Exam 4: Financial Reporting and Analysis

Which of the following accounting conventions would an accountant most likely apply when facing major uncertainties?

A practical decision to expense small capital expenditures rather than record them as property,plant,and equipment and depreciate them probably is made on the basis of the convention of

According to the FASB,the usefulness of accounting is judged by which of the following two prime qualitative characteristics of accounting information?

The following lettered items represent a classification scheme for a balance sheet,and the numbered items represent accounts.In the blank next to each account,write the letter indicating to which category it belongs. a. Current assets b. Investments c. Property, plant, and equipment h. Retained earnings d. Intangible assets i. Not on balance sheet e. Current liabilities f. Long-term liabilities g. Contributed capital h. Retained earnings i. Not on balance sheet

The convention of consistency relates most closely to

A material item is one that is likely to affect a user's decision.

Which of the following is not a subtotal?

A company should classify land held for a planned manufacturing facility as

The user can depend on the accuracy of financial information when which of the following qualitative characteristics has been followed?

Bill Pierce owns several ice cream shops all within 50 miles of his home.He has plans to expand greatly the number of shops he owns.This planned expansion will require a large bank loan.Bill has always done his own accounting work and has prepared a set of financial statements for each of the past five years of operations to present to the bank.Because some periods were more profitable than others,Bill attempted to streamline his earnings by switching depreciation and inventory valuation methods frequently.This created the appearance that his company earnings were very consistent over the years.Discuss the merits of Bill's financial statements with regard to his streamlining decisions.

Which of the following is not a measure of profitability?

Delivery expense is a selling expense on the income statement.

Income from operations is arrived after considering all except

Expensing a building in the year of purchase represents an abuse of which of the following accounting conventions?

Use this information to answer the following question. The total amount of working capital is

Use the following information to calculate the liquidity and profitability ratios listed below.Round to two decimal places. Average stockholders equity \ 14,000 Net mcome \ 2,100 Average total assets 21,000 Net sales 17,500 Current assets 15,000 Total liabilities 10,500 Current liabilities 10,000 a. Current ratio b. Working capital c. Return on equity d. Profit margin e. Debt to equity f. Return on assets g. Asset turnover

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

Which of the following should be classified as an intangible asset?

Profit margin and gross margin are the same thing.

Financial statements are important to the efficient allocation of resources in our economy.