Question 1

A series of high-profile scandals in the early 2000s put the accounting profession under intense scrutiny.

Accepted Answer

A) True 
 B)False

Question 2

Nebraska Communications is considering the purchase of a new satellite.The firm believes the satellite will help generate future earnings.In addition,the firm recognizes the tax benefits of a lower net income provided by the annual ________ of the asset.

Accepted Answer

A)   inventory valuation
B)   declining balance
C)   appreciation
D)   depreciationE) B) and D)
F) All of the above

Question 3

Good decisions are based on good information.Organizations need accounting-to provide good financial information.

Accepted Answer

A) True 
 B)False

Question 4

The accounting profession is divided into two main fields: bookkeeping and auditing.

Accepted Answer

A) True 
 B)False

Question 5

In order to understand if the results of ratio calculations indicate a financially strong company,the results:

Accepted Answer

A)   Should be compared to other firms in the same industry.
B)   Are compared to same size firms in the same geographic region of the country.
C)   Are compared to the norms established by generally accepted accounting principles.
D)   Are compared to the largest firms in the country.E) B) and C)
F) A) and C)

Question 6

The main reason an accountant would conduct a trial balance is to:

Accepted Answer

A)   Determine whether account figures in the ledger are correct and balanced.
B)   Obtain an estimate of the amount of taxes the firm owes.
C)   Ensure the audit was done correctly.
D)   Verify the validity of last year's balance sheet before beginning the next accounting cycle.E) A) and B)
F) B) and C)

Question 7

The "bottom line" of the Barkley Company's income statement is equal to the net worth of the firm.

Accepted Answer

A) True 
 B)False

Question 8

When reviewing the Balance Sheet for Preferred Pet Care,Inc. ,a mobile small animal care business,Julian noted the following information: Company assets totaling $3.5 million,and liabilities totaling $1.3 million.On paper,the net worth (owner's equity) for this business = ___________.

Accepted Answer

A)   $2.2 million
B)   $4.8 million
C)   $3.5 million
D)   $0.2 millionE) A) and B)
F) None of the above

Question 9

Meg Malloy is running an income statement on her QuickBooks™ computer accounting program.Which of the following accounts will be used to calculate gross profit?

Accepted Answer

A)   Revenues,net sales,depreciation,and operating expenses
B)   Revenues,general expenses
C)   Revenues,cost of goods sold,tax expenses,net income before taxes
D)   Revenues,cost of goods soldE) B) and D)
F) None of the above

Question 10

Government organizations such as the IRS and other government regulatory agencies are interested in a firm's accounting information in order to help the firm strategize about ways to cut costs in order to minimize net income before taxes.

Accepted Answer

A) True 
 B)False

Question 11

The current ratio is used to evaluate a firm's ability to pay its short-term debts.

Accepted Answer

A) True 
 B)False

Question 12

Marissa is taking her first course in accounting this semester.One of the first things she learns is that "revenue" and "net income" mean the same thing.

Accepted Answer

A) True 
 B)False

Question 13

When an accountant "writes off" the cost of a tangible asset over its estimated lifetime,it is called depreciation.

Accepted Answer

A) True 
 B)False

Question 14

Accountants record,classify,and ____________ the results of the financial information they gather.

Accepted Answer

A)   interpret
B)   sell
C)   buy
D)   changeE) A) and C)
F) None of the above

Question 15

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

Question 16

Scott Drilling Contractors recently issued a corporate bond on which it expects to pay interest for the next twenty years.Scott would record this as a __________ on its balance sheet.

Accepted Answer

A)   declining balance asset
B)   retained earning
C)   long-term liability
D)   long-term expenseE) A) and D)
F) B) and D)

Question 17

The Chapter 17 Connecting Across Borders box discusses the future of international accounting standards.In summary,the message is:

Accepted Answer

A)   GAAP (Generally Accepted Accounting Standards) created and established in the U.S.will be adopted worldwide by 2014.
B)   Accounting professionals do not see an immediate need to standardize accounting practices globally due to the fact that patents and other legal measures are not standardized.
C)   Due to the fact that global markets continue to rise in economic importance,the accounting field is working on integrating GAAP with IFRS (International Financial Reporting Standards) .
D)   It has been established that most U.S.accountants will refuse to acknowledge the IFRS standards because U.S.accounting firms mostly represent companies that do business domestically.E) A) and B)
F) None of the above

Question 18

An extremely high inventory turnover ratio may represent lost sales due to holding inadequate stocks of merchandise.

Accepted Answer

A) True 
 B)False

Question 19

One way to make ratio analysis more meaningful is to compare the ratios of one firm to those of other firms in the same industry.

Accepted Answer

A) True 
 B)False

Question 20

Skilled professionals who are responsible for the development of strategies to minimize taxes are called:

Accepted Answer

A)   tax accountants.
B)   certified public accountants.
C)   certified management accountants.
D)   certified internal auditors.E) B) and D)
F) A) and D)

Exam 17: Understanding Accounting and Financial Information

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

Correct AnswerverifiedShow Answer

When reviewing the Balance Sheet for Preferred Pet Care,Inc. ,a mobile small animal care business,Julian noted the following information: Company assets totaling $3.5 million,and liabilities totaling $1.3 million.On paper,the net worth (owner's equity) for this business = ___________.

Correct AnswerverifiedShow Answer

The "bottom line" of the Barkley Company's income statement is equal to the net worth of the firm.

Correct AnswerverifiedShow Answer

Meg Malloy is running an income statement on her QuickBooks™ computer accounting program.Which of the following accounts will be used to calculate gross profit?

Correct AnswerverifiedShow Answer

One way to make ratio analysis more meaningful is to compare the ratios of one firm to those of other firms in the same industry.

Correct AnswerverifiedShow Answer

The accounting profession is divided into two main fields: bookkeeping and auditing.

Correct AnswerverifiedShow Answer

When an accountant "writes off" the cost of a tangible asset over its estimated lifetime,it is called depreciation.

Correct AnswerverifiedShow Answer

The Chapter 17 Connecting Across Borders box discusses the future of international accounting standards.In summary,the message is:

Correct AnswerverifiedShow Answer

Nebraska Communications is considering the purchase of a new satellite.The firm believes the satellite will help generate future earnings.In addition,the firm recognizes the tax benefits of a lower net income provided by the annual ________ of the asset.

Correct AnswerverifiedShow Answer

Scott Drilling Contractors recently issued a corporate bond on which it expects to pay interest for the next twenty years.Scott would record this as a __________ on its balance sheet.

Correct AnswerverifiedShow Answer

The current ratio is used to evaluate a firm's ability to pay its short-term debts.

Correct AnswerverifiedShow Answer

The main reason an accountant would conduct a trial balance is to:

Correct AnswerverifiedShow Answer

An extremely high inventory turnover ratio may represent lost sales due to holding inadequate stocks of merchandise.

Correct AnswerverifiedShow Answer

Government organizations such as the IRS and other government regulatory agencies are interested in a firm's accounting information in order to help the firm strategize about ways to cut costs in order to minimize net income before taxes.

Correct AnswerverifiedShow Answer

Good decisions are based on good information.Organizations need accounting-to provide good financial information.

Correct AnswerverifiedShow Answer

A series of high-profile scandals in the early 2000s put the accounting profession under intense scrutiny.

Correct AnswerverifiedShow Answer

Marissa is taking her first course in accounting this semester.One of the first things she learns is that "revenue" and "net income" mean the same thing.

Correct AnswerverifiedShow Answer

Skilled professionals who are responsible for the development of strategies to minimize taxes are called:

Correct AnswerverifiedShow Answer

In order to understand if the results of ratio calculations indicate a financially strong company,the results:

Correct AnswerverifiedShow Answer

Accountants record,classify,and ____________ the results of the financial information they gather.

Correct AnswerverifiedShow Answer

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