Exam 4: Financial Reporting and Analysis

Sean and Dylan Matthews are brothers who each own and operate sports memorabilia shops in neighboring towns.They decide to have a contest to see whose shop can be more profitable for the year.At year-end,Sean's records show sales of $105,000,cost of goods sold of $55,000,and operating expenses of $21,000.The records of Dylan's shop reveal sales of $108,000,cost of goods sold of $62,000,and operating expenses of $19,000.Dylan's shop also had other revenue of $3,000 received for allowing the shop to be used in taping a television show.Each brother claims to have won the contest.Provide explanations as to why each would think so,and then name the winner.

The convention of consistency relates most closely to

On the income statement of a merchandising company,net income is the amount by which net sales exceed operating expenses.

Which of the following should be classified as an intangible asset?

The convention of consistency pertains to the use of the same accounting principles by firms in the same industry.

Using the following data,prepare a multistep income statement for Matthew's Dry Goods for the month ended February 28,2010. Cost of Goods Sold \ 15,000 General and Administrative Expenses 4,000 Net Sales 25,000 Selling Expenses 3,500 Income Taxes 475

Advertising expense should be included in the general and administrative expenses section of a multistep income statement.

The Retained Earnings portion of a corporation represents the initial contribution of capital to the business.

Financial statements are generally prepared for a limited number of users.

To understand accounting information,users must be familiar with the accounting conventions,or rules of thumb,used in preparing financial statements.

A debt to equity ratio of 1.0 means that half of the company's assets are financed by creditors.

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

The Sarbanes-Oxley Act requires a company to guarantee that its financial statements are 100 percent accurate.

Natural resources,such as coal mines and oil wells,are classified as intangible assets.

In accounting,$1,000 is considered the dividing line between material and immaterial amounts.

Earnings per share are found on which financial statement?

Accounting information should make a difference to the outcome of a decision,according to the qualitative characteristic of

Which of the following items is not shown on a single-step income statement?

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 asset turnover for Abner Systems is

Even when no errors have been made,accounting is never 100 percent accurate because of the extensive use of estimates.