Exam 17: Understanding Accounting and Financial Information

The firm's most valuable assets are listed at the top of its balance sheet.

For firms that sometimes have difficulty selling their inventory,the current ratio is likely to be a better measure of liquidity than the acid-test ratio.

Peak Performance Sporting Goods Company has reported net income after taxes = $3,750,000,with 18,250,000 shares outstanding.Basic Earning per Share for Peak Performance = ________.

Mini-Case Minnie A.Wright-Hoff works as an accountant for Double Entry Doors,Inc.Her company sells and installs oversized garage doors needed by large vehicles.Most of Minnie's work involves helping department heads and other decision-makers by measuring and reporting costs for their departments,and by identifying areas where departments are exceeding their budgets.However,as one of only three accountants employed by Double Entry Doors,Minnie is something of a "jill-of-all-trades" in terms of her accounting assignments.For example,she recently spent several hours summarizing all of the financial data in account ledgers to see if the information was correct and balanced.Her efforts revealed no problems,so she is now ready to start working on the firm's financial statements.Minnie is interested in this part of the accounting cycle because she likes to be one of the first to know the "bottom line" her company will report.She knows that she and the other accountants who work on these statements can influence the results by the choices they make about the way they report certain items. -The last major task Minnie completed before getting ready to prepare the firm's financial statements was the preparation of the:

Although accounting has several specific uses,the overall purpose of accounting can be summarized as:

Liabilities are reported on the income statement.

Kelley's Kloset,LLC has applied for a business loan.Her prospective banker has requested information concerning the financial condition of her business.Which accounting discipline is responsible for providing accounting information to outside stakeholders?

Identify the three key financial statements that corporations are required to prepare,and describe the type of information found on each.

Carole Grand and Bonnie Lamore run a shuttle service from Western Illinois to the busy Chicago O'Hare airport.Last month,they recorded the following: Carole and Bonnie's gross profit for the past month was:

FIFO and LIFO are two common methods used to compute the depreciation of tangible assets.

The cost of goods sold includes all the costs of buying and keeping merchandise available for sale.

As a bank loan officer,you are considering a loan application by Peak Performance Sporting Goods.The company has provided you with the following information from its Balance Sheet: Peak Performance's current ratio is:

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

An independent audit is an evaluation and unbiased opinion about the accuracy of a company's financial statements.

Bridget Cartier has privately invested $100,000 in Jacques and Jacqueline's Idaho Ski Resort.The business will use the money to purchase new ski lift chairs.$100,000 will be recorded on the balance sheet as part of the owners' equity account.In order to keep the accounts balanced,the balance sheet will also show:

The area of accounting that provides managers inside the organization with information they need to make decisions is called:

Harrison Manufacturing owns land worth $600,000 and has $130,000 worth of cash in its bank account.In the asset section of the balance sheet,Harrison lists its land holdings prior to listing its cash since it is a higher value.

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

As a recent college graduate with a degree in accounting,Jeff is helping a newly formed construction company set up its accounting system.Although the company had purchased accounting software,Jeff wants to make certain that future reports will distinguish between current liabilities and long-term liabilities.In the future,he will need to know the amount of total current liabilities in order to ___________________.

Generally,a high ___________ ratio could lead investors and creditors to view the company as being very risky.