Question 1

Good decisions are based on good information.Organizations need accounting-to provide good financial information.

Accepted Answer

A) True 
 B)False

Question 2

Skilled professionals who are responsible for the development of strategies to minimize taxes are called:

Accepted Answer

A)  tax accountants. 
B)  certified public accountants. 
C)  certified management accountants. 
D)  certified internal auditors. 
A)  tax accountants. 
B)  certified public accountants. 
C)  certified management accountants. 
D)  certified internal auditors.

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

Nebraska Communications is considering the purchase of a new satellite.The firm believes the satellite will help generate future earnings.In addition,the firm recognizes the tax benefits of a lower net income provided by the annual ________ of the asset.

Accepted Answer

A)  inventory valuation 
B)  declining balance 
C)  appreciation 
D)  depreciation 
A)  inventory valuation 
B)  declining balance 
C)  appreciation 
D)  depreciation

Question 5

A series of high-profile scandals in the early 2000s put the accounting profession under intense scrutiny.

Accepted Answer

A) True 
 B)False

Question 6

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.

Accepted Answer

A) True 
 B)False

Question 7

Scott Drilling Contractors recently issued a corporate bond on which it expects to pay interest for the next twenty years.Scott would record this as a __________ on its balance sheet.

Accepted Answer

A)  declining balance asset 
B)  retained earning 
C)  long-term liability 
D)  long-term expense 
A)  declining balance asset 
B)  retained earning 
C)  long-term liability 
D)  long-term expense

Question 8

An extremely high inventory turnover ratio may represent lost sales due to holding inadequate stocks of merchandise.

Accepted Answer

A) True 
 B)False

Question 9

Meg Malloy 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 10

In order to understand if the results of ratio calculations indicate a financially strong company,the results:

Accepted Answer

A)  Should be compared to other firms in the same industry. 
B)  Are compared to same size firms in the same geographic region of the country. 
C)  Are compared to the norms established by generally accepted accounting principles. 
D)  Are compared to the largest firms in the country. 
A)  Should be compared to other firms in the same industry. 
B)  Are compared to same size firms in the same geographic region of the country. 
C)  Are compared to the norms established by generally accepted accounting principles. 
D)  Are compared to the largest firms in the country.

Question 11

When reviewing the Balance Sheet for Preferred Pet Care,Inc. ,a mobile small animal care business,Julian noted the following information: Company assets totaling $3.5 million,and liabilities totaling $1.3 million.On paper,the net worth (owner's 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 12

One way to make ratio analysis more meaningful is to compare the ratios of one firm to those of other firms in the same industry.

Accepted Answer

A) True 
 B)False

Question 13

The accounting profession is divided into two main fields: bookkeeping and auditing.

Accepted Answer

A) True 
 B)False

Question 14

Accountants record,classify,and ____________ the results of the financial information they gather.

Accepted Answer

A)  interpret 
B)  sell 
C)  buy 
D)  change 
A)  interpret 
B)  sell 
C)  buy 
D)  change

Question 15

The Chapter 17 Connecting Across Borders box discusses the future of international accounting standards.In summary,the message is:

Accepted Answer

A)  GAAP (Generally Accepted Accounting Standards)created and established in the U.S.will be adopted worldwide by 2014. 
B)  Accounting professionals do not see an immediate need to standardize accounting practices globally due to the fact that patents and other legal measures are not standardized. 
C)  Due to the fact that global markets continue to rise in economic importance,the accounting field is working on integrating GAAP with IFRS (International Financial Reporting Standards). 
D)  It has been established that most U.S.accountants will refuse to acknowledge the IFRS standards because U.S.accounting firms mostly represent companies that do business domestically. 
A)  GAAP (Generally Accepted Accounting Standards)created and established in the U.S.will be adopted worldwide by 2014. 
B)  Accounting professionals do not see an immediate need to standardize accounting practices globally due to the fact that patents and other legal measures are not standardized. 
C)  Due to the fact that global markets continue to rise in economic importance,the accounting field is working on integrating GAAP with IFRS (International Financial Reporting Standards). 
D)  It has been established that most U.S.accountants will refuse to acknowledge the IFRS standards because U.S.accounting firms mostly represent companies that do business domestically.

Question 16

Company resources that are purchased with the intention that they will convert to cash within one year are:

Accepted Answer

A)  Fixed assets 
B)  Current liabilities 
C)  Current assets 
D)  Owners' equity 
A)  Fixed assets 
B)  Current liabilities 
C)  Current assets 
D)  Owners' equity

Question 17

The main reason an accountant would conduct a trial balance is to:

Accepted Answer

A)  Determine whether account figures in the ledger are correct and balanced. 
B)  Obtain an estimate of the amount of taxes the firm owes. 
C)  Ensure the audit was done correctly. 
D)  Verify the validity of last year's balance sheet before beginning the next accounting cycle. 
A)  Determine whether account figures in the ledger are correct and balanced. 
B)  Obtain an estimate of the amount of taxes the firm owes. 
C)  Ensure the audit was done correctly. 
D)  Verify the validity of last year's balance sheet before beginning the next accounting cycle.

Question 18

The "bottom line" of the Barkley Company's income statement is equal to the net worth of the firm.

Accepted Answer

A) True 
 B)False

Question 19

When an accountant "writes off" the cost of a tangible asset over its estimated lifetime,it is called depreciation.

Accepted Answer

A) True 
 B)False

Question 20

Government organizations such as the IRS and other government regulatory agencies are interested in a firm's accounting information in order to help the firm strategize about ways to cut costs in order to minimize net income before taxes.

Accepted Answer

A) True 
 B)False

Exam 17: Understanding Accounting and Financial Information

Good decisions are based on good information.Organizations need accounting-to provide good financial information.

Skilled professionals who are responsible for the development of strategies to minimize taxes are called:

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

Nebraska Communications is considering the purchase of a new satellite.The firm believes the satellite will help generate future earnings.In addition,the firm recognizes the tax benefits of a lower net income provided by the annual ________ of the asset.

A series of high-profile scandals in the early 2000s put the accounting profession under intense scrutiny.

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.

Scott Drilling Contractors recently issued a corporate bond on which it expects to pay interest for the next twenty years.Scott would record this as a __________ on its balance sheet.

An extremely high inventory turnover ratio may represent lost sales due to holding inadequate stocks of merchandise.

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

In order to understand if the results of ratio calculations indicate a financially strong company,the results:

When reviewing the Balance Sheet for Preferred Pet Care,Inc. ,a mobile small animal care business,Julian noted the following information: Company assets totaling $3.5 million,and liabilities totaling $1.3 million.On paper,the net worth (owner's equity)for this business = ___________.

One way to make ratio analysis more meaningful is to compare the ratios of one firm to those of other firms in the same industry.

The accounting profession is divided into two main fields: bookkeeping and auditing.

Accountants record,classify,and ____________ the results of the financial information they gather.

The Chapter 17 Connecting Across Borders box discusses the future of international accounting standards.In summary,the message is:

Company resources that are purchased with the intention that they will convert to cash within one year are:

The main reason an accountant would conduct a trial balance is to:

The "bottom line" of the Barkley Company's income statement is equal to the net worth of the firm.

When an accountant "writes off" the cost of a tangible asset over its estimated lifetime,it is called depreciation.

Government organizations such as the IRS and other government regulatory agencies are interested in a firm's accounting information in order to help the firm strategize about ways to cut costs in order to minimize net income before taxes.

Taking Risks and Making Profits Within the Dynamic Business Environment

Understanding How Economics 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

Adapting Organizations to Todays Markets

Production and Operations Management

Motivating Employees

Human Resource Management: Finding and Keeping the Best Employees

Dealing With Employee-Management Issues and Relationships

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 A: Using Technology to Manage Information

Appendix B: Managing Risk

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