Business 1201 Chapter 15

Tim Jones is a C.P.A. with his own practice. A client asks for consulting services. Which of the following represents a key component of the Sarbanes-Oxley Act relating to consulting services?

Accounting firms are prohibited from providing many types of consulting services to the companies they audit.

Teri is applying for a job at an accounting office. As part of her interview for the position she has been asked to state the accounting equation. She correctly answers

Assets = liabilities + owners' equity

Merit is an accountant who keeps his clients' books according to GAAP. What does GAAP stand for?

Generally accepted accounting principles

______ is the total dollar amount of all goods and services sold during the accounting period.

Gross sales

Copyrights, trademarks, and patents are

Intangible assets

_____ provide the bulk of the data provided for a management information system.

Internal Sources

___ occurs when expenses exceed revenues.

Net Loss

____ is the value of a firm's stock plus any retained earnings that have accumulated to date.

Owners' equity

Tito's Tamarinds Restaurant had a total of $320,000 in expenses and $295,000 in revenues. Tito's had

a net loser of $25,000 for the year

Jenny bought a sweater at J.C.Penney and later returned it to the store for a refund. What would the sweater be called on J.C.Penney's books?

a sales return

Armando's Furniture buys its inventory on credit. Before Armando pays for this merchandise in 60 days, the amount owed is classified on its balance sheet as a(n)

account payable.

Larry Lawyer provides legal services for clients and bills them when he has completed his work. He normally gives them about 30 days to make the payments. The amounts of money his customers owe are called

accounts receivable

Larry's Lawn Service works out an agreement with its Internet provider that will give Larry's a 20 percent break on the cost of Internet service if Larry's prepays for a year of service. On Larry's books this prepaid expense would be classified as

an asset

Terry's Tire Shop is located in a building owned by the business. The building is a(n) ___ of the business.

asset

Tom is reviewing the balance sheet for his business. He notices that to be ordered correctly the accounts should be

assets, liabilities, owner's equity.

Ron and Don are studying for their accounting class exam. They have discovered that another name for the statement of financial position is the

balance sheet

Teri has been asked by the owner of the accounting office to prepare a "statement of financial position" for a client. Another name for this statement is

balance sheet

The proper order for information reported on the ____ is assets = liabilities + owners' equity.

balance sheet

All of the following can provide answers to a variety of questions about a firm's ability to do business and stay in business, its profitability, and its value as an investment except

bank statements

The _____ is a financial statement that provides information about a firm's operating, investing, and financial activities during an accounting period.

cash flow statement

On an income statement, the ____ is the remainder or residual value.

cash surplus

The normal reference to profit and loss for a business on its income statement is ___ and ___.

cash surplus; cash deficit

Assets and liabilities are presented in a specific order on the balance sheet. Which of the following presents assets in the correct balance sheet order?

cash, inventory, equipment

Inventory turnover is calculated by dividing the _____ by the average inventory.

cost of goods sold

The ____ ratio averages about 2.0 for all industries.

current

Jeremy owes $2,000 to his attorney and $500 to his accountant. He will pay off both of these debts, which on a balance sheet are classified as _____, in a year or less.

current liabilities

On Terry's Tire Shop books, the cost of the car lifts, which are fixed assets, will be spread over their useful life which is called

depreciation.

Leading audit firms must be changed ____ for public corporations.

every five years

Tito is reviewing the statement of cash flows for his business. This statement will provide him with all of the following information except

expenses during a particular accounting period.

Weiders C.P.A. develops statements and reports for the shareholders, financial analysts, and bankers of HJK Inc. These services can be classified as

financial accounting

A ____ shows a relationship between two elements of a company's financial statements.

financial ratio

If Facebook decided to issue new stock to expand its facilities, where would the receipt of cash from the sale appear on the statement of cash flows?

financing

The equipment racks built into the walls, the car lifts, and the outside business sign that will be used by the business for more than a year are considered ___ for Terry's Tire Shop.

fixed assets

In order to compare financial data in their annual reports, most corporations include important elements of their financial statements

for recent years

Timothy is the operations manager at Aristocrat, Inc. In his position he will need management information in all of the following areas except

future capitalization needs.

Jeremy, an employee of an advertising and marketing firm, is working on a new campaign for one of the firm's clients. He must choose between several potential ad pieces. To choose the best piece, he should

gather information from coworkers and consumers on their reaction to. the different ad pieces.

Tom Taxin, C.P.A., is auditing the books of a business. Audits are performed to ensure that financial statements have been prepared according to

generally accepted accounting principles.

Barry's Backhoe Corporation's account has prepared a(n) ___ for the company. It is a summary of the firm's revenues and expenses during a specified accounting period, such as a year.

income statement

The ___ is summarized in the formula: Revenues - cost of goods sold - expenses = net income.

income statement

The _____ is also called the earnings statement.

income statement

The ____ is the number of times a company sells and replaces its merchandise inventory in one year.

inventory turnover

Tommy's Burgers has several locations and determines that three are not profitable. Tommy's sells the facilities to a new business. The money Tommy's receives from this sale will be found in the ___ section of the statement of cash flows.

investing

Managers need different specific types of information which depend on their area of management and

level within the firm

Of the following, only ____ would not be a section of the income statement for a business.

liabilities

Terry's Tire Shop has debts. In accounting, debts are known as

liabilities

Westchester Mall has decided to expand the mall square footage. To do so it had to borrow money from a local bank. The debt owed to the banker is a(n)

liability.

Jonathan owns savings bonds, a certificate of deposit, stock, and an office building. The ease with which each of these can be converted into cash is referred to as its

liquidity

Kenny's Muffler Service will pay the mortgage off on its shop over a 20-year period. The majority of this mortgage will be classified on Kenny's balance sheet as a

long term liability

Jan's Jujitsu owes money for mats, light fixtures, bulletin boards, and white boards that Jan's will repay to the seller over a five-year period. On Jan's balance sheet these debts will be classified as

long-term liabilities

A ____ manager would be most concerned about the competitor's product offerings.

marketing

Dishes, luggage, clothing, golf clubs, and camping gear that Costco owns for selling to its customers are classified as

merchandise inventory

Every year Walmart used to open early and had hundreds of employees and temporary helpers count everything in the store. On a balance sheet the value of these goods is called

merchandise inventory

Teri is explaining the statement of financial positions to the firm's client. One of the things she will explain to the client is that on the asset side of the statement she has included

merchandise inventory

Bill graduated from college and obtained a job selling insurance. He later obtained a full-time job in accounting. At the end of his first year of employment, his assets, which included his car and some money in the bank, totaled $9,000 and his liabilities totaled $3,000, therefore, his ___ was $6,000.

net worth

Accountant Andy will include all of the following on the company's books as current assets except

office equipment.

Dean is calculating the ____ by subtracting the total liabilities from total assets.

owners' equity

Terry's Tires owner, Terry, has no accounting training and has three employees. He will most likely_____ to handle the necessary accounting for his business.

pay a public accountant

A ____ is an accountant who is the employee of the company he or she provides accounting services for.

private accountant

Bill is hired by Mike's Mufflers to help with determining the costs of the firm's muffler services, record transactions, and create financial statements. Bill is a

private accountant

Another name for return on sales is

profit margin.

Fred and Bernard start a rock quarry business. They each contribute $25,000 of capital to the business. After the first year of operation, the total owners' equity is listed as $70,000. Most likely, the additional $20,000 of owners' equity is

retained earnings.

Sheri is evaluating her financial statements to determine profitability. She creates a ratio by dividing net income after taxes by net sales. This is known as the ____ ratio.

return on sales

The owner of John's Tire Store is attempting to understand how effectively the firm is transforming sales into profits. To do this, which of the following ratios should he use?

return on sales

Peter provides math tutoring services in his home five days a week. The money he earns from tutoring is called ___ on an income statement.

revenue

Travis has worked for his school district for two weeks but the district only pays monthly. The amount of money the district owes him is classified as ____ on the district's balance sheet.

salaries payable

Jennifer has found a dress at Ross she would like to buy; however, one of the belt loops has become unattached and will need to be sewn into place. She takes the dress to customer service and asks the manager for a ___, which is a reduction in price for accepting the slightly damaged merchandise.

sales allowance

Henry's Market has an agreement with one of its suppliers that provides a 10 percent discount if Henry's pays the bill within ten days of receiving it. This is called a ____.

sales discount

When a firm reports its operating expenses, they are categorized as either ____ expenses related to the firm's marketing activities or ____ expenses incurred in managing the business.

selling;general

All of the following statements about the Sarbanes-Oxley Act are correct except:

the act was passed in 1996

Marilyn's Beauty Salon has assets of $107,000, and the owners' equity is $75,000, therefore,

the liabilities are $32,000

Becky's Bicycle Shop has assets of $124,000 and liabilities of $31,000, therefore,

the owners' equity is $93,000

Charity's Cupcakes has liabilities totaling $59,000 and owners' equity of $124,000, therefore,

the total assets equal $183,000

Tyler's Yard Art turns over inventory 10.0 times a year. Tyler's cost of goods sold is $300,000. What is its average inventory?

$30,000

Barry's Backhoe Corporation has issued only common stock. It has 10,000 shares outstanding at $20 per share. In addition, $100,000 of Barry's earnings have been reinvested in the business since it was founded. What is Barry's total owners' equity?

$300,000

Sarah's Beauty Salon has $260,000 in assets and $158,000 in stockholders' equity. It owes $55,000 from a long-term loan (this is its only long-term liability). Sarah's has ___ in total current liabilities.

$47,000

Peter Pauper's Clothing store had net sales for the period of $175,000 and a cost of goods sold of $85,000. What is the firm gross profit on sales?

$90,000

____ is (are) the most liquid asset.

Cash

Becky's Bagel Restaurant has a statement of cash flows prepared. Which section of the statement will show her payments for food ingredients and wages paid to employees?

Cash flows from operating activities

_____ may include cash, marketable securities, notes receivable, and merchandise inventory.

Current Assets

_____ can be defined as numerical or verbal descriptions that usually result from some sort of measurements.

Data