Question 1

Describe the major elements of an income statement.

Accepted Answer

- Revenues: monies received as a result

Question 2

Explain the accounting equation.

Accepted Answer

The accounting equation is Assets = Liab

Question 3

What is the purpose of an income statement? What important information is reflected in this statement?

Accepted Answer

- An income statement describes a firm's

Question 4

To compute the current ratio, current assets are divided by

Accepted Answer

A)  debt. 
B)  current liabilities. 
C)  long-term assets. 
D)  owners' equity. 
E)  quick assets. 
A)  debt. 
B)  current liabilities. 
C)  long-term assets. 
D)  owners' equity. 
E)  quick assets.

Question 5

What is the difference between financial accounting and managerial accounting?

Accepted Answer

Financial accounting is the process wher

Question 6

Cash flow from operations refers to

Accepted Answer

A)  money received from borrowing or issuing stock. 
B)  cash transactions from buying and selling goods and services. 
C)  cash used in, or provided by, investing. 
D)  the cash outflow required to pay dividends. 
E)  all of these. 
A)  money received from borrowing or issuing stock. 
B)  cash transactions from buying and selling goods and services. 
C)  cash used in, or provided by, investing. 
D)  the cash outflow required to pay dividends. 
E)  all of these.

Question 7

At Lexi Corp., sales revenue is $20 million, the cost of goods sold is $14 million, operating expenses are $3 million, and income taxes are $1 million. What are retained earnings?

Accepted Answer

A)  $6 million 
B)  $17 million 
C)  $3 million 
D)  $2 million 
E)  It is not possible to tell with the information provided. 
A)  $6 million 
B)  $17 million 
C)  $3 million 
D)  $2 million 
E)  It is not possible to tell with the information provided.

Question 8

The controller is a company's chief accounting officer.

Accepted Answer

A) True 
 B)False

Question 9

A company ended the year with $4.5 million in cash. During this year, it had earned $2.4 million in operating and financing activities. Which of the following statements is necessarily true?

Accepted Answer

A)  The company started the year with less than $2.1 million. 
B)  The company started the year with more than $2.1 million. 
C)  The company started the year with $2.1 million minus the amount of investing activities during the year. 
D)  The company started the year with $2.1 million plus the amount of investing activities during the year. 
E)  The company started the year with $4.5 million in cash. 
A)  The company started the year with less than $2.1 million. 
B)  The company started the year with more than $2.1 million. 
C)  The company started the year with $2.1 million minus the amount of investing activities during the year. 
D)  The company started the year with $2.1 million plus the amount of investing activities during the year. 
E)  The company started the year with $4.5 million in cash.

Question 10

The income statement details a firm's yearly cash receipts and cash payments.

Accepted Answer

A) True 
 B)False

Question 11

Mary Ann is considering buying an existing catering business that is up for sale. The current owners claim that the business is highly profitable, but Mary Ann has her doubts. She also thinks that the price that they are asking seems high. In reviewing the financial statements of the catering business, she discovers that the current balance sheet shows that the business has more liabilities than assets. Why would this explain why the owners want to sell the business?

Accepted Answer

The current owners face a negative owner

Question 12

Marshall is preparing a statement of estimated profits and losses for a new product that has just been introduced by his company. The field of accounting that Marshall is working in is

Accepted Answer

A)  managerial accounting. 
B)  auditing. 
C)  public accounting. 
D)  financial accounting. 
E)  bookkeeping. 
A)  managerial accounting. 
B)  auditing. 
C)  public accounting. 
D)  financial accounting. 
E)  bookkeeping.

Question 13

Forensic accountants are sometimes used to

Accepted Answer

A)  ensure that the accounting system adheres to GAAP. 
B)  track down hidden funds in business firms. 
C)  ensure auditors follow auditing standards. 
D)  ensure businesses remain profitable. 
E)  do all of these. 
A)  ensure that the accounting system adheres to GAAP. 
B)  track down hidden funds in business firms. 
C)  ensure auditors follow auditing standards. 
D)  ensure businesses remain profitable. 
E)  do all of these.

Question 14

What is the formula for determining owners' equity?

Accepted Answer

A)  Assets minus liabilities 
B)  Assets plus liabilities 
C)  Assets minus goodwill 
D)  Current assets minus current liabilities 
E)  There is no formula for computing owners' equity. 
A)  Assets minus liabilities 
B)  Assets plus liabilities 
C)  Assets minus goodwill 
D)  Current assets minus current liabilities 
E)  There is no formula for computing owners' equity.

Question 15

Kershner says: "Our income statement should be looking good this year. We've been doing excellent business this year, so we have a lot of gross sales. The company should be in good shape." Michaels replies: "It remains to be seen how our income statement will look overall. In spite of strong sales revenue, the overall income statement might not be as good as we might hope."
Which of the following does Kershner assume?

Accepted Answer

A)  High revenues equate to a healthy income statement. 
B)  Many factors must be taken into account to calculate the income statement. 
C)  The company's revenue next year will be as good as this year's. 
D)  Operating expenses have been relatively high this year. 
E)  Gross profit is much lower than gross sales. 
A)  High revenues equate to a healthy income statement. 
B)  Many factors must be taken into account to calculate the income statement. 
C)  The company's revenue next year will be as good as this year's. 
D)  Operating expenses have been relatively high this year. 
E)  Gross profit is much lower than gross sales.

Question 16

The debt-to-owners' equity ratio measures a firm's ability to meet

Accepted Answer

A)  dividend payments. 
B)  long-term liabilities. 
C)  interest payments. 
D)  short-term liabilities. 
E)  all liabilities. 
A)  dividend payments. 
B)  long-term liabilities. 
C)  interest payments. 
D)  short-term liabilities. 
E)  all liabilities.

Question 17

Streeter & Sons is a regional service company that has been in business for a few years, but has not employed a controller or anyone else full-time to keep track of its financial state. The company needs to take a good look at its financial state to determine whether it needs to make any changes in its practices, in order to prevent possible financial meltdown. Which of the following, if true, would strengthen the case that Streeter & Sons is profitable?

Accepted Answer

A)  The company's sales revenue is low relative to its cost of goods sold. 
B)  The company's cost of goods sold is low relative to its sales revenue. 
C)  The company has had the same number of customers for some time. 
D)  The company has had the same owners over its lifetime. 
E)  The company's selling expenses are high relative to its administrative expenses. 
A)  The company's sales revenue is low relative to its cost of goods sold. 
B)  The company's cost of goods sold is low relative to its sales revenue. 
C)  The company has had the same number of customers for some time. 
D)  The company has had the same owners over its lifetime. 
E)  The company's selling expenses are high relative to its administrative expenses.

Question 18

A current asset is

Accepted Answer

A)  an expense, such as rent, that is paid before the upcoming period in which it is due. 
B)  a nonphysical asset, such as a patent or trademark, that has economic value in the form of expected benefit. 
C)  an amount due from a customer who has purchased goods on credit. 
D)  an asset with long-term use or value, such as land, buildings, and equipment. 
E)  an asset that can or will be converted to cash within the following year. 
A)  an expense, such as rent, that is paid before the upcoming period in which it is due. 
B)  a nonphysical asset, such as a patent or trademark, that has economic value in the form of expected benefit. 
C)  an amount due from a customer who has purchased goods on credit. 
D)  an asset with long-term use or value, such as land, buildings, and equipment. 
E)  an asset that can or will be converted to cash within the following year.

Question 19

Janice is a bookkeeper. Her primary function would be to

Accepted Answer

A)  generate financial statements. 
B)  measure business performance. 
C)  record accounting transactions. 
D)  complete the same tasks as accountants do. 
E)  determine the value of the firm to investors. 
A)  generate financial statements. 
B)  measure business performance. 
C)  record accounting transactions. 
D)  complete the same tasks as accountants do. 
E)  determine the value of the firm to investors.

Question 20

What is owners' equity?

Accepted Answer

The amount of money that busin

Describe the major elements of an income statement.

Explain the accounting equation.

What is the purpose of an income statement? What important information is reflected in this statement?

To compute the current ratio, current assets are divided by

What is the difference between financial accounting and managerial accounting?

Cash flow from operations refers to

At Lexi Corp., sales revenue is $20 million, the cost of goods sold is $14 million, operating expenses are $3 million, and income taxes are $1 million. What are retained earnings?

The controller is a company's chief accounting officer.

A company ended the year with $4.5 million in cash. During this year, it had earned $2.4 million in operating and financing activities. Which of the following statements is necessarily true?

The income statement details a firm's yearly cash receipts and cash payments.

Marshall is preparing a statement of estimated profits and losses for a new product that has just been introduced by his company. The field of accounting that Marshall is working in is

Forensic accountants are sometimes used to

What is the formula for determining owners' equity?

The debt-to-owners' equity ratio measures a firm's ability to meet

A current asset is

Janice is a bookkeeper. Her primary function would be to

What is owners' equity?

Understanding the Canadian Business System

The Environment of Business

Conducting Business Ethically and Responsibly

Entrepreneurship, Small Business, and New Venture Creation

The Global Context of Business

Managing the Business Enterprise

Organizing the Business Enterprise

Managing Human Resources and Labour Relations

Motivating, Satisfying, and Leading Employees

Operations Management, Productivity, and Quality

Understanding Marketing Principles and Developing Products

Pricing, Promotion, and Distributing Products

Money and Banking

Finacial Decisions and Risk Management

Filters

Exam 11: Understanding Accounting

Describe the major elements of an income statement.

Explain the accounting equation.

What is the purpose of an income statement? What important information is reflected in this statement?

To compute the current ratio, current assets are divided by

What is the difference between financial accounting and managerial accounting?

Cash flow from operations refers to

At Lexi Corp., sales revenue is $20 million, the cost of goods sold is $14 million, operating expenses are $3 million, and income taxes are $1 million. What are retained earnings?

The controller is a company's chief accounting officer.

A company ended the year with $4.5 million in cash. During this year, it had earned $2.4 million in operating and financing activities. Which of the following statements is necessarily true?

The income statement details a firm's yearly cash receipts and cash payments.

Marshall is preparing a statement of estimated profits and losses for a new product that has just been introduced by his company. The field of accounting that Marshall is working in is

Forensic accountants are sometimes used to

What is the formula for determining owners' equity?

The debt-to-owners' equity ratio measures a firm's ability to meet

A current asset is

Janice is a bookkeeper. Her primary function would be to

What is owners' equity?

Understanding the Canadian Business System

The Environment of Business

Conducting Business Ethically and Responsibly

Entrepreneurship, Small Business, and New Venture Creation

The Global Context of Business

Managing the Business Enterprise

Organizing the Business Enterprise

Managing Human Resources and Labour Relations

Motivating, Satisfying, and Leading Employees

Operations Management, Productivity, and Quality

Understanding Marketing Principles and Developing Products

Pricing, Promotion, and Distributing Products

Money and Banking

Finacial Decisions and Risk Management

Filters