C213

What two items of information are revealed on the balance sheet? Choose 2 answers A. Ownership B. Debt C. Expenses D. Revenues E. Costs

A. Ownership B. Debt

Increased federal oversight of the audit process resulted from the passage of the following act of Congress - A. Sarbanes-Oxley Act B. Financial Reports Act C. Access to High Standards Act D. AGOA Acceleration Act

A. Sarbanes-Oxley Act

Which two examples represent financial statement errors? Choose 2 answers A. An accounting employee overpays a supplier and receives a portion of the excess as a kickback B. The accounting department miscalculates the payroll tax due at year-end, resulting in an inaccurate liability C. The outside auditor disagrees with the amount reported as an allowance for uncollectible accounts receivable D. The accountant unintentionally records amounts as revenue that were prepaid by customers but not yet earned

B. The accounting department miscalculates the payroll tax due at year-end, resulting in an inaccurate liability D. The accountant unintentionally records amounts as revenue that were prepaid by customers but not yet earned

Which of the following types of accounts show evidence of aquired resources? Assets Owners' equity Liabilities Both liabilities and owners' equity

Both liabilities and owners' equity

If a company anticipates a 40% increase in sales volume, then it is most likely that the company will need about a 40% increase in accounts payable. operating profit. bank loans payable. property, plant, and equipment.

accounts payable.

The revenue principle states that revenue should be recognized at a point when an exchange transaction involving goods and services has occurred and the earnings process is essentially complete. an order for shipment of a definite amount of merchandise has been received. the seller has shipped merchandise to a customer under the terms that the customer need not pay for the merchandise until it is sold. a contract between buyer and seller has been signed by both parties.

an exchange transaction involving goods and services has occurred and the earnings process is essentially complete.

Winthrop Merchandising is preparing its budget for 2011 (its first year of operation). Sales for the year are budgeted at $1,500,000; 20% are cash sales and 80% are credit sales. The company expects to collect 60% of all credit sales in 2011. Budgeted expenses are $1,200,000. These expenditures include $37,500 for depreciation and $745,500 for variable manufacturing overhead.Given the information above, total cash outflows for 2011 would be: $1,162,500 $454,500 $417,000 $1,200,000

$1,162,500 Cash outflow: $1,200,000 - $37,500 = $1,162,500

Given the following information, compute net income - Extraordinary Loss -80 Income Taxes 150 Interest Expense 100 Operating Income 1,500 Unrealized Gain not included in Net Income 120 $1,290 $1,500 $1,170 $1,250

$1,170 $1,500 - $150 - $100 - $80 = $1,170

Given the following information, compute income from continuing operations - Cost of Goods Sold $2,000 Extraordinary Item -170 Income Taxes 350 Interest Expense 200 Operating Expenses 1,500 Sales 5,500 $1,450 $2,000 $3,500 $1,280

$1,450 $5,500 - $2,000 - $1,500 - $350 - $200 = $1,450

For 2011, Raster Graphics forecasts cash receipts of $405,000 and cash disbursements of $430,000. If the beginning cash balance is $35,000 and the desired ending balance is $21,000, how much must Raster borrow during the year? $25,000 $11,000 $10,000 $0

$11,000 Financing needed: $35,000 + $405,000 - $430,000 - $21,000 = (11,000)

Cheroke Company had an accounts receivable balance of $16,000 at December 31, 2013. Projected sales for the first three months of 2014 are: January $120,000 February 130,000 March 100,000 All sales are credit sales. Cheroke Company usually collects 40% of its sales during the month of sale, 50% in the month following the sale, and 10% in the second month following the sale. Given the information above, cash collections during March should be: $117,000 $130,000 $113,000 The answer cannot be determined

$117,000 Cash collections: ($120,000 x 10%) + ($130,000 x 50%) + ($100,000 x 40%) = $117,000

Kimball Co. wishes to forecast it cash disbursements relating to inventory for the month of March. Estimated purchases of inventory in January, February, and March are $100,000, 120,000, and $150,000, respectively. Kimball typical pays for 40 percent of its inventory purchased in the month of purchase, 50 percent in the month following purchase, and the remaining 10% in the second month following the purchase. Given this information, forecasted cash paid for inventory in March is: $150,000 $130,000 $120,000 $133,000

$130,000 Forecasted cash paid in March = $10,000 + $60,000 + $60,000 = $130,000 From January purchases = $100,000 x .10 = $10,000 From February purchases = $120,000 x .50 = $60,000 From March purchases = $150,000 x .40 = $60,000

The following information was taken from the records of Tellers Corporation for the month ended December 31, 2012: Advertising expense $20,625 Income tax expense 13,095 Accounts payable 13,450 Dividends paid 14,125 Retained earnings (12/1/12) 57,860 Consulting fees revenue 93,550 Rent expense 11,728 Supplies expense 16,917 If Tellers has 2,100 shares of stock outstanding, earnings per share is approximately $46.51 $4.67 $14.85 $16.81

$14.85 Net income: $93,550 - $20,625 - $13,095 - $11,728 - $16,917 = $31,185 Earnings per share: $31,185 / 2,100 shares = $14.85

Burke Corporation had accounts receivable of $44,400 on April 1 and $33,600 on April 30. How much cash was collected from accounts receivable during April if Burke's April sales on account totaled $134,400? $134,400 $100,800 $123,600 $145,200

$145,200 Cash collected from accounts receivable: $134,400 + $44,400 - $33,600 = $145,200

Hee Jung Company had the following information available: Collections on accounts receivable $53,200 Payments for equipment purchase $23,200 Payments for wages and salaries $18,000 Receipt of interest revenue $ 2,500 Payments to principal amount on loan $12,800 Payments for inventory $22,200 Using this information, compute Hee Jung's cash provided by (paid for) operating activities. $15,500 $13,000 $12,000 $14,500

$15,500 Operating activities: $53,200 - $18,000 + $2,500 - $22,200 = $15,500

Winthrop Merchandising is preparing its budget for 2011 (its first year of operation). Sales for the year are budgeted at $1,500,000; 20% are cash sales and 80% are credit sales. The company expects to collect 60% of all credit sales in 2011. Budgeted expenses are $1,200,000. These expenditures include $37,500 for depreciation and $745,500 for variable manufacturing overhead. If the desired ending cash balance is $45,000, how much must Winthrop borrow during the year? $142,500 $187,500 $180,000 $225,000

$187,500 Cash available: (1,500,000 x 20%) + (1,500,000 x 80% x 60%) = $1,020,000 Total cash needed: $1,200,000 - $37,500 + $45,000 = $1,207,500 Total cash borrowed: $1,020,000 - $1,207,500 = ($187,500)

Yuka Company had a beginning cash balance of $1,875. In addition, Yuka Company reported the following items from its cash flow statement: Operating activities $6,450 Investing activities ($4,735) Financing activities ($1,200) Given this information, Yuka Company's ending cash balance is $2,390 $3,590 $515 $2,480

$2,390 Ending cash balance: $1,875 + $6,450 - $4,735 - $1,200 = $2,390

Avondale Inc. had the following cash transactions during 2012: Sales receipts $2,000,000 Inventory payments 1,500,000 Interest payments 20,000 Wage payments 120,000 Dividend receipts 10,000 Interest receipts 6,000 Equipment purchased 150,000 Stock of Canton Company purchased 50,000 Stock issued 300,000 Repaid a note (nonoperating) 100,000 What was Avondale's total net increase in cash for the year provided by (used in) financing activities? $300,000 $100,000 $200,000 $150,000

$200,000 Cash provided by financing activities: $300,000 - $100,000 = $200,000

Chen Company's financial statements show a net income of $184,000. The following items also appear on Chen's balance sheet: Depreciation expense $40,000 Accounts receivable decrease 12,000 Inventory increase 28,000 Accounts payable increase 8,000 What is Chen's net cash flow from operating activities? The company uses the indirect method. $136,000 $216,000 $272,000 $232,000

$216,000

The following financial information is available for the year 2012: Operating activities $ 309,800 Investing activities ($118,000) Financing activities ($190,000) Ending cash balance $ 5,600 Given this information, what is the beginning cash balance? $112,400 $72,600 $3,800 $1,800

$3,800 Beginning cash balance: x + $309,800 - $118,000 - $190,000 = $5,600 x = $3,800

LeMinton Company expects the following credit sales for the first five months of the year: January, $25,000; February, $40,000; March, $30,000; April, $36,000, May $40,000. Experience has shown that payment for the credit sales is received as follows: 60% in the month of sale, 25% in the first month after sale, 12% in the second month after sale, and the remainder is uncollectible. How much cash can LeMinton Company expect to collect in March as a result of credit sales? $18,000 $31,000 $28,600 $30,000

$31,000 Cash collected in March: ($25,000 x 12%) + ($40,000 x 25%) + ($30,000 x 60%) = $31,000

If a company has $528,000 of sales revenue, pays $26,400 in dividends, and has net income of $158,400, how much were the expenses for the year? $343,200 $369,600 $396,000 $422,400

$369,600 Expenses: $528,000 - $158,400 = $369,600

Avondale Inc. had the following cash transactions during 2012: Sales receipts $2,000,000 Inventory payments 1,500,000 Interest payments 20,000 Wage payments 120,000 Dividend receipts 10,000 Interest receipts 6,000 Equipment purchased 150,000 Stock of Canton Company purchased 50,000 Stock issued 300,000 Repaid a note (nonoperating) 100,000 What was Avondale's net cash provided by (used in) operating activities? $2,016,000 $516,000 $376,000 $360,000

$376,000 Cash provided by operating activities: $2,000,000 - $1,500,000 - $20,000 - $120,000 + $10,000 + $6,000 = $376,000

Avondale Inc. had the following cash transactions during 2012: Sales receipts $2,000,000 Inventory payments 1,500,000 Interest payments 20,000 Wage payments 120,000 Dividend receipts 10,000 Interest receipts 6,000 Equipment purchased 150,000 Stock of Canton Company purchased 50,000 Stock issued 300,000 Repaid a note (nonoperating) 100,000 What was Avondale's net increase in cash for the year? $266,000 $376,000 $576,000 $306,000

$376,000 Net increase in cash: $2,000,000 - $1,500,000 - $20,000 - $120,000 + $10,000 + $6,000 - $150,000 - $50,000 + $300,000 - $100,000 = $376,000

You currently work as a school bus driver. Your salary is $28,000 per year. You are thinking about quitting your job and going back to college. It will take you two years to obtain your college degree. Tuition and other costs of the education will total $24,000. You also intend to keep your car by making the $250 per month payments out of your savings. How much is the opportunity cost of going to college? $56,000 $52,000 $62,000 $28,000

$56,000 $28,000 lost salary x 2 years = $56,000

Chen Corporation had the following cash flows during 2012. The company uses the direct method of preparing a statement of cash flows. Cash receipt from the issuance of stock $80,000 Cash received from customers 40,000 Dividends received on long-term investments 20,000 Cash paid for wages 24,000 Cash paid for insurance 2,000 Cash paid for dividends 12,000 Cash paid to purchase building 120,000 Loan made to another company 40,000 Given the information above, net cash inflow (outflow) from financing activities is ($12,000) $68,000 ($52,000) $80,000

$68,000 Cash inflow from financing activities: $80,000 - $12,000 = $68,000

Dahbi Corporation has the following financial information available: Operating activities $14,250 Financing activities $ 3,500 Beginning cash balance $ 1,450 Ending cash balance $ 5,650 Given this information, what is the amount of cash provided by (used in) Dahbi's investing activities? ($13,550) $13,550 ($24,850) $17,750

($13,550) Investing activities: $1,450 + $14,250 + x + $3,500 = $5,650x = ($13,550)

Chen Corporation had the following cash flows during 2012. The company uses the direct method of preparing a statement of cash flows. Cash receipt from the issuance of stock $80,000 Cash received from customers 40,000 Dividends received on long-term investments 20,000 Cash paid for wages 24,000 Cash paid for insurance 2,000 Cash paid for dividends 12,000 Cash paid to purchase building 120,000 Loan made to another company 40,000 Given the information above, net cash inflow (outflow) from ALL activities is $22,000 ($98,000) $40,000 ($58,000)

($58,000) Cash inflow from operating activities: $40,000 + $20,000 - $24,000 - $2,000 = $34,000 Cash outflow from investing activities: ($120,000) + ($40,000) = ($160,000) Cash inflow from financing activities: $80,000 - $12,000 = $68,000 Net cash outflow from all activities: $34,000 - $160,000 + $68,000 = ($58,000)

During the month, Meridian Company had the following cash transactions: Cash collected from customers $ 12,500 Cash received from a loan 8,000 Cash paid for wages payable (5,750) Cash paid for the purchase of a building (15,000) Cash received for the issuance of new shares of stock 2,600 Cash received from sale of land 6,400 Cash paid for rent (2,500) Cash paid for dividends (1,500) Given the above information, compute cash flow from investing activities. $4,250 $8,600 ($4,250) ($8,600)

($8,600) Investing activities: ($15,000) + $6,400 = ($8,600)

The following data came from the financial statements of Petrini Company: Total assets $205,000 Total liabilities 95,000 Total stockholders' equity 110,000 Operating profit 60,000 Interest expense 500 Given the information above, compute the debt ratio (rounded to two decimal places) for Petrini Company. 0.46 0.86 1.86 2.15

0.46 Debt ratio: $95,000 / $205,000 = 0.46

Order the steps in the decision cycle from first (1) to last (5). Select your answers from the pull-down list. - Implement decision - Gather information - Analyze financial statements - Make decision - Prepare financial statements

1. Prepare financial statements 2. Analyze financial statements 3. Gather information 4. Make decision 5. Implement decision

Match each accounting term with its definition. Answer options may be used more than once or not at all. 1. Reliable 2. Relevant 3. Material 4. Conservatism A. Information having to do with the matter at hand B. Information that can be verified C. Information related to recognizing losses as they occur D. Information that is important enough to make a difference

1. Reliable: Information that can be verified 2. Relevant: Information having to do with the matter at hand 3. Material: Information that is important enough to make a difference 4. Conservatism: Information related to recognizing losses as they occur

Which form must be filed quarterly by all publicly held corporations? 8-Q 8-K 10-Q 10-K

10-Q

On December 31, 2010 and 2011, Taft Corporation had 100,000 shares of common stock issued and outstanding. Additional information is as follows: Stockholders' equity at 12/31/2011 $4,500,000 Net income year ended 12/31/2011 1,200,000 Market price per share of common stock at 12/31/2011 144 The price-earnings ratio on common stock at December 31, 2011, was: 16 14 12 10

12 Price-earnings ratio: (100,000 × $144) / $1,200,000 = 12

Cash paid for income taxes: $11,986 Cash paid for interest: 5,204 Cash from operations: 62,030 Using the above information, computer the company's cash times interest earned ratio. 4.6 times 15.2 times 12.9 times 11.9 times

15.2 times

The following data came from the financial statements of the Green Company: Cash from operations $900,000 Cash from investing activities 350,000 Cash from financing activities 220,000 Cash paid for capital expenditures 55,000 Net income 425,000 Compute the cash flow-to-net income ratio.

2.12 Cash flow-to-net income: $900,000 / $425,000 = 2.12

Selected financial statement numbers for Frederick Company are given below: Sales $277,480 Cost of goods sold 179,155 Average accounts receivable 20,730 Average inventory 4,145 Average property, plant, and equipment 75,705 Using the information above, calculate Frederick's average collection period (round to two decimal places). 5.45 days 27.26 days 99.46 days 42.25 days

27.26 days 20,730 / 760.22

The balance sheet at the end of the first year of operations indicates the following: 2012 Total current assets $600,000 Total investments 85,000 Total property, plant, and equipment 900,000 Total current liabilities 250,000 Total long-term liabilities 350,000 Common stock, $10 par 600,000 Paid-in capital in excess of par-common stock 60,000 Retained earnings 325,000 What is the debt ratio for 2012 (rounded to one decimal places)? 37.9% 41.7% 22.1% 40.0%

37.9% Debt Ratio: ($250,000 + $350,000) / ($600,000 + $85,000 + $900,000) = 37.9%

Selected information for Alastair Company is as follows: 2012 Current assets $450,000 Total assets 725,000 Cost of goods sold 700,000 Sales revenue 915,000 Net income 145,000 What is the percentage that would be given to current assets on a common-size balance sheet using the percent of sales method (round to the nearest percent)? 20 percent. 100 percent 77 percent 49 percent

49 percent Sales revenue: $450,000 / $915,000 = 49%

Public Company Accounting Oversight Board (PCAOB

A board created by SOX that regulates the auditing profession; was created as part of SOX. Inspects the audit practices of registered audit firms and has statutory authority to investigate questionable audit practices and to impose sanctions such as barring an audit firm from auditing SEC-registered companies.

An independent audit report is usually issued by Management A certified public accountant A private detective A government accountant

A certified public accountant

Which of the following would be added to net income on a statement of cash flows prepared using the indirect method? A decrease in accounts receivable A gain from the sale of equipment A decrease in accounts payable Dividends received

A decrease in accounts receivable

Which of the following would be deducted from net income on a statement of cash flows prepared using the indirect method? Dividends paid A decrease in accounts receivable An increase in accounts payable A gain from the sale of equipment

A gain from the sale of equipment

Unearned Revenue

A liability is created when a business collects cash from customers in advance of providing services or delivering goods.

Which of the following is NOT included in the DuPont framework? A measure of efficiency A measure of leverage A measure of market share A measure of profitability

A measure of market share

The traditional overhead cost allocation system assumes a simple relationship between overall overhead cost and Beginning raw materials inventory Cost of goods sold Number of headquarters staff A single measure of activity

A single measure of activity

Financial statement notes are of the following four general types:

A summary of significant accounting policies Additional information about the summary totals found in the statements Disclosure of important information not recognized in the statements Supplementary information required by the Financial Accounting Standards Board (FASB) or the Securities and Exchange Commission (SEC)

Partial financial information for a company is as follows: Current assets $36,543 total assets $58,719 Current liabilities $24,824 Total liabilities $48,561 Stockholders' equity $10,158 Sales $46,997 Net Income $3,761 Market value of shares $41,316 What is the price-earnings (PE) ratio for this company? A. 11.0 B. 12.5 C. 12.9 D. 15.6

A. 11.0

A company manufactures and sells widgets. The following information is available: • Each widget sells for $100. • The variable cost per widget is $50. • Total fixed costs per month are $300,000. How many widgets does the company need to sell each month to break even? A. 6,000 B. 4,500 C. 3,000 D. 2,000

A. 6,000

In January of year 1, a company began doing business as a corporation in order to sell technology-related accessories and services. During its first month of operations, it focused on obtaining the financing needed to start its operations. In February of year 1, the company sold inventory costing $25,000 for $75,000 cash. In February of year 1, the company provided technology-related services worth $10,000. Customers paid a total of $4,000 in cash for these services and promised to pay the remainder the following month. What will be the total impact of these services provided on the company's balance sheet other than an increase in cash of $4,000? Choose 2 answers A. Accounts receivable will increase $6,000. B. Retained earnings will increase $10,000. C. Retained earnings will decrease $2,000. D. Retained earnings will increase $6,000. E. Accounts receivable will decrease $6,000.

A. Accounts receivable will increase $6,000. B. Retained earnings will increase $10,000.

Which cash flow category would include "cash received from investors"? A. Cash from financing activities B. Cash from charitable activities C. Cash from investing activities D. Cash from sponsoring activities

A. Cash from financing activities

Which of the following distinguishes between current and long-term assets? A. Classified balance sheet B. Liquidity balance sheet C. Income statement D. Comparative balance sheet

A. Classified balance sheet

In January of year 1, a company began doing business as a corporation in order to sell technology-related accessories and services. During its first month of operations, the following events occurred: January 1 The corporation received $1,000,000 in cash in exchange for stock issued to stockholders. January 3 The corporation borrowed $250,000 from bank. The loan is a four-year loan with an interest rate of 12 percent, payable each year on January 1 beginning in year 2. January 5 The corporation purchased equipment to be used in the business for $200,000 cash. January 8 The corporation purchased inventory costing $200,000 by paying $120,000 in cash. The remainder was put on credit accounts with suppliers January 15 The corporation hired five employees. Each employee will be paid $1,000 at the end of each month. January 30 The corporation paid $6,000 cash for a one-year insurance policy. The policy period will begin on February 1, year 1. What will be the impact of the January 5 event on the company's balance sheet on that date? A. Equipment will increase $200,000, and cash will decrease $200,000. B. Cash will decrease $200,000, and paid-in-capital will decrease $200,000. C. Equipment will increase $200,000, and retained earnings will decrease $200,000. D. Cash will decrease $200,000, and loan payable will decrease $200,000.

A. Equipment will increase $200,000, and cash will decrease $200,000.

Which two requirements must accounting firms that audit public companies meet under the Sarbanes-Oxley Act? Choose 2 answers A. Firms must not provide certain nonaudit services to audit clients, such as management functions or legal services. B. Firms must report to and be retained by the audit committee rather than the CFO or other company management. C. Firms must help to develop and enforce a code of ethics on audit clients. D. Firms must not audit the same public company for more than five consecutive years.

A. Firms must not provide certain nonaudit services to audit clients, such as management functions or legal services. B. Firms must report to and be retained by the audit committee rather than the CFO or other company management.

Which two items' subtotals are included in a multi-step income statement? Choose 2 answers A. Gross profit B. Total assets C. Current liabilities D. Income from operations

A. Gross profit D. Income from operations

What impact does the sale of equipment have on the statement of cash flows? A. Increase in cash from investing activities B. Increase in cash from operating activities C. Increase in cash from financing activities D. Decrease in cash from operating activities

A. Increase in cash from investing activities

The organization that develops worldwide accounting standards is the A. International Accounting Standards Board (IASB) B. International Board of Accounting Standards (IBAS) C. International Committee on Accounting Standards (ICAS) D. International Accounting Standards Committee (IASC)

A. International Accounting Standards Board (IASB)

Standards established by the International Accounting Standards Board are referred to as A. International Financial Reporting Standards B. International Auditing Standards C. International Financial Accounting Standards D. Generally Accepted Accounting Standards

A. International Financial Reporting Standards

Which of the following organizations has specific legal authority to establish accounting standards for publicly held companies? A. Securities and Exchange Commission (SEC) B. American Institute of Certified Public Accountants (AICPA) C. Financial Accounting Standards Board (FASB) D. Internal Revenue Service (IRS)

A. Securities and Exchange Commission (SEC)

Another name for the balance sheet is the A. Statement of financial position B. Statement of cash flows C. Statement of earnings D. Retained earnings statement

A. Statement of financial position

Which body regulates a certified public accounting firm's audit practices when the firm is auditing a large publicly traded company? A. The Public Company Accounting Oversight Board (PCAOB) B. The Financial Accounting Standards Board (FASB) C. Another certified public accounting (CPA) firm D. The Internal Revenue Service (IRS)

A. The Public Company Accounting Oversight Board (PCAOB)

Which of the following is NOT one of the three primary financial statements? A. The Statement of Retained Earnings B. The Balance Sheet C. The Statement of Cash Flows D. The Income Statement

A. The Statement of Retained Earnings

What does it mean if a company has a debt ratio of 101.5%? A. The company has 1.5% more total liabilities than total assets. B. The company has 1.5% more total liabilities than gross sales. C. The company has 1.5% more current liabilities than current assets. D. The company has 1.5% more total liabilities than net income.

A. The company has 1.5% more total liabilities than total assets.

What does management accounting provide? Choose 2 answers A. The insight that management needs so the business can perform more effectively B. The insight that outside stakeholders need to choose a company that has a competitive advantage over competitors C. The detailed data that managers need to make decisions that will give the business a competitive edge D. The information needed by the IRS to decide if a company should have a tax audit performed

A. The insight that management needs so the business can perform more effectively C. The detailed data that managers need to make decisions that will give the business a competitive edge

Company A calculated the following information under traditional and activity-based costing for the production and sale of 1,000 units of Product B: Traditional ABC Sales $100,000 $100,000 Cost of goods sold $70,000 $110,000 Gross margin $30,000 ($10,000) Which decision should be made about the selling price of Product B? A. The price of Product B should be increased. B. The price of Product B should be decreased. C. The number of production batches of Product B should be increased. D. Traditional costing should be used instead of activity-based costing.

A. The price of Product B should be increased.

What are two common reasons for managers to manipulate reported earnings? Choose 2 answers A. They are feeling pressured to meet internal sales goals. B. They are preparing to qualify for a bank loan. C. They are feeling pressured to comply with an external auditor. D. They are preparing to meet Sarbanes-Oxley requirements.

A. They are feeling pressured to meet internal sales goals. B. They are preparing to qualify for a bank loan.

What is a significant role of the U.S. Securities and Exchange Commission (SEC) in financial reporting? A. They ensure that financial statement users are provided with reliable information to use in decision making. B. They ensure that auditors have the resources and information necessary to provide valuable professional services. C. They support company management and boards of directors in the effective discharge of their responsibilities. D. They provide representation and training to controllers of public companies.

A. They ensure that financial statement users are provided with reliable information to use in decision making.

Which two requirements must management of public companies meet under the Sarbanes-Oxley Act? Choose 2 answers A. They must provide an assessment of the effectiveness of internal controls with each annual report. B. They must support a stronger board and audit committee. C. They must be rotated every five years. D. They must authorize any loans to members of the board of directors.

A. They must provide an assessment of the effectiveness of internal controls with each annual report. B. They must support a stronger board and audit committee.

Which two actions do internal auditors perform to assist in maintaining the integrity of financial statements? Choose 2 answers A. They search for and investigate fraud. B. They review financial records and internal controls. C. They perform the initial accounting for various transactions. D. They issue opinions regarding whether financial statements align with Generally Accepted Accounting Principles (GAAP).

A. They search for and investigate fraud. B. They review financial records and internal controls.

Which of the following is NOT one of the effects that the Securities Exchange Act of 1934 had on accountants? Accountants must audit all 10-K reports. Accountants must audit all 10-Q reports. Accountants' work is subject to approval by the SEC All of these are effects of the Securities Exchange Act of 1934.

Accountants must audit all 10-Q reports.

Accounts payable

Accounts payable are the flip side of accounts receivable—when one company sells on credit, creating for itself an account receivable, the company on the other side of the transaction is buying on credit, creating an account payable.

Which of the following would be classified as a current asset? Capital stock Accounts receivable Land Accounts payable

Accounts receivable

Accounts receivable

Accounts receivable are amounts owed to a business by its credit customers and are usually collected in cash within 10 to 60 days. Companies may or may not charge interest on unpaid account balances—normally, credit agreements between two businesses, such as a restaurant buying lettuce on credit from a produce wholesaler, do not involve interest.

Activity-based costing systems assume that: Overhead costs are insignificant Products consume overhead costs Activities consume overhead costs All of these are correct

Activities consume overhead costs

Which method for allocating manufacturing overhead costs is usually more accurate? Unit-based costing Activity-based costing Process costing Job order costing

Activity-based costing

Which of the following types of costing systems identifies business activities that create overhead costs and then assigns overhead to products or divisions according to these activities? Activity-based costing Job order costing Unit-based costing Process costing

Activity-based costing

Assume that direct labor and direct materials are the major cost components of a product and that the small amount of overhead cost can easily be associated with products using a simple overhead allocation basis such as direct labor hours. Which one of the following statements is the most correct? Activity-based costing should probably be used in this situation. Activity-based costing is probably too expensive to justify using it in this situation. Job order costing is probably too expensive to justify using it in this situation. None of these are correct

Activity-based costing is probably too expensive to justify using it in this situation.

Which of the following groups of control activities are considered detective controls? Independent checks on performance and physical control over assets and records Segregation of duties and physical control over assets and records Segregation of duties and adequate documents and records Adequate documents and records and independent checks on performance

Adequate documents and records and independent checks on performance

Which of the following statements is true regarding retained earnings? Increasing revenues will increase retained earnings Increasing expenses will decrease retained earnings Increasing dividends will decrease retained earnings All of the statements are true

All of the statements are true

Which one of these is NOT one of the benchmarking problems that arises when analyzing financial statements? Reported financial statement numbers may actually be a measurement of different things Companies that are being compared may be conglomerate Not all companies use the same accounting practices All of these are benchmarking problems

All of these are benchmarking problems

Which one of these is NOT one of the benchmarking problems that arises when analyzing financial statements? Reported financial statement numbers may actually be a measurement of different things Companies that are being compared may be conglomerates Not all companies use the same accounting practices All of these are benchmarking problems

All of these are benchmarking problems

The Sarbanes-Oxley Act establishes Independent oversight of auditors Constraints on auditors All of these are correct Constraints on company management

All of these are correct

Which one of the following is NOT an ethical guideline that the Institute of Management Accountants (IMA) requires its members to follow? Not disclose confidential information Maintain objectivity when communicating information to decision makers Act with both actual and apparent integrity in all situations All of these are correct

All of these are correct

Which of the following is an incentive that influences auditors to remain independent and to provide fair and reliable financial information? Auditors have a reputation to protect. Management would be taking a large legal risk if they interfere with the auditors. All of these are correct. External auditors are taking a large legal risk if they allow their independence and integrity to be compromised.

All of these are correct.

If the total amount for Insurance Expense is inadvertently posted to Prepaid Insurance at the end of the year, what will be the effect on the year-end financial statements? Net income will be overstated All of these are true Expenses will be understated Owner's equity will be overstated

All of these are true

Sarbanes-Oxley Act

An act was passed into law by Congress in 2002 to establish strict accounting and reporting rules in order to make senior managers more accountable and to improve and maintain investor confidence.

Expenses generally cause No change in net assets An increase in liabilities An increase in net assets A decrease in net assets

An increase in liabilities

Revenues cause An increase in liabilities A decrease in net assets No change in net assets An increase in net assets

An increase in net assets

Which of the following audit processes attempts to identify areas that may deserve attention by using techniques such as comparative ratio analysis? Analytical procedures Sampling Confirmation Observations

Analytical procedures

The idea that certain figures on an operating statement help to explain changes in figures on comparative balance sheets is referred to as Classification Double entry Liquidity Articulation

Articulation

Which of the following ratios is used to measure a firm's leverage? Sales ÷ Assets Assets ÷ Equity Net income ÷ Equity Net income ÷ Sales

Assets ÷ Equity

A company has a credit policy of net 10 and is considering changing it to net 30 to be more in line with industry standards. What is a benefit to changing the credit policy? Reduction in long-term financing Attracting more customers Discount for customer Increase in carrying costs

Attracting more customers

According to Sarbanes-Oxley, who are auditors required to report to and be retained by? Chief Executive Officer Internal auditors Chief Financial Officer Audit committee

Audit committee

A company budgeted the following purchases for raw materials: Month Budget January $10,000 February $20,000 March $25,000 April $22,000 May $27,000 June $30,000 July $24,000 The company has a policy of paying for 40% of the purchases in the month of purchase, 35% in the month following the purchase, and 25% in the second month following the purchase. Based on this information, what are the budgeted cash disbursements for May? A. $18,500 B. $24,750 C. $25,050 D. $27,300

B. $24,750

Which category of ABC activities are machine setup and material movement costs associated with? A. Unit-level activities B. Batch-level activities C. Product line activities D. Facility support activities

B. Batch-level activities

A corporation has total liabilities of $300 million, total owners' equity of $100 million, and current assets of $50 million. What is the value of the firm's long-term assets? A. $250 million B. $350 million C. $400 million D. $450 million

B. $350 million

On May 1, 2011, a company using accrual accounting purchased equipment costing $500,000. It expects the equipment to have a useful life of five years. At the time of purchase, the company also purchased a one-year insurance policy on this equipment, which cost $6,000. How much insurance expense should the company have recognized for the year ending in 2011? A. $3,000 B. $4,000 C. $6,000 D. $8,000

B. $4,000

Which two cash flow adequacy ratios represent a cash cow? Choose 2 answers A. $4,510 / $4,932 B. $6,991 / $5,486 C. $8,091 / $9,374 D. $5,220 / $1,875 E. $7,589 / $9,210

B. $6,991 / $5,486 D. $5,220 / $1,875

During its first month of operations, a manufacturer incurs the following costs (in dollars) related to activities within its factory: Direct materials $15,000 Direct labor $30,000 Manufacturing overhead $40,000 What amount should be reported as cost of goods sold on the income statement if 5,000 units are produced and 4,000 are sold? A. $56,000 B. $68,000 C. $70,000 D. $85,000

B. $68,000

A company plans to purchase inventory for the second half of 2014 as follows: July $100,000 August $75,000 September $225,000 October $125,000 November $250,000 December $30,000 They usually pay 50% of inventory purchases in the month of purchase, 35% in the following month, and 15% in the second month Based on this information, what are the forecasted total 2014 cash payments for inventory purchased in the second half of 2014? A. $705,000 B. $752,500 C. $790,000 D. $805,000

B. $752,500

Which two examples are period costs? Choose 2 answers A. Direct labor B. Administrative expenses C. Selling expenses D. Manufacturing overhead

B. Administrative expenses C. Selling expenses

Which formula yields a cash times interest earned ratio of 11? A. Cash before interest and taxes of $11,000 / cash paid for income taxes of $1,000 B. Cash before interest and taxes of $11,000 / cash paid for interest of $1,000 C. Cash before interest and taxes of $11,000 / cash from operations of $1,000 D. Cash before interest and taxes of $11,000 / cash paid for acquisitions of $1,000

B. Cash before interest and taxes of $11,000 / cash paid for interest of $1,000

What is a cost that will change in the future based upon the decision made? A. Opportunity cost B. Differential cost C. Sunk cost D. Out-of-pocket cost

B. Differential cost

Which two costs are included when calculating inventory costs? Choose 2 answers A. Selling B. Direct labor C. Overhead D. Legal

B. Direct labor C. Overhead

Which users would have a primary concern with an organization's ability to provide healthcare benefits? A. Competitors B. Employees C. Vendors D. Suppliers

B. Employees

The current standard-setting board for accounting in the private sector is the A. American Accounting Association (AAA) B. Financial Accounting Standards Board (FASB) C. Securities and Exchange Commission (SEC) D. International Accounting Standards Board (IASB)

B. Financial Accounting Standards Board (FASB)

The initials GAAP stand for A. Generally Applied Accounting Procedures B. Generally Accepted Accounting Principles C. Generally Accepted Accounting Practices D. General Accounting Administration Practices

B. Generally Accepted Accounting Principles

Which of the following is NOT a service typically provided by large public accounting firms? A. Performing audits B. Making management decisions C. Redesigning operating procedures D. Establishing accounting systems

B. Making management decisions

How does management accounting differ from financial accounting? A. Management accounting presents an unbiased view of a company's economic performance. B. Management accounting is used primarily for internal planning, control, and evaluation. C. Management accounting is restricted to providing financial rather than nonfinancial data. D. Management accounting is not used to gain a competitive advantage in the marketplace.

B. Management accounting is used primarily for internal planning, control, and evaluation.

Which form of debt should be reported in the long-term liability category? A. Unearned revenue that will be earned in 9 months B. Notes payable expected to be paid in 18 months C. Accounts payable due in 30 days D. Salaries payable due in 2 weeks

B. Notes payable expected to be paid in 18 months

In January of year 1, a company began doing business as a corporation in order to sell technology-related accessories and services. During its first month of operations, the following events occurred: January 1 The corporation received $1,000,000 in cash in exchange for stock issued to stockholders. January 3 The corporation borrowed $250,000 from a bank. The loan is a four-year loan with an interest rate of 12 percent, payable each year on January 1 beginning in year 2. January 5 The corporation purchased equipment to be used in the business for $200,000 cash. January 8 The corporation purchased inventory costing $200,000 by paying $120,000 in cash. The remainder was put on credit accounts with suppliers. January 15 The corporation hired five employees. Each employee will be paid $1,000 at the end of each month. January 31 The corporation paid $6,000 cash for a one-year insurance policy. The policy period will begin on February 1, year 1. What will be the impact of the January 31 event on the company's balance sheet on that date? A. Cash will decrease $6,000, and paid-in capital will decrease $6,000. B. Prepaid insurance will increase $6,000, and cash will decrease $6,000. C. Prepaid insurance will decrease $6,000, and accounts payable will decrease $6,000. D. Cash will decrease $6,000, and accounts receivable will increase $6,000.

B. Prepaid insurance will increase $6,000, and cash will decrease $6,000.

Which two concepts are studied in cost-volume-profit analysis? Choose 2 answers A. Liabilities B. Profits C. Levels of activity D. Inventory

B. Profits C. Levels of activity

What is known about the direct and indirect methods of preparing statements of cash flow? A. The direct method is more popular among large U.S. companies B. The indirect method is more popular among large U.S. companies C, Both methods have the same popularity among large U.S. companies D. Neither method is very popular among large U.S. companies

B. The indirect method is more popular among large U.S. companies

The exchange of debt for equipment would Be shown on a statement of cash flows as an operating activity Be shown on a statement of cash flows as an investing activity Be shown as a supplementary disclosure Be shown on a statement of cash flows as a financing activity

Be shown as a supplementary disclosure

recognition

Boil down all the estimates and judgments into one number and report that one number in formal financial statements

Which of the following is one of the purposes of financial statement analysis? Prognosis Neither diagnosis nor prognosis Both diagnosis and prognosis Diagnosis

Both diagnosis and prognosis

Financial statement analysis is greatly enhanced when financial ratios are compared with Past values Values for other firms in the same industry Future values Both past values and values for other firms in the same industry

Both past values and values for other firms in the same industry

Fraud is The creation of fictitious transactions Both the deceptive concealment of transactions and the creation of fictitious transactions Unintentional errors The deceptive concealment of transactions

Both the deceptive concealment of transactions and the creation of fictitious transactions

A company's statement of cash flows includes the following cash transactions: Sales 1,250,000 Inventory Purchase -750,000 Property and Equipment Purchase-270,000 Interest Payment on Long-Term Debt -25,000 Payment of Wages -315,000 Payment of Rent -40,000 Borrowing Long-Term Debt 200,000 Payment of Cash Dividends -15,000 Repurchase of Treasury Stock -40,000 Total Cash Flows -5,000 Assuming the company uses US GAAP standards, what is the total cash flow from financing activities? A. $175,000 B. $160,000 C. $145,000 D. $120,000

C. $145,000

What was the 2012 net profit amount if the 2013 pro-forma net profit of $187,000 was based on a 22% increase? A. $228,140 B. $182,975 C. $153,279 D. $145,860

C. $153,279

A manufacturer produces three products: A, B, and C. The company uses the following information to determine activity rates for each pool: Cost Pool Costs Total Activity Pool 1 $300,000 20,000 hours Pool 2 $20,000 500 pounds Pool 3 $10,000 100 moves TOTAL $330,000 Data concerning the three products appear below: Cost Driver Products A Products B Products C Number of hours 10,000 7,500 2,500 Number of pounds 150 250 100 Number of moves 20 30 50 What is the total amount of overhead applied to product A? A. $125,500 B. $150,000 C. $158,000 D. $265,000

C. $158,000

A company has projected the following sales for the spring quarter of 2014: April $200,000 May $250,000 June $275,000 65% of all sales are paid for with cash. The remainder is on credit. The pattern for credit receivables collections are: Month of Sale 60% Month After Sale 30% Second Month After Sale 10% What are the forecasted cash collections for the month of June? A. $178,750 B. $248,750 C. $269,750 D. $275,000

C. $269,750

A running shoe manufacturer produces three types of shoes: traditional, minimalist, and spikes. The company uses the following information to determine activity rates for each pool: Cost Pool Costs Total Activity Shoe Production $250,000 20,000 pairs of shoes Shoe batches $10,000 500 batches Shoe design $5,000 100 parts Total $265,000 Data concerning the three shoe products appear below: Cost Driver Traditional Minimalist Spikes # of pairs of shoes 10,000 7,500 2,500 # of batches 150 250 100 # of parts 20 30 50 What is the total amount of overhead applied to spikes shoes? A. $265,000 B. $100,250 C. $35,750 D. $31,250

C. $35,750

Which benefit does a corporation gain by following Generally Accepted Accounting Principles (GAAP)? A. A decrease in its income tax obligations B. A decrease in the amount of net income it reports C. An increase in its comparability to other companies D. An increase in the amount of assets it reports

C. An increase in its comparability to other companies

The financial statement that reports resources owned, the obligations to transfer resources to other organizations, and the claims by the entity's owners is known as the A. Statement of retained earnings B. Income statement C. Balance sheet D. Statement of cash flows

C. Balance sheet

The idea that transactions are recorded at their exchange prices at the transaction date is referred to as the A. Going concern assumption B. Monetary measurement principle C. Cost principle D. Arm's-length transaction assumption

C. Cost principle

A company is experiencing an increase in their bad debt expense. Which change in credit policy would cause this increase? A. Credit terms of 2/10, n/30 were granted on all credit sales. B. The company tightened their credit policy. C. Credit limits were increased for all customers. D. Some customers were allowed to pay their bills in 60 days versus the normal 30 days.

C. Credit limits were increased for all customers.

Generally accepted accounting principles are A. Natural laws B. Based on scientific proofs C. Developed by accounting rule makers D. None of these are correct

C. Developed by accounting rule makers

Which situation should result in revenue recognition on the income statement for the year ending 12/31/14 if the firm is using accrual-basis accounting? A. In 2014, a company enters into a contract whereby it agrees to provide services to a customer next year (2015). B. In 2014, a company collects cash from a customer for services it will provide next year (2015). C. In 2014, a company provides services to a customer for which cash will be collected the next year (2015). D. In 2014, a company collects cash from a customer for services it provided in the previous year (2013).

C. In 2014, a company provides services to a customer for which cash will be collected the next year (2015).

What has had the most significant impact on accounting practices? A. Certification requirements B. New product innovations C. Information technology D. Mobile computing

C. Information technology

Which account is seen on the balance sheet of a manufacturing company but not on the balance sheet of a service-oriented company? A. Equipment B. Accounts receivable C. Inventory D. Cash

C. Inventory

Internal reports are generally used by A. Suppliers B. Employees C. Management D. Lenders

C. Management

Which of the following is NOT an external user of financial information? A. Customers B. Competitors C. Management D. Suppliers

C. Management

Which two values affect the measurement of net income? Choose 2 answers A. Dividends paid B. Stockholder contributions C. Operating expenses D. Ordinary gains and losses

C. Operating expenses D. Ordinary gains and losses

A company manufactures custom-built wooden bookshelves. Which two costs would the company classify as period costs? Choose 2 answers A. Wood cost B. Salary cost of the craftsperson C. Salary cost of the receptionist D. Advertising cost

C. Salary cost of the receptionist D. Advertising cost

Which assurance does an external audit report provide for its readers? A. The company will be a good credit risk B. The company will generate net income C. The company's financial statements fairly reflect its financial position D. The company will generate positive cash flows

C. The company's financial statements fairly reflect its financial position

Which internal control is intended to ensure that a company does not mistakenly pay a supplier for an invoice that includes more items than were actually received? A. The purchasing department authorizes the order of all items before they occur. B. The company requires two signatures on each check in order for a payment to be sent. C. The inventory department counts and inspects items as received and forwards the receiving record to accounts payable. D. The accounts payable department utilizes prenumbered checks in the payment of supplier invoices.

C. The inventory department counts and inspects items as received and forwards the receiving record to accounts payable.

Which cash flow ratio reflects the extent to which accrual accounting adjustments and assumptions have been included in net income? Cash flow adequacy Cash flow-to-operating profit Cash flow-to-net income Cash flow frequency

Cash flow-to-net income

The director of a marathon race wants to assign the cost of having police officers along the race route to manage crowd control. Which consideration is an appropriate cost driver? A. The amount of hours the director spends on organizing the race B. The amount of the registration fee C. The number of race participants and spectators D. The cost of liability insurance for the race

C. The number of race participants and spectators

What role do ethical standards have in management accounting? A. To prevent all unethical behavior of anyone the management accountant may work with B. To provide the management accountant with the ability to know if a person will act ethically or not C. To guide the resolution to possible ethical dilemmas that the managerial accountant may encounter D. To provide the management accountant with the ability to work with only companies that follow strict ethical principles

C. To guide the resolution to possible ethical dilemmas that the managerial accountant may encounter

______ is/are not considered to be an expense of doing business. Wages Cash dividends Buying Landscaping Supplies None are considered to be an expenses of doing business

Cash dividends

Which cash flow ratio reflects the extent to which accrual accounting adjustments and assumptions have been included in net income? Cash flow-to-operating profit Cash flow-to-net income Cash flow frequency Cash flow adequacy

Cash flow-to-net income

The cash flow adequacy ratio is computed as Cash for investing activities ÷ Cash from operations Cash from operations ÷ Cash paid for dividends Cash from operations ÷ Cash for financing activities Cash from operations ÷ Cash for investing activities

Cash from operations ÷ Cash for investing activities

Which of the following would be reported as a cash flow from financing activities? Cash receipts from the issuance of long-term debt Cash receipts from dividends on long-term investments Cash receipts from interest on notes receivable Cash receipts from the sale of equipment

Cash receipts from the issuance of long-term debt

Which of the following would be classified as an operating activity on a statement of cash flows? Cash dividends paid to stockholders Cash received as dividends on investments Cash received from selling equity securities Cash paid to purchase treasury stock

Cash received as dividends on investments

Which of the following would be classified as an operating activity on a statement of cash flows? Cash received from selling equity securities Cash received as dividends on investments Cash paid to purchase treasury stock Cash dividends paid to stockholders

Cash received as dividends on investments

Which cash flow ratio reflects a company's ability to make its interest payments from cash generated through operations? Cash flow to net income Cash flow adequacy Cash flow to operating profit Cash times interest earned

Cash times interest earned

____ is increased and ____ is decreased when cash is collected from customers who had previously purchased a product or service on account. Assets, Liability Cash, Accounts Receivable Cash, Accounts Payable Debt, Cash

Cash, Accounts Receivable

External audits are performed by Certified Financial Analysts Certified Management Accountants Certified Internal Auditors Certified Public Accountants

Certified Public Accountants

Earnings management through deceptive accounting is best exemplified by Timing transactions such that large one-time gains and losses occur in the same quarter. Changing the interest rate used in accounting for leases without describing the change in the notes to the financial statements. Capitalizing as assets expenditures that have no future economic benefit. Changing the useful life of a depreciable asset and fully disclosing it in the notes.

Changing the interest rate used in accounting for leases without describing the change in the notes to the financial statements.

Which of the following is a poor internal accounting control feature? Rotation of personnel Combining accountability with custodianship Internal auditing Division of work

Combining accountability with custodianship

Which of the following below generally is the most useful in analyzing companies of different sizes? Price-level accounting Audit report Common-sized financial statements Comparative statements

Common-sized financial statements

The idea that information becomes more useful when it can be related to a benchmark or a standard is referred to as Comparability Materiality Relevance Conservatism

Comparability

A useful tool in financial statement analysis is the common-size financial statement. What does this tool enable the financial analyst to do? Compare the mix of revenue, and expenses, and determine efficient use of resources within a company over time or between companies within a given industry without respect to relative size. Ascertain the relative potential of companies of similar size in different industries. Evaluate financial statements of companies within a given industry of approximately the same value. Determine which companies in the same industry are at approximately the same stage of development.

Compare the mix of revenue, and expenses, and determine efficient use of resources within a company over time or between companies within a given industry without respect to relative size.

With activity-based costing, overhead costs are assigned using: Product costs Cash flows Cost drivers Direct labor hours

Cost drivers

investment securities

Composed of publicly traded stocks and bonds. (I owe you)

The Public Company Accounting Oversight Board. Reviews tax returns of public companies Establishes requirements for entry into the CPA profession Enforces compliance with the Foreign Corrupt Practices Act Conducts inspections of accounting firms

Conducts inspections of accounting firms

The notion that when doubt exists concerning two or more reporting alternatives, users should select the alternative with the least favorable impact on reported income, assets, and liabilities is referred to as Comparability Materiality Conservatism Relevance

Conservatism

The top accountant in most large organizations is usually called the: Chief executive officer Chief financial officer Controller Sales' manager

Controller

Which management function implements management plans and identifies how plans compare with actual performance? Evaluating Controlling Tracking Planning

Controlling

disclosure

Convey the details in a narrative note without ever including anything in the financial statements themselves.

An activity that affects a particular cost is a(n): Cost driver Cost pool Pool rate Overhead rate

Cost driver

Current liabilities

Current liabilities are those obligations expected to be paid within one year, the most common being accounts payable.

What ratio is used to measure a firm's liquidity? Asset turnover Return on equity Debt ratio Current ratio

Current ratio

Which of the following is NOT included in the DuPont framework of the return on equity ratio? Asset-to-equity ratio Current ratio Return on sales Asset turnover

Current ratio

Given the following information: Pairs of shoes expected to be produced 1,950,000 Pairs of shoes produced 2,500,000 Overhead rate $0.75 What is the amount of applied overhead? A. $412,500 B. $550,000 C. $1,462,500 D. $1,875,000

D. $1,875,000

During its first month of operations, a manufacturer incurs the following costs in dollars related to activities within its factory: Direct materials costs $5,000 Indirect materials $2,000 Direct labor $15,000 Indirect labor$3,000 Factory rent $10,000 Depreciation on factory equipment $8,000 What are the manufacturer's total product costs for the month? A. $20,000 B. $25,000 C. $38,000 D. $43,000

D. $43,000

In which scenario would activity-based costing be more appropriate than traditional costing? A. Direct labor and direct materials are the major costs associated with a company's two products. The small overhead cost is closely associated with the products' use of direct labor hours. B. A company produces one product line. All of the overhead is, therefore, allocated to that product line. C. A company produces several different products. The products have very similar requirements for their production and have minimal variation between them. D. A company produces five different products. The products are highly differentiated and have significantly different demands for their use of overhead costs.

D. A company produces five different products. The products are highly differentiated and have significantly different demands for their use of overhead costs.

The emphasis in financial accounting is on which of the following external user groups? A. Management B. Educators C. Certified public accountants D. Investors and creditors

D. Investors and creditors

Which category on the statement of cash flows summarizes cash receipts and payments to owners and creditors of the company? A. Cash flows from investing activities B. Cash flows from operating activities C. Cash flows from business activities D. Cash flows from financing activities

D. Cash flows from financing activities

What is a common category in a statement of cash flows? A. Cash from planning activities B. Cash from production activities C. Cash from marketing activities D. Cash from investing activities

D. Cash from investing activities

Which item is an investing activity? A. Cash receipts from dividend revenue B. Cash receipts from issuance of stock C. Cash payments for dividends D. Cash payments for purchase of plant assets

D. Cash payments for purchase of plant assets

The initials CPA stand for A. Certified Professional Appraiser B. Certified Professional Accountant C. Certified Public Auditor D. Certified Public Accountant

D. Certified Public Accountant

What is consistent with a continual decline in gross profit if the firm's cost of goods sold remains the same? A. Continual decrease in salaries B. Continual increase in interest C. Continual increase in taxes D. Continual decrease in sales

D. Continual decrease in sales

The idea that businesses must be accounted for as though they will exist at least for the foreseeable future is the A. Arm's-length transaction assumption B. Monetary measurement concept C. Entity concept D. Going concern concept

D. Going concern concept

The primary internal group that uses accounting information is A. Management B. Investors C. Competitors D. Government agencies

D. Government agencies

Where would an investor find a summary of a company's significant accounting policies? A. In the balance sheet B. In the income statement C. In the statement of cash flows D. In the notes to financial statements

D. In the notes to financial statements

Which of the following is NOT true of the Financial Accounting Standards Board (FASB)? A. It consists of seven full-time members B. It is a government agency C. It seeks consistency for its proposed standards D. It has no legal power to enforce the standards it sets

D. It has no legal power to enforce the standards it sets

A furniture company using accrual accounting purchased 20 sofas in November 2011. In December 2011, 8 of the 20 sofas were sold to customers. The customers all signed contracts agreeing to pay half the amount owed in February 2012 and the remaining half in March 2012. At the time of sale, the company was reasonably sure the customers would pay the amount owed. The furniture company pays its salespeople a commission on each sofa sold, with commissions for December 2011 sales paid in January 2012. The furniture company paid $3,000 for advertising that ran in the local newspaper in November 2011. In which month should advertising costs be expensed? A. February 2012 B. January 2012 C. December 2011 D. November 2011

D. November 2011

Which term is defined as the residual interest in the net assets of a company? A. Operating income B. Liabilities C. Revenues D. Owners' equity

D. Owners' equity

Which report summarizes cash collections and cash expenditures from operating, investing, and financing activities over a period of time? A. Cash receipts and disbursements sheet B. Cash flow schedule C. Summary of cash receipts D. Statement of cash flows

D. Statement of cash flows

What does accounting focus on? A. The impact a business's activities have on its relationships with customers B. The impact a business's activities have on the environment C. The impact a business's activities have on its public image D. The impact a business's activities have on its overall financial performance

D. The impact a business's activities have on its overall financial performance

Which of the following is NOT a reason for the integration of worldwide accounting standards? A. the integration of the global economy B. the need to evaluate investments across the world C. the increased efficiency of financial markets D. the theoretical necessity of a common set of accounting standards

D. the theoretical necessity of a common set of accounting standards

When using common-size statements Data may be selected for the same business as of different dates, or for two or more businesses as of the same date Relationships should be stated in terms of ratios Dollar changes are reported over a period of at least three years All of these are correct

Data may be selected for the same business as of different dates, or for two or more businesses as of the same date

The ratio that reflects the mix of sources of financing for a company is the Times interest earned ratio Debt-to-equity ratio Price-earnings ratio Current ratio

Debt-to-equity ratio

Current assets usually are listed on a balance sheet in Decreasing order of profitability Decreasing order of liquidity Increasing order of liquidity A random fashion

Decreasing order of liquidity

Which of the following items would be reported on a statement of cash flows prepared by the indirect method but NOT by the direct method? Cash received from issuance of stock Depreciation expense Cash paid for dividends Cash received from the sale of a building

Depreciation expense

The method by which cash flows are presented on a statement of cash flows as operating cash receipts and payments is the Direct method All financial resources method Indirect method Working capital method

Direct method

If two different accountants were to estimate the percentage of customers who will NOT pay their accounts (bad debts), they could arrive at different estimates. These differing estimates would affect the financial statements. Such differences in assessing estimates are due to Fraudulent financial reporting Errors in accounts and ledgers Lack of internal controls Disagreements in judgment

Disagreements in judgment

Which of the following statements is true about disagreements in the financial statements of a company? Disagreements are usually an intentional attempt at fraud. Disagreements result when different people arrive at different conclusions based on the same set of facts. Disagreements are a result of intentional mistakes made while recording or posting transactions. Disagreements are not intentional and when detected are immediately corrected.

Disagreements result when different people arrive at different conclusions based on the same set of facts.

Reporting the details of a transaction in the notes to the financial statements is called Disclosure Valuation Recognition Materiality

Disclosure

This is sometimes done in place of recognition when the effects of an event cannot be quantified with any degree of certainty. Valuation Disclosure Materiality Recognition

Disclosure

What is the first step a business professional should take when confronted with a situation that may involve an ethical conflict? Discuss the problem with the immediate supervisor. Refrain from discussing the problem with anyone. Use an objective advisor to help clarify issues. Resign from the organization.

Discuss the problem with the immediate supervisor.

Which of the following would NOT be included in the operating activities section of the statement of cash flows? Dividends paid Interest paid Dividends received Interest received

Dividends paid

What are two impacts on costs as sales volume increases? Choose 2 answers A. Total fixed costs will increase in direct proportion. B. Total fixed costs will decrease in direct proportion. C. Fixed costs per unit will stay the same. D. Fixed costs per unit will increase. E. Total fixed costs will stay the same. F. Fixed costs per unit will decrease.

E. Total fixed costs will stay the same. F. Fixed costs per unit will decrease.

Which of the following accounts would NOT be considered a current asset? Equipment Inventory Accounts Receivable Cash

Equipment

Which of the following statements is true about errors in the financial statements of a company? Errors are not intentional and therefore do not need to be corrected. Errors are usually an intentional attempt at fraud. Errors are a result of intentional mistakes made while recording or posting transactions. Errors are not intentional and when detected are immediately corrected.

Errors are not intentional and when detected are immediately corrected.

Financial Accounting Standards Board (FASB)

Establishes financial accounting rules for the United States

International Accounting Standards Board (IASB)

Establishes financial accounting rules for the world Formed to develop a common set of worldwide accounting standards. IASB standards are increasingly accepted worldwide, but FASB rules are still the standard in the United States.

Variances which result from a comparison of actual performance against expected results would be used in which management function? Planning Controlling Evaluating None of these are correct

Evaluating

Which management function analyzes results, rewards performance and identifies problems? Controlling Evaluating Tracking Planning

Evaluating

Which statement best describes the role of external auditors when auditing a large public company? Examine the organization's accounting for every business transaction to provide reasonable assurance that the financial statements are presented fairly Examine the organization's accounting for every business transaction to guarantee that the financial statements are presented fairly Examine the organization's accounting for a sample of business transactions to provide reasonable assurance that the financial statements are presented fairly Examine the organization's accounting for a sample of business transactions to guarantee that the financial statements are presented fairly

Examine the organization's accounting for a sample of business transactions to provide reasonable assurance that the financial statements are presented fairly

Analysis of revenue and expense transactions requires the use of the: Break-even Point Cash Flow Adequacy Equation Assets-to-equity Ratio Expanded Accounting Equation

Expanded Accounting Equation

Which one of the following errors causes net income to be understated? Failure to record wages employees have earned but not yet been paid Failure to record collection of accounts receivable Failure to record revenue earned but not billed Failure to record depreciation expense

Failure to record revenue earned but not billed

With a multiple-step income statement all revenues are grouped together, all expenses are grouped together, and net income is computed as the difference between the two. True or False

False

With the current state of information technology, investors outside a company are now allowed access to a company's internal database of financial information and do their own customized analysis of a firm's performance. True or False

False

Relationships between financial statement amounts are called Financial ratios Financial statement analyses Liquidity ratios DuPont ratios

Financial ratios

Financing activities

Financing activities are those activities whereby cash is obtained from, or repaid to, owners and creditors. For example, cash received from owners' investment or as proceeds from a loan would be classified under financing activities

The repayment of the principal on a loan should be classified as a(n) Noncash transaction Operating activity Financing activity Investing activity

Financing activity

Which of the following is the correct way to date an income statement? For the Year Ended December 31, 2012 December 31, 2012 At December 31, 2012 As of December 31, 2012

For the Year Ended December 31, 2012

What is the detailed report that companies file annually with the Securities and Exchange Commission? Form 10-Q Form 10-K Form 8-K Form S-16

Form 10-K

Which of the following is true about fraudulent accounting? None of these are true. Fraudulent accounting is the result of intentional errors in the accounting records. Fraudulent accounting results when different people arrive at different conclusions based on the same set of facts. Fraudulent accounting is the result of unintentional errors in the accounting records.

Fraudulent accounting is the result of intentional errors in the accounting records.

External users of financial statements use financial statement analysis for Operating, investing, and financing decisions Operating and financing decisions Investing decisions Financing decisions

Investing decisions

Which of the following requires CPAs to provide reasonable assurance that significant fraud or misstatement is NOT present in financial statements? Generally Accepted Accounting Principles Sarbanes-Oxley Act Generally Accepted Auditing Standards Foreign Corrupt Practices Act

Generally Accepted Auditing Standards

In general, most companies have significant noncash expenses that reduce net income and also cause the cash flow-to-net income ratio to be Greater than 1 Equal to 1 Less than 1 None of these are correct

Greater than 1

Which of the following is the correct sequence of the five steps of implementing and using an activity-based costing system? Use the cost data to make decisions, analyze individual overhead costs in terms of those cost activities, identify measurable cost drivers, assign overhead, and identify overhead cost activities Identify measurable cost drivers, assign overhead, identify overhead cost activities, analyze individual overhead costs in terms of those cost activities, and use the cost data to make decisions Identify overhead cost activities, identify measurable cost drivers, assign overhead, analyze individual overhead costs in terms of those cost activities, and use the cost data to make decisions Identify overhead cost activities, analyze individual overhead costs in terms of those cost activities, identify measurable cost drivers, assign overhead, and use the cost data to make decisions

Identify overhead cost activities, analyze individual overhead costs in terms of those cost activities, identify measurable cost drivers, assign overhead, and use the cost data to make decisions

Which of the following principles best describes the rationale for matching administrative and selling expenses with revenues of the current period? Partial recognition Immediate recognition Direct matching Systematic and rational allocation

Immediate recognition

A measure of a company's performance that includes all items that are expected to continue into the future is - Gross Profit Income from Continuing Operations Operating Income Net Income

Income from Continuing Operations

As William is preparing the end of year financial statements, he has been asked to reconsider the timing of revenues and expenses in order to report less volatile earnings. This is an example of Income smoothing Meeting external expectations Meeting internal targets Window dressing

Income smoothing

The cost of milk for an ice cream manufacturer would be considered all of the following EXCEPT: Indirect cost Variable cost Manufacturing cost Product cost

Indirect cost

Which of the following generally is NOT considered to be a liability? Taxes payable Notes payable Inventory Accounts payable

Inventory

Inventory

Inventory is the name given to goods held for sale in the normal course of business. For example, when you walk into a Wal-Mart store, everything you see for sale, such as shoes, clothes, and garden equipment, is inventory.

Which of the following classifications refers to those activities associated with buying and selling long-term assets? Borrowing Operating Financing Investing

Investing

Which of the following is NOT a purpose of the statement of cash flows? It highlights changes in managerial strategy regarding investments and finances. It provides information about an entity's cash receipts and payments over a period of time. It measures the profitability of an entity. It provides investors with information about the investing and financing activities of an entity.

It measures the profitability of an entity.

Which of the following would be classified as a long-term asset? Accounts payable Land Inventory Accounts receivable

Land

The ability a company has to pay its debts in the short run is its Profitability Liquidity Efficiency Leverage

Liquidity

Which of the following does Sarbanes-Oxley NOT require management to do? Support a much stronger board and audit committee in each public company Make loans to executive officers and directors Prepare a statement to accompany the audit report Develop and enforce an officer code of ethics

Make loans to executive officers and directors

The accuracy of the information contained in the financial statements is the responsibility of the Certified Public Accountant Management Securities and Exchange Commission Stockholders

Management

Good management accounting is motivated by: Government regulators Accounting rules Management's desire to improve All of these are correct

Management's desire to improve

With regard to a particular company, which of the following groups generally has the widest variety of decisions to make? Investors Creditors Regulators Managers

Managers

Whether an item is big enough that proper accounting will make a difference to users of accounting information is referred to as Relevance Comparability Conservatism Materiality

Materiality

Usually activity-based costing would be significantly more accurate than traditional product costing in a: One-product firm Multiple-product firm where products are quite similar Multiple-product firm that has separate manufacturing facilities for each product Multiple-product firm where products are quite different

Multiple-product firm where products are quite different

Which of the following is an overall measure of the performance of a business entity's activities? Assets Owners' equity Revenues Net income (or net loss)

Net income (or net loss)

Thus far, the only national government to adopt the accrual basis for its official accounting system is ______. The United States of America France No country has adopted the accrual basis for its official accounting system New Zealand

New Zealand

If a cost activity does NOT have any production-related cost driver that matches up with changes in the amount of overhead cost associated with the activity then: Number of items produced should be the cost driver. Direct labor hours should be used as the cost driver Any basis can be selected as a cost driver No cost driver should be selected; the costs should be treated as common costs

No cost driver should be selected; the costs should be treated as common costs

The statement of cash flows replaces the Balance sheet Statement of financial position Income statement None of these

None of these

Which of the following would NOT be considered cash or cash equivalents for purposes of preparing a statement of cash flows? Checking accounts Money market funds Notes receivable Treasury bills

Notes receivable

Vital information that CANNOT be captured solely by dollar amounts is reported in a firm's Income statement Balance sheet Notes to financial statements Statement of retained earnings

Notes to financial statements

valuation

Once it has been determined that an item should be recognized in financial statements, the question then arises about what dollar amount to assign to the item.

Which of the following classifications refers to those activities that are part of the day-to-day business of a company? Investing Financing Operating Borrowing

Operating

The direct and indirect methods will usually show different amounts of cash flows from Operating activities Financing activities Investing activities None of these are correct

Operating activities

Operating activities

Operating activities are those activities involved in producing and selling goods and services and thus comprise the day-to-day business of a company. Cash receipts from selling goods or from providing services are the primary operating cash inflow

Which of the following decreases owners' equity? None of these decreases owners' equity Operations generate a loss Operations generate a profit that is retained in the company Additional investments in the company are made by the owners

Operations generate a loss

According to Sarbanes-Oxley, which one of the following services is an accounting firm permitted to provide to its audit client? Legal services and expert services unrelated to the audit Internal audit outsourcing services Opinions about the reliability of internal controls Bookkeeping or other services related to the accounting records or financial statements

Opinions about the reliability of internal controls

You want to go skiing for the day. The cost of the lift ticket would be considered a(n): Opportunity cost Out-of-pocket cost Indirect cost Sunk cost

Out-of-pocket cost

Which of the following would be reported as an operating activity on a statement of cash flows? Repayment of a loan Purchase of a building Payment of dividends Payment of taxes

Payment of taxes

Prepaid expenses

Prepaid expenses are payments in advance for business expenses. Two common examples are insurance and rent. Businesses, like individuals, usually pay for insurance for 6 to 12 months in advance; rent is usually paid at least 1 month in advance.

Which of the following ratios represents an indication of investors' expectations concerning a firm's growth potential? Asset turnover Earnings per share Price-earnings ratio Return on equity

Price-earnings ratio

Asset

Probable future economic benefit obtained or controlled by a particular entity as a result of past transactions or events

Liability

Probable future sacrifice of economic benefit arising from a present obligation of a particular entity to transfer assets or provide services to other entities in the future as a result of past transactions or events

Direct labor is most often considered which of the following? Product cost Indirect cost Fixed cost Manufacturing overhead

Product cost

The particular analytical measures chosen to analyze a company may be influenced by all BUT which one of the following? Companies are conglomerates Industry type Diversity of business operations Product quality or service effectiveness

Product quality or service effectiveness

The particular analytical measures chosen to analyze a company may be influenced by all BUT which one of the following? Product quality or service effectiveness Industry type Diversity of business operations Companies are conglomerates

Product quality or service effectiveness

Traditional product costing systems (e.g. job order costing and process costing) usually assume that: Products consume overhead costs Activities consume overhead costs Overhead costs are insignificant All of these are correct

Products consume overhead costs

In completing an audit of a company's financial statements, auditors Provide some assurance that the financial statements are not misleading Examine every transaction underlying the financial statements Assume responsibility for the accuracy of the financial statements Guarantee that the financial statements are accurate

Provide some assurance that the financial statements are not misleading

Which of the following activities would NOT be classified as an investing activity? Sale of equipment Sale of Land Purchase of land Purchase of inventory

Purchase of inventory

Which of the following would be reported as a financing activity on a statement of cash flows? Receipt of a dividend Proceeds from the sale of land Payment of interest Purchase of treasury stock

Purchase of treasury stock

A major source of cash from operating activities is Receipts from sale of building Receipts from borrowing Receipts from investment by owner Receipts from sale of goods

Receipts from sale of goods

The process of formally recording an item in the accounting records so that it will be reflected in the financial statements is called Disclosure Materiality Valuation Recognition

Recognition

Which of the following typically involves the use of non-GAAP accounting? Changing an interest rate and disclosing it in the financial statements Recording expenses as assets Changing an interest rate but not disclosing it in the financial statements Delaying a transaction to be recorded in a more advantageous quarter

Recording expenses as assets

Securities and Exchange Commission (SEC)

Regulates U.S. stock exchanges and seeks to create a fair information environment in which investors can buy and sell stocks without fear that companies are hiding or manipulating financial data

The notion that information will be more useful if it will impact a decision is referred to as Materiality Conservatism Relevance Comparability

Relevance

The process of valuation involves computing numbers that are both Material and conservative Understandable and useful Relevant and reliable Comparable and consistent

Relevant and reliable

Historical cost has long been used in accounting because it is Reliable Useful Conservative Relevant

Reliable

Significant noncash financing and investing transactions are Converted to cash equivalents Reported under the financing and investing activities sections Reported in a narrative or in a separate schedule Listed in the body of a statement of cash flows

Reported in a narrative or in a separate schedule

Which of the following are the two economic factors that enable us to trust an independent auditor despite the fact that the auditor was hired by the company being audited? Risk of lawsuits and integrity of auditor Integrity of auditor and government policy Reputation of auditor and government policy Reputation of auditor and risk of lawsuits

Reputation of auditor and risk of lawsuits

Equity

Residual interest in the assets of an entity that remains after deducting its liabilities

Which of the following ratios is calculated using numbers from both the income statement and the balance sheet? Current ratio Return on equity Return on sales Price-earnings ratio

Return on equity

Which of the following ratios is calculated using only income statement numbers? Return on sales Return on equity Debt ratio Current ratio

Return on sales

Balance sheet

Reveals what a company owns and what it owes A balance sheet is a listing of an organization's assets and of its liabilities at a certain time.

In a common-size income statement, each item on the statement is expressed as a percentage of Expenses Net income Revenue Gross profit

Revenue

In a common-size income statement, each item on the statement is expressed as a percentage of Revenue Gross profit Expenses Net income

Revenue

What will increase from the sale of goods or services? Assets Gains Revenues Net income

Revenues

When a company determines to get out of a specific line of business All revenues, expenses, assets, and liabilities of the discontinued line of business are excluded from the financial statements and instead are disclosed in the financial statement notes. Assets and liabilities from the discontinued line are included with other assets and liabilities until they are sold. Only the net of revenues and expenses and the net of the assets and liabilities is disclosed in the financial statements. Revenues and expenses from that line of business are excluded from the company's recurring revenues and expenses when preparing an income statement.

Revenues and expenses from that line of business are excluded from the company's recurring revenues and expenses when preparing an income statement.

Which of the following is NOT a reason for problems occurring in the financial statements? Safeguards Errors Fraud Disagreement

Safeguards

Which of the following would NOT be considered a manufacturing cost? Milk for an ice cream maker Tires for an automobile manufacturer Sales commissions for an automobile manufacturer Property taxes on the factory for an ice cream maker

Sales commissions for an automobile manufacturer

In a common-size balance sheet, using the percent of sales method, each item on the balance sheet is typically expressed as a percentage of Net income Equity Assets Sales revenue

Sales revenue

In a common-size balance sheet, using the percent of sales method, each item on the balance sheet is typically expressed as a percentage of Sales revenue Net income Assets Equity

Sales revenue

Which of the following ratios is used to measure a firm's efficiency? Net income ÷ Equity Assets ÷ Equity Sales ÷ Assets Net income ÷ Sales

Sales ÷ Assets

Which of the following requires that audit committee members be financially literate? Securities Exchange Commission American Institute of Certified Public Accountants Sarbanes-Oxley Act Foreign Corrupt Practices Act

Sarbanes-Oxley Act

Which of the following is a revenue generating activity? Selling a product Paying rent Selling capital stock Borrowing money from a bank

Selling a product

In the Lily Ice Cream example, number of purchase orders is an example of an overhead cost associated with Producing a specific batch of ice cream Operating the ice cream production process Servicing the special needs of each individual ice cream flavor Keeping the factory open

Servicing the special needs of each individual ice cream flavor

Short-term loans

Short-term loans payable are formal, interest-bearing loans that are expected to be paid back within one year.

Another name for the income statement is Statement of financial position Retained earnings statement Statement of earnings Statement of cash flows

Statement of earnings

Which is usually conducted by executive level management? Controlling Strategic planning Evaluating Operational budgeting

Strategic planning

The statement of cash flows Summarizes all cash inflows and outflows of an entity for a given period of time Provides a connecting link between two consecutive income statements Is intended primarily to provide necessary information for assessing the profitability of an entity Is a required statement only for those companies using cash-basis accounting

Summarizes all cash inflows and outflows of an entity for a given period of time

Which of the following is NOT one of the four general types of financial statement notes? Disclosure of important information that is not recognized in the financial statements Summary of significant accounting policies Supplementary information required by the Internal Revenue Service Additional information about the summary totals found in the financial statements

Supplementary information required by the Internal Revenue Service

The control environment can be defined as The lines of authority and responsibility within a company. The actions, policies, and procedures that reflect the overall attitudes of top management about control. The policies and procedures used by management to meet their objectives. The members of a company's board of directors who are responsible for dealing with the external and internal auditors.

The actions, policies, and procedures that reflect the overall attitudes of top management about control.

Cheroke Company had an accounts receivable balance of $60,000 at December 31, 2013. Projected sales for the first three months of 2014 are: January $120,000 February 130,000 March 100,000 All sales are credit sales. Cheroke Company usually collects 40% of its sales during the month of sale, 50% in the month following the sale, and 10% in the second month following the sale. Given the information above, cash collections during February should be: $112,000 $128,000 $129,000 The answer cannot be determined

The answer cannot be determined

Cheroke Company had an accounts receivable balance of $60,000 at December 31, 2013. Projected sales for the first three months of 2014 are: January $120,000 February 130,000 March 100,000 All sales are credit sales. Cheroke Company usually collects 40% of its sales during the month of sale, 50% in the month following the sale, and 10% in the second month following the sale. Given the information above, cash collections during January should be: $108,000 $88,000 $128,000 The answer cannot be determined

The answer cannot be determined

If an external auditor suspects wrongdoing in financial statements, the concerns should be addressed to The Securities and Exchange Commission The management of the company The audit committee The board of directors

The audit committee

Internal Revenue Service (IRS)

The branch of the U.S. Treasury Department in charge of collecting and regulating income taxes Establishes rules to define exactly when income should be taxed. It has no role in setting financial accounting rules; and a company's financial statements are not used in determining how much tax the company must pay

long-term investments

Those assets that you expect to still be around next year when you prepare the balance sheet again.

retained earnings

The cumulative amount of corporation's profits that have been reinvested on behalf of the stockholders

Which of the following is an example of a disclosure of information NOT recognized that would be explained in the notes to the financial statements? The method used to estimate depreciation on a piece of equipment The description of all the individual items that comprise notes payable The disclosure of quarterly financial information The disclosure of the uncertain, potential outcome of a lawsuit

The description of all the individual items that comprise notes payable

stockholders' equity

The difference between assets and liabilities in a corporation

Which of the following is an example of additional information about summary totals that would be explained in the notes to the financial statements? The method used to estimate depreciation on a piece of equipment The disclosure of the uncertain, potential outcome of a lawsuit The description of all the individual items that comprise notes payable The disclosure of quarterly financial information

The disclosure of the uncertain, potential outcome of a lawsuit

Which of the following is an example of a significant accounting policy that would be explained in the notes to the financial statements? The method used to estimate depreciation on a piece of equipment The disclosure of the uncertain, potential outcome of a lawsuit The disclosure of quarterly financial information The description of all the individual items that comprise notes payable

The method used to estimate depreciation on a piece of equipment

When analyzing financial statements, prognosis is The identification of the trends in past numbers The prediction of how many employees will lose their jobs in the coming year The prediction of how a business will perform in the future The identification of where a business has problems

The prediction of how a business will perform in the future

transaction analysis

The process of determining how an economic event impacts the financial statements

American Institute of Certified Public Accountants (AICPA)

The professional organizations of certified public accountants (CPA) in the United States. A CPA is someone who has taken a minimum number of college-level accounting classes, has passed the CPA exam, and has met other requirements set by his or her state. A CPA firm is a company that provides freelance business advice, particularly in connection with accounting issues.

Which of the following statements is NOT true? The statement of cash flows does not replace the income statement. The statement of cash flows sheds some light on a company's ability to generate income in the future. The statement of cash flows provides details as to how the cash account changed during a period. The statement of cash flows includes transactions that are not already reflected in the balance sheet and income statement.

The statement of cash flows includes transactions that are not already reflected in the balance sheet and income statement.

In non-U.S. Balance sheets, you will often see each of the following EXCEPT: Current assets and current liabilities will be netted together The stockholders' equity section will be listed first on the balance sheet Property, plant, and equipment will be listed first

The stockholders' equity section will be listed first on the balance sheet

What are the three factors that have combined to make right now a time of significant change in accounting?

The three factors are the rapid advance in information technology, the international integration of worldwide business, and the increased scrutiny associated with the large corporate accounting scandals

The ratio that indicates if a borrowing company will be able to meet its required interest payments is the Current ratio Times interest earned ratio Price-earnings ratio Debt-to-equity ratio

Times interest earned ratio

The ratio that indicates if a borrowing company will be able to meet its required interest payments is the Times interest earned ratio Debt-to-equity ratio Price-earnings ratio Current ratio

Times interest earned ratio

A company is thought to 'breaks even' when: Total sales revenue covers all variable costs Total sales revenue covers all fixed costs Total sales revenue covers all fixed and variable costs Total sales revenue covers all manufacturing costs

Total sales revenue covers all fixed and variable costs

A borrower benefits from providing financial information regarding income and expenses in the form of a lower interest rate on the loan because of reduced uncertainty for the lender with regard to repayment. True or False

True

One reason for a company's preparing and providing financial statements is to reduce uncertainty for an investor regarding the firm's future financial performance. True or False

True

The International Accounting Standards Board (IASB) is charged with developing worldwide accounting practices? True or False

True

With a single-step income statement all revenues are grouped together, all expenses are grouped together, and net income is computed as the difference between the two. True or False

True

Which of the following is NOT a situation when it would be important to analyze cash flow information because net income is NOT giving an accurate portrayal of the economic performance of the company? When a company has a negative operating cash flow When a company is growing rapidly When a company is striving to present a stellar financial record When a company has several large non-cash expenses

When a company has a negative operating cash flow

When does the Securities and Exchange Commission (SEC) typically require a company to submit a registration statement to the SEC for approval? When the company issues new debt or stock securities to the public When the company receives a qualified opinion from the external auditors When the company has experienced a major fraud When the company receives a disclaimer of opinion from the external auditors

When the company issues new debt or stock securities to the public

long-term debt

a liability that falls due beyond one year from the date of the financial statements

Intangible assets

assets that do not have physical or tangible characteristics

Generally, recognition criteria are met and revenues are recognized at appropriate points throughout the operating cycle. at the point of sale. when cause and effect are associated. at the point of cash collection.

at the point of sale.

For a gain or loss to be classified as extraordinary, it must be both unusual and infrequent either unusual or infrequent infrequent but within the normal course of business unusual and material

both unusual and infrequent

Costs that can be reasonably associated with specific revenues but NOT with specific products should be capitalized and then amortized over a period not to exceed 60 months. charged to expense in the period incurred. allocated to specific products based on the best estimate of the production processing time. expensed in the period in which the related revenue is recognized.

expensed in the period in which the related revenue is recognized.

The concept that income is defined as the excess of net assets at the end of an accounting period over the net assets at the beginning of the accounting period, excluding effect of transactions with owners is called - economic capital maintenance component capital maintenance financial capital maintenance physical capital maintenance

financial capital maintenance

A wholesale bakery would normally recognize revenue when goods are delivered to the customer. the product is available for sale to a customer. cash is received from the customer. management chooses to do so.

goods are delivered to the customer.

The proper order on an income statement for the various measures of income is - gross profit, operating income, income from continuing operations, net income, comprehensive income operating income, income from continuing operations, gross profit, net income, comprehensive income operating income, gross profit, income from continuing operations, net income, comprehensive income gross profit, income from continuing operations, operating income, net income, comprehensive income

gross profit, operating income, income from continuing operations, net income, comprehensive income

investing activities

investing activities are the purchase and sale of land, buildings, and equipment. Investing activities also include buying and selling stocks of other companies. You can think of investing activities as those activities associated with buying and selling long-term assets

When revenue and expense items are arranged to highlight important profit relationships, the resulting income statement format is called a - single-step income statement comparative income statement multiple-step income statement classified income statement

multiple-step income statement

Statement of cash flows

outlines where a company gets its cash and how it spends that cash

Excessive earnings management typically begins as a result of pressure to meet the expectations of stakeholders. a downturn in business. a violation of generally accepted accounting principles. a regulatory investigation.

pressure to meet the expectations of stakeholders.

Income statement

provides the accountant's best attempt at measuring the economic performance of a company

Most forecasting exercises begin with a forecast of total assets. sales. net income. cash.

sales