Question 1

The balance sheet reports revenues and selling costs for a period of time.

Accepted Answer

A) True 
 B)False  False

Question 2

Blake took a marketing class at the local community college before starting his landscape business. He decided that his time would be better utilized in this class because if he could learn to sell his services well, the revenues and profits would follow. Your assessment of his plan might include which of the following?

Accepted Answer

A)   Blake understands that marketing is the lifeblood of the company, and he is right on track with his approach.
B)   Blake has elected to operate like a virtual company and leave various parts of the business including accounting, environmental trends scanning, and management to outsourcers.
C)   Blake knows that increasing revenues will always keep the business profitable and in a positive cash position.
D)   Blake needs to realize that the ability to understand and interpret financial statements provided by his accountant might enhance his profits. D

Question 3

As U.S. firms focus on cost cutting in order to stay competitive with producers in low-wage countries, they will rely on ________ to create strategies to help reduce costs.

Accepted Answer

A)   managerial accountants
B)   financial accountants
C)   government accountants
D)   auditors A

Question 4

Because each business is unique, the accounting profession recognizes that the accounting principles followed by one company may need to be completely different from the accounting principles followed by another firm.

Accepted Answer

A) True 
 B)False

Question 5

Managers who are concerned about keeping costs under control should be very interested in the information and advice provided by their company's managerial accountants.

Accepted Answer

A) True 
 B)False

Question 6

The balance sheet is composed of the following types of accounts:

Accepted Answer

A)   revenue, expenses, and earnings.
B)   operating expenses, cash flow, and capital expenditures.
C)   capital, cost, and valuation.
D)   assets, liabilities, and owners' equity.

Question 7

Nathan works as an accountant for a mid-sized retail store. He has just completed a trial balance that resulted in no unexpected problems. Nathan's next task is likely to be

Accepted Answer

A)   conducting the full audit.
B)   preparing a tax return for the company.
C)   preparing the store's balance sheet and other major financial statements.
D)   presenting the trial balance to the company owners.

Question 8

An extremely high inventory turnover ratio may represent lost sales due to holding inadequate stocks of merchandise.

Accepted Answer

A) True 
 B)False

Question 9

The balance sheet for Greeley Contracting shows assets totaling $207,000 and liabilities totaling $95,000. Which of the following statements is correct?

Accepted Answer

A)   Owners' equity equals $182,000.
B)   Current assets are worth $92,000.
C)   Net income for the period is $112,000.
D)   Owners' equity equals $112,000.

Question 10

If a firm has a debt to owners' equity ratio of .75 (or 75%) we can conclude that

Accepted Answer

A)   it has relied more on debt than equity to finance its operations.
B)   the firm is likely to have trouble paying its short-term debts when they come due.
C)   its total liabilities are less than its owners' equity.
D)   the firm has expenses that are exactly 75% of its gross profit.

Question 11

Net income before taxes is found by deducting total operating expenses from gross profit before factoring tax expense.

Accepted Answer

A) True 
 B)False

Question 12

Cash flow difficulties are unlikely for a firm that is profitable.

Accepted Answer

A) True 
 B)False

Question 13

Coolest Closet, a chain of retail clothing stores, wants to assure investors and other outsiders that its financial statements are accurate. One way to do so would be to hire a public accounting firm to

Accepted Answer

A)   produce an internal audit.
B)   take overall stock of its accounting functions.
C)   provide a "generally accepted practices" endorsement.
D)   perform an independent audit.

Question 14

_______ refers to the value that stockholders or owners have in a company.

Accepted Answer

A)   Assets
B)   Liabilities
C)   Owners' equity
D)   Contra receivables

Question 15

Brody has just finished working on the balance sheet, income statement, and statement of cash flows for his company. The next step in the accounting cycle involves

Accepted Answer

A)   posting the results of these statements to the appropriate journal.
B)   analyzing the firm's financial statements to evaluate the financial condition of the firm.
C)   conducting forensic tests of the data to ensure its accuracy.
D)   placing the data used to construct the statements into an archive known as a data warehouse.

Question 16

The purpose of a trial balance is to prepare a practice balance sheet.

Accepted Answer

A) True 
 B)False

Question 17

A firm that takes on too much debt could experience problems repaying its lenders or meeting promises made to stockholders.

Accepted Answer

A) True 
 B)False

Question 18

Inputs to the accounting system include sales documents.

Accepted Answer

A) True 
 B)False

Question 19

Discuss the role of an independent auditor. Provide information about the types of accounting activities they perform and the recent laws that have emerged to help guide them as they do their job.

Accepted Answer

The answer of Discuss the role of an independent auditor....

Question 20

The reports and financial statements prepared by accountants

Accepted Answer

A)   are more useful for profit-seeking businesses than they are for not-for-profit organizations.
B)   are mainly used to help the firm complete its tax forms.
C)   provide information that can be used by decision makers both inside and outside the organization.
D)   are not as useful now that firms have moved into a more global environment.

Exam 17: Understanding Accounting and Financial Information

The balance sheet reports revenues and selling costs for a period of time.

As U.S. firms focus on cost cutting in order to stay competitive with producers in low-wage countries, they will rely on ________ to create strategies to help reduce costs.

Because each business is unique, the accounting profession recognizes that the accounting principles followed by one company may need to be completely different from the accounting principles followed by another firm.

Managers who are concerned about keeping costs under control should be very interested in the information and advice provided by their company's managerial accountants.

The balance sheet is composed of the following types of accounts:

Nathan works as an accountant for a mid-sized retail store. He has just completed a trial balance that resulted in no unexpected problems. Nathan's next task is likely to be

An extremely high inventory turnover ratio may represent lost sales due to holding inadequate stocks of merchandise.

The balance sheet for Greeley Contracting shows assets totaling $207,000 and liabilities totaling $95,000. Which of the following statements is correct?

If a firm has a debt to owners' equity ratio of .75 (or 75%) we can conclude that

Net income before taxes is found by deducting total operating expenses from gross profit before factoring tax expense.

Cash flow difficulties are unlikely for a firm that is profitable.

Coolest Closet, a chain of retail clothing stores, wants to assure investors and other outsiders that its financial statements are accurate. One way to do so would be to hire a public accounting firm to

_______ refers to the value that stockholders or owners have in a company.

Brody has just finished working on the balance sheet, income statement, and statement of cash flows for his company. The next step in the accounting cycle involves

The purpose of a trial balance is to prepare a practice balance sheet.

A firm that takes on too much debt could experience problems repaying its lenders or meeting promises made to stockholders.

Inputs to the accounting system include sales documents.

Discuss the role of an independent auditor. Provide information about the types of accounting activities they perform and the recent laws that have emerged to help guide them as they do their job.

The reports and financial statements prepared by accountants