match the following characteristics with the statements about each qualitative characteristic's importance. -This quality allows users to analyze two or more companies and look for similarities and differences.

Accounting As a Form of Communication

Processing Accounting Information

Income Measurement and Accrual Accounting

Inventories and Cost of Goods Sold

Cash and Internal Control

Receivables and Investments

Operating Assets: Property, Plant and Equipment, and Intangibles

Current Liabilities, Contingencies, and the True Value of Money

Long-Term Liabilities

Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

Exploring Accounting Standards and Differences around the World

Filters