Deck 15: Using Management Information Systems and Accounting Information

Question 1

A private accountant is an accountant whose services may be hired on a fee basis by individuals or business firms.

Answer 1

False

Question 2

Without the audit function and GAAP, there would be very little oversight or supervision of corporate accounting practices.

Answer 2

True

Question 3

Current assets are assets that can be converted quickly into cash or that will be used in two years or less.

Answer 3

False

Question 4

On a balance sheet, assets are listed in order, from the most liquid to the least liquid.

Question 5

A person who wishes to practice accounting as a CPA must pass an exam prepared by the American Institute of Certified Public Accountants (AICPA).

Question 6

Typically, the majority of the data gathered for an MIS come from external sources.

Question 7

Net income is the profit earned (or the loss suffered) by a firm during an accounting period after the cost of goods sold and all expenses have been deducted from revenues.

Question 8

Multinational corporations do not have the responsibility nor the incentive to follow international accounting standards as there still is no particular set of global standards that are generally accepted worldwide.

Question 9

According to the Sarbanes-Oxley Act, the FTC is required to establish a full-time, five-member federal oversight board that will police the accounting industry.

Question 10

The statement of cash flows illustrates the effects on cash of the operating, investing, and financing activities of a company for an accounting period.

Question 11

Audited financial statements guarantee that a firm has not "cooked" the books.

Question 12

The total dollar amount of all goods and services sold during the accounting period is called net sales.

Question 13

Resources that a firm owns are classified as assets.

Question 14

Because information rules must be checked out before a decision can be made, they lengthen the time required to analyze choices.

Question 15

Management and employees are the groups that would be most likely to evaluate the risk associated with investing in a company's stocks, bonds, or securities.

Question 16

According to the accounting equation, cash, inventory, equipment, and real estate are classified as owners' equity.

Question 17

Data are always in numerical form.

Question 18

Owners' equity is the dollar value that remains after the total liabilities of a business are subtracted from its total assets.

Question 19

The return on sales ratio indicates how effectively a firm is transforming its sales into profits.

Question 20

Individuals or organizations outside of a company will never have the need or desire to view information on another company's finances.

Question 21

A public accountant works on a fee basis for clients.

Question 22

A firm's MIS data bank should include all past and current data that may be useful in managing the firm.

Question 23

Knowledge management is a firm's procedures for using computer software to solve business problems.

Question 24

The statement of financial position is also known as the balance sheet.

Question 25

Dividing current assets by current liabilities gives the current ratio.

Question 26

The cost of goods sold equals beginning inventory plus net purchases minus ending inventory.

Question 27

There is added protection for whistle-blowers who report violations of the Sarbanes-Oxley Act.

Question 28

The statement of financial position presents the business firm's assets, liabilities, and owners' equity accounts at the end of an accounting period, such as on December 31, whereas the income statement summarizes operations during a specified accounting period.

Question 29

Equipment and patents are known as intangible assets.

Question 30

When smart investors take a practical approach to evaluating a company's accounting information, they need only look at the snapshot data that a balance sheet offers as it will be the primary tool to guide potentially profitable investments.

Question 31

Long-term liabilities need not be repaid for at least one year.

Question 32

In 1987, the Securities and Exchange Commission (SEC) and the Financial Accounting Standards Board (FASB) required all publicly traded companies to include a statement of cash flows along with the balance sheet and income statement in their annual report.

Question 33

An accountant can calculate a return on sales ratio to determine how well the firm is using the money invested by the owners.

Question 34

The standard form of the accounting equation is assets equal liabilities minus owners' equity.

Question 35

The ending cash balance reported on the statement of cash flows is the same as the net sales amount reported on the firm's income statement.

Question 36

For a corporation, the owners' equity amount is the total value of stock minus the retained earnings that have accumulated to date.

Question 37

The debts of a business are called its liabilities.

Question 38

Managers often compare financial and accounting data with previous accounting periods and with competing firms.

Question 39

Managerial accounting generates financial statements and reports for interested people outside an organization.

Question 40

Debts that will be repaid in one year or less are known as current liabilities.

Question 41

Cash, marketable securities, notes receivable, and merchandise inventory are examples of

A)current assets.
B)expenses.
C)acid-test assets.
D)fixed assets.
E)overhead costs.

Question 42

Jessica has worked for one week but her employer only pays its employees every two weeks. The amount of money her company owes her is classified as

A)accounts notable.
B)accounts receivable.
C)notes payable.
D)prepaid wages.
E)salaries payable.

Question 43

Merchandise that has been sold and is returned to the firm by the customer is called

A)a sales discount.
B)an expense.
C)a sales allowance.
D)cost of goods sold.
E)a sales return.

Question 44

The cash at the end of the year reported on the statement of cash flows is the same as the

A)cash amount reported on the firm's balance sheet.
B)cash amount reported on the firm's income statement.
C)net income reported on the firm's income statement.
D)owners' equity amount reported on the firm's balance sheet.
E)total amount of assets reported on the firm's balance sheet.

Question 45

A low inventory turnover can be improved by ordering merchandise in smaller quantities at more frequent intervals.

Question 46

The ratio obtained by dividing net income after taxes by net sales is the

A)return on sales ratio.
B)acid-test ratio.
C)return on equity ratio.
D)earnings per share.
E)working capital.

Question 47

Which of the following statements is false?

A)It is possible to compare one firm's accounting data with another firm's accounting data as long as both firms used generally accepted accounting procedures.
B)Many managers compare the financial results from one accounting period with the results from previous accounting periods.
C)Most corporations include in their annual reports comparisons of important elements of their financial statements for recent years.
D)The format and information contained in one firm's financial statements are most likely to differ drastically from the format and information contained in another firm's financial statements.
E)Many firms compare their financial results with industry averages.

Question 48

Commonly used in accounting analysis, a ____ shows a relationship between two elements of a firm's financial statements.

A)statistic
B)comparative number
C)current ratio
D)financial ratio
E)formula

Question 49

Kim's Copy Shop is in the process of organizing its assets in the appropriate order. They ask you for help in arranging the following assets: equipment, accounts receivable, cash, merchandise inventory, and notes receivable. You list ____ first and ____ last.

A)merchandise inventory; notes receivable
B)accounts receivable; equipment
C)notes receivable; accounts receivable
D)equipment; accounts receivable
E)cash; equipment

Question 50

Television sets that Best Buy owns for selling to its customers are classified as

A)equipment.
B)machinery.
C)receivables.
D)merchandise inventory.
E)prepaid merchandise.

Question 51

Ebony Jones is hired by Ruby Tuesday to help with budgeting, determining the costs of the firm's meal services, and recording transactions and creating financial statements. Ebony is a

A)private accountant.
B)budget manager.
C)public accountant.
D)clerk.
E)public auditor.

Question 52

​All of the following, except _____, can provide answers to a variety of questions about a firm's ability to do business and stay in business, its profitability, and its value as an investment.

A)​bank statements
B)​balance sheet
C)​income statement
D)​statement of cash flows

Question 53

In order for The Gift Market, a local specialty store, to purchase Christmas merchandise for selling in its store, it had to borrow money from a local bank. This debt owed to the bank is a(n)

A)liability.
B)expense.
C)owners' equity.
D)asset.
E)credit.

Question 54

Which type of manager would be most concerned with information about the products offered by competitors?

A)Financial
B)Marketing
C)Operations
D)Administrative
E)Human resources

Question 55

While chief executives and financial officers are currently not subject to criminal penalties, they are required to certify periodic financial reports.

Question 56

KYZ Radio pays salaries, rent, insurance, and utilities each month. These are all

A)current assets.
B)operating expenses.
C)cost of merchandise sold.
D)fixed liabilities.
E)None of these answers is correct.

Question 57

Winshare Art Company has issued only common stock. Currently it has 10,000 shares outstanding. The value of the stock is shown as $20 per share. In addition, $100,000 of Winshare's earnings have been reinvested in the business since it was founded. What is Winshare's total owners' equity?

A)$300,000
B)$200,000
C)$100,000
D)$2,000,000
E)$100,020

Question 58

Salaries payable, accounts payable, and taxes payable are examples of

A)expenses.
B)current liabilities.
C)current assets.
D)long-term liabilities.
E)owners' equity.

Question 59

The financial statement that provides information about a firm's operating, investing, and financing activities during an accounting period is the

A)balance sheet.
B)income statement.
C)cash flows statement.
D)retained earnings statement.
E)financial analysis statement.

Question 60

All of the following are classified as fixed assets except

A)factory equipment.
B)a company car.
C)computers held for resale.
D)property.
E)buildings.

Question 61

During the year Comer, Inc., had $200,000 in goods available for sale. At the end of the accounting period it had an ending inventory of $40,000. This reveals that it had sold all but ____ worth of the available goods.

A)$200,000
B)$160,000
C)$40,000
D)$20,000
E)$10,000

Question 62

What are the three activities according to which a statement of cash flows is organized?

A)Operating, selling, and investing
B)Financing, buying, selling
C)Investing, financing, and expensing
D)Processing, operating, receiving
E)Operating, investing, financing

Question 63

Marilyn provides piano lessons to students in her home four days a week. The money she earns from providing these services would be called ____ on an income statement.

A)expenses
B)cash
C)revenues
D)retained earnings
E)equity

Question 64

The balance sheet is composed of

A)owners' equity, assets, and liabilities.
B)expenses, revenue, and net income.
C)revenue, expenses, and owners' equity.
D)assets, expenses, and net income.
E)assets, liabilities, and revenues.

Question 65

The statement of cash flows for a business offers information on all of the following except

A)available cash to pay a company's bills.
B)expenses during a particular accounting period.
C)available cash to pay dividends to stockholders.
D)decisions about the evaluation of a company's future investments.
E)a company's financing needs.

Question 66

Which of the following statements about the Sarbanes-Oxley Act is incorrect?

A)The act was passed in 1996.
B)Because the act is complex, compliance is more expensive and time consuming for corporate management.
C)Because of the act, the SEC was required to establish a federal oversight board.
D)Because of the act, a corporation's chief executive and financial officers must certify financial reports.
E)The act strengthened the penalty for destroying financial documents related to an audit.

Question 67

If the liabilities of a business are $85,000 and the owners' equity is $110,000, which of the following is a correct statement?

A)Assets equal $25,000.
B)Assets equal $195,000.
C)Assets equal $110,000.
D)Assets equal $85,000.
E)It is impossible to determine the value of the assets.

Question 68

All of the following are current assets except

A)office equipment.
B)cash.
C)prepaid insurance.
D)accounts receivable.
E)marketable securities.

Question 69

Because of the Sarbanes-Oxley Act, accountants must maintain financial documents and audit work for

A)six months.
B)one year.
C)three years.
D)five years.
E)ten years.

Question 70

The current ratio is calculated by dividing

A)current assets by owners' equity.
B)current assets by current liabilities.
C)income by operating expenses.
D)net sales after taxes by net sales.
E)accounts receivable by inventory turnover.

Question 71

The value of goods on hand for sale to customers is called

A)sales.
B)merchandise inventory.
C)cost of goods sold.
D)prepaid expenses.
E)operating expenses.

Question 72

Ruin Company's net sales for the period were $175,000. Its cost of goods sold was $85,000. What is this firm's gross profit on sales?

A)$175,000
B)$135,000
C)$125,000
D)$100,000
E)$90,000

Question 73

Revenues − cost of goods sold − expenses = net income characterizes which financial statement?

A)Balance sheet
B)Statement of retained earnings
C)Statement of cash flows
D)Statement of financial position
E)Income statement

Question 74

The most liquid asset is

A)sales.
B)accounts receivable.
C)marketable securities.
D)cash.
E)capital.

Question 75

If total liabilities were subtracted from total assets, the residual value would be

A)revenues.
B)owners' equity.
C)net income.
D)working capital.
E)expenses.

Question 76

If the assets of Martin's Pet Store are $107,000 and the owners' equity is $75,000, which of the following is a correct statement?

A)The owners' investment equals $182,000.
B)The current assets are worth $32,000.
C)The new income for the period is $32,000.
D)The long-term liabilities are $75,000.
E)The liabilities are $32,000.

Question 77

Chase invests $5,000 of his own money in his new auto detailing business. He then obtains a loan and builds a small workshop in his backyard for $10,000. At this point assets are ____, liabilities are ____, and owners' equity is ____.

A)$10,000; $5,000; $15,000
B)$15,000; $10,000; $5,000
C)$5,000; $0; $5,000
D)$15,000; $10,000; $0
E)$10,000; $5,000; $5,000

Question 78

All of the following are acceptable ways of stating the accounting equation except

A)owners' equity = assets − liabilities.
B)assets = liabilities + owners' equity.
C)owners' equity − liabilities = assets.
D)assets − liabilities = owners' equity.
E)assets = shareholders' equity + liabilities.

Question 79

According to the accountant for Michael's Floral Supply, the firm's assets are $124,000 and its liabilities are $31,000. Which of the following statements is correct?

A)The owners' equity is $155,000.
B)The owners' equity is $93,000.
C)The firm's current assets are $62,000.
D)The firm's current liabilities are $24,000.
E)The firm's accounting equation won't balance.

Question 80

Ridgley, Cooper, and Ross (RCR)
Katie is the CEO of Ridgley, Cooper, and Ross (RCR), a regional accounting firm. RCR offers services in most areas of accounting, including auditing and consulting services. The firm must follow the GAAP rules, just like any other accounting firm. If there are information gaps that are not addressed and resolved by the firm, RCR could be considered a violator of the Sarbanes-Oxley Act. Katie understands what must be done and wants every employee of the firm to understand that they have to follow all the rules and regulations. Like any other industry, accounting is a competitive industry and employees of accounting firms must be productive, progressive, and well trained.
Refer to Ridgley, Cooper, and Ross. Which of the following represents a key component of the Sarbanes-Oxley Act relating to consulting services?

A)A public corporation must change its lead consulting firm every five years.
B)Accounting firms are prohibited from providing many types of consulting services to the companies they audit.
C)Accounting firms who report violations of the Sarbanes-Oxley Act must be banned from consulting for five years.
D)The SEC is required to establish a full-time five-member federal oversight board that will police the consulting industry.
E)Consultants must maintain financial documents and audit work papers for fifteen years.