Question 1

Consistency in accounting means that a company uses the same generally accepted accounting principles from one accounting period to the next accounting period.

Accepted Answer

A) True 
 B)False

Question 2

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

Accepted Answer

A)  .48. 
B)  .34. 
C)  .52. 
D)  .66. 
A)  .48. 
B)  .34. 
C)  .52. 
D)  .66.

Question 3

Gross margin equals the difference between net sales and

Accepted Answer

A)  net income. 
B)  cost of goods sold plus operating expenses. 
C)  operating expenses. 
D)  cost of goods sold. 
A)  net income. 
B)  cost of goods sold plus operating expenses. 
C)  operating expenses. 
D)  cost of goods sold.

Question 4

State the definition of a current asset.

Accepted Answer

A current asset is cash or ano

Question 5

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

Accepted Answer

A)  Relevance 
B)  Faithful representation 
C)  Understandability 
D)  Timeliness 
A)  Relevance 
B)  Faithful representation 
C)  Understandability 
D)  Timeliness

Question 6

Classified balance sheets list accounts in alphabetical order.

Accepted Answer

A) True 
 B)False

Question 7

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

Accepted Answer

A)  $370,000. 
B)  $40,000. 
C)  $140,000. 
D)  $60,000. 
A)  $370,000. 
B)  $40,000. 
C)  $140,000. 
D)  $60,000.

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

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

Accepted Answer

A)  Intangible assets 
B)  Current assets 
C)  Property, plant, and equipment 
D)  Stockholders' equity 
A)  Intangible assets 
B)  Current assets 
C)  Property, plant, and equipment 
D)  Stockholders' equity

Question 10

Oil wells and coal mines used in the normal course of business would appear in which section of the balance sheet?

Accepted Answer

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

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

A)  $100,000. 
B)  $180,000. 
C)  $0. 
D)  $80,000. 
A)  $100,000. 
B)  $180,000. 
C)  $0. 
D)  $80,000.

Question 13

A company with a current ratio of 1.0 is considered more liquid than one with a current ratio of 2.0.

Accepted Answer

A) True 
 B)False

Question 14

Operating expenses include cost of goods sold.

Accepted Answer

A) True 
 B)False

Question 15

Use this information to answer the following question. $\begin{array}{c}
  \text {Alcorn \& Zeto Company}\
  \text { Income Statement}\
\text {For the Year Ended December 31, 2010}\\begin{array}{llr}
  \text {  Revenues} &\
 \text {Net sales   } &\$100,000\
 \text {Dividend income  }& 8,750\
 \text { Total revenues } &&\$108,750\
\text { Costs and expenses } & \
\text { Costs of goods sold } & \$ 37,750\
\text { Selling expenses } & 10,000 \
\text { General and administrative expenses } & 6,000 \
\text { Interest expense } & 6,250 \ 
\text { Total costs and expenses } && 60,0000 \
\text { Income before income taxes } && \$48,750 \
\text { Income taxes } && 19,500 \
\text { Net income } && \$ 29,250 \
\end{array}\end{array}$
 If the income statement were prepared in a multistep form,operating expenses would be

Accepted Answer

A)  $46,000. 
B)  $16,000. 
C)  $22,250. 
D)  $40,000. 
A)  $46,000. 
B)  $16,000. 
C)  $22,250. 
D)  $40,000.

Question 16

A company with a profit margin of 6 percent earns six cents profit for every dollar of net sales.

Accepted Answer

A) True 
 B)False

Question 17

Working capital measures

Accepted Answer

A)  the excess of current assets over current liabilities-what is on hand to continue business operations. 
B)  the ability to earn a satisfactory income. 
C)  the amount of debt in the company. 
D)  the profitability of the business. 
A)  the excess of current assets over current liabilities-what is on hand to continue business operations. 
B)  the ability to earn a satisfactory income. 
C)  the amount of debt in the company. 
D)  the profitability of the business.

Question 18

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 debt to equity ratio for Layton Novelties is

Accepted Answer

A)  16-2/3 percent. 
B)  20 percent. 
C)  80 percent. 
D)  83-1/3 percent. 
A)  16-2/3 percent. 
B)  20 percent. 
C)  80 percent. 
D)  83-1/3 percent.

Question 19

The relevance of accounting information is also an indication of its reliability.

Accepted Answer

A) True 
 B)False

Question 20

To which account is the cost of inventory transferred when a product is sold?

Accepted Answer

A)  Sales 
B)  Operating expenses 
C)  Inventory sold 
D)  Cost of goods sold 
A)  Sales 
B)  Operating expenses 
C)  Inventory sold 
D)  Cost of goods sold

Exam 4: Financial Reporting and Analysis

Consistency in accounting means that a company uses the same generally accepted accounting principles from one accounting period to the next accounting period.

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

Gross margin equals the difference between net sales and

State the definition of a current asset.

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

Classified balance sheets list accounts in alphabetical order.

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

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

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

Oil wells and coal mines used in the normal course of business would appear in which section of the balance sheet?

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

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

A company with a current ratio of 1.0 is considered more liquid than one with a current ratio of 2.0.

Operating expenses include cost of goods sold.

A company with a profit margin of 6 percent earns six cents profit for every dollar of net sales.

Working capital measures

The relevance of accounting information is also an indication of its reliability.

To which account is the cost of inventory transferred when a product is sold?

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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