Accounting

Dividends become a liability...

on the date of declaration.

Which ONE of the following statements is TRUE?

"Revenue" is a measure of economic value created.

Compute NUMBER OF DAYS' SALES IN ACCOUNTS RECEIVABLE

365/(Sales/Accounts Receivable)

Which ONE of the following is NOT one of the factors that can reduce comparability among financial statements?

A company reports both net income AND retained earnings.

Which ONE of the following is NOT a characteristic of DEBT financing?

A right to have a say in the affairs of the business

How does Wal-Mart finance most of its inventory purchases?

Accounts Payable

Which ONE of the following is NOT one of the issues of concern to Larson Company (the company receiving investor financing in our in-class example) when deciding whether the $100,000 investment should be a loan or an ownership investment?

Are there any existing deferred tax liabilities?

All of the following in the judgment hierarchy are inside the company EXCEPT for

Auditor

Which ONE of the following statements BEST describes BERKSHIRE HATHAWAY?

Berkshire Hathaway is a large company that owns a controlling interest in many operating subsidiaries and also owns smaller investments in a number of large corporations.

Which ONE of the following statements is FALSE with respect to the differences among proprietorships, partnerships, and corporations?

Both a partnership and a corporation separate business liability from personal liability.

Which of the following is an example of a "wide" dispersion of experts' estimates

Brand Name

Which ONE of the following is NOT one of the three basic kinds of businesses described in the first Software lesson?

Capital (Service, Merchandising, Manufacturing)

Which ONE of the following was a CONSEQUENCE of the GM Jobs Bank?

Converted a variable cost into a fixed cost

Compute CURRENT RATIO

Current Assets/Current Liabilities

Which ONE of the following statements correctly identifies the two ways for an owner to make a profit on an investment?

Dividends and capital gains

Which ONE of the following companies is most likely to have the largest amount of DEPRECIATION?

Exxon Mobil A company with lots of property, plant, and equipment, such as Exxon Mobil or General Motors, reports a large amount of annual depreciation.

Which ONE of the following is TRUE regarding the DuPont framework comparison of Wal-Mart and Google?

Google's efficiency is lower than Wal-Mart's efficiency.

Which ONE of the following is more true of MANAGERIAL accounting systems than it is of FINANCIAL accounting systems?

Have substantial competitive value.

Which ONE of the following statements is FALSE?

In times of DEFLATION, AVERAGE COST results in the highest ending INVENTORY. (In times of steady inflation or deflation, the average cost values typically fall between the FIFO and the LIFO values.)

Which ONE of the following is a BETTER description of managerial accounting than it is of financial accounting?

Includes budgets and forecasts

Compute NUMBER OF DAYS' SALES IN INVENTORY

Inventory/Cost of Goods Sold * 365

Compute P/E RATIO

Market Value/Net income

Which ONE of the following is the BEST description of "internal controls"?

Policies and procedures implemented by a business that are designed to safeguard assets and ensure accurate accounting records.

Which ONE of the following sequences is the CORRECT sequence for the flow of materials costs through a production process?

Raw materials inventory, work-in-process inventory, finished goods inventory, cost of goods sold

All of the following are part of the definition of an Asset EXCEPT for

Result of a future transaction

Which ONE of the following is NOT one of the three basic tax planning strategies?

Shift income from one financial statement to another

Compute BOOK VALUE PER SHARE

Stockholder's Equity/Number of Shares

According to our discussion in class, which ONE of the following is the FINAL step in diagnosing a company's problems?

Talk to people.

In a corporation, who hires the top management personnel?

The Board of Directors

Which ONE of the following is TRUE with respect to P/E ratio?

The P/E ratio serves as an index of the investor's expectations of a company's earnings potential in the future.

What is the danger in focusing a financial analysis solely on the data found in the historical financial statements?

The analysis might ignore current-year data

Which ONE of the following statements BEST describes the ENTITY CONCEPT as it applies to a small sole proprietorship?

The balance sheet should contain the assets and liabilities of the business operations themselves and should not include any personal assets or obligations.

Which ONE of the following statements is the BEST description of "retained earnings"?

The cumulative amount of net income kept in the business for expansion.

Compute DEBT-TO-EQUITY RATIO

Total Liabilities/Stockholder's Equity

Compute DEBT RATIO

Total Liabilities/Total Assets

Which ONE of the following companies has recorded in its balance sheet a large liability that relates to services for which customers have paid but that the company has not yet delivered?

United Airlines

For which ONE of the following is COST OF GOODS SOLD most likely to be the largest expense?

Wal-Mart A retail merchandising company, such as Wal-Mart or Home Depot, has a very large amount of Cost of Goods Sold.

Which ONE of the following companies is most likely to have the largest amount of bad debt expense?

Zions Bank