Exam 17: Understanding Accounting and Financial Information

At the time the Jepson Plumbing Supply prepared its financial statements, it had several customers who bought goods over the past three months on its "90 days same as cash" credit plan. These customers had not yet paid their bills, but they have good credit ratings and Jepson is confident that they will make their payments on time. The amount these credit customers owe would show up as part of the:

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.

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.

The __________ is an accounting statement that reports the financial condition of a firm at a specific point in time.

The balance sheet reflects the fact that assets equal the sum of liabilities and owners' equity.

The three important financial statements prepared by accountants are:

The accounting cycle is a six-step procedure that results in the preparation and analysis of major financial statements.

Marissa is taking her first course in accounting this semester. One of the first things she learns is that revenue and net income mean the same thing.

The top managers of Highbrow Bookstores want to indicate to the firm's shareholders how effectively they have managed the company. Perhaps the most meaningful way to do this would be by reporting strong:

A business manager who keeps his/her customers satisfied can be successful without having a great deal of knowledge about accounting practices.

A firm's ________ reports the profit or loss for the firm over a specified time period.

Marshall McBride inherited $10,000 from his Great Aunt Martha. He invested $5,000 in a new, risky start-up venture, 10th Generation, Inc., and the other $5,000 in Major Chemicals, Inc., a well-known chemical company that's been around for years. Today, his financial planner called to inform him that the Return on equity on 10th Generation = 6.28%; and, Return on equity on Major Chemicals = 10.50%. Which of the following facts is important information for Marshall McBride?

If prices of inventory are unchanged throughout the year, LIFO and FIFO inventory valuation methods will produce the same reported net income.

Stockholders of the Sasha Deal Company are concerned about irregularities in the firm's accounting system. One approach to identify problems in the records of the company would be to have a(n) ________ performed.

_________ is the systematic write-off of the value of a tangible asset over its useful life.

The purpose of a trial balance is to prepare a practice balance sheet.

Expenses a firm incurs for insurance, office salaries, and rent are classified as:

The Sarbanes-Oxley Act strengthens the protection for whistleblowers who report wrongful actions of company officers.

Careful consideration of the use of computers in accounting indicates that computers _____________________.

The accounting book that provides all the information about a single account in one place is called the ledger.