Exam 4: Financial Reporting and Analysis

Sean and Dylan Matthews are brothers who each own and operate sports memorabilia shops in neighboring towns.They decide to have a contest to see whose shop can be more profitable for the year.At year-end,Sean's records show sales of $105,000,cost of goods sold of $55,000,and operating expenses of $21,000.The records of Dylan's shop reveal sales of $108,000,cost of goods sold of $62,000,and operating expenses of $19,000.Dylan's shop also had other revenue of $3,000 received for allowing the shop to be used in taping a television show.Each brother claims to have won the contest.Provide explanations as to why each would think so,and then name the winner.

(Essay)

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Question 81

Advertising expense appears as a selling expense on the income statement.

(True/False)

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Question 82

Use this balance sheet and income statement to answer the following question.Use ending balances whenever average balances are required for computing ratios. $Use this balance sheet and income statement to answer the following question.Use ending balances whenever average balances are required for computing ratios. \begin{array}{c} \text {Abner Systems, Inc.}\\ \text {Income Statement}\\ \text {For the Year Ended December 31, 2010}\\\begin{array}{lr} \text { Net sales } & \$ 24,000 \\ \text { Costs of goods sold } & \underline{8,000} \\ \text { Gross margin } & \$ 16,000 \\ \text { Operating expenses } & \underline{8,000}\\ \text { Income before income taxes }&\$8,000 \\ \text { Income taxes }& \underline{3,200}\\ \text {Net income } & \$4,800 \end{array}\end{array} The total amount of working capital of Abner Systems is$ 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 total amount of working capital of Abner Systems is

(Multiple Choice)

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Question 83

Although a stapler that costs $15 is a long-term asset,can be expensed because the amount is immaterial and will not affect anyone's decision making.

(True/False)

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Question 84

Investors and creditors use financial statements to evaluate a company's ability to pay dividends and interest.

(True/False)

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Question 85

It is possible for an asset to be a current asset even though the expected conversion of that asset into cash is to be longer than one year.

(True/False)

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Question 86

Which of the following appears in different sections of the income statement when prepared on a single-step basis and when prepared on a multistep basis?

(Multiple Choice)

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Question 87

Both investors and creditors have an interest in a company's ability to generate favorable cash flows.

(True/False)

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Question 88

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. $Use this balance sheet and income statement for the first year of operations for Layton Novelties,Inc.to answer the following question.Use ending balances whenever average balances are required for computing ratios. \begin{array}{c} \text {Abner Systems, Inc.}\\ \text {Income Statement}\\ \text {For the Year Ended December 31, 2010}\\\begin{array}{lr} \text { Net sales } & \$ 80,000 \\ \text { Costs of goods sold } & \underline{32,000} \\ \text { Gross margin } & \$ 48,000 \\ \text { Operating expenses } & \underline{12,000}\\ \text { Income before income taxes }&\$36,000 \\ \text { Income taxes }& \underline{14,400}\\ \text {Net income } & \$21,600 \end{array}\end{array} The return on equity for Layton Novelties is$ 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 return on equity for Layton Novelties is

(Multiple Choice)

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Question 89

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. $Use this balance sheet and income statement for the first year of operations for Layton Novelties,Inc.to answer the following question.Use ending balances whenever average balances are required for computing ratios. \begin{array}{c} \text {Abner Systems, Inc.}\\ \text {Income Statement}\\ \text {For the Year Ended December 31, 2010}\\\begin{array}{lr} \text { Net sales } & \$ 80,000 \\ \text { Costs of goods sold } & \underline{32,000} \\ \text { Gross margin } & \$ 48,000 \\ \text { Operating expenses } & \underline{12,000}\\ \text { Income before income taxes }&\$36,000 \\ \text { Income taxes }& \underline{14,400}\\ \text {Net income } & \$21,600 \end{array}\end{array} The total amount of working capital of Layton Novelties is$ 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 total amount of working capital of Layton Novelties is

(Multiple Choice)

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Question 90

The single-step and multistep income statements result in different net income figures.

(True/False)

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Question 91

The condensed form of the income statement refers only to the single-step type.

(True/False)

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Question 92

For a merchandising company,the difference between net sales and operating expenses is called gross margin.

(True/False)

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Question 93

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

(Multiple Choice)

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Question 94

Which of the following accounts is not classified as a selling expense on the income statement?

(Multiple Choice)

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Question 95

Use the information from the following single-step income statement to prepare a condensed multistep income statement in proper form. Midway Industries Income Statement For the Month Ended December 31, 2010 Revenues Net sales \1 0,000 Interest income 300 Total revenues \1 0,300 Costs of goods sold \ 5,000 Selling expenses 3,000 General and administrative expenses 1,800 Interest expense 800 Total costs and expense 10,600 Net (loss) ( \3 00)

(Essay)

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Question 96

Financial statements are generally prepared for a limited number of users.

(True/False)

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Question 97

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. $Use this balance sheet and income statement for the first year of operations for Layton Novelties,Inc.to answer the following question.Use ending balances whenever average balances are required for computing ratios. \begin{array}{c} \text {Abner Systems, Inc.}\\ \text {Income Statement}\\ \text {For the Year Ended December 31, 2010}\\\begin{array}{lr} \text { Net sales } & \$ 80,000 \\ \text { Costs of goods sold } & \underline{32,000} \\ \text { Gross margin } & \$ 48,000 \\ \text { Operating expenses } & \underline{12,000}\\ \text { Income before income taxes }&\$36,000 \\ \text { Income taxes }& \underline{14,400}\\ \text {Net income } & \$21,600 \end{array}\end{array} The debt to equity ratio for Layton Novelties is$ 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 debt to equity ratio for Layton Novelties is

(Multiple Choice)

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Question 98

Both return on assets and working capital are profitability measures.

(True/False)

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Question 99

The profit margin equals

(Multiple Choice)

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Question 100

Showing 81 - 100 of 166

Exam 4: Financial Reporting and Analysis

Advertising expense appears as a selling expense on the income statement.

Although a stapler that costs $15 is a long-term asset,can be expensed because the amount is immaterial and will not affect anyone's decision making.

Investors and creditors use financial statements to evaluate a company's ability to pay dividends and interest.

It is possible for an asset to be a current asset even though the expected conversion of that asset into cash is to be longer than one year.

Which of the following appears in different sections of the income statement when prepared on a single-step basis and when prepared on a multistep basis?

Both investors and creditors have an interest in a company's ability to generate favorable cash flows.

The single-step and multistep income statements result in different net income figures.

The condensed form of the income statement refers only to the single-step type.

For a merchandising company,the difference between net sales and operating expenses is called gross margin.

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

Which of the following accounts is not classified as a selling expense on the income statement?

Financial statements are generally prepared for a limited number of users.

Both return on assets and working capital are profitability measures.

The profit margin equals

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

Contributed Capital

Investments

The Corporate Income Statement and the Statement of Stockholders Equity

The Statement of Cash Flows

The Changing Business Environment - a Managers Perspective

Cost Concepts and Cost Allocation

Costing Systems- Job Order Costing

Costing Systems- Process Costing

Value-Based Systems- Abm and Lean

Cost Behavior Analysis

The Budgeting Process

Performance Management and Evaluation

Standard Costing and Variance Analysis

Short Run Decision Analysis

Capital Investment Analysis

Pricing Decisions,incltarget Costing and Transfer Pricing

Quality Management and Measurement

Financial Analysis of Performance

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