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Exam 17: Understanding Accounting and Financial Information

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Question 111

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General expenses include office salaries,rent,and insurance.

A) True
B) False

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Question 112

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The reports and financial statements prepared by accountants:

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.

E) A) and D)
F) All of the above

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Question 113

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When valuing items in inventory for financial reporting purposes,generally accepted accounting principles (GAAP)requires firms to value the cost of goods sold by assuming that the items that have been in inventory the longest are the ones that are sold first.

An accountant who has a bachelor's degree,two years of experience in internal auditing and who has passed an exam by the Institute of Internal Auditors can become recognized as a certified internal auditor.

Accounting,as the language of business,is solely concerned with providing information useful to managers of profit-seeking firms.

For the past several years,Bill Reynolds has retained accountant Chelsea Jones for help in preparing his personal income tax forms.Bill's boss recommended Chelsea because she had done a good job setting-up the company's new accounting system.Bill is very satisfied with Chelsea's work and feels that the fees she charges are quite reasonable.Chelsea would be classified as a(n) :

The Statement of Cash flows identifies cash receipts and disbursements that result ______________.

The current ratio is a type of ________ ratio.

_________ is the systematic write-off of the value of a tangible asset over its useful life.

_________ refers to how quickly an asset can be converted into cash.

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. -Minnie knows that Double Entry has a lot of short-term debt coming due in the next year,and wants to make sure that the company will have the ability to make the required payments.Given a troubling downturn in construction activity over the past couple of months,she is not confident that Double Entry can count on selling its current inventory of doors before the debt comes due.Which of the following ratios would be most relevant to Minnie?

Debts owed by a business are called __________.

Julio borrowed money from a close friend to obtain a liquor license for his pub,and gave him a written promise to repay the amount within six months.Julio should list this business debt as an operating expense on his pub's balance sheet.

Accounting provides information about the financial condition and operating performance of a firm.

When creating the income statement,which of the following statements is accurate?

If a firm can reduce its cost of goods sold and continue to sell its product for the same price,we would expect the firm to enjoy an increase in its:

Bark Three Times Pet Store recently hired an accountant to make sense of each day's transactions,and keep better financial records for the business.The accountant showed the owner that the ledger in a computerized accounting system would automatically take entries and post them to the correct accounts in the ledger,making the bookkeeping tasks much easier.

Accounting is an easy subject for people to understand because almost everyone is exposed to basic accounting concepts in their everyday life.

Explain the meaning of the fundamental accounting equation and its relation to the Balance Sheet.If it is helpful,create an example using numbers.

The statement of cash flows calculates cash flows from operations,investing activities,and financing activities.