Exam 4: Financial Reporting and Analysis

Each of the following statements violates a concept or convention of accounting.Write the letter in the blank next to each statement corresponding to the concept or convention violated. a. Consistency b. Materiality c. Conservatism _____ 1. A note to the financial statements indicating a change in inventory methods is omitted. _____ 2. When management is unsure of which estimates to use in a given situation, the estimate resulting in the largest net income is always used. _____ 3. In 2009, a company uses straight-line depreciation and in 2010 the company uses declining-balance depreciation. _____ 4. A small company expenses all expenditures under $10,000. _____ 5. A small company purchases a $50,000 computer to save $3,000 per year in bookkeeping wages. d. Full disclosure e. Cost-benefit

Which of the following is expressed in terms of a percentage?

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 revenues \1 08,750 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 \ 48,750 Income taxes Net income If the income statement were prepared in a multistep form,operating expenses would be

State the definition of a current asset.

Interest paid on bank loans is classified as cost of goods sold.

Which type of account is gross margin?

Use this information to answer the following question. The debt to equity ratio is

Which of the following items is not shown on a single-step income statement?

Classified balance sheets list accounts in alphabetical order.

The following lettered items represent a classification scheme for a multistep income statement.In the blank next to each account,write the letter indicating to which category it belongs. a. Revenues b. Cost of goods sold c. Selling expenses d. General and administrative expenses e. Other revenues and expenses f. Not on income statement _____ 1. Interest Income _____ 2. Accumulated Depreciation _____ 3. Sales Returns and Allowances _____ 4. Inventories _____ 5. Company President's Salary _____ 6. Utilities Expense for Store _____ 7. Interest Expense _____ 8. Freight-Out Expense _____ 9. Office Salaries Expense for Headquarters _____ 10. Interest Receivable

Use this information to answer the following question. The debt to equity ratio is

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 revenues \1 08,750 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 \ 48,750 Income taxes Net income If the income statement were prepared in a multistep form,income before income taxes would be

Current assets divided by current liabilities is known as the

Use this balance sheet and income statement for the first year of operations for Layton Novelties,Inc.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 \ 80,000 Costs of goods sold Gross margin \ 48,000 Operating expenses Income before income taxes \3 6,000 Income taxes Net income \2 1,600 The profit margin of Layton Novelties is

The other revenues and expenses section of a multistep income statement could include all the following except

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

Using the following data,prepare a multistep income statement for Matthew's Dry Goods for the month ended February 28,2010. Cost of Goods Sold \ 15,000 General and Administrative Expenses 4,000 Net Sales 25,000 Selling Expenses 3,500 Income Taxes 475

All the following are standards of accounting information except

The normal operating cycle helps define which of the following balance sheet sections?

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 current ratio for Abner Systems is (after rounding to two decimal places)