ACCT 115 Final
Net income results when
Revenues > Expenses
(T or F) A corporation can be organized for the purpose of making profit or it may be nonprofit
True
(T or F) A liability is classified as a current liability if it is to be paid within the coming year
True
(T or F) A manufacturer's inventory consists of raw materials, work in process, and finished goods
True
(T or F) Accounting communicates financial information about a business to both internal and external users
True
(T or F) All publicly traded U.S. companies must provide their stockholders with an annual report each year
True
(T or F) Assets are resources owned by a business and provide future services or benefits to the business
True
(T or F) Consigned goods are held for sale by one party although ownership of the goods is retained by another party
True
(T or F) Consistent use of the same accounting principles and methods is necessary for meaningful analysis of trends within a company
True
(T or F) Earnings per share measures the net income earned on each share of common stock
True
(T or F) Generally accepted accounting principles are rules and practices that are recognized as a general guide for financial reporting purposes
True
(T or F) Intangible assets are rights, privileges, and competitive advantages that result from ownership of long-lived assets without physical substance
True
(T or F) Inventory methods such as FIFO and LIFO deal more with flow of costs than with flow of goods
True
(T or F) Liquidity ratios measure the short-term ability of a company to pay its maturing obligations and meet unexpected needs for cash
True
(T or F) Net sales minus cost of goods sold is called gross profit
True
(T or F) Paid-in capital is the amount paid in to the corporation by stockholders in exchange for shares in ownership
True
(T or F) Preferred stockholders generally do not have the right to vote for the board of directors
True
(T or F) Profitability ratios measure the operating success of a company for a given period of time
True
(T or F) Stockholders' equity is divided into two parts: common stock and retained earnings
True
(T or F) The debt to assets ratio measures the percentage of assets financed by creditors
True
(T or F) The liability of a stockholder is usually limited to the stockholders' investment in the corporation
True
(T or F) The multiple-step income statement is considered more useful than the single-step income statement because it highlights the components of net income
True
(T or F) The number of common shares outstanding can never be greater than the number of shares issued
True
(T or F) The operating cycle involves the purchase and sale of merchandise inventory as well as the subsequent collection of cash from credit sales
True
(T or F) The primary purpose of the statement of cash flows is to provide information about the cash receipts and cash payments of a company for a specific period of time
True
(T or F) The tax laws can be a significant disadvantage of the corporate form of business
True
(T or F) Under a periodic inventory system, the merchandise on hand at the end of the period is determined by a physical count of the inventory
True
Treasury stock is
a corporation's own stock, which has been reacquired and held for future use
The right to receive money in the future is called a(n)
account receivable
In computing depreciation, salvage value is
an estimate of a plant asset's value at the end of its useful life
Generally accepted accounting principles
are accounting rules that are recognized as a general guide for financial reporting
Liabilities
are debts and obligations
Resources owned by a business are referred to as
assets
A balance sheet shows
assets, liabilities, and stockholders equity
Common stock is reported on the
balance sheet
Which of the following financial statements is concerned with the company at a point in time
balance sheet
Multiple-step income statements show
both income from operations and gross profit
Stockholders' equity is comprised of
common stock and retained earnings
A company using the same accounting principles from year to year is an application of
consistency
A business organized as a separate legal entity is a
corporation
Gross profit for a merchandising company is net sales minus
cost of goods sold
The current ratio is
current assets divided by current liabilities
Working capital is calculated by taking
current assets minus current liabilities
In a classified balance sheet, assets are usually classified as
current assets; long-term investments; property, plant, and equipment; and intangible assets
Liabilities are generally classified on a balance sheet as
current liabilities and long-term liabilities
Which of the following methods will result in the highest depreciation in the first year
declining-balance
The term applied to the periodic expiration of a plant asset's cost is
depreciation
The primary difference between a periodic and perpetual inventory system is that a periodic system
determines the inventory on hand only at the end of the accounting period
Payments to stockholders are called
dividends
All of the following are normally found in a corporation's stockholders' equity section except
dividends in arrears
In a perpetual inventory system, cost of goods sold is recorded
each time a sale occurs
A current asset is
expected to be converted to cash or used in the business within a relatively short period of time
Borrowing money is an example of a(n)
financing activity
Sales revenue less cost of goods sold is called
gross profit
On a classified balance sheet, companies usually list current assets
in the order in which they are expected to be converted into cash
Trademarks would appear in which balance sheet section
intangible assets
Which activities involve acquiring the resources/assets to operate the business
investing
Which of the following is not one of the three forms of business organization
investors
Par value
is the value assigned per share in the corporate character
Working capital is a measure of
liquidity
The group of users of accounting information charged with achieving the goals of the business is its
managers
Dividends in arrears on cumulative preferred stock
must be paid before common stockholders can receive a dividend
After gross profit is calculated, operating expenses are deducted to determine
net income
The gross profit rate is computed by dividing gross profit by
net sales
Which activities involve putting the resources of the business into action to generate a profit
operating
An income statement
presents the revenues and expenses for a specific period of time
Earnings per share is a
profitability ratio
Ratios that measure the income or operating success of a company for a given period of time are
profitability ratios
The two ways that a corporation can be classified by ownership are
publicly held and privately held
Dividends are reported on the
retained earnings statement
An income statement shows
revenues, expenses, and net income
Gross profit equals the difference between
sales revenue and cost of goods sold
The debt to assets ratio is a
solvency ratio
The retained earnings statement
summarizes the changes in retained earnings for a specific period of time
Retained earnings is
the amount of net income kept in the corporation for future use
The historical cost principle requires that when assets are acquired, they be recorded at
the amount paid for them
Stockholders of a corporation directly elect
the board of the directors
Which of the following financial statements is divided into major categories of operating, investing, and financial activities
the statement of cash flows
All of the following are needed for the computation of depreciation except
training costs of manufacturing personnel
Information presented in a clear and concise fashion so that users can comprehend its meaning is an application of
understandability
Which of the following is a measure of liquidity
working capital
(T or F) Owners of business firms are the only people who need accounting information
False
(T or F) Raw materials inventories are the goods that a manufacturing company has completed and are ready to be sold to customers
False
(T or F) Sales revenue minus operating expenses equals gross profit
False
(T or F) The asset turnover is calculated as net sales divided by ending total assets
False
(T or F) The basic accounting equation states that Assets = Liabilities
False
(T or F) The book value of a plant asset is always equal to its fair market value
False
(T or F) The book value of a plant asset is the amount originally paid for the asset less anticipated salvage value
False
(T or F) The declining-balance method of depreciation is called an accelerated depreciation method because it depreciates an asset in a shorter period of time than the asset's life
False
(T or F) The inventory turnover is calculated as cost of goods sold divided by ending inventory
False
(T or F) When the terms of sale are FOB shipping point, legal title to the goods remains with the seller until the goods reach the buyer
False
If total liabilities increased by $79000 and stockholders' equity increased by $35000 during a period of time, then total assets must change by what amount and direction during the same period
$114000 increase
A machine was purchased for $57000 and it was estimated to have a $6000 salvage value at the end of its useful life. Monthly depreciation expense of $829 was recorded using the straight-line method. The annual depreciation rate is
19.5%
If Kingbird, Inc. has net sales of $481000 and cost of goods sold of $348000, Kingbird gross profit rate is
28%
Windsor, Inc. had 160000 shares of common stock outstanding before a stock split occurred and 480000 shares outstanding after the stock split. The stock split was
3-for-1
The accounting equation may be expressed as
Assets = Liabilities + Stockholders' Equity
(T or F) A business organized as a separate legal entity owned by stockholders is a partnership
False
(T or F) External users of accounting information are managers who plan, organize, and run a business
False
(T or F) Franchises are classified as a plant asset
False
(T or F) If the ownership pf merchandise passes to the buyer when the seller ships the merchandise, the terms are stated as FOB destination
False