Question 1

Contributed capital is shown on a corporate balance sheet as two amounts: the par value of the issued stock and additional paid-in capital.

Accepted Answer

A) True 
 B)False

Question 2

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. $\begin{array}{c}
  \text {Layton Novelties. Inc.}\
  \text {Income Statement}\
  \text {For the Year Ended December 31, 2010}\
\begin{array}{llr}
  \text { Net sales } &\$80,000\
 \text { Costs of goods sold } &32,000\
 \text { Gross margin } &\$48,000\
 \text {  Operating expenses} &12,000\
 \text {Income before income taxes  } &\$36,000\
 \text { Income taxes } &14,400\
 \text {  Net income} &\$21,600
\end{array}\end{array}$

The current ratio for Layton Novelties is

Accepted Answer

A)  1.75. 
B)  .57. 
C)  1.4. 
D)  2.0. 
A)  1.75. 
B)  .57. 
C)  1.4. 
D)  2.0.

Question 3

The Securities and Exchange Commission instituted rules requiring the chief executive officers and chief financial officers of all publicly traded companies to certify that,to their knowledge,the quarterly and annual statements that their companies file with the SEC are

Accepted Answer

A)  100 percent accurate and contain no misstatements, errors, or mistakes. 
B)  accurate and complete. 
C)  subject to interpretation due to the many accounting rules and regulations. 
D)  not to be used except by individuals working for the company. 
A)  100 percent accurate and contain no misstatements, errors, or mistakes. 
B)  accurate and complete. 
C)  subject to interpretation due to the many accounting rules and regulations. 
D)  not to be used except by individuals working for the company.

Question 4

The convention of consistency refers to consistent use of accounting principles

Accepted Answer

A)  among firms. 
B)  throughout the accounting period. 
C)  within industries. 
D)  among accounting periods. 
A)  among firms. 
B)  throughout the accounting period. 
C)  within industries. 
D)  among accounting periods.

Question 5

Why is it important for a company to maintain the same accounting methods and practices from period to period?

Accepted Answer

An important aspect of financial analysi

Question 6

The accounting convention that is most responsible for the increase in the number of notes to financial statements is

Accepted Answer

A)  materiality. 
B)  full disclosure. 
C)  consistency. 
D)  conservatism. 
A)  materiality. 
B)  full disclosure. 
C)  consistency. 
D)  conservatism.

Question 7

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. $\begin{array}{c}
  \text {Layton Novelties. Inc.}\
  \text {Income Statement}\
  \text {For the Year Ended December 31, 2010}\
\begin{array}{llr}
  \text { Net sales } &\$80,000\
 \text { Costs of goods sold } &32,000\
 \text { Gross margin } &\$48,000\
 \text {  Operating expenses} &12,000\
 \text {Income before income taxes  } &\$36,000\
 \text { Income taxes } &14,400\
 \text {  Net income} &\$21,600
\end{array}\end{array}$

The return on equity for Layton Novelties is

Accepted Answer

A)  48 percent. 
B)  21.6 percent. 
C)  42 percent. 
D)  30 percent. 
A)  48 percent. 
B)  21.6 percent. 
C)  42 percent. 
D)  30 percent.

Question 8

Income from operations is arrived after considering all except

Accepted Answer

A)  administrative salaries. 
B)  interest income. 
C)  the cost of sales. 
D)  sales returns and allowances. 
A)  administrative salaries. 
B)  interest income. 
C)  the cost of sales. 
D)  sales returns and allowances.

Question 9

Earnings per share,often called net income per share,is the net income earned on each share of common stock.

Accepted Answer

A) True 
 B)False

Question 10

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.

Accepted Answer

Bill's attempt to streamline his earning

Question 11

Profit margin and gross margin are the same thing.

Accepted Answer

A) True 
 B)False

Question 12

Both wholesalers and retailers are types of merchandising companies.

Accepted Answer

A) True 
 B)False

Question 13

The profit margin equals

Accepted Answer

A)  net sales divided by net income. 
B)  gross margin divided by net income. 
C)  net income divided by gross margin. 
D)  net income divided by net sales. 
A)  net sales divided by net income. 
B)  gross margin divided by net income. 
C)  net income divided by gross margin. 
D)  net income divided by net sales.

Question 14

Patents would appear in which section of the balance sheet?

Accepted Answer

A)  Investments 
B)  Property, plant, and equipment 
C)  Current assets 
D)  Intangible assets 
A)  Investments 
B)  Property, plant, and equipment 
C)  Current assets 
D)  Intangible assets

Question 15

Which of the following is not considered a selling expense?

Accepted Answer

A)  Cost of goods sold 
B)  Sales salaries expense 
C)  Freight-out expense 
D)  Insurance on the sales office 
A)  Cost of goods sold 
B)  Sales salaries expense 
C)  Freight-out expense 
D)  Insurance on the sales office

Question 16

Using the following data,prepare a classified balance sheet for Blanchard Corporation as of December 31,2010.
$\begin{array}{lr}
\text { Cash } & \$ 200 \
\text { Investments in Short-Term } & 400 \
\text { Government Securities } & \
\text { Accounts Receivable } & 800 \
\text { Inventory } & 3,000 \
\text { Prepaid Rent } & 100 \
\text { Investment in Land Held } & 2,700 \
\text { for future use } & \
\text { Land } & 2,000 \
\text { Building } & 8,000
\end{array}
\begin{array}{lr}
\text { Accumulated Depreciation- } & \$ 1,000 \
\text { Building } & \
\text { Franchise } & 1,800 \
& \
\text { Accounts Payable } & 1,600 \
\text { Revenues Received in Advance } & 400 \
\text { Notes Payable (in two years) } & 4,000 \
\text { Common Stock- \$10 par value, } & 10,000 \
& \
\text { Retained Earnings }&2,000
\end{array}$

Accepted Answer

The answer of Using the following data,prepare a classified balance...

Question 17

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.

Accepted Answer

A) True 
 B)False

Question 18

Asset turnover equals

Accepted Answer

A)  net sales divided by average total assets. 
B)  average total assets divided by net income. 
C)  average total assets divided by total liabilities. 
D)  net income divided by average total assets. 
A)  net sales divided by average total assets. 
B)  average total assets divided by net income. 
C)  average total assets divided by total liabilities. 
D)  net income divided by average total assets.

Question 19

An advantage of accounting information is that it provides exact and completely reliable measures.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following accounts is most likely to appear on the balance sheet as a current liability?

Accepted Answer

A)  Accumulated Depreciation 
B)  Bonds Payable 
C)  Mortgage Payable 
D)  Wages Payable 
A)  Accumulated Depreciation 
B)  Bonds Payable 
C)  Mortgage Payable 
D)  Wages Payable

Exam 4: Financial Reporting and Analysis

Contributed capital is shown on a corporate balance sheet as two amounts: the par value of the issued stock and additional paid-in capital.

The Securities and Exchange Commission instituted rules requiring the chief executive officers and chief financial officers of all publicly traded companies to certify that,to their knowledge,the quarterly and annual statements that their companies file with the SEC are

The convention of consistency refers to consistent use of accounting principles

Why is it important for a company to maintain the same accounting methods and practices from period to period?

The accounting convention that is most responsible for the increase in the number of notes to financial statements is

Income from operations is arrived after considering all except

Earnings per share,often called net income per share,is the net income earned on each share of common stock.

Profit margin and gross margin are the same thing.

Both wholesalers and retailers are types of merchandising companies.

The profit margin equals

Patents would appear in which section of the balance sheet?

Which of the following is not considered a selling expense?

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.

Asset turnover equals

An advantage of accounting information is that it provides exact and completely reliable measures.

Which of the following accounts is most likely to appear on the balance sheet as a current liability?

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

Filters