Question 1

Net income is simply the difference between revenue and cost of goods sold.

Accepted Answer

A) True 
 B)False

Question 2

An accountant who works for a single business or government agency is referred to as a:

Accepted Answer

A)  Public accountant.
B)  Private accountant.
C)  Certified accountant.
D)  Commission accountant.E) C) and D)
F) None of the above

Question 3

Similar to the example of FIFO and LIFO inventory accounting methods depicted in the Spotlight on Small Business box titled,"What's Coming and Going at the College Bookstore?" a college store purchased sweatshirts for the upcoming fall semester.Using the following data,where a total of 100 sweatshirts were purchased by the store and placed in inventory,select the correct statement from the following choices.

Accepted Answer

A)  FIFO would provide the least profit.
B)  FIFO would provide the most profit.
C)  LIFO or FIFO will produce the same amount of profit.
D)  LIFO would provide the most profit.E) A) and C)
F) C) and D)

Question 4

The balance sheet is set up to reflect the Fundamental Accounting Equation.This equation shows:

Accepted Answer

A)  Assets = Liabilities + Owners' equity.
B)  Revenues - Expenses = Gross profit.
C)  Cash inflows = Cash outflows.
D)  Current assets + Current liabilities = Owners' equity.E) C) and D)
F) A) and B)

Question 5

The equipment a firm owns and the money it has in its bank account are considered assets.

Accepted Answer

A) True 
 B)False

Question 6

Rents,salaries,utilities and insurance are examples of operating expenses.

Accepted Answer

A) True 
 B)False

Question 7

Miko is preparing her homework for her accounting class.She is uncertain as to the proper handling of patents and copyrights on a firm's financial statements.Which of the following is correct?

Accepted Answer

A)  Patents and copyrights are included with the firm's intangible assets on the balance sheet.
B)  Patents and copyrights are included with the firm's long-term liabilities on the balance sheet.
C)  Patents and copyrights are included with the firm's cost of goods sold on the income statement.
D)  Patents and copyrights are included with the firm's fixed assets on the balance sheet.E) A) and D)
F) A) and B)

Question 8

Liabilities are reported on the income statement.

Accepted Answer

A) True 
 B)False

Question 9

Debts owed by a business are called ___________.

Accepted Answer

A)  revenues
B)  liabilities
C)  equities
D)  assetsE) A) and C)
F) None of the above

Question 10

Assets are economic resources that are owned by a firm.

Accepted Answer

A) True 
 B)False

Question 11

Today's computerized accounting programs are:

Accepted Answer

A)  Very helpful for small business owners who lack strong accounting support within their companies.
B)  Too expensive and complicated for most small businesses.
C)  A poor investment for small start-up companies due to the fact that these programs are seldom needed unless the firm is considered a mid-sized to large company.
D)  So sophisticated that they can make most financial decisions without the aid of an accountant.E) A) and D)
F) B) and C)

Question 12

The LIFO method of inventory valuation assumes the newest items in inventory are sold first.

Accepted Answer

A) True 
 B)False

Question 13

Company resources that are purchased with the intention that they will convert to cash within one year are:

Accepted Answer

A)  Fixed assets
B)  Current liabilities
C)  Current assets
D)  Owners' equityE) All of the above
F) None of the above

Question 14

Net Profit refers to:

Accepted Answer

A)  The result of deducting liabilities from the assets of the firm.
B)  The result of subtracting cost of good sold from revenues.
C)  The result of deducting depreciation expense from revenues.
D)  The net earnings after the deduction of all expenses,including tax expense.E) B) and C)
F) A) and C)

Question 15

A _________ summarizes all the data from the account ledgers to verify that they are correct and balanced.

Accepted Answer

A)  ledger statement
B)  balance sheet
C)  trial balance
D)  statement of cash flowsE) All of the above
F) A) and B)

Question 16

Brand names such as Coca-Cola and McDonald's are examples of intangible assets.

Accepted Answer

A) True 
 B)False

Question 17

The three important financial statements prepared by accountants are:

Accepted Answer

A)  Ledger,journal,and trial balance.
B)  Cash budget,capital budget,and master budget.
C)  Revenue summary,expense summary,and consolidation statement.
D)  Balance sheet,income statement,and statement of cash flows.E) A) and B)
F) All of the above

Question 18

Carol has worked as a bookkeeper for a small clothing store for almost three years.Her old boss recently retired and a new manager took over.The new manager frequently asks her for information and advice about how to interpret the information she records.Carol's experience as a bookkeeper means she is qualified to provide this type of advice.

Accepted Answer

A) True 
 B)False

Question 19

The Music Museum,LLC sells a unique assortment of sheet music.The company indexes just about any published music ever written before 1970.Its customers are high school and college band directors,church choir directors,and glee clubs who require several copies of the same music,including music written for a variety of instruments.To buy inventory for resale,the business seeks out wholesalers with large inventories.Due to the fact that cash flow is always an important concern,the owner keeps a watchful eye on how quickly various genres of sheet music sell.To help him in this assessment,which of the following ratios would be an important part of this company's financial analysis?

Accepted Answer

A)  Asset turnover ratio
B)  Inventory turnover ratio
C)  Sales turnover ratio
D)  Cost of goods sold turnover ratioE) A) and B)
F) All of the above

Question 20

If a firm has a debt to owners' equity ratio of .54 or 54%) 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 54% of its gross profit.E) None of the above
F) C) and D)

Exam 17: Understanding Accounting and Financial Information

Rents,salaries,utilities and insurance are examples of operating expenses.

Correct Answer
verified

An accountant who works for a single business or government agency is referred to as a:

Correct Answer
verified

Correct Answer
verified

Liabilities are reported on the income statement.

Correct Answer
verified

Today's computerized accounting programs are:

Correct Answer
verified

The LIFO method of inventory valuation assumes the newest items in inventory are sold first.

Correct Answer
verified

Company resources that are purchased with the intention that they will convert to cash within one year are:

Correct Answer
verified

The three important financial statements prepared by accountants are:

Correct Answer
verified

The balance sheet is set up to reflect the Fundamental Accounting Equation.This equation shows:

Correct Answer
verified

The equipment a firm owns and the money it has in its bank account are considered assets.

Correct Answer
verified

Assets are economic resources that are owned by a firm.

Correct Answer
verified

Net income is simply the difference between revenue and cost of goods sold.

Correct Answer
verified

Net Profit refers to:

Correct Answer
verified

Brand names such as Coca-Cola and McDonald's are examples of intangible assets.

Correct Answer
verified

Miko is preparing her homework for her accounting class.She is uncertain as to the proper handling of patents and copyrights on a firm's financial statements.Which of the following is correct?

Correct Answer
verified

If a firm has a debt to owners' equity ratio of .54 or 54%) we can conclude that:

Correct Answer
verified

Debts owed by a business are called ___________.

Correct Answer
verified

Correct Answer
verified

A _________ summarizes all the data from the account ledgers to verify that they are correct and balanced.

Correct Answer
verified

Correct Answer
verified

Exam 17: Understanding Accounting and Financial Information

Rents,salaries,utilities and insurance are examples of operating expenses.

Correct AnswerverifiedShow Answer

An accountant who works for a single business or government agency is referred to as a:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Liabilities are reported on the income statement.

Correct AnswerverifiedShow Answer

Today's computerized accounting programs are:

Correct AnswerverifiedShow Answer

The LIFO method of inventory valuation assumes the newest items in inventory are sold first.

Correct AnswerverifiedShow Answer

Company resources that are purchased with the intention that they will convert to cash within one year are:

Correct AnswerverifiedShow Answer

The three important financial statements prepared by accountants are:

Correct AnswerverifiedShow Answer

The balance sheet is set up to reflect the Fundamental Accounting Equation.This equation shows:

Correct AnswerverifiedShow Answer

The equipment a firm owns and the money it has in its bank account are considered assets.

Correct AnswerverifiedShow Answer

Assets are economic resources that are owned by a firm.

Correct AnswerverifiedShow Answer

Net income is simply the difference between revenue and cost of goods sold.

Correct AnswerverifiedShow Answer

Net Profit refers to:

Correct AnswerverifiedShow Answer

Brand names such as Coca-Cola and McDonald's are examples of intangible assets.

Correct AnswerverifiedShow Answer

Miko is preparing her homework for her accounting class.She is uncertain as to the proper handling of patents and copyrights on a firm's financial statements.Which of the following is correct?

Correct AnswerverifiedShow Answer

If a firm has a debt to owners' equity ratio of .54 or 54%) we can conclude that:

Correct AnswerverifiedShow Answer

Debts owed by a business are called ___________.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A _________ summarizes all the data from the account ledgers to verify that they are correct and balanced.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
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