Question 1

The LIFO method of inventory valuation bases the cost of goods sold on the cost of

Accepted Answer

A)  merchandise that has been held in inventory for the longest period of time. 
B)  most recent merchandise purchased by the firm. 
C)  actual units customers purchased. 
D)  merchandise the firm acquired at the lowest cost. 
A)  merchandise that has been held in inventory for the longest period of time. 
B)  most recent merchandise purchased by the firm. 
C)  actual units customers purchased. 
D)  merchandise the firm acquired at the lowest cost.

Question 2

If the goal of a business is to pay lower taxes on its income during an inflationary period, it is likely to use the FIFO inventory costing method.

Accepted Answer

A) True 
 B)False

Question 3

A ________ summarizes all the data from the account ledgers to verify that they are correct and balanced.

Accepted Answer

A)  ledger statement 
B)  balance sheet 
C)  trial balance 
D)  statement of cash flows 
A)  ledger statement 
B)  balance sheet 
C)  trial balance 
D)  statement of cash flows

Question 4

A debt to owners' equity ratio of 25% indicates that a firm has more debt than equity.

Accepted Answer

A) True 
 B)False

Question 5

The LIFO method of inventory valuation assumes the newest items in inventory are sold first.

Accepted Answer

A) True 
 B)False

Question 6

Josephine has discovered her small business needs a better way to maintain accounting records and analyze business opportunities. Currently, she uses a manual accounting system. These days, any accounting program should do an excellent job of meeting her firm's accounting needs.

Accepted Answer

A) True 
 B)False

Question 7

If the economy began experiencing a prolonged period of deflation in which the prices of most goods are falling, many firms would find that the LIFO method of inventory valuation would result in higher reported profits.

Accepted Answer

A) True 
 B)False

Question 8

Double Entry Door's suppliers maintained very stable prices for many years, but Minnie has noticed that the cost of doors has been rising steadily for the past few years. She is concerned that, given the company's current accounting methods of basing its cost on the most recent doors purchased, this will result in a much lower net income than in the past. The most likely reason for her concern is that Double Entry has apparently been using

Accepted Answer

A)  the FIFO inventory valuation method to determine its cost of goods sold. 
B)  a great deal of equity financing to purchase the doors. 
C)  the LIFO inventory valuation method to determine its cost of goods sold. 
D)  a depreciation method based on the average value of inventory. 
A)  the FIFO inventory valuation method to determine its cost of goods sold. 
B)  a great deal of equity financing to purchase the doors. 
C)  the LIFO inventory valuation method to determine its cost of goods sold. 
D)  a depreciation method based on the average value of inventory.

Question 9

Double-entry bookkeeping requires that every transaction be recorded in two places.

Accepted Answer

A) True 
 B)False

Question 10

________ is the monetary value that is received for goods sold, services rendered, and money received from other sources.

Accepted Answer

A)  Revenue 
B)  Gross margin 
C)  Net income 
D)  Cost of goods sold 
A)  Revenue 
B)  Gross margin 
C)  Net income 
D)  Cost of goods sold

Question 11

Mallory is running an income statement on her QuickBooks computer accounting program. Which of the following accounts will be used to calculate gross profit?

Accepted Answer

A)  revenues, net sales, depreciation, and operating expenses 
B)  revenues, general expenses 
C)  revenues, cost of goods sold, tax expenses, net income before taxes 
D)  revenues, cost of goods sold 
A)  revenues, net sales, depreciation, and operating expenses 
B)  revenues, general expenses 
C)  revenues, cost of goods sold, tax expenses, net income before taxes 
D)  revenues, cost of goods sold

Question 12

The ________ sets accounting standards used in government accounting.

Accepted Answer

A)  Federal Accounting Review Board 
B)  Governmental Accounting Standards Board 
C)  Academy of Public Sector Accountants 
D)  Federal Reserve Board 
A)  Federal Accounting Review Board 
B)  Governmental Accounting Standards Board 
C)  Academy of Public Sector Accountants 
D)  Federal Reserve Board

Question 13

The basic earnings per share ratio does not take stock options, warrants, and preferred stock into account.

Accepted Answer

A) True 
 B)False

Question 14

A balance sheet is composed of assets, liabilities, and revenues.

Accepted Answer

A) True 
 B)False

Question 15

The purpose of the current ratio is to evaluate the firm's ability to

Accepted Answer

A)  generate sales with a given level of current assets. 
B)  utilize current assets profitably. 
C)  pay its bills in the short run. 
D)  effectively use borrowed funds. 
A)  generate sales with a given level of current assets. 
B)  utilize current assets profitably. 
C)  pay its bills in the short run. 
D)  effectively use borrowed funds.

Question 16

Liquidity refers to how fast an asset can be converted to cash.

Accepted Answer

A) True 
 B)False

Question 17

Liquidity refers to how quickly liabilities must be paid.

Accepted Answer

A) True 
 B)False

Question 18

Important provisions of the Sarbanes-Oxley Act

Accepted Answer

A)  approve corporate loans to directors of the company. 
B)  encourage the destruction of financial documents. 
C)  require the CEO and CFO of corporations to certify the accuracy of financial reports. 
D)  encourage outside CPA firms to deliver several services to their clients, including auditing services and consulting services. 
A)  approve corporate loans to directors of the company. 
B)  encourage the destruction of financial documents. 
C)  require the CEO and CFO of corporations to certify the accuracy of financial reports. 
D)  encourage outside CPA firms to deliver several services to their clients, including auditing services and consulting services.

Question 19

The Barkatorium Pet Supplies accountant has recorded the following: Total current assets = $60,000, including Cash = $24,000; Accounts Receivable = $20,000; and Inventory = $16,000. Total assets = $230,000; Total current liabilities = $48,000; and Total current and long-term liabilities = $98,000. The store's current ratio = 1.25. The store's acid-test ratio = .92

Accepted Answer

A) True 
 B)False

Question 20

While reviewing the books at his firm, Colin noticed discrepancies between how the firm recorded revenues last year and how it elected to record revenues during the recent quarter of the current year. As a recent business graduate, Colin felt confident that the changes needed clarification. To get another opinion, Colin suggested to the company's controller that the firm solicit

Accepted Answer

A)  the assistance of the Government Accounting Standards Board. 
B)  the services of a certified internal auditor. 
C)  the services of a senior executive at the IRS. 
D)  the services of an independent auditor. 
A)  the assistance of the Government Accounting Standards Board. 
B)  the services of a certified internal auditor. 
C)  the services of a senior executive at the IRS. 
D)  the services of an independent auditor.

Exam 17: Understanding Accounting and Financial Information

The LIFO method of inventory valuation bases the cost of goods sold on the cost of

If the goal of a business is to pay lower taxes on its income during an inflationary period, it is likely to use the FIFO inventory costing method.

A ________ summarizes all the data from the account ledgers to verify that they are correct and balanced.

A debt to owners' equity ratio of 25% indicates that a firm has more debt than equity.

The LIFO method of inventory valuation assumes the newest items in inventory are sold first.

Josephine has discovered her small business needs a better way to maintain accounting records and analyze business opportunities. Currently, she uses a manual accounting system. These days, any accounting program should do an excellent job of meeting her firm's accounting needs.

If the economy began experiencing a prolonged period of deflation in which the prices of most goods are falling, many firms would find that the LIFO method of inventory valuation would result in higher reported profits.

Double-entry bookkeeping requires that every transaction be recorded in two places.

________ is the monetary value that is received for goods sold, services rendered, and money received from other sources.

Mallory is running an income statement on her QuickBooks computer accounting program. Which of the following accounts will be used to calculate gross profit?

The ________ sets accounting standards used in government accounting.

The basic earnings per share ratio does not take stock options, warrants, and preferred stock into account.

A balance sheet is composed of assets, liabilities, and revenues.

The purpose of the current ratio is to evaluate the firm's ability to

Liquidity refers to how fast an asset can be converted to cash.

Liquidity refers to how quickly liabilities must be paid.

Important provisions of the Sarbanes-Oxley Act

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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