Question 1

Use this information to answer the following question.   If the income statement were prepared in a multistep form,operating expenses would be

Accepted Answer

A)  $92,000. 
B)  $32,000. 
C)  $44,500. 
D)  $80,000. 
A)  $92,000. 
B)  $32,000. 
C)  $44,500. 
D)  $80,000.

Question 2

Each of the following statements violates a concept or convention of accounting.Write the name of the concept or convention that is violated.
a.A note to the financial statements indicating a change in inventory methods is omitted.
b.When management is unsure of which estimates to use in a given situation,the estimate resulting in the largest net income is always used.
c.In 2012,a company uses straight-line depreciation and in 2013 the company uses declining-balance depreciation.
d.A small company expenses all expenditures under $10,000.
e.A small company purchases a $50,000 computer to save $3,000 per year in bookkeeping wages.

Accepted Answer

a. Full disclosure

Question 3

Positive operating income will result if gross margin exceeds

Accepted Answer

A)  operating expenses. 
B)  purchases. 
C)  cost of goods sold. 
D)  cost of goods sold minus operating expenses. 
A)  operating expenses. 
B)  purchases. 
C)  cost of goods sold. 
D)  cost of goods sold minus operating expenses.

Question 4

Which accounting convention describes a note to the financial statements explaining the company's method of revenue recognition?

Accepted Answer

A)  Comparability and consistency 
B)  Materiality 
C)  Conservatism 
D)  Full disclosure 
A)  Comparability and consistency 
B)  Materiality 
C)  Conservatism 
D)  Full disclosure

Question 5

Each of the following statements is justified by a concept or convention of accounting.Write the name of the concept or convention that applies to each statement.
a.This convention best enhances comparability of financial statements between years.
b.A merger agreed on just after the balance sheet date nevertheless is reported in the notes to the financial statements.
c.A company forgoes hiring another full-time accountant,which would add only slightly to the financial statements' accuracy.
d.A company uses lower-of-cost-or-market to value inventory.
e.A large company rounds its financial statement figures to the nearest $10,000.

Accepted Answer

a. Consistency 
b. F

Question 6

A corporation's stockholders' equity section of the balance sheet may contain all except

Accepted Answer

A)  T.McDonald,capital 
B)  Retained earnings 
C)  Additional paid-in capital 
D)  Common stock 
A)  T.McDonald,capital 
B)  Retained earnings 
C)  Additional paid-in capital 
D)  Common stock

Question 7

The Sarbanes-Oxley Act requires the management of a company to guarantee,to its knowledge,that the financial statements that are filed with the SEC are accurate and complete.

Accepted Answer

A) True 
 B)False

Question 8

The convention of consistency relates most closely to

Accepted Answer

A)  verifiability. 
B)  comparability. 
C)  timeliness. 
D)  faithful representation. 
A)  verifiability. 
B)  comparability. 
C)  timeliness. 
D)  faithful representation.

Question 9

Financial statements are not important to the efficient allocation of resources in our economy.

Accepted Answer

A) True 
 B)False

Question 10

Illegal acts of a small dollar amount can be ignored because they are immaterial.

Accepted Answer

A) True 
 B)False

Question 11

Profit margin and gross margin are not the same thing.

Accepted Answer

A) True 
 B)False

Question 12

Return on assets is a better measure of profitability than profit margin because it takes into account the assets invested in the business.

Accepted Answer

A) True 
 B)False

Question 13

From the simplified balance sheet and income statement of the business below,compute the following ratios.Assume that the June 30 amounts for total assets and stockholders' equity also represent their average amounts for the period.Round percentages to the nearest whole percent.
a.Profit margin
b.Return on assets
c.Debt to equity
d.Return on equity
e.Asset turnover

Accepted Answer

a.10% ($2,400 ÷ $24,000) 
b.12

Question 14

The convention of consistency refers to the consistent use of accounting principles

Accepted Answer

A)  among all firms in a particular industry. 
B)  throughout one accounting period. 
C)  among all firms. 
D)  among accounting periods. 
A)  among all firms in a particular industry. 
B)  throughout one accounting period. 
C)  among all firms. 
D)  among accounting periods.

Question 15

An advantage of the single-step income statement is that it is less complex than the multistep form.

Accepted Answer

A) True 
 B)False

Question 16

The convention of materiality requires that financial statements present all the information relevant to users' understanding of the statements.

Accepted Answer

A) True 
 B)False

Question 17

Classified balance sheets list accounts in alphabetical order.

Accepted Answer

A) True 
 B)False

Question 18

Use this information to answer the following question.   The total dollar amount of assets to be classified as investments is

Accepted Answer

A)  $200,000. 
B)  $360,000. 
C)  $0. 
D)  $160,000. 
A)  $200,000. 
B)  $360,000. 
C)  $0. 
D)  $160,000.

Question 19

Accounting information does not contain estimates,classifications,summarizations,judgments,and allocations.

Accepted Answer

A) True 
 B)False

Question 20

Advertising expense appears as a general and administrative expense on the income statement.

Accepted Answer

A) True 
 B)False

Use this information to answer the following question. If the income statement were prepared in a multistep form,operating expenses would be

Positive operating income will result if gross margin exceeds

Which accounting convention describes a note to the financial statements explaining the company's method of revenue recognition?

A corporation's stockholders' equity section of the balance sheet may contain all except

The Sarbanes-Oxley Act requires the management of a company to guarantee,to its knowledge,that the financial statements that are filed with the SEC are accurate and complete.

The convention of consistency relates most closely to

Financial statements are not important to the efficient allocation of resources in our economy.

Illegal acts of a small dollar amount can be ignored because they are immaterial.

Profit margin and gross margin are not the same thing.

Return on assets is a better measure of profitability than profit margin because it takes into account the assets invested in the business.

The convention of consistency refers to the consistent use of accounting principles

An advantage of the single-step income statement is that it is less complex than the multistep form.

The convention of materiality requires that financial statements present all the information relevant to users' understanding of the statements.

Classified balance sheets list accounts in alphabetical order.

Use this information to answer the following question. The total dollar amount of assets to be classified as investments is

Accounting information does not contain estimates,classifications,summarizations,judgments,and allocations.

Advertising expense appears as a general and administrative expense on the income statement.

Uses of Accounting Information and the Financial Statements

Analyzing Business Transactions

Measuring Business Income

Supplement - Closing Entries and the Work Sheet

The Operating Cycle and Merchandising Operations

Inventories

Cash and Receivables

Current Liabilities and Fair Value Accounting

Long Term Assets

Long-Term Liabilities

Stockholders Equity

The Statement of Cash Flows

Financial Performance Measurement

Investments

Filters

Exam 5: Financial Reporting and Analysis

Use this information to answer the following question. If the income statement were prepared in a multistep form,operating expenses would be

Positive operating income will result if gross margin exceeds

Which accounting convention describes a note to the financial statements explaining the company's method of revenue recognition?

A corporation's stockholders' equity section of the balance sheet may contain all except

The Sarbanes-Oxley Act requires the management of a company to guarantee,to its knowledge,that the financial statements that are filed with the SEC are accurate and complete.

The convention of consistency relates most closely to

Financial statements are not important to the efficient allocation of resources in our economy.

Illegal acts of a small dollar amount can be ignored because they are immaterial.

Profit margin and gross margin are not the same thing.

Return on assets is a better measure of profitability than profit margin because it takes into account the assets invested in the business.

The convention of consistency refers to the consistent use of accounting principles

An advantage of the single-step income statement is that it is less complex than the multistep form.

The convention of materiality requires that financial statements present all the information relevant to users' understanding of the statements.

Classified balance sheets list accounts in alphabetical order.

Use this information to answer the following question. The total dollar amount of assets to be classified as investments is

Accounting information does not contain estimates,classifications,summarizations,judgments,and allocations.

Advertising expense appears as a general and administrative expense on the income statement.

Uses of Accounting Information and the Financial Statements

Analyzing Business Transactions

Measuring Business Income

Supplement - Closing Entries and the Work Sheet

The Operating Cycle and Merchandising Operations

Inventories

Cash and Receivables

Current Liabilities and Fair Value Accounting

Long Term Assets

Long-Term Liabilities

Stockholders Equity

The Statement of Cash Flows

Financial Performance Measurement

Investments

Filters