Question 1

Rapidly growing companies often buy increasing amounts of merchandise from suppliers on credit,and then sell the goods to their customers on credit.These companies sometimes have difficulty repaying their suppliers when customers who buy on credit don't pay on time.Firms that experience this difficulty need to do a better job of:

Accepted Answer

A) Generating revenue. 
B) Controlling inventory. 
C) Managing cash flows. 
D) Balancing assets with liabilities.

Question 2

Harrison Manufacturing owns land worth $600,000 and has $130,000 worth of cash in its bank account.In the asset section of the balance sheet,Harrison lists its land holdings prior to listing its cash since it is a higher value.

Accepted Answer

A) True 
 B)False

Question 3

Rent,salaries,insurance and depreciation are examples of the cost of goods sold.

Accepted Answer

A) True 
 B)False

Question 4

Which financial statement reports the company's revenues and selling costs over a period of time?

Accepted Answer

A) income statement 
B) balance sheet 
C) statement of cash flows 
D) trial balance

Question 5

While reviewing the books at his firm,Chad Cooper noticed discrepancies between how the firm recorded revenues last year and how it elected to record revenues during the recent quarter of the current year.As a recent business graduate,Chad felt confident that the changes needed clarification.To get another opinion,Chad suggested to the company's controller that the firm solicit ______________.

Accepted Answer

A) the assistance of the Government Accounting Standards Board 
B) the services of a certified internal auditor 
C) the services of a senior executive at the IRS 
D) the services of an independent auditor

Question 6

A balance sheet is composed of assets,liabilities,and revenues.

Accepted Answer

A) True 
 B)False

Question 7

Liabilities are reported on the income statement.

Accepted Answer

A) True 
 B)False

Question 8

The accounting profession is divided into 5 key working areas,two of which are:

Accepted Answer

A) Auditing and managerial accounting. 
B) Forecasting and logistical accounting. 
C) Inventory control and budgeting. 
D) Income accounting and expenditure accounting.

Question 9

Money received from tickets sold for the Rolling Stones concert is recorded as net income on the concert promoter's income statement.

Accepted Answer

A) True 
 B)False

Question 10

The purpose of liquidity ratios is to indicate the degree to which a firm relies on borrowed funds in its operations.

Accepted Answer

A) True 
 B)False

Question 11

The acid-test ratio is found by dividing inventory by cost of goods sold.

Accepted Answer

A) True 
 B)False

Question 12

Martha is a member of a conservative political group that wants to identify and publicize examples of wasteful government spending.The type of accounting information Martha and her group will follow most closely is provided by certified public accountants.

Accepted Answer

A) True 
 B)False

Question 13

Double-entry bookkeeping can help identify a recording error made by a bookkeeper.

Accepted Answer

A) True 
 B)False

Question 14

Kelley's Kloset,LLC has applied for a business loan.Her prospective banker has requested information concerning the financial condition of her business.Which accounting discipline is responsible for providing accounting information to outside stakeholders?

Accepted Answer

A) Management accounting. 
B) Financial accounting. 
C) Tax accounting. 
D) Certified bookkeeping.

Question 15

The _______ ratio helps determine the ability of a firm to repay its short-term debts even if it has difficulty selling its inventory.

Accepted Answer

A) acid-test 
B) cash flow 
C) diluted current asset 
D) required reserve

Question 16

A firm's ________ reports the profit or loss for the firm over a specified time period.

Accepted Answer

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

Question 17

McCartney Consulting Group is a management-consulting firm that provides its expertise to businesses that employ its services.Since it does not hold an inventory of goods or produce any goods itself:

Accepted Answer

A) its revenue will equal its net income. 
B) its gross profit could be identical to its net revenue. 
C) it is unlikely to have any operating expenses. 
D) its balance sheet will not record any current assets.

Question 18

Which of the following is an example of a financial transaction?

Accepted Answer

A) A firm purchases a fire insurance policy. 
B) An internal auditor discovers an error in a firm's inventory valuation. 
C) A potential customer accesses a firm's Web page. 
D) A manager reviews the financial statements prepared by an accountant.

Question 19

Perry is responsible for recording sales transactions at Turncoat Enterprises.Perry's company utilizes _____________________,to help minimize entry errors.

Accepted Answer

A) auditing 
B) capital budgeting 
C) double-entry bookkeeping 
D) revenue assessment

Question 20

The accounting scandals of the early 2000s led many people to question the legitimacy of:

Accepted Answer

A) Ratio analysis as a means of evaluating the performance of a firm. 
B) Relying on the recommendations of tax accountants to find ways of reducing the taxes owed by a business organization. 
C) Publishing financial information about a firm on the Internet. 
D) Allowing an accounting firm to do both consulting and auditing work for the same company.

Exam 17: Understanding Accounting and Financial Information

Harrison Manufacturing owns land worth $600,000 and has $130,000 worth of cash in its bank account.In the asset section of the balance sheet,Harrison lists its land holdings prior to listing its cash since it is a higher value.

Rent,salaries,insurance and depreciation are examples of the cost of goods sold.

Which financial statement reports the company's revenues and selling costs over a period of time?

A balance sheet is composed of assets,liabilities,and revenues.

Liabilities are reported on the income statement.

The accounting profession is divided into 5 key working areas,two of which are:

Money received from tickets sold for the Rolling Stones concert is recorded as net income on the concert promoter's income statement.

The purpose of liquidity ratios is to indicate the degree to which a firm relies on borrowed funds in its operations.

The acid-test ratio is found by dividing inventory by cost of goods sold.

Martha is a member of a conservative political group that wants to identify and publicize examples of wasteful government spending.The type of accounting information Martha and her group will follow most closely is provided by certified public accountants.

Double-entry bookkeeping can help identify a recording error made by a bookkeeper.

Kelley's Kloset,LLC has applied for a business loan.Her prospective banker has requested information concerning the financial condition of her business.Which accounting discipline is responsible for providing accounting information to outside stakeholders?

The _______ ratio helps determine the ability of a firm to repay its short-term debts even if it has difficulty selling its inventory.

A firm's ________ reports the profit or loss for the firm over a specified time period.

McCartney Consulting Group is a management-consulting firm that provides its expertise to businesses that employ its services.Since it does not hold an inventory of goods or produce any goods itself:

Which of the following is an example of a financial transaction?

Perry is responsible for recording sales transactions at Turncoat Enterprises.Perry's company utilizes _____________________,to help minimize entry errors.

The accounting scandals of the early 2000s led many people to question the legitimacy of: