Question 1

The current ratio is used to evaluate a firm's ability to pay its short-term debts.

Accepted Answer

A) True 
 B)False  True

Question 2

In an effort to maintain a competitive advantage, firms do not share accounting information with people outside of the firm.

Accepted Answer

A) True 
 B)False  False

Question 3

The balance sheet, the statement of cash flows, and the ________ are three key financial statements prepared by accountants.

Accepted Answer

A)  income statement 
B)  statement of retained earnings 
C)  statement of changes in financial position 
D)  trial balance 
A)  income statement 
B)  statement of retained earnings 
C)  statement of changes in financial position 
D)  trial balance A

Question 4

Managers who are concerned about keeping costs under control should be very interested in the information and advice provided by their company's managerial accountants.

Accepted Answer

A) True 
 B)False

Question 5

Jeremy thinks his business will be successful as long as he just keeps his customers satisfied. He does NOT need to have a great deal of knowledge about accounting practices.

Accepted Answer

A) True 
 B)False

Question 6

Accounting software for small businesses has become so sophisticated that most small business owners will never need to consult with an actual accountant or understand accounting information themselves.

Accepted Answer

A) True 
 B)False

Question 7

Once a trial balance has been prepared, the next step of the accounting cycle involves

Accepted Answer

A)  posting the information to the correct ledger accounts. 
B)  completing a balance sheet and ratio analysis. 
C)  preparing financial statements such as the balance sheet, income statement, and statement of cash flows. 
D)  classifying the transactions into logical categories. 
A)  posting the information to the correct ledger accounts. 
B)  completing a balance sheet and ratio analysis. 
C)  preparing financial statements such as the balance sheet, income statement, and statement of cash flows. 
D)  classifying the transactions into logical categories.

Question 8

Green Goddess Lawn Services will refer to its income statements to determine whether it was profitable, or whether it lost money over the past year.

Accepted Answer

A) True 
 B)False

Question 9

As mentioned in the Adapting to Change box, accountants that search for fraudulent activities are called forensic accountants.

Accepted Answer

A) True 
 B)False

Question 10

Gross profit represents profit after the deduction of cost of goods sold, and before the deduction of all other selling expenses, general expenses, and tax expense.

Accepted Answer

A) True 
 B)False

Question 11

During periods of rising prices, firms that want to report more attractive profits would tend to favor the FIFO technique of inventory valuation.

Accepted Answer

A) True 
 B)False

Question 12

When reviewing the balance sheet for Portable Pet Care, Inc., a mobile small animal care business, Ricky noted the following information: Company assets totaling $3.5 million, and liabilities totaling $1.3 million. On paper, the net worth (owners' equity) for this business =

Accepted Answer

A)  $2.2 million. 
B)  $4.8 million. 
C)  $3.5 million. 
D)  $0.2 million. 
A)  $2.2 million. 
B)  $4.8 million. 
C)  $3.5 million. 
D)  $0.2 million.

Question 13

Quinn is an accountant employed by CCDL Enterprises. Recently, she has spent much of her time working on defining measures of costs for the production department and checking to ensure that various departments are staying within their budgets. Quinn is a

Accepted Answer

A)  public accountant whose work is mainly concerned with auditing. 
B)  public accountant whose work is mainly concerned with financial accounting. 
C)  private accountant whose work is mainly concerned with managerial accounting. 
D)  private accountant whose work is mainly concerned with financial accounting. 
A)  public accountant whose work is mainly concerned with auditing. 
B)  public accountant whose work is mainly concerned with financial accounting. 
C)  private accountant whose work is mainly concerned with managerial accounting. 
D)  private accountant whose work is mainly concerned with financial accounting.

Question 14

Day-by-Day Calendar Company's statement of cash flows showed the following activities for the year ended December 31, 2019:   The year-end cash balance for this firm is:

Accepted Answer

A)  $7,000.00 
B)  $53,000.00 
C)  $23,000.00 
D)  $30,000.00 
A)  $7,000.00 
B)  $53,000.00 
C)  $23,000.00 
D)  $30,000.00

Question 15

As a certified public accountant, you would be working in the area of managerial accounting.

Accepted Answer

A) True 
 B)False

Question 16

The balance sheet for Greeley Contracting shows assets totaling $207,000 and liabilities totaling $95,000. Which of the following statements is correct?

Accepted Answer

A)  Owners' equity equals $182,000. 
B)  Current assets are worth $92,000. 
C)  Net income for the period is $112,000. 
D)  Owners' equity equals $112,000. 
A)  Owners' equity equals $182,000. 
B)  Current assets are worth $92,000. 
C)  Net income for the period is $112,000. 
D)  Owners' equity equals $112,000.

Question 17

Andrea is preparing her homework for her accounting class. She is uncertain as to the proper handling of patents and copyrights on a firm's financial statements. Which of the following is correct?

Accepted Answer

A)  Patents and copyrights are included with the firm's intangible assets on the balance sheet. 
B)  Patents and copyrights are included with the firm's long-term liabilities on the balance sheet. 
C)  Patents and copyrights are included with the firm's cost of goods sold on the income statement. 
D)  Patents and copyrights are included with the firm's fixed assets on the balance sheet. 
A)  Patents and copyrights are included with the firm's intangible assets on the balance sheet. 
B)  Patents and copyrights are included with the firm's long-term liabilities on the balance sheet. 
C)  Patents and copyrights are included with the firm's cost of goods sold on the income statement. 
D)  Patents and copyrights are included with the firm's fixed assets on the balance sheet.

Question 18

After recording a business's transactions, bookkeepers usually classify the recorded transactions into groups with common characteristics.

Accepted Answer

A) True 
 B)False

Question 19

A(n) ________ is an evaluation and unbiased opinion about the accuracy of a firm's financial statements.

Accepted Answer

A)  internal audit 
B)  annual report 
C)  independent audit 
D)  certified audit 
A)  internal audit 
B)  annual report 
C)  independent audit 
D)  certified audit

Question 20

The company controller asked Jade to determine if it could borrow more money for an expansion project. When she calculated a leverage ratio, she determined that the company already had 1.5 times as much debt as equity. Do you agree with her assessment that the company should back off with borrowing more funds at this time?

Accepted Answer

A)  Yes, but if the company would increase sales, it could go ahead with borrowing more funds. 
B)  Not necessarily. She should investigate the debt to equity ratios of other firms in the same industry. 
C)  Yes, but the firm should pursue equity investment until the ratio equals 1:1. 
D)  Not necessarily. In poor economic times, it is good financial strategy for a firm to be highly leveraged. 
A)  Yes, but if the company would increase sales, it could go ahead with borrowing more funds. 
B)  Not necessarily. She should investigate the debt to equity ratios of other firms in the same industry. 
C)  Yes, but the firm should pursue equity investment until the ratio equals 1:1. 
D)  Not necessarily. In poor economic times, it is good financial strategy for a firm to be highly leveraged.

Exam 17: Understanding Accounting and Financial Information

The current ratio is used to evaluate a firm's ability to pay its short-term debts.

In an effort to maintain a competitive advantage, firms do not share accounting information with people outside of the firm.

The balance sheet, the statement of cash flows, and the ________ are three key financial statements prepared by accountants.

Managers who are concerned about keeping costs under control should be very interested in the information and advice provided by their company's managerial accountants.

Jeremy thinks his business will be successful as long as he just keeps his customers satisfied. He does NOT need to have a great deal of knowledge about accounting practices.

Accounting software for small businesses has become so sophisticated that most small business owners will never need to consult with an actual accountant or understand accounting information themselves.

Once a trial balance has been prepared, the next step of the accounting cycle involves

Green Goddess Lawn Services will refer to its income statements to determine whether it was profitable, or whether it lost money over the past year.

As mentioned in the Adapting to Change box, accountants that search for fraudulent activities are called forensic accountants.

Gross profit represents profit after the deduction of cost of goods sold, and before the deduction of all other selling expenses, general expenses, and tax expense.

During periods of rising prices, firms that want to report more attractive profits would tend to favor the FIFO technique of inventory valuation.

When reviewing the balance sheet for Portable Pet Care, Inc., a mobile small animal care business, Ricky noted the following information: Company assets totaling $3.5 million, and liabilities totaling $1.3 million. On paper, the net worth (owners' equity) for this business =

Quinn is an accountant employed by CCDL Enterprises. Recently, she has spent much of her time working on defining measures of costs for the production department and checking to ensure that various departments are staying within their budgets. Quinn is a

Day-by-Day Calendar Company's statement of cash flows showed the following activities for the year ended December 31, 2019: The year-end cash balance for this firm is:

As a certified public accountant, you would be working in the area of managerial accounting.

The balance sheet for Greeley Contracting shows assets totaling $207,000 and liabilities totaling $95,000. Which of the following statements is correct?

Andrea is preparing her homework for her accounting class. She is uncertain as to the proper handling of patents and copyrights on a firm's financial statements. Which of the following is correct?

After recording a business's transactions, bookkeepers usually classify the recorded transactions into groups with common characteristics.

A(n) ________ is an evaluation and unbiased opinion about the accuracy of a firm's financial statements.

Taking Risks and Making Profits Within the Dynamic Business Environment

Understanding Economics and How It Affects Business

Doing Business in Global Markets

Demanding Ethical and Socially Responsible Behavior

How to Form a Business

Entrepreneurship and Starting a Small Business

Management and Leadership

Structuring Organizations for Todays Challenges

Production and Operations Management

Motivating Employees

Human Resource Management: Finding and Keeping the Best Employees

Dealing With Employeemanagement Issues

Marketing: Helping Buyers Buy

Developing and Pricing Goods and Services

Distributing Products

Using Effective Promotions

Financial Management

Using Securities Markets for Financing and Investing Opportunities

Money, Financial Institutions, and the Federal Reserve

Appendix: Working Within the Legal Environment

Appendix: Using Technology to Manage Information

Appendix: Managing Risk

Appendix: Managing Personal Finances

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