Financial 1 - Exam 1

c

A ratio used to measure liquidity is the..? a. earnings per share ratio b. price to earnings c. quick ratio d. debt to equity ratio

d

A situation that requires an adjusting entry that is not a prepayment or an accrual entry is..? a. collecting cash from customers b. paying suppliers on account c. closing the accounts at year-end d. estimating bad debt

a

A temporary investment or short-term marketable security should be reported in which section of the balance sheet?

periodic

A temporary purchases account is used when the _______________ inventory system is used

a and b

Adjusting journal entries are needed to record (Select all that apply). a. Revenue earned, but not yet received b. Expense incurred, but not yet paid c. Cash that has been collected from customers d. Cash that has been paid for expenses

a

An account that is used for instructional purposes instead of drawing a formal general ledger account is referred to as a(n) __________________ a. T-account b. dual account c. general account d. bank account

a

Another term for equity is: a. Net assets b. Retained earnings c. Revenue less expenses d. total assets

a

Any information useful to decision makers should be provided in the financial statement, subject to the cost effectiveness constraint. This describes which accounting principle? a. full-disclosure principle b. historical cost principle c. Realization principle d. Matching principle

a

Applies to initial offerings of securities such as stocks or bonds a. 1933 securities act b. 1934 securities exchange act

b

Applies to secondary market transactions. Mandates reporting for publicly traded companies. a. 1933 securities act b. 1934 securities exchange act

a, b, c

Cash flows are classified on the statement of cash flows as: (Select all that apply) a. financing b. operating c. investing d. non-operating

a

Cash set aside for future plant expansion and a 3 year note receivable are both examples of what on a company's balance sheet? a. Investments b. Intangible assets c. PPE d. Other assets

prepaid expenses

Costs of assets acquired in one accounting period and expensed in a future accounting period are...?

conceptual framework

Described as an "accounting constitution," provides an underlying foundation for US accounting standards

b

Economic events cause changes in the: a. cash position of a company b. financial position of a company c. operating activities of a company d. operating results of a company

EITF (Emerging Issues Task Force)

Identifies financial reporting issues and attempts to resolve them without involving the FASB (usually implementation issues)

economic entity

If a company pays the mortgage on the home of its CEO, and the company charges the expenditure to misc expense, its an example of which underlying assumption?

c

Inflows and outflows of cash related to transactions that impact net income are: a. Financing activities b. Investing activities c. Operating activities

a, b, d

Majerek Company accrues salaries at year-end. What is the financial statement of this adjusting entry? Select all that apply. a. Net income is decreased b. Retained earnings is decreased c. Assets are decreased d. Expense is increased

IASB

Purpose is to develop a single set of high-quality, understandable, and enforceable global accounting standards

FASB

Sets US accounting standards, 7 members, supported by Financial Accounting Foundation (FAF)

b and c

Short-term investments are sometimes called which of the following? Select all that apply. a. Primary investments b. Short-term marketable securities c. Temporary investments d. Non-marketable securities

Norwalk Agreement

Signed by FASB and IASB in 2002, they pledged to remove existing differences between their standards and to coordinate their future standard-setting agendas

c

The ability to pay its long-term debts as they become due is referred to as _____________ of the company a. working capital b. liquidity c. solvency

c

The management approach to segment reporting requires that _________ financial info is available a. accrual-based b. complete c. discrete d. monthly

FASB ASC

The only source of authoritative nongovernmental US GAAP

true

True or false? A liability is a present obligation.

true

True or false? Accounts receivable is a quick asset, but inventory is not

false

True or false? Accrued salaries payable are classified as long-term liabilities

false (cash equivalents)

True or false? Cashier's checks payable on demand are considered cash equivalents.

true

True or false? EITF rulings are ratified by the FASB and are considered a part of GAAP

true

True or false? Natural resources are included in PPE

true

True or false? Noncurrent investments that are immaterial must be disclosed in other long-term assets on the balance sheet.

false (less, not plus)

True or false? Retained earnings equals net income plus distributions to shareholders

false

True or false? Support calculations for income taxes are included in the summary of significant accounting policies included in the notes to the financial statements.

true

True or false? WIP and raw materials are included in inventory

b and d

Which of the following accounts represents amounts shareholders have invested in the company? Select all that apply. a. accumulated other comprehensive income b. Common stock c. Retained earnings d. Additional PIC

a and c

Abbey is preparing the closing journal entries for the year. To close the revenue accounts, Abbey should? Select all that apply a. credit income summary b. credit revenue c. debit revenue d. debit income summary

a

Bear Corp. has $100,000 cash in the bank restricted to repay a note payable that matures in 2 years. How should this $100,000 be reported? a. As restricted cash in the long-term section of the balance sheet b. As cash in the current asset section of the balance sheet c. As cash and cash equivalents on the balance sheet d. As part of the stockholders' equity on the balance sheetq

SEC

Created by Congress in 1929 in response to the stock market crash. Its goal is to restore investor confidence

retained earnings

The accumulated net income earned since the inception of the corporation and not yet paid to shareholders is referred to as ____________________ __________________

c

The changes during the period to common stock and retained earnings is reports on the: a. balance sheet b. income statement c. statement of shareholders' equity d. statement of cash flows

b and d

The components of the income statement are usually classified as: (Select all that apply) a. investing items b. operating items c. financing items d. non-operating items

transaction analysis

The process of reviewing the source documents to determine the dual effect on the accounting equation and the specific elements involved is called...?

c

The purpose of the statement of comprehensive income is to report current period changes in equity that arose from a. internal transactions b. customers c. non-owner transactions d. owner transactions

operational

The risk that a company may not effectively manage its business and might impair its ability to earn profits is known as _________________ risk

c

The type of analysis that examines the relationship of items on the financial statements of one year is called... a. horizontal analysis b. perpendicular analysis c. vertical analysis

b and d

What is included in a company's paid in capital? Select all that apply. a. RE b. additional PIC c. Comprehensive income d. Common stock

b

What refers to the riskiness of a company with regard to the amount of liabilities in its capital structure? a. Cash flow risk b. Long-term solvency c. Liquidity

a and d

Which accounts are found on the statement of shareholders' equity? Select all that apply. a. common stock b. gain on sale of equipment c. accounts receivable d. retained earnings

a and c

Which formats are acceptable for reporting comprehensive income? Select all that apply. a. Two separate but consecutive statements b. A single statement included in the shareholders' equity statement c. A single, continuous statement of comprehensive income

b, c, d,

Which of the following are accrued liabilities? Select all that apply. a. Notes payable b. Salaries payable c. Interest payable d. Warranty liabilities e. Bonds payable

a, c, d

Which of the following are cash inflows from investing activities? Select all that apply. a. sale of building b. sale of long-term investment c. purchase of land d. collection from customers

b, c, d

Which of the following are characteristics of an operating segment? Select all that apply. a. It is within the same geographic location as the company b. It engages in business to earn revenues and incur expenses c. Discrete financial info is available d. Its operating results are regularly reviewed by the chief operating decision maker

b and c

Which of the following are economic events? Select all that apply. a. A proposal to purchase $1,000 of inventory from supplier b. The payment of employee salaries for the week c. Borrowing $10,000 from the bank

a, b, c

Which of the following are likely example of a related-party transaction? a. Selling goods to affiliated companies b. Loaning money to officers and directors c. Borrowing or lending money at an unusually low interest rate to an affiliated company d. Purchasing goods from independent suppliers

b, d, e

Which of the following are permanent accounts? (Select all that apply.) a. COGS b. equipment c. revenue d. common stock e. cash

a and d

Which of the following describe long-term liabilities? (Select all that apply.) a. They do not require the creation of current liabilities for payment b. They require the use of current assets c. They require the creation of current liabilities for payment d. They do not require the use of current assets

b

Which of the following is included with the annual report to help evaluate a firm's financial performance and financial health? a. Press releases b. Note disclosures c. Proxy statements d. Marketing data

b and c

Which of the following items are included in the professional opinions given in the auditor's report? Select all that apply. a. The effectiveness of management strategy b. The fairness of the financial statements c. The effectiveness of internal control. d. The accuracy of the financial statements

a, c, d

Which of the following items requires supplemental disclosures in the notes to the financial statements? a. long-term debt b. items that are immaterial c. pension plans d. leases

c and d

Which of the following items should be disclosed in other long-term assets on the balance sheet? Select all that apply. a. goodwill from a business acquisition b. intangible assets used in the business c. Noncurrent investments that are not material d. Long-term prepaid expenses

b and e

Which of the following make up shareholders' equity? Select all that apply. a. assets purchased by the corporation b. amounts earned by the corporation c. liabilities owed by the corporation d. assets owned by the shareholders e. amounts invested by shareholders

b and d

Which of the following ratios are used to evaluate a company's ability to pay long-term debts? Select all that apply. a. Cash flow per share ratio b. Times interest earned ratio c. Current ratio d. Debt to equity ratio

b

Which of the following represents the net income earned by a corporation and not yet paid to shareholders? a. additional PIC b. RE c. Other comprehensive income d. PIC

a

Which statement reports the changes in shareholders' equity during the period that were not a result of transactions by owners? a. The statement of comprehensive income b. The statement of cash flows c. Income statement d. Balance sheet

c

Which type of analysis is used to determine if the company can pay its short-term debts as they come due? a. Currency analysis b. Solvency analysis c. Liquidity analysis d. Default analysis

a

Which type of analysis uses ratios to analyze the financial statements of 2 or more years? a. horizontal analysis b. perpendicular analysis c. vertical analysis