MGST Chapter 16
cost of goods sold and operating expenses
Which of the following are the two types of expenses recorded on the income statement? Question options: cost of goods sold and production costs sales expenses and administrative expenses` operating expenses and administrative expenses cost of goods sold and operating expenses
False
An example of an intangible asset is accounts receivable because the company does not see or feel it until it is paid in full. Question options: False True
False
Another term for "net worth" is "working capital." Question options: False True
False
Auditors are correctly portrayed as bean-counters. Question options: False True
True
The $200 fee owed to a landscape designer for work done two months ago is an example of a note receivable. Question options: False True
an intangible asset
The Jolly Green Giant appears on all packages of frozen and canned vegetables and other dishes sold by the Green Giant Company. Because it does not have a physical existence, what is the Jolly Green Giant? Question options: a retained asset a tangible expense an intangible asset a hidden asset
The school has more debt than equity.
The Kosov School teaches adults how to communicate in a foreign language in a period of weeks. The school's debt-to-equity ratio is 120 percent. Which of the following interpretations is represented by the ratio? Question options: The school has surplus retained earnings. The school is very liquid. The school has more debt than equity. The school has high accrued expenses.
False
The balance sheet summarizes a company's financial position over a period of time, for instance three months or a year. Question options: False True
short-term financial stability
What do liquidity ratios measure? Question options: long-term financial stability earnings per share annual sales and profits short-term financial stability
an income statement
What is another term for an operating statement or an earnings statement? Question options: a cash flow statement an income statement a balance sheet a transaction ledger
net worth
What is another term for owners' equity? Question options: assets gross worth net worth liabilities
differs for each industry
What is the acceptable inventory turnover ratio? Question options: once every sixty days once per year once every ninety days differs for each industry
gross profit
What is the difference between net sales and cost of goods sold? Question options: net income general income net revenues gross profit
revenues
What is the dollar amount of sales plus any other income received from sources such as interest and dividends? Question options: revenues capital intangible assets equities
Analyze the business transaction documents
What is the first step in the accounting cycle? Question options: Analyze the financial statements. Prepare the financial statements. Analyze the business transaction documents. Prepare the trial balance.
earnings per share (EPS)
What is the ratio of net profit to the number of shares of common share outstanding? Question options: equity earnings share-to-earnings ratio earnings for profit earnings per share (EPS)
marketable securities
Which of the following are temporary investments of excess cash in bonds and shares that can readily be converted into cash? Question options: marketable securities accounts receivable owners' net contribution margins notes payable
the acid-test ratio
Which of the following ratios is a measure of the company's ability to pay its current liabilities once inventory is subtracted from current assets? Question options: the acid-test ratio the net margin ratio the profitability ratio the inventory ratio
debt to equity
Which of the following ratios measures the relationship between the amount of debt financing and the amount of equity financing? Question options: sales to ownership liability to ownership debt to equity debt to revenue
True
An accounting system should generate both internal and external reports. Question options: True False
the sale of land adjacent to the manufacturer's administrative office building
On a statement of cash flows for a manufacturer of digital thermometers, the cash flows from investment activities section would include which of the following? Question options: the sale of land adjacent to the manufacturer's administrative office building purchase of a new $25,000 copying machine repayment of long-term loan by a wholesaler of weather-related items the money borrowed from the bank to start the company
general and administrative expenses
On an income statement, expenses such as professional salaries, office salaries, office supplies, rent, and insurance are known as which of the following? Question options: miscellaneous expenses managerial expenses functional expenses general and administrative expenses
general and administrative
On an income statement, operating expenses that cannot be linked to cost of goods sold or to sales are known as which type of expense? Question options: incidental functional miscellaneous general and administrative
True
Profitability ratios measure how well a company uses its assets. Question options: False True
generally accepted accounting principles
To ensure accuracy and consistency in the way financial information is reported, accountants have historically followed which of the following rules? Question options: generally accepted accounting principles comparable accounting standards accounting rules and principles principled accounting procedures
as gross profit
Watts Regulator makes hydroponic pressure valves used in water pumps and water heaters. Watts had $100,000 in net sales for the month. Cost of goods sold was $42,000. On an income statement, how would the remaining $58,000 be classified? Question options: as gross profit as net revenues as general income as gross revenues
accounts receivable
What are amounts owed to the company by customers who bought goods and services on credit? Question options: notes payable owners' equity marketable receivables accounts receivable
liquidity ratios
What are ratios of special interest to the company's creditors and measure the company's ability to pay short-term debts as they come due? Question options: liquidity ratios earnings ratios profitability ratios current ratios
assets
What are things of value owned by a company? Question options: intangibles assets owners' equity tangibles
True
A current asset is one that can or will be converted into cash within one year. Question options: True False
net loss
After all expenses have been subtracted from revenues on an income statement, if the final figure is negative, it is known as which of the following? Question options: owners' negative equity net loss negative liability net liability
net profit
After all expenses have been subtracted from revenues on an income statement, if the final figure is positive, it is known as which of the following? Question options: owners' equity net revenue net profit gross profit
True
All publicly held companies must include a statement of cash flows in their financial reports to shareholders. Question options: True False
True
An accounting journal is a chronological list of transactions, each assigned to a particular account. Question options: True False
a long-term liability
Bert Yelverton has a 20-year mortgage on the building where his office is located. The mortgage is an example of which of the following? Question options: a long-term liability a current asset owners' equity a current liability
the inventory turnover ratio
By dividing cost of goods sold by the average inventory to measure the speed with which inventory moves through the company and is turned into sales, which of the following ratios is calculated? Question options: the price-earnings ratio the inventory turnover ratio the profitability ratio the sales to inventory ratio
True
Earnings per share is the dollar amount earned by each share, not the actual amount given to shareholders in the form of dividends. Question options: True False
shareholders
Financial accounting produces financial reports that are important to which of the following groups? Question options: shareholders managers supervisors employees
one year
Fixed assets are property and buildings that a company expects to use for more than which of the following periods of time? Question options: one month six months one year two years
its warehouse
For which of the following assets would a wholesale company use depreciation? Question options: its patented computer tracking equipment inventory of unsold merchandise gasoline used to power its delivery trucks its warehouse
net sales
Gross sales for Alfredo Milling Company was $100,000 for the month of May. Sales discounts amounted to $3,000. There were no returns. The difference, $97,000, represents which of the following for Alfredo Milling Company? Question options: cost of goods sold gross revenues gross profit net sales
within 1 year
How soon are current assets, such as marketable securities and inventory, usually expected to be turned into cash? Question options: within 1 month within 1 year within 18 months within 5 years
certified management accountant
In the accounting field, CMA stands for which of the following? Question options: certified management accountant centralized managerial accountant certified motivational accountant consolidated monetary auditor
publicly accountable organizations
International Financial Reporting Standards will first be adopted by which of the following in Canada? Question options: companies with government loans owing publicly accountable organizations for-profit companies only all companies
monthly sales records
Managerial accounting provides which of the following financial information? Question options: monthly sales records income statements reports for bankers and other investors reports for shareholders
$6,000
Myriad Canning Company has the following balance sheet figures for the year ending December 31, 200X: Cash $1,000 Marketable securities $5,000 Inventory $3,000 Total current assets $9,000 Accounts payable $2,000 Notes payable $1,000 Total current liabilities $3,000 What is its net working capital? Question options: $1,000 $3,000 $6,000 $9,000
False
The final figure or bottom line on an income statement is called the net revenue. Question options: False True
False
The income statement is a snapshot of the company's financial position at a certain point in time. Question options: False True
$5
The net profit for a company that builds portable oil well exploration rigs was $10 million last year. The company paid out $4 million in dividends and has 2 million shares of common share outstanding. What are its earnings per share? Question options: $2.50 $3.00 $4 $5
True
The postage stamps and petty cash in the architect's drawer as well as his drawing table, his office furniture, and money owed to him by clients are all examples of assets. Question options: True False
assets = liabilities + owners' equity
Which of the following calculations is a formal expression of the accounting equation? Question options: assets - owners' equity = liabilities assets = liabilities + owners' equity assets ´ liabilities = retained earnings assets + liabilities = owners' equity
financial accounting
Which of the following deals with reporting to outsiders? Question options: financial accounting auditing bookkeeping internal accounting
managerial accounting
Which of the following deals with the internal operation of the company? Question options: managerial accounting auditing accounting bookkeeping financial accounting
financial reporting
Which of the following involves calculating and interpreting financial ratios taken from the company's financial statements in order to assess its condition and performance? Question options: organizational performance appraisal ratio analysis performance analysis financial reporting
the statement of cash flows
Which of the following is a summary of the money flowing into and out of a company? Question options: the short-term budget the statement of cash flows the balance sheet the income statement
the income statement
Which of the following is a summary of what a company has earned and spent over a given period? Question options: the balance sheet the cash flow statement the income statement the trial balance
an annual report
Which of the following is a yearly document that describes a company's financial status and usually discusses a company's financial activities during the past year and its prospects for the future? Question options: an earnings report a trial balance an annual report a company summary
factory utilities
Which of the following is an example of a cost of goods sold for a manufacturer of electric fans? Question options: overtime hours needed to fill a large summer order the office phone bill sales commissions factory utilities
factory utilities
Which of the following is an example of a cost of goods sold for a manufacturer of electric fans? Question options: overtime hours needed to fill a large summer order the office phone bill sales commissions factory utilities
shipping area for finished goods and receiving area for component parts
Which of the following is an example of a fixed asset for a manufacturer of road building equipment? Question options: patents held on a new type of asphalt shipping area for finished goods and receiving area for component parts computer cartridges cans of yellow paint for painting equipment
money owed to shoe distributors
Which of the following is an example of a liability that might be owed by a discount shoe store? Question options: promotional signs money owed to shoe distributors money in the cash register the reduced prices paid by customers
a patent on a titanium lock mechanism
Which of the following is an example of an intangible asset for a manufacturer of padlocks? Question options: a patent on a titanium lock mechanism money owed to the company by a superstore chain a machine for forming the locks out of sheet metal a warehouse for storing locks
net working capital
Which of the following is often used to measure a company's overall liquidity even though it is not really a financial ratio? Question options: earnings per share return on equity net profit margin net working capital
credit card charges by patients
Which of the following is the best example of a current asset for a clinical psychologist? Question options: the building in which his clinic is located money he pays for rent and utilities credit card charges by patients his reputation as a compassionate man
the balance sheet
Which of the following is the financial statement used to assess the sources and uses of cash during the year? Question options: the trial balance the balance sheet the income statement the statement of cash flows
the move to IFRS
Which of the following is the most significant current trend in accounting in Canada? Question options: the importance of knowledge assets the move to IFRS the importance of intellectual capital the expanded role of accountants
depreciation
Which of the following is the process of distributing the original cost of a long-term asset over the years of its useful life? Question options: depreciation accountable life cost distribution appreciation
bookkeeping
Which of the following is the system used to record a company's financial transactions in a routine and clerical process? Question options: auditing bookkeeping record keeping accounting
Accountants are typically classified as one of three professional designations
Which of the following statements best describes the accounting profession? Question options: Certified Management Accountants work for local, provincial, and national agencies. Accountants do not need a degree to obtain their designation. Accountants are typically classified as one of three professional designations. Accountants need a master's degree to obtain their designation.
the balance sheet
Which of the following summarizes an organization's financial status at the end of an accounting period? Question options: the cash flow statement the balance sheet the trial balance the income statement
retained earnings
Which of the following terms equals the total profits of a company minus all dividends (distributions of profits) to shareholders? Question options: net earnings net worth retained earnings owners' equity