FIN463 Double-Weight Quiz
Where would you find the following information? (1) An attestation to the fairness of financial statements. (2) Summary of significant accounting polices (3) Cash flow from operating, financing, and investing activities. (4) A qualified opinion (5) Information about principal, interest, and maturity of long-term debt (6) Financial position on a particular date. (7) Discussion of the company's results of operations. (8) Description of pension plans (9) Anticipated commitments for capital expenditures. (10) Reconciliation of beginning and ending balances of equity accounts. A) Financial Statements B) Notes to the Financial Statements C) Auditor's Report D) Management discussion and analysis
(1) C (2) B (3) A (4) C (5) B (6) A (7) D (8) B (9) D (10) A or B
The following categories appear on the income statement of Joshua Jeans Company: (a) Net sales (b) Cost of sales (c) Operating expenses (d) Other revenue/ expense (e) Income tax expense Classify the following items according to income statement category. ___(1) Deprecation expense ___(2) Interest revenue ___(3) Sales revenue ___(4) Advertising expense ___(5) Interest expense ___(6) Sales returns and allowances ___(7) Federal income taxes ___(8) Repairs and maintenance ___(9)Selling and administrative expenses ___(10) Cost of products sold ___(11) Dividend Income ___(12) Lease payments
(1) c (2) d (3) a (4) c (5) d (6) a (7) e (8) c (9) c (10) b (11) d (12) c
Listed below are balance sheet accounts for Elf's Gift Shop. Mark current accounts with "c" and non current accounts with "NC." (A) Long-term debt______ (B) Inventories_____ (C) Accounts Payable _____ (D) Prepaid Expenses ______ (E) Equipment______ (F) Accured Liabilities____ (G) Accounts Receivable____ (H)Cash_____ (I) Bonds Payable____ (J) Patents______
(A) NC (B) C (C) C (D) C or NC (E) NC (F) C (G) C (H) C (I) NC (J) NC
Dot's Delicious Donuts has the following accounts on its balance sheet: (1) Current Assets (2) Property, Plant, and Equipment (3) Intangible Assets (4) Other Assets (5) Current Liabilities (6) Deferred Federal Income Taxes (7) Long-term Debt (8) Stockholders' Equity How would Each of the following items be classified? ______ (a) Land held for speculation ______ (b) Current maturities on mortgage ______ (c) Common Stock ______ (d) Mortgage payable ______ (e) Balances outstanding on credit sales to customers ______ (f) Accumulated Depreciation ______ (g) Buildings used in business ______ (h) Accrued payroll ______ (I) Preferred Stock ______ (j) Debt outstanding from credit extended by suppliers ______ (k) Patents ______ (l) Land on which warehouse is located ______ (m) Allowance for doubtful accounts ______ (n) Liability due to difference in taxes paid and taxes reported ______ (o) Additional paid-in capital
(a) 4 (b) 5 (c) 8 (d) 7 (e) 1 (f) 2 (g) 2 (h) 5 (I) 5 (j) 5 (k) 3 (l) 2 (m) 1 (n) 6 (o) 8
Match the following items with the correct definition: ___ (a) Depreciation ___ (b) Depletion ___ (c) Amortization ___ (d) Gross profit ___ (e) Operating profit ___ (f) Net profit ___ (g) Equity method ___ (h) Cost method ___ (I) Single step format ___ (j) Multiple-step format ___ (k) Basic earnings per share ___ (l) Diluted earnings per share ___ (m) Extraordinary events ___ (n) Discontinued operations (1) Proportionate recognition of investor's net income for investments in voting stock of other companies (2) Presentation of income statement that provides several intermediate profit measures (3) Unusual events not expected to recur in the foreseeable future (4) Allocation of costs of tangible fixed assets (5) Difference between sales revenue and expenses associated with generating sales (6) Recognition of income from investments in voting stock of other companies to the extent of cash dividend received (7) Operations that will not continue in the future because the firm sold a major portion of its business (8) Difference between net sales and cost of goods sold (9) Allocation of costs acquiring and developing natural resources (10) Earnings per share figure calculated by dividing the average number of common stock shares outstanding into the net earnings available to common stockholders (11) Presentation of income statement that groups all the revenue items, then deducts all expenses, to arrive at net income (12) Earnings per share figure based on the assumption that all potentially dilutive securities have been converted to common stock (13) Allocation of costs of intangible assets (14) Difference between all revenues and expenses
(a) 4 (b) 9 (c) 13 (d) 8 (e) 5 (f) 14 (g) 1 (h) 6 (I) 11 (j) 2 (k) 10 (l) 12 (m) 3 (n) 7
Match the following terms with the correct definitions. (a) Consolidated financial statements (b) Current assets (c) Deprecation (d) Deferred taxes (e) Allowance for doubtful accounts (f) Prepaid expenses (g) Current maturities (h) Accrued expense (I) Capital lease (j) Market value of stock (1) Used up within one year or operating cycle, whichever is longer. (2) Expenses incurred prior to cash outflow. (3) An agreement to use assets that is in substance a purchase (4) Estimation of uncollectible accounts receivable (5) Cost allocation of fixed assets other than land (6) Expenses paid in advance (7) Combined statements of parent company and controlled subsidiary companies (8) Price at which stock trades (9) Difference in taxes reported and taxes paid (10) Portion of debt to be repaid during the upcoming year
(a) 7 (b) 1 (c) 5 (d) 9 (e) 4 (f) 6 (g) 10 (h) 2 (I) 3 (j) 8
What is the balancing equation for a balance sheet? A) Assets = Liabilities + Stockholders' Equity B) Assets + Stockholders' Equity = Liabilities C) Assets + Liabilities + Stockholders' Equity D) Revenues - Expenses = Net Income
A) Assets = Liabilities + Stockholders' Equity
What are internal sources of cash? A) Cash inflows from operating activities B) Cash inflows from investing activities C) Cash inflows from financing activities D) All of the above
A) Cash inflows from operating activities
Which of the following items needs to be disclosed separately in the income statement? A) Discontinued operations B) Salary Expense C) Warranty Expense D) Bad Debt Expense
A) Discontinued operations
Which of the following is a technique for booting revenues? A) Follow the "35-day month practice" in which the books are kept open longer than the month end in order to record extra sales B) Record transitions at the net amount C) Delay shipment of goods D) Increase the allowance for doubtful accounts
A) Follow the "35-day month practice" in which the books are kept open longer than the month end in order to record extra sales
Why is it important to evaluate increases and decreases in operating expenses? A) Increases in operating expenses may indicate inefficiencies and decreases in operating expenses may be detrimental to long-term sales growth B)It is important to determine whether companies are spending at least 10 cents of every sales dollar on advertising expenses C) Increases in operating expenses are always an indication that a firm will increase sales in the future. D) None of the above
A) Increases in operating expenses may indicate inefficiencies and decreases in operating expenses may be detrimental to long-term sales growth
Why should the effective tax rate be evaluated when assessing earnings? A) It is important to understand whether earnings have increased because of the tax techniques rather than from positive changes in core operations B) Effective tax rates are irrelevant because they are mandated by law C) Effective tax rates do not include the effects of foreign tax D) Net operating losses allow a firm to change its effective tax rates for each of the five years prior to the loss
A) It is important to understand whether earnings have increased because of the tax techniques rather than from positive changes in core operations
How can a reserve account be abused by management? A) Management can intentionally overestimate the reserve account to decrease earnings or underestimate the reserve account to increase earnings. B) Management can charge estimates of obligations to be paid in the future to reserve account C) There is no way for management to abuse this account D) None of the above
A) Management can intentionally overestimate the reserve account to decrease earnings or underestimate the reserve account to increase earnings.
What type of firm generally has the highest proportion of fixed assets to total assets? A) Manufactures B) Retailers C) Wholesalers D) Retailers and wholesalers
A) Manufactures
How would payments for taxes be classified? A) Operating outflow B) Operating inflow C) Investing inflow D) Financing inflow
A) Operating outflow
Which of the following statements is false? A) Publicly help companies may chose to prepare either a statement of cash flows or a statement of changes in financial position B) The statement of cash flows was mandated by the FASB in the late 1980s C) Understanding how to prepare a statement of cash flows helps the analyst to better understand and analyze the cash flow statement D) The statement of cash flows is prepared by calculating changes in all balance sheet accounts
A) Publicly help companies may chose to prepare either a statement of cash flows or a statement of changes in financial position
What type of firm generally has the highest proportion of inventory to total assets? A) Retailers B) Wholesalers C) Manufacturers D) Service- Oriented Firms
A) Retailers
Which of the following statements is false? A) The Sarbanes-Oxley Act of 2002 was the cause of the demise Enron. B) The FASB and the IASB are working closely to develop a set of accounting rules that would ultimately be used by the publicly traded companies worldwide. C) The Public Company Accounting Oversight Board is responsible for monitoring auditors of all publicly owned companies D) The Sarbanes-Oxley Act of 2002 requires the chief executive officer and the chief financial officer of a publicly traded company to certify the accuracy f the financial statements.
A) The Sarbanes-Oxley Act of 2002 was the cause of the demise Enron.
What is meant by the term "cookie-jar accounting?" A) The abuse that occurs when companies create reserve accounts for the purposes of setting aside funds in good years and then shifting the reserve amounts to the income statement in poor years B) The abuse that occurs when companies use operational funds for nonoperational items such as parties, doughnuts, cookies, and personal travel expenses. C) The abuse that occurs when firms acquire another company and then write down the cost of in-process research and development D) The abuse that occurs when firms change ordinary business expenses as restructuring charges.
A) The abuse that occurs when companies create reserve accounts for the purposes of setting aside funds in good years and then shifting the reserve amounts to the income statement in poor years
If a firm had written down the value of their inventory, what should be concern to the analyst? A) The analyst should consider removing the effects of the write down from the profit margins to better compare changes from one period to the next B) The analyst should deduct the loss from the write down from the net earnings amount C) The analyst does not need to do anything because write doesn't of inventory are so frequent D) The analyst cannot determine the effect of the write down and, therefore, is unable to make any adjustments
A) The analyst should consider removing the effects of the write down from the profit margins to better compare changes from one period to the next
What must be true for an item to be classified as an extraordinary item? A) The item must be both unusual and infrequent in nature B) The item must be either unusual or infrequent in nature C) The item must be registered as extraordinary with the FASB D) The item must be approved as extraordinary by the SEC
A) The item must be both unusual and infrequent in nature
What is the goal of the IASB? A) To have worldwide acceptance of a set of international financial reporting standards. B) To create a set of accounting rules that Europe and the United States will follow. C) To create a set of accounting riles for countries other than the United States D) To work with the SEC to create a set of accounting rules for publicly held companies.
A) To have worldwide acceptance of a set of international financial reporting standards.
When does a base LIFO layer liquidation occur? A) A base LIFO layer liquidation occurs during a deflationary environment B) A base LIFO layer liquid occurs when companies are shrinking rather than increasing inventories after a period of in inflation C) A base LIFO later liquidation occurs when a company switches form the LIFO from the FIFO to the LIFO method of inventory valuation D) A base LIFO layer liquidation occurs when a firm increases inventories after a period of inflation.
B) A base LIFO layer liquid occurs when companies are shrinking rather than increasing inventories after a period of in inflation
Which of the following securities would be classified as a marketable securities in the current assets section of the balance sheet? A) Commercial paper, U.S. Treasury bills, land held for investment. B) Commercial paper, U.S. Treasury bills, negotiable certificates of deposit. C) Commercial paper, land held for investment, bonds with maturities in 10 years. D) U.S. Treasury Bills, long-term stock investment, bonds with maturities in 10 years.
B) Commercial paper, U.S. Treasury bills, negotiable certificates of deposit.
What does the balance sheet summarize for a business enterprise? A) Operating results for a period. B) Financial position at a point in time. C) Financing and investment activities for a period. D) Profit or loss at a point in time
B) Financial position at a point in time.
Which of the following statements is true? A) The quality issues of pension accounting have been largely elite by the issuance of FASB Statement No.87 B) If the assumed pension interest rate assumption is lowered, the annual pension cost will increase C) If the assumed pension interest rate assumption is increased, the annual pension cost will increase D) Due to the accounting rules for pension plans, most companies have underfunded pension plans
B) If the assumed pension interest rate assumption is lowered, the annual pension cost will increase
Why can the equity method of accounting for investments in the voting stock of other companies cause distortions in net earnings? A) Significant influence may exist even if the ownership of voting stock is less than 20% B) Income is recognized where no cash may ever be received C) Income should be recognized in accordance with the accrual method of accounting D) Income is recognized only to the extent of cash dividends is received
B) Income is recognized where no cash may ever be received
Which group of items would most likely be included in the other assets account on the balance sheet? A) Inventories, marketable securities, bonds B) Land held for investment purposes and long-term prepayments C) One- year prepaid insurance policy, stock investments, copyrights D) Inventories, franchises, patents
B) Land held for investment purposes and long-term prepayments
What type of accounts are accounts receivable and inventory? A) Cash accounts B) Operating accounts C) Financing accounts D) Investing accounts
B) Operating accounts
How would revenue from sales of goods and services be classified? A) Operating outflow B) Operating inflow C) Investing inflow D) Financing inflow
B) Operating inflow
Which of the following statements is true? A) Annual Reports only contain glossy pictures B) Public Relations Material should be used cautiously C) Market Data Refers to the Advertising Budget of a Firm D) The Shareholders' letter should be ignored
B) Public relations material should be used cautiously.
Which of the following could lead to cash flow problems? A) Obsolete inventory, accounts receivable of inferior quality, easing of credit by suppliers B) Slow-moving inventory, accounts receivable of inferior quality, tightening of credit by suppliers C) Obsolete inventory, increasing notes payable, easing of credit by suppliers D) Obsolete inventory, improved quality of accounts receivable, easing of credit by suppliers
B) Slow-moving inventory, accounts receivable of inferior quality, tightening of credit by suppliers
Assuming a period of inflation, which statement is true? A) The FIFO method understates balance sheet inventory. B) The FIFO method understates cost of goods sold on the income statement C) The LIFO method overstates balance sheet inventory D) The LIFO method understates cost of goods sold on the incomes statement.
B) The FIFO method understates cost of goods sold on the income statement
Why is it important to analyze the relationship among sales, accounts receivable, and the allowance for doubtful accounts? A) Comparing the three accounts' growth rates is the only way to determine whether the firm is using vendor financing B) The allowance for doubtful accounts is a reserve account that can be used to manipulate the earnings number C) Price and volume changes will cause the relationship among the three accounts to be volatile D) It is important to determine whether the three accounts are changing with the inflation rate
B) The allowance for doubtful accounts is a reserve account that can be used to manipulate the earnings number
An inflow of cash would result from which of the following? A) The increase in an asset account other than cash B) The decrease in an asset account other than cash C) The decrease in an equity account D) The decrease in liability account
B) The decrease in an asset account other than cash
Thus is the figure for operating profit important? A) This is the figure used for calculating federal income tax expense B) The figure for operating profit provides a basis for assessing the success of a company apart form its financing and investment activities and separate from its tax returns C) The operating profit figure includes all operating revenues and expenses as well as interest and taxes related to the operations D) The figure for operating profit provides a basis for assessing the wealth of the firm
B) The figure for operating profit provides a basis for assessing the success of a company apart form its financing and investment activities and separate from its tax returns
What does an unqualified auditor's report indicate? A) The financial statements unfairly and inaccurately present the company's financial position for the accounting period. B) The financial statements present fairly the financial position, the results of operations, and the changes in cash flows for the company. C) There are certain factors that might impair the firm's ability to continue as a growing concern. D) Certain managers with the firm are unqualified and, as such, are not fairly or adequately representing the interests of the shareholders.
B) The financial statements present fairly the financial position, the results of operations, and the changes in the cash flows of the company.
How is it possible for a firm to be profitable and still go bankrupt? A) Earnings have increased more rapidly than sales B) The firm has positive net income but has failed to generate cash from operations C) Net income has been adjusted for inflation D) Sales have not improved even though credit polices have been eased
B) The firm has positive net income but has failed to generate cash from operations
What items should be calculated when analyzing the accounts receivable and allowance for doubtful accounts? A) The growth rate of sales and inventories. B) The growth rates of sales, accounts receivables, and the allowance fro doubtful accounts, as well as the percentage of the allowance account relative to the total or gross accounts receivable. C) The common-size balance sheet D) The growth rates of all assets and liabilities.
B) The growth rates of sales, accounts receivables, and the allowance fro doubtful accounts, as well as the percentage of the allowance account relative to the total or gross accounts receivable.
Which method of calculating cash flow from operations requires the adjustment of net income for deferrals, accruals, non cash, and non operating expense? A) The direct method B) The indirect method C) The inflow method D) The outflow method
B) The indirect method
What accounts can be found on a statement of stockholders' equity? A) Investments in other companies B) Treasury stock, accumulated and other comprehensive income, and retained earnings C) Market value of treasury stock D) Both (A) and (B)
B) Treasury stock, accumulated and other comprehensive income, and retained earnings
Which method of inventory is generally thought to produce the highest quality of earnings? A) FIFO B)LIFO C) Average cost D) All of the above
B)LIFO
Which of the following would be classified as long-term debt? A) Mortgages, current maturities of long-term debt, bonds B)Mortgages, long-term notes payable, bonds due in ten years C) Accounts payable, bonds, obligations under leases D) Accounts payable, long-term notes payable, long-term warranties
B)Mortgages, long-term notes payable, bonds due in ten years
What information cannot be found in the notes to the financial statements regarding income taxes? A) A reconciliation of the U.S. federal statutory tax rate to the company's effective tax rate B) Year-to-year changes in deferred tax accounts C) A reconciliation of any foreign statuary tax rate to the company's effective tax rate D) All of the above
C) A reconciliation of any foreign statuary tax rate to the company's effective tax rate
What does Section 404 of the Sarbanes-Oxley Act of 2002 require? A) A ten-year jail sentence and $1million fine for violations of the act B)Rotation of audit partners every 5 years C)A statement but the company regarding the effectiveness of internal control and a disclosure of any material weakness in a firm's internal control system. D) Auditor independence, which prohibits audit firms from offering any services other than audit services.
C) A statement by the company regarding the effectiveness of internal controls and a disclosure of any material weakness in a firm's internal control system.
What is a common size balance sheet? A) A statement that expresses each account on the balance sheet as a percentage of net income. B) A statement that is common to an industry. C) A statement that expresses each account on the balance sheet as a percentage of total assets. D) A statement that expresses each asset account on the balance sheet as a percentage of total assets and each liability account on the balance sheet as a percentage of total liabilities
C) A statement that expresses each account on the balance sheet as a percentage of total assets.
What is a common-size income statement? A) An income statement that provides intermediate profit measures B) An income statement that groups all items of revenue together, then deducts all categories of expense C) A statement that expresses each item on an income statement as a period D) An income statement that includes all changes of equity during a period
C) A statement that expresses each item on an income statement as a period
What does the retained earnings account measure? A) Cash held by the company since its inception B) Payments made to shareholders in the form of cash or stock dividends C) All undisturbed earnings D) Financial resources currently available to satisfy financial obligations.
C) All undisturbed earnings
Which of the following statements is false? A) A negative cash flow can occur in a year in which net income is positive B) An increase in accounts receivable represents accounts not yet collected in cash C) An increase in accounts payable represents accounts not yet collected in cash D) To obtain cash flow from operations, the reported net income must be adjusted
C) An increase in accounts payable represents accounts not yet collected in cash
How is goodwill evaluated? A) Goodwill must be amortized over a 40-year period B) Goodwill should be written up each year C) Companies should determine whether goodwill has lost value, and if so, the loss in value should be written off as an impairment expense. D) Goodwill is to be written off at the end of the tenth year.
C) Companies should determine whether goodwill has lost value, and if so, the loss in value should be written off as an impairment expense.
Which of the following organizations write accounting rules? A) FASB and Congress B) EDGAR and IASB C) FASB, SEC, and IASB D) SOX, SEC, and IASB
C) FASB, SEC, and IASB
What type of accounts are notes payable and current maturities of long-term debt? A) Cash accounts B) Operating accounts C) Financing accounts D) Investing accounts
C) Financing accounts
Which of the following statements is false? A) The straight-line method of depreciation is lower in quality than other methods, in most cases, because it does not reflect the economic reality of product usefulness B) Poor quality of financial reporting results when firms misclassify operating expenses as capital expenditures C) Firms must follow the schedule prescribed by the FASB for determining the lives of long-lived assets D) Analysts can learn about the deprecation policy a firm by reading the notes to the financial statements
C) Firms must follow the schedule prescribed by the FASB for determining the lives of long-lived assets
What are three profit measures calculated from the income statement? A) Operating profit margin, net profit margin, repairs and maintenance to fixed assets B) Gross Profit margin, cost of goods sold percentage, EBIT C) Gross profit margin operating profit margin, net profit margin D) None of the above
C) Gross profit margin operating profit margin, net profit margin
How would the sale of a building be classified? A) Operating outflow B) Operating inflow C) Investing inflow D) Financing inflow
C) Investing inflow
What is a statement of stockholders' equity? A) It is the same as retained earnings statement B) It is a statement that reconciles only the treasury stock account C) It is a statement that summarizes changes in the entire stockholders' equity section of the balance sheet D) It is a statement reconciling the difference between stock issued at par value and stock issued at market value
C) It is a statement that summarizes changes in the entire stockholders' equity section of the balance sheet
Why would a company switch to the LIFO method of inventory valuation? A) By switching to LIFO reported earnings will be higher. B) A new tax law requires, companies using LIFO for reporting purposes also to use LIFO for figuring taxable income. C) LIFO produces the largest cost of good sold expense in a period of inflation and thereby lowers taxable income and taxes D) A survey by Accounting Trends and Techniques revealed that the switch to LIFO is a current accounting "fad."
C) LIFO produces the largest cost of good sold expense in a period of inflation and thereby lowers taxable income and taxes
What are three major cost flow assumptions used by the U.S. companies in valuing inventory? A) LIFO, FIFO, average market B) LIFO, FIFO, actual cost C) LIFO, FIFO, average cost D) LIFO, FIFO, double-declining balance
C) LIFO, FIFO, average cost
Which of the following assets will not be depreciated over its service of life? A) Buildings B) Furniture C) Land D) Equipment
C) Land
The change in retained earnings is affected by which of the following? A) Net income and common stock B) Net income and paid-in capital C) Net income and payment of dividends D) Payment of dividends and common stock
C) Net income and payment of dividends
When should revenue be recognized, assuming generally accepted accounting principles are followed? A) Revenue should be recognized when cash is collected from customer B) Revenue should be recognized based on the company's individual policy C) Revenue should be recognized when delivery of products or title of those products has passed to the buyer or services have been rendered and the price has been determined with the expectation of collection D) Revenue should be recognized when a contract has been signed that details the date and time that that the product will be delivered or the shrives rendered and the price has been determined
C) Revenue should be recognized when delivery of products or title of those products has passed to the buyer or services have been rendered and the price has been determined with the expectation of collection
Which of the following items could cause the recognition of accrued liabilities? A) Sales, interest expense, rent B) Sales, taxes, interest income C) Salaries, rent, insurance D) Salaries, interest expense, interest income
C) Salaries, rent, insurance
Which of the following statements is false? A) If a firm uses operating leases extensively, the analyst should investigate the impact of those leases on leverage ratios B)The analyst should rad the "Commitments and Contingencies" disclosures to learn of any off-balance-sheet financing or other complex financing arrangements C) The analyst should assess whether the right type of debt is used to finance assets (I.e., short-term debt is used to finance long-term assets and long-term debt s used to finance current assets). D) The analyst should determine the significance of any legal proceedings
C) The analyst should assess whether the right type of debt is used to finance assets (I.e., short-term debt is used to finance long-term assets and long-term debt s used to finance current assets).
An outflow of cash would result from which of the following? A) The decrease in an asset account than cash B) The increase in liability account C) The decrease in liability account D) The increase in equity account
C) The decrease in liability account
How should the effects of a base LIFO layer liquidation (assuming inflation) be handled for purposes of considering the future, ongoing potential of a company? A) The effects of a base LIFO later liquidation should be added back to net income B) The effects of a base LIFO layer liquidation should be dented from cost of goods sold C) The effects of a base LIFO layer liquidation should be excluded from the reported earnings D) The effects of a base LIFO layer liquidation are irrelevant and should be ignored
C) The effects of a base LIFO layer liquidation should be excluded from the reported earnings
What does the income statement measure for a firm? A) The changes in assets and liabilities that occurred during the period B) The financing and investment activities for a period C) The results of operations for a period D) The financial position of a firm for a period
C) The results of operations for a period
Which statement is true for gains and losses from capital asset sales? A) They do not affect cash and are excluded from the statement of cash flows B) They are included in cash flows from operating activities C) They are included in cash flows from investing activities D) That are included in cash flows from financing activities
C) They are included in cash flows from investing activities
What information can be found in a proxy statement? A) Information on voting procedures B) Information on Executive Compensation C)Information on the Breakdown of Audit and Non Audit Fees Paid to the Audit Firm D)All of the Above
D) All of the Above
What items are included in the notes to the financial statements? A) Summary of accounting policies B) Changes in accounting polices, if any C) Detail about particular accounts D) All of the above.
D) All of the Above
What subject(s) should the management discussion and analysis section discuss? A) Liquidity B) Commitments for Capital Expenditures C) A Breakdown of Sales Increases into Price and Volume Components D) All of the Above
D) All of the Above
How are companies required to report total comprehensive income? A) On the face of the income statement B)In a separate statement of comprehensive income C) In its statement of stockholders' equity D) All of the above
D) All of the above
Which of the following are methods by which management can manipulate earnings and possibly lower the quality of reported earnings. A) Changing and accounting policy to increase earnings B) Refusing to take a loss on inventory in and accounting period when inventory is known to be obsolete C) Decreasing discretionary expenses D) All of the above
D) All of the above
Which of the following cause(s) a change in the retained earnings account balance? A) Prior period adjustment B) Payment of dividends C) Net profit or loss D) All of the above
D) All of the above
Which of the following current assets is included in the adjustment of net income to obtain cash flow from operating activities? A) Accounts receivable B) Inventory C) Prepaid expenses D) All of the above
D) All of the above
Which of the following items is included in the adjustment of net income to obtain cash flow from operating activities? A) Deprecation expense for the period B) The change in deferred taxes C) The amount by which equity income recognized exceeds cash received D) All of the above
D) All of the above
Which of the following items should be reordered as other comprehensive income? A) Foreign currency translation effects B) Extraordinary gains and losses C) Realized gains and losses D) All of the above
D) All of the above
Why has cash flow from operations become increasingly important as an analytical tool? A) Inflation has distorted the meaningfulness of net income B) High interest rates can put the cost of borrowing to cover short-term cash needs out of reach for many firms C) Firms may have uncollected accounts receivable and unsalable inventory on the books D) All of the above
D) All of the above
Why would a firm repurchase its own common stock? A) The firm believes its stock is undervalued and purchases it as an investment B) The firm purchases stock to be used in employee stock option programs C) The firm is trying to reduce the number of shares outstanding in order to boost the earnings per share amount D) All of the above
D) All of the above
What are the basic financial statements provided in an annual report? A) Balace sheet and income statement B) Statement of financial earnings and statement of stockholders' equity C) Balance sheet, income statement, and statement of cash flows. D) Balance sheet, income statement, and statement of cash flows, and statement of stockholders' equity
D) Balance Sheet, Income Statement, Statement of Cash Flows, and Stockholders' equity.
How are costs of assets that benefit a firm for more than one year allocated? A) Deprecation B) Depletion and amortization C) Costs are dived by service lives of assets and allocated to repairs and maintenance D) Both (A) and (B)
D) Both (A) and (B)
Which of the following expenses are usually considered to be discretionary? A) Research and development B) Advertising C) Depreciation D) Both (A) and (B)
D) Both (A) and (B)
If discontinued operations have been sold, what must be recorded on the income statement? A) The gain or loss from operations of the division up to the time of sale, net of tax B)The amount that the buyer paid for the discounted operations C) The gain or loss from the sale of discontinued operations, net of tax D) Both (A) and (C)
D) Both (A) and (C)
Which of the following current liabilities is included in the adjustment of expenses to obtain cash flow from operating activities? A) Accounts payable B) Notes payable and current maturities of long-term debt C) Accrued liabilities D) Both (A) and (C)
D) Both (A) and (C)
What are the external sources of cash? A) Cash inflows from operating activities B) Cash inflows from investing activities C) Cash inflows from financing activities D) Both (B) and (C)
D) Both (B) and (C)
What is accrual basis accounting? A) Recognition of revenue when it is received in cash B) Recognition of revenue in the accounting period when the sales is made rather than when cash is received. C) Matching expenses with revenue in the appropriate accounting period D) Both (B) and (C)
D) Both (B) and (C)
What accounts are most likely to be found in the stockholders' equity section of the balance sheet? A) Common stock, long-term debt, preferred stock B) Common stock, additional paid-in capital, liabilities C) Common stock, retained earnings, dividends payable D) Common stock, additional paid-in capital, retained earnings.
D) Common stock, additional paid-in capital, retained earnings.
What do current liabilities and current assets have in common? A) Current assets are claims against current liabilities B) If current assets increase, then there will be a corresponding increase in current liabilities C) Current liabilities and current assets are converted into cash D) Current liabilities and current assets are those items that will be satisfied and converted to cash, respectively, in one year or one operating cycle, whichever is longer
D) Current liabilities and current assets are those items that will be satisfied and converted to cash, respectively, in one year or one operating cycle, whichever is longer
How would the repayment of debt principal be classified? A) Operating outflow B) Operating inflow C) Investing inflow D) Financing inflow
D) Financing inflow
Where can information about sales price and volume changes be found? A) On the face of the income statement B) In the notes to the financial statements C) On the balance sheet D) In the management's discussion and analysis
D) In the management's discussion and analysis
Where can one most typically find the cost flow assumption used for inventory valuation for a specific company? A) In The Risk Management Association, Annual Statement Studies. B) In the statement of retained earnings C) On the face of the balance sheet with the total current asset amount D) In the notes of the financial statements
D) In the notes of the financial statements
Why should the expenditures for repairs and maintenance correspond to the level of investment in capital equipment and to the age and condition of that equipment? A) Repairs and maintenance expense is calculated in the same manner as depreciation expense B) Repairs and maintenance are deprecated over the remaining life of the assets involved C) It is a generally accepted principle that repairs and maintenance expense is generally between 5% and 10% of fixed assets D) Inadequate repairs of equipment can impair the operating success of a business enterprise
D) Inadequate repairs of equipment can impair the operating success of a business enterprise
Why should an individual learn to read and interpret financial statements? A) Understanding financial statements will guarantee at least a 20% return on investments. B) An individual need not learn to read and interpret financial statements because auditors offer a report indicating whether the company is financially sound or not. C) Learning to read and interpret financial statements will enable individuals to gain employment. D) Individuals cannot necessarily rely on auditors and management of firms to offer honest information about the financial well-being of firms.
D) Individuals cannot necessarily rely on auditors and management of firms to offer honest information about the financial well-being of firms.
The statement of cash flows segregates cash inflows and outflows by: A) Operating and financial activities B) Financing and investing activities C) Operating and investing activities D) Operating, financing, and investing activities
D) Operating, financing, and investing activities
Which information is hard to find or missing from the financial statements? A) Total Long-term debt B) Net Income C) Five-Year Summary of Selected Financial Data D) Reputation of the Firm with its Customers
D) Reputation of the Firm with its Customers
Which of the following is not classified as a non operating revenue or expense? A) Interest income B) Equity income or loss C) Gains or losses on the sales of assets D) Salaries expense
D) Salaries expense
Which statement is false? A) Deferred taxes are the product of temporary differences in the recognition of revenue and expense for taxable income relative to reported income B) Deferred taxes arise from he use of the same method of depreciation for tax and reporting purposes C) Deferred taxes arise when taxes actually paid are less than tax expense reported in the financial statements D) Temporary differences causing the recognition of deferred taxes may arise from the methods used to account for items such as depreciation, installment sales, leases, and pensions
D) Temporary differences causing the recognition of deferred taxes may arise from the methods used to account for items such as depreciation, installment sales, leases, and pensions
What does the additional paid-in capital account represent? A) The difference between the par and the stated value of common stock B) The price changes that result for stock trading subsequent to its original issue C) The market price of all common issued stock D) The amount by which the original sales price of stock exceeds the par value
D) The amount by which the original sales price of stock exceeds the par value
Why is the method of valuing inventory important? A) Inventory valuation is based on the actual flow of goods. B) Inventories always account for more than 50% of totally assets and therefore have a considerable impact on company's financial position. C) Companies desire to use the inventory valuation method that minimizes the cost of good sold expense. D) The inventory valuation method chosen determines the value of inventory on the balance sheet and the cost of goods sold expense on the income statement, two items having considerable impact on the financial position of a company.
D) The inventory valuation method chosen determines the value of inventory on the balance sheet and the cost of goods sold expense on the income statement, two items having considerable impact on the financial position of a company.
When is a dual presentation of basic and diluted earnings per share required? A) When a company has pension liabilities B) When convertible securities are in fact converted C) When a company has a simple capital structure D) When a company has a complex capital structure
D) When a company has a complex capital structure
Which of the following statements is incorrect with regard to gross profit or gross profit margin? A) The gross profit margin and the cost of goods sold percentage are complements of each other B) Generally, firms want to maintain the relationship between gross profit and sales, or, if possible, increase gross profit margin C) The gross profit margin tends to be more stable in industries such as groceries D) When cost of goods sold increases, most firms do not raise prices.
D) When cost of goods sold increases, most firms do not raise prices.
