Chapter 12

Which line item appears on both the income statement and the statement of retained earnings?

Net income

Current assets are called "current" because

they are cash or will be converted to cash soon

The cash flow statement answers the question:

"How much cash was received and disbursed this period?"

Which of the following is not a type of information you would expect to find on a balance sheet?

. Net income

Cost of goods sold usually excludes which type of expense?

Income tax expense

Which of the following is not one of the drawbacks of automated information systems, as compared to manual systems?

Consistency of calculations and procedures

Which item has a negative effect on assets?

Depreciation

A fiscal year is always the period from January 1 to December 31 of one year.

False

An internal audit examines the firm's operations while an external audit examines elements from the firm's environment.

False

In automated systems terminology, "application integration" refers to data privacy and security against threats.

False

Which financial statement shows results at one moment in time—the end of an accounting period—rather than results over an entire period of time?

The balance sheet

Which of the following is not one of the common corporate financial statements?

The expense account

Assets = Liabilities + Owners' Equity

True

In the temporal rate method of foreign currency translation, the goal is to measure each subsidiary transaction as though it were made by the parent company.

True

The current value of a company's stock is primarily dependent on the expectations of its future earnings.

True

Within an organization, accountants are the individuals who have the most complete knowledge of a firm's income and expenses.

True

Liabilities plus equals assets.

a. owners' equity

When a multinational firm translated its financial statements from subsidiaries into its reporting currency, it translated assets and liabilities using the current exchange rate and income statement items were translated using an average exchange rate. This is an indicator that the company was using the

current rate method

When a financial statement says that it is "consolidated," that means

it includes the parent firm and its subsidiaries.

The best predictor of a company's future earnings is

its past earnings.

An audit trail describes the

link between transactions and the financial statements

After an organization accounts for everything it owns (its assets) and subtracts everything it owes (its liabilities) what remains is called

owners' equity.

Common sources and uses of cash that might be included on a statement of cash flows include all of the following except

retained earnings.

Net income is equal to

revenues minus expenses.

The primary responsibility for the design of an effective accounting information system belongs to

the company's management