ACCT Ch.5

The income statement for ABC Company shows Gross profit of $144,000; Operating expenses of $130,000; and Cost of goods sold of $216,000. What is net sales revenue?

$360,000

Revenues were $1,000,000, Cost of Goods Sold was $750,000, and Net Income was $120,000. Net profit margin equals ______.

12%

What do independent auditors provide for companies who hire them?

Assurance that the financial statements follow Generally Accepted Accounting Principles

Which of the following are major actors involved in ensuring the integrity of financial statements of a publicly-traded company? (Check all that apply.)

Board of Directors Independent Auditors PCAOB SEC Management

The_______________ of _________________ is elected by the stockholders and is responsible for ensuring that processes are in place for maintaining the integrity of the company's accounting records. (Enter one word per blank.)

Board, Directors

Which of the following are sections found in a statement of cash flows. (Check all that apply.)

Cash Flows from Investing Activities Cash Flows from Operating Activities Cash Flows from Financing Activities

Cash Flows from Operating Activities

Cash flows associated with earning income

Cash Flows from Financing Activities

Cash flows related to borrowings, stocks and dividend payments

__________ financial statements report financial statement values for the current period and one or more other prior periods. (Enter one word per blank.)

Comparative

______ refers to procedures designed to ensure that the company is managed in the interests of the shareholders.

Corporate governance

Which of the following are parts of a Form 10-K? (Select all that apply.)

Financial statements Management's discussion and analysis Auditor reports

Which of the following are the principal components of the financial disclosures in a Form 10-K? (Select all that apply.)

Financial statements and supplemental data Management's discussion and analysis Select summarized financial data for a 5-year period

Dividend payments would be found under Cash Flows from ______ Activities on the ______.

Financing; statement of cash flows

Which of the following reports is filed annually and which is filed quarterly with the SEC?

Form 10-K is filed annually and Form 10-Q is filed quarterly.

Who has primary responsibility for preparing and making sure that a company's financial statements follow GAAP?

Management

Who has the responsibility to apply accounting standards when communicating with investors and creditors?

Management

Which of the following appears on the statement of stockholders' equity? (Check all that apply.)

Net income Additional paid-in capital Beginning balance of retained earnings Common stock Dividends

Which of the following is not a typical element of a company's annual report?

Press release

Who uses accounting information? (Check all that apply.)

Private investors Government Managers Creditors Institutional investors

Identify various sources of financial information for the investing public. (Select all that apply.)

SEC's EDGAR Service Companies' Websites Financial analysts' earnings forecast

Which of the following would be found under Cash Flows from Investing Activities? (Check all that apply.)

Sales of productive assets Purchases of productive assets Investments in other companies

Public companies issuing securities in the United States are required to file a number of detailed financial reports with the ______.

Securities and Exchange Commission

SEC stands for the ______.

Securities and Exchange Commission

Which government agency is responsible for the functioning of stock markets in the US?

Securities and Exchange Commission

Which financial statement shows the changes in equity accounts during the accounting period?

Statement of stockholders' equity

Who are the external users of accounting information? (Check all that apply.)

The current and potential creditors Institutional investors Private investors

True or false: Comparative financial statements include separate columns for more than one period's results.

True

True or false: The SEC, FASB, external auditors, and management of companies are involved in ensuring the integrity of financial statements.

True

Accumulated amortization is ______. (Select all that apply.)

a contra-asset account similar to accumulated depreciation similar to depreciation except it is netted against intangible assets instead of tangible assets

When determining the effect of a transaction on a financial ratio, the steps include ______. (Select all that apply.)

determine if the accounts affected are included in the financial statement subtotals or totals in the ratio's numerator journalize the transaction to see what accounts are affected determine if the accounts affected are included in the financial statement subtotals or totals in the ratio's denominator

Corporate Blank ___________ ,refers to procedures designed to ensure that the company is managed in the interests of the shareholders.

governance

If a company reports Amortization Expense for the period, it must have ______.

intangible assets on its balance sheet

Investors rely on ______ for information needed to make investment decisions.

many sources

On the income statement, Operating Income differs from Income before Income Taxes in that ______ are subtracted from Operating Income to arrive at Income before Income Taxes.

transactions that are non-operating or infrequently occurring

Public companies file their quarterly reports on the SEC's ______.

Form 10-Q

Which of the following is not a significant part of the financial reporting process?

Form Y2-K, which reports technological difficulties

The SEC requires public companies to report their quarterly and annual results.

True

True or false: Companies listed on US stock exchanges are required to file quarterly financial information with the SEC.

True

The ____________ committee of the board of directors must consist of non-management, independent directors with financial knowledge and is responsible for hiring the independent auditors. (Enter one word per blank.)

audit

The SEC's ______ requires companies provide all investors equal access to all company news and prohibits managers or other insiders from trading shares based on nonpublic information.

fair disclosure

To determine how transactions affect ratios, such as the the effect of purchasing land for cash on a company's current ratio, you need to ______.

know the journal entry and its effect on the ratio's numerator and denominator and then evaluate the combined effect

An unqualified (clean) audit opinion, should help ______ the expected rate of return investors charge for providing capital.

lower

Return on assets (ROA) equals ______.

net income divided by average total assets

The net profit margin ratio is calculated by dividing net income by ______.

net sales

The ___________ in the annual report should be reviewed to determine the significant accounting rules used. (Enter only one word per blank.)

notes

A classified income statement is useful to financial statement users because it ______. (Check all that apply.)

presents income statement items in meaningful categories separates cost of goods sold from other operating expenses, which allows the calculation of gross profit

Net income divided by average assets equals ______.

return on assets (ROA)

The notes to financial statements may include ______. (Check all that apply.)

segment information accounting policies applied relevant information, not disclosed on the statements revenues broken out by geographic region

IFRS are ______.

the International Financial Reporting Standards

US GAAP are ______.

the accounting rules developed by the FASB for use in the United States

Voluntary disclosures of financial accounting information, such as press releases, may be issued ______.

to guide market expectations

Cash Flows from Investing Activities

Cash flows associated with the purchase and sale of productive assets

Who has primary responsibility for making sure that a company's financial statements follow GAAP? (Check all that apply.)

Chief financial officer Chief executive officer

The SEC's "Fair Disclosure" requires publicly traded companies to provide access to ______.

all important company news

Press releases and conference calls are used by companies to ______. (Select all that apply.)

announce quarterly and annual earnings to limit the possibility of selective leakage of information provide timely information for external users

IFRS and US GAAP ______.

are similar but have differences that are currently being resolved with the aim of having one set of standards