Business principles chap 8

Alexis decides to check with his accountant as to how much money his company owes to the raw materials supplier. To determine this, Alexis should ask the accountant to provide him with the company's balance sheet

True

Balance sheets usually classify assets into at least two major categories: current assets and property, plant, and equipment assets.

True

Common stock is a key owners' equity account for corporations.

True

Expenses such as insurance and advertising that have been cleared before they are due are known as prepaid expenses.

True

In the context of franchises, the term accounts receivable refers to money owed to a parent company by franchisees who bought its goods on credit.

True

Intangible assets are assets that have no physical existence—you can't see or touch them—but they still have value.

True

Inventory is an example of a current asset.

True

John and Elizabeth evaluate three telecommunication companies to determine the best company to invest in. A horizontal analysis will enable them to make comparisons of financial statements of the three companies over the past several years and help in the determination of the increase in their profits.

True

Public accountants provide services such as tax preparation, external auditing, or management consulting to clients on a fee basis.

True

The net income of a company is calculated by subtracting expenses from revenue

True

The _____ of a firm combines the revenue projections from the firm's sales budget and the cost projections from the firm's other operating budgets to present a forecast of expected net income.

budgeted income statement

Pastello, a bakery in New Jersey, needs to sell all the goods in its inventory before they perish. The bakery owners, Mark and Julia, plan to use the cash received from selling the goods to open a new outlet of Pastello in a different locality. In this scenario, the goods stored in Pastello's inventory represent its _____.

current assets

Aegirine Corp., a publicly traded firm based in New Mexico, manufactures iron. According to U.S. securities laws, the firm must:

let an independent CPA (Certified Public Accountant) firm perform an annual external audit of its financial statements.

In the context of accounting, which of the following best defines cost?

the value of what is given up in exchange for something else

The overstating of needs or setting low budget goals by managers in a budgeting process can result in _____.

Budgetary slack

A firm's operating budget represents the firm's overall plan of action for a specified time period.

False

Contingent expenses are costs that a firm incurs in the regular functioning of its business.

False

In order for CPA firms to perform audits with integrity, they must be tied to the firms they audit.

False

In the accounting equation, assets are equal to liabilities minus the owners' equity.

False

The Securities and Exchange Commission (SEC) bans publicly traded corporations from making comparative financial statements

False

The difference between a firm's revenue and its cost of goods sold is its accounts receivable.

False

The direct labor method of costing is a technique to assign product costs based on links between the daily tasks of a company that drive costs and the production of specific products.

False

The income statement is also known as the statement of financial position.

False

In the context of budget preparation, which of the following is an advantage of using bottom-up budgeting?

Middle managers are likely to be highly motivated to achieve budgetary goals.

In which of the following ways do public accountants differ from management accountants?

Public accountants conduct external audits, whereas management accountants analyze the financial statements of their own organization.