Question 1

Once a data bank has been established, there is no need to make any additions to or changes in its contents.

Accepted Answer

A) True 
 B)False

Question 2

Equipment and patents are known as intangible assets.

Accepted Answer

A) True 
 B)False

Question 3

Why are current assets listed before fixed assets on the balance sheet?

Accepted Answer

The answer of Why are current assets listed before fixed...

Question 4

Christine's First Job
Christine has just earned her undergraduate degree in accounting and has successfully completed the CPA exam. She recently interviewed with a relatively small and new company and was offered a job. The offer sounded very promising; the job had opportunities to grow with the company and provided diverse challenges. Christine accepted the job.
Once Christine started working, she realized that the owners and employees did not have a general understanding of accounting. She had to teach them how data is transformed into financial information and, from that point, reported on various statements. When she talked about the statement of financial position, they had no idea what she was talking about. She was the qualified individual responsible for accounting. No one else working with her had much knowledge. They did not even know the different financial ratios that someone could use to understand the financial standing of a company. Christine knows it will be a challenge to keep everyone on the same page when it comes to numbers and reports.
-Refer to Christine's First Job. To help the owners understand how effectively the firm is transforming sales into profits, Christine should address which of the following ratios?

Accepted Answer

A)  Return on sales 
B)  Earnings per share 
C)  Acid-test ratio 
D)  Return of owners' equity 
E)  Inventory turnover

Question 5

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

Accepted Answer

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

Question 6

If you are taking a common sense approach to evaluating a firm's accounting information, which of the following would not be something that you would hope to see?

Accepted Answer

A)  Financial statements audited by an outside source 
B)  Remembering that a balance sheet is only a snapshot in time 
C)  Paying great attention to current profit and not worrying about the future 
D)  Strategies to reduce operating expenses 
E)  How the company manages its cash flow

Question 7

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

Accepted Answer

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 8

The cost of goods sold for McPherson Fashions is $360,000. The beginning inventory for the firm was $20,000. Twelve months later the ending inventory was $40,000. What is the firm's inventory turnover?

Accepted Answer

A)  6 times a year 
B)  9 times a year 
C)  12 times a year 
D)  18 times a year 
E)  24 times a year

Question 9

Which of the following presents assets in the correct balance sheet order?

Accepted Answer

A)  Cash, land, accounts receivable, equipment 
B)  Marketable securities, equipment, prepaid insurance, inventory 
C)  Cash, inventory, equipment 
D)  Accounts receivable, buildings, inventory, land 
E)  Buildings, prepaid expenses, inventory, equipment

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

Write the accounting equation. Then define each term and give an example.

Accepted Answer

The answer of Write the accounting equation. Then define each...

Question 12

What type of information is reported on a corporation's statement of cash flows?

Accepted Answer

The answer of What type of information is reported on...

Question 13

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.

Accepted Answer

A) True 
 B)False

Question 14

For the previous year, Sambino's Italian Restaurant had a total of $320,000 in expenses and $295,000 in revenues. Sambino's

Accepted Answer

A)  had a net income of $325,000 for the year. 
B)  had a net loss of $25,000 for the year. 
C)  lost $25,000 in revenues. 
D)  acquired an additional $295,000 in assets. 
E)  increased its stockholders' equity by $25,000.

Question 15

The term ____ describes assets that can be quickly converted into cash or consumed in one year or less.

Accepted Answer

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

Question 16

Emiliano Garza spent five years in an accounting educational program and successfully completed a rigorous accounting examination five years ago. Since then, he has worked for several accounting firms. Currently he is a senior partner in a huge international accounting firm. By profession, Emiliano is probably a

Accepted Answer

A)  bookkeeper. 
B)  certified public accountant. 
C)  marketing manager. 
D)  vice president of finance. 
E)  private accountant.

Question 17

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.

Accepted Answer

A) True 
 B)False

Question 18

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

Accepted Answer

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

Question 19

A price reduction to customers who pay their bills promptly is called

Accepted Answer

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

Question 20

The specific types of information that managers need depend on their area of management and on their

Accepted Answer

A)  level within the firm. 
B)  understanding of data. 
C)  background in computer science. 
D)  use of the information. 
E)  accounting background.

Exam 17: Using Management and Accounting Information

Once a data bank has been established, there is no need to make any additions to or changes in its contents.

Equipment and patents are known as intangible assets.

Why are current assets listed before fixed assets on the balance sheet?

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

If you are taking a common sense approach to evaluating a firm's accounting information, which of the following would not be something that you would hope to see?

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

The cost of goods sold for McPherson Fashions is $360,000. The beginning inventory for the firm was $20,000. Twelve months later the ending inventory was $40,000. What is the firm's inventory turnover?

Which of the following presents assets in the correct balance sheet order?

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

Write the accounting equation. Then define each term and give an example.

What type of information is reported on a corporation's statement of cash flows?

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.

For the previous year, Sambino's Italian Restaurant had a total of $320,000 in expenses and $295,000 in revenues. Sambino's

The term ____ describes assets that can be quickly converted into cash or consumed in one year or less.

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.

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 price reduction to customers who pay their bills promptly is called

The specific types of information that managers need depend on their area of management and on their