Exam 4: Financial Reporting and Analysis

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

An investment is classified as short term or long term based on

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

Distinguish between cost of goods sold and operating expenses,describing the nature of these two items and their placement on the income statement.

Asset turnover measures how efficiently assets are used to produce sales.

Full disclosure of all important facts aids in overcoming the limitations of accounting information.

Use this information to answer the following question. The total dollar amount of assets to be classified as property,plant,and equipment is

The investments category on the balance sheet normally includes investments that are intended to be held for a short period of time.

The following lettered items represent a classification scheme for a multistep income statement.In the blank next to each account,write the letter indicating to which category it belongs. a. Revenues b. Cost of goods sold c. Selling expenses d. General and administrative expenses e. Other revenues and expenses f. Not on income statement _____ 1. Interest Income _____ 2. Accumulated Depreciation _____ 3. Sales Returns and Allowances _____ 4. Inventories _____ 5. Company President's Salary _____ 6. Utilities Expense for Store _____ 7. Interest Expense _____ 8. Freight-Out Expense _____ 9. Office Salaries Expense for Headquarters _____ 10. Interest Receivable

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

Use this balance sheet and income statement to answer the following question.Use ending balances whenever average balances are required for computing ratios. The profit margin of Abner Systems is

Only the chief financial officer and the company's CPAs are responsible for the accuracy of financial statements.The chief executive officer is not expected to understand financial information.

Use the following information to calculate the liquidity and profitability ratios listed below.Round to two decimal places. Average stockholders' equity \ 9,250 Net income \ 1,500 Average total assets 18,000 Net sales 15,625 Current assets 11,250 Total liabilities 8,750 Current liabilities 7,500 a. Current ratio b. Working capital c. Return on equity d. Profit margin e. Debt to equity f. Return on assets g. Asset turnover

Freight paid on goods shipped to customers is classified as a selling expense.

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 return on equity for Abner Systems is

The asset turnover ratio measures

Which of the following is not a measure of profitability?

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

Liabilities have which of the following two major categories?

The term net worth is a more accurate term than owner's equity because assets are recorded at original cost rather than at current value.