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Exam 17: Understanding Accounting and Financial Information

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Question 21

Multiple Choice

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Carole Grand and Bonnie Lamore run a shuttle service from Western Illinois to the busy Chicago O'Hare airport. Last month, they recorded the following: Carole and Bonnie's gross profit for the past month was:

A) $682.00
B) Carole: $341.00; Bonnie: $341.00
C) $1250.00
D) $2750.00

E) B) and C)
F) A) and D)

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Question 22

Multiple Choice

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Mini-Case Minnie A. Wright-Hoff works as an accountant for Double Entry Doors, Inc. Her company sells and installs oversized garage doors needed by large vehicles. Most of Minnie's work involves helping department heads and other decision makers by measuring and reporting costs for their departments, and by identifying areas where departments are exceeding their budgets. However, as one of only three accountants employed by Double Entry Doors, Minnie is something of a "jill-of-all-trades" in terms of her accounting assignments. For example, she recently spent several hours summarizing all of the financial data in account ledgers to see if the information was correct and balanced. Her efforts revealed no problems, so she is now ready to start working on the firm's financial statements. Minnie is interested in this part of the accounting cycle because she likes to be one of the first to know the "bottom line" her company will report. She knows that she and the other accountants who work on these statements can influence the results by the choices they make about the way they report certain items. -The fact that Minnie wants to determine the "bottom line" for Double Entry Doors means that she is particularly interested in preparing her firm's:

A) income statement.
B) cash flow statement.
C) master budget.
D) capital budget.

E) A) and C)
F) None of the above

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Question 23

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Revenue on the income statement represents the dollar amount of what is received for goods sold, services rendered and/or from other revenue sources.

Citizens and special interest groups often have interest in the information generated by government accounting.

Oklahoma Chemicals plans to use its computers to post information from journals to the ledger instantaneously. One obvious benefit of this technology is:

Mike is the head of the accounting department at Micro Flash. After completing the trial balance, he will proceed with the preparation of the balance sheet, the income statement and the statement of cash flows.

The books where accounting data are first entered are called ledgers.

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 _______________.

Today's computerized accounting programs are:

Patents and copyrights are examples of intangible assets.

A firm's efficient use of its assets in running the business is key to maintaining sufficient cash flow. Ratios that accountants utilize to measure the efficient use of assets are called ____________ ratios.

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

The ______________ shows how the capital is structured in the business, including the value of assets and the amount the firm owes at a specific point in time.

Accountants not only provide financial information to the firm, they:

Green Living Construction Company installs solar panels in large newly constructed buildings. The company employs several expert installers who work on a full-time basis. Although the installers work every day, the company pays them at the end of the month, for the previous month's work. Employee salaries are recorded as ___________ on Green Living's balance sheet.

Preferred Pet Care, Inc., a mobile veterinary care clinic, has more appointments than it ever expected to have when it opened its doors. Each week it orders more vaccines, antibiotics, and preventive care supplies from a major veterinary supplier, with the understanding that it will pay for these supplies in one month's time. Most of the company's clients are elderly and on fixed incomes, and often do not pay for services for two or more months. This is not a problem because as long as the company continues to increase its appointments, it will create profits and growth.

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

There are five key working areas in accounting: financial accounting, managerial accounting, auditing, tax accounting, and government and not-for-profit accounting.

General expenses include office salaries, rent, and insurance.

A major part of a bookkeeper's job is to interpret financial data and suggest strategies for improving the firm.