Exam 4: Financial Reporting and Analysis

Profitability means having enough cash on hand to pay bills when they become due.

Which type of account is gross margin?

Which of the following is a measure of liquidity?

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

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 \2 4,000 Costs of goods sold 8,000 Gross margin \1 6,000 Operating expenses 8,000 Income before income taxes \8 ,000 Income taxes 3,200 Net income \4 ,800 The debt to equity ratio for Abner Systems is

Use the information from the following multistep income statement to prepare a single-step income statement in proper form. Olga \& Daughters, Inc. Income Statement For the Month Ended July 31, 2010 Revenues Net sales \1 5,000 Dividend income 250 Interest income 350 Total revenues \1 5,600 Costs and expenses Cost of goods sold \9 ,000 Selling expenses 1,200 General and administrative expenses 800 Interest expense 150 Total costs and expenses 11,150 Income before income taxes \4 ,450 Income taxes 1,780 Net income \2 ,670

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

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

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

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. Layton Novelties. Inc. Income Statement For the Year Ended December 31, 2010 Net sales \8 0,000 Costs of goods sold 32,000 Gross margin \4 8,000 Operating expenses 12,000 Income before income taxes \3 6,000 Income taxes 14,400 Net income \2 1,600 The total amount of working capital of Layton Novelties is

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. Layton Novelties. Inc. Income Statement For the Year Ended December 31, 2010 Net sales \8 0,000 Costs of goods sold 32,000 Gross margin \4 8,000 Operating expenses 12,000 Income before income taxes \3 6,000 Income taxes 14,400 Net income \2 1,600 The return on assets for Layton Novelties is

Which type of account is cost of goods sold?

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 \2 4,000 Costs of goods sold 8,000 Gross margin \1 6,000 Operating expenses 8,000 Income before income taxes \8 ,000 Income taxes 3,200 Net income \4 ,800 The current ratio for Abner Systems is (after rounding to two decimal places)

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

An advantage of the single-step income statement over the multistep form is

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

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

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 \ 6,000 Average stockholders' equity \ 15,000 Average total assets 30,000 Net sales 19,500 Current liabilities 4,500 Net income 2,400 Long-term liabilities 10,500 a. Return on assets b. Working capital c. Return on equity d. Current ratio

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