Exam 4: Financial Reporting and Analysis

The qualitative characteristic of faithful representation contains all the following features except

Interest expense on a mortgage would be classified on a multistep income statement under the heading

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 profit margin of Layton Novelties is

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. Depreciation Expense (for delivery truck) _____ 2. Dividend Income _____ 3. Cash _____ 4. Interest Income _____ 5. Prepaid Rent _____ 6. Rent Expense (for main office) _____ 7. Advertising Expense _____ 8. Personnel Expense _____ 9. Unearned Revenue _____ 10. Sales Discounts

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 \ 30,000 Average stockholders' equity \ 60,000 Average total assets 120,000 Net sales 64,000 Current liabilities 20,000 Net income 3,000 Long-term liabilities 40,000 a. Current ratio b. Return on equity c. Return on assets d. Working capital

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 d. Intangible assets e. Current liabilities f. Long-term liabilities g. Stockholders' equity h. Not on balance sheet

General-purpose external financial statements that are divided into subcategories are called classified financial statements.

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

Interest paid on debt would be entered on the multistep income statement in the category called

The two parts of a corporation's stockholders' equity section are contributed capital and retained earnings.

Which accounting convention describes a note to the financial statements explaining the company's method of revenue recognition?

Positive operating income will result if gross margin exceeds

Which of the following is not considered an operating expense?

Current assets divided by current liabilities is known as the

Using the following data,prepare a classified balance sheet as of December 31,2010,for the Lee Company.There are 2,000 shares of $10 par value common stock issued and outstanding. Accounts Payable \ 1,600 Accounts Receivable 3,000 Building Not Currently Used 19,000 Cash 5,200 Accumulated Depreciation, 8,000 Unearned Revenue 800 Equipment Short-Term Investments 2,000 Common Stock 20,000 Land 16,000 Retained Earnings 22,600 Equipment 15,000 Copyright 5,000 Long-Term Investments 800 Bonds Payable (due in 20 13,000 years)

Sales returns and allowances are deducted from gross sales on the balance sheet.

A merchandiser will earn an operating income of exactly $0 when

Which of the following is not a subtotal?

Which of the following should not be classified as a current asset?