Exam 4: Financial Reporting and Analysis

Liabilities have which of the following two major categories?

A merchandiser will earn an operating income of exactly $0 when

Distinguish between cost of goods sold and operating expenses,describing the nature of these two items and their placement on the income statement.

Use this information to answer the following question. Alcorn \& Zeto Company Income Statement For the Year Ended December 31, 2010 Revenues Net sales \ 100,000 Dividend income 7,000 revenues \1 07,000 Costs and expenses Costs of goods sold \ 30,000 Selling expenses 10,000 General and administrative expenses 13,750 Interest expense Total costs and expenses before income taxes \ 47,000 Income taxes Net income If the income statement were prepared in a multistep form,excess of other expenses over other revenues would be

Advertising expense should be included in the general and administrative expenses section of a multistep income statement.

Patents would appear in which section of the balance sheet?

Accounting information contains numerous estimates,classifications,summarizations,judgments,and allocations.

In which category would office salaries expense be included?

Use this balance sheet and income statement to answer the following question.Use ending balances whenever average balances are required for computing ratios. Abner Systems, Inc. Income Statement For the Year Ended December 31, 2010 Net sales \ 24,000 Costs of goods sold Gross margin \ 16,000 Operating expenses Income before income taxes \8 ,000 Income taxes Net income \4 ,800 The profit margin of Abner Systems is

The lower-of-cost-or-market method of accounting for inventories follows the convention of

Use this information to answer the following question. The total dollar amount of assets to be classified as property,plant,and equipment is

Using the following data,prepare a classified balance sheet as of December 31,2010,for the Lee Company.There are 2,000 shares of $10 par value common stock issued and outstanding. Accounts Payable \ 1,600 Accounts Receivable 3,000 Building Not Currently Used 19,000 Cash 5,200 Accumulated Depreciation, 8,000 Unearned Revenue 800 Equipment Short-Term Investments 2,000 Common Stock 20,000 Land 16,000 Retained Earnings 22,600 Equipment 15,000 Copyright 5,000 Long-Term Investments 800 Bonds Payable (due in 20 13,000 years)

Which accounting convention could cause an overload of information for the financial statement user?

Use this balance sheet and income statement to answer the following question.Use ending balances whenever average balances are required for computing ratios. Abner Systems, Inc. Income Statement For the Year Ended December 31, 2010 Net sales \ 24,000 Costs of goods sold Gross margin \ 16,000 Operating expenses Income before income taxes \8 ,000 Income taxes Net income \4 ,800 The debt to equity ratio for Abner Systems is

Use this balance sheet and income statement to answer the following question.Use ending balances whenever average balances are required for computing ratios. Abner Systems, Inc. Income Statement For the Year Ended December 31, 2010 Net sales \ 24,000 Costs of goods sold Gross margin \ 16,000 Operating expenses Income before income taxes \8 ,000 Income taxes Net income \4 ,800 The return on equity for Abner Systems is

The owner's capital for a sole proprietorship is similar in nature to which of the following for corporations?

Using the following amounts taken from the balance sheet and income statement of a business,compute the measures listed below.After each answer,write "L" if it is a measure of liquidity or "P" if it is a measure of profitability.Round to two decimal places. Current assets 30,000 Average stacknolders' eqquty Average total as5ets 120,000 Net sales Curent labilities 20,000 Net income Long-term liabilities 40,000 a. Current ratio b. Return on equity c. Return on assets d. Working capital

Freight paid on goods shipped to customers is classified as a selling expense.

Match the following financial statement ratios with their definition. 1.Working capital _____ 2.Current ratio _______ 3.Profit margin ______ 4.Return on assets______ 5.Debt to equity ratio________ 6.Return on equity_______ 7.Asset turnover_________ a.A measure of profitability that shows the proportion of a company's assets that is financed by creditors and the proportion financed by stockholders b.A measure of liquidity that shows the net current assets on hand to continue business operations c.A measure of profitability that relates the amount earned by a business to the stockholders' investment in the business d.A measure of profitability that shows the percentage of each sales dollar that results in net income e.A measure of liquidity; current assets divided by current liabilities .A measure of profitability that shows how efficiently a company uses its assets to produce income g.A measure of how efficiently assets are used to produce sales

For accounting information to be useful,it must be both relevant and reliable.