Whitt's Quizlet

C. Balance sheet

Accumulated other comprehensive income is found on what financial statement? A. Income statement B. Statement of cash flows C. Balance sheet

A. separate a company's temporary and permanent earnings

Analyzing earnings quality requires an analyst to: A. separate a company's temporary and permanent earnings B. score a company based on its historical earnings C. combine all earnings for analysis D. determine whether the auditor was correct in calculating earnings

D. inventory turnover ratio

Average days in inventory is calculated as 365 divided by the: A. average cost of goods sold B. average accounts receivable C. average total assets D. inventory turnover ratio

D. weighted average common shares outstanding

Basic earnings per share is calculated as net income available to common shareholders divided by: A. average total assets B. ending retained earnings C. average stockholders' equity D. weighted average common shares outstanding

financing

Cash borrowed or paid to a creditor is an example of a______________ activity.

assets

Cash flows from investing activities include inflows and outflows of cash related to the acquisition and disposition of long-term_______ used in operations.

investing

Cash flows from_____________ activities are related to the purchase and sale of long-term assets used in business operations.

continuing, discontinuing

Companies have considerable flexibility in reporting income from______________ operations, but the reporting of income from____________ operations is strictly mandated.

restructuring

Costs that are planned and controlled by management that materially change the scope of the business undertaken or the manner in which the business is conducted are called_____________ costs.

A. net of tax below income from continuing operations

Discontinued operations should be reported on the income statement: A. net of tax below income from continuing operations B. pre-tax before income from continuing operations C. net of tax in operating income D. pre-tax with other income and other loss in operating income

C. they are often nonrecurring

Gains and losses from the sale of investments can affect earnings quality because: A. they are often recurring B. they are netted against cost of goods sold C. they are often nonrecurring D. the gains were included in revenues

D. 40.6 days

Green company has net credit sales of $100,000 an asset turnover ratio of 4, and a receivables turnover ratio of 9. What is the average collection? A. 36 days B. 25 days C. 11.1 days D. 40.6 days

A. Below income from continuing operations

How are discontinued operations reported? A. Below income from continuing operations B. With tax on the discontinued operation included in total income tax expense C. As a separate line item on the income statement D. Above income from continuing operations

A. All related revenues, expenses, gains, and losses must be removed from continuing operations

If a component of the business qualifies for discontinued operations treatment, which of the following statements are true? (select all that apply) A. All related revenues, expenses, gains, and losses must be removed from continuing operations B. Revenues and expenses are reported in continuing operations, but gains and losses are reported as discontinued operations C. Revenue from the discontinued operations is listed immediately below revenue in the operating section of the income statement D. The tax expense effect is removed from continuing operations

material

If discontinued operations have a__________ effect on the income statement, they must be reported separately.

C. Managers manipulate the pattern of income to not vary much between years

Income smoothing describes the concept that: A. Income is averaged over a 10-year moving average B. Income is not reported until approved by the board of directors C. Managers manipulate the pattern of income to not vary much between years

A. As a separate line item

Income tax expense is reported in what way on the income statement? A. As a separate line item B. As part of general expenses C. As part of other expenses

A. Operating

Inflows and outflows of cash related to the transactions used to determine net operating income are what type of activities? A. Operating B. Investing C. Income D. Financing

A. long-lived assets used in business operations B. nonoperating investment assets

Investing activities involve the acquisition and sale of: (select all that apply) A. long-lived assets used in business operations B. nonoperating investment assets C. Inventories sold in normal operations

D. Non-GAAP earnings

Management's assessment of permanent earnings are referred to as what? A. Income from continuing operations B. Perpetual income C. Net income D. Non-GAAP earnings

C. comprehensive income

Net income is a part of: A. cost of goods sold B. gross income C. comprehensive income D. gross margin

C. based on management's assumptions of permanent earnings

Non-GAAP earnings are calculated: A. based on statistical analysis of time series data B. based on assets that are expected to be converted to cash in the next operating cycle C. based on management's assumptions of permanent earnings D. based on historical cost assumptions

temporary, excluded

Nonoperating items that are not expected to continue into the future are considered a__________ component of earnings and should be_____________ when forecasting future performance.

D. Statement of cash flows

Operating, investing, and financing activities are found on which financial statement? A. Income statement B. Balance sheet C. Statement of operations D. Statement of cash flows

accumulated

Other comprehensive income is reported in the current reporting period on the income statement or as an addition to the income statement, and__________________ other comprehensive income is reported on the balance sheet.

profit

Profit margins on sales, return on assets, and return on shareholders' equity are commonly used_____________ ratios.

discontinued, operation

Revenues, expenses, gains, losses, and income tax related to a(n)_____________ _______________ must be removed from continuing operations and reported separately on the income statement.

A. provide more complete information

Significant noncash investing and financing activities are disclosed because they: A. provide more complete information B. are classified as an extraordinary item C. occur in the normal course of business D. are part of operating activities

D. Income Statement

Statement of operations and statement of earnings are additional titles for the A. Balance Sheet B. Statement of Cash Flows C. Statement of Shareholders' Equity D. Income Statement

F

T or F. Income tax expense may be disclosed either on the income statement or in the notes to the financial statements.

T

T or F. Net income is a portion of comprehensive income.

T

T or F. Reporting comprehensive income can be done with a single, continuous statement or in two separate, but consecutive statements.

quality

The ability of reported earnings to predict a company's future earnings is referred to as earnings____________.

A. the receivable turnover ratio

The average collection period is calculated as 365 divided by: A. the receivable turnover ratio B. net credit sales C. average accounts receivable D. average total assets

B. investing activities D. operating activities E. financing activities

The classifications on the statement of cash flows are cash flows from: (select all that apply) A. discontinued activities B. investing activities C. business activities D. operating activities E. financing activities

A. earnings have a steady stream over time

The evidence that a financial statement user or analyst might use as evidence to suggest that earnings have been smoothed is: A. earnings have a steady stream over time B. income is deferred until contractual relations are negotiated C. earnings may not increase more than 10% without a penalty D. income is averaged with historical numbers

B. average accounts receivable

The formula to complete the receivables turnover ratio is net credit sales divided by: A. cost of goods sold B. average accounts receivable C. average total assets D. the receivable turnover ratio

A. is classified as held for sale B. has been sold

The guidance on discontinued operations defines a discontinued operation as a component that either/or (select all that apply) A. is classified as held for sale B. has been sold C. will likely be sold

revenue

The inflow of resources resulting from providing goods or services to customers is referred to as_______________.

operating

The inflows and outflows of cash that result from activities reported in the income statement are classified as cash flows from___________________.

material

The majority of errors discovered are not____________ and are corrected in the year discovered.

cash, accrual

The operating activities section on the statement of cash flows includes the elements of net income on a(n)____________ basis rather than a(n)_____________ basis.

B. can be shown separately for each item or aggregated and reported as on line item

The potential tax expense or benefits of items reported as components of Other Comprehensive Income: A. must be aggregated for all items and reported as one line item B. can be shown separately for each item or aggregated and reported as on line item C. must be presented separately for each item

net income

The profit margin ration is defined as______ ____________ divided by net sales.

A. Reverse the erroneous journal entry and record the correct entry C. Provide information about cash disbursements during a period

The purpose of the statement of cash flows include which of the following? (select all that apply) A. Provide information about cash receipts during a period B. Provide information about cash disbursements on a specific date C. Provide information about cash disbursements during a period D. Provide information about cash receipts on a specific date

A. operating, investing, and financing

The statement of cash flows classifies items as: A. operating, investing, and financing B. current and noncurrent C. operating and nonoperating D. recurring and nonrecurring

A. It provides information about liquidity C. It reveals the company's ability to generate positive cash flow from its normal operations

The statement of cash flows is useful because (select all that apply) A. It provides information about liquidity B. It provides a more accurate prediction of the company's ability to generate future cash flows than income does C. It reveals the company's ability to generate positive cash flow from its normal operations

D. accrual-based income is not an indication of cash flows

The statement of cash flows is useful because: A. it is more accurate in measuring net income for the period B. it provides more accurate information than the balance sheet C. it is prepared on an accrual basis D. accrual-based income is not an indication of cash flows

estimate, entity

The three types of accounting changes are a change in accounting principle, a change in accounting______________, and a change in reporting_______.

single, multiple

The two approaches for preparing an income statement are the___________ step and_____________ step approaches.

financing

The type of activities related to the external financing of the company are___________ activities.

A. A component of the entity has been sold, disposed of, or is held for sale D. A strategic shift is represented that will have a major effect on financial results

To qualify as an operation for purposes of determining discontinued operations, which of the following must occur? (select all that apply) A. A component of the entity has been sold, disposed of, or is held for sale B. The operation must have been in business for more than 3 years C. The operation must have completed a separate tax return in the past 2 years D. A strategic shift is represented that will have a major effect on financial results

A. each period for which a balance sheet and income statement are prepared

U.S. GAAP requires that a statement of cash flows must be presented for: A. each period for which a balance sheet and income statement are prepared B. every reporting period to date C. each period in which an income statement is not prepared

C. Operating activities section of the statement of cash flows

What are the elements of net income found on a cash basis rather than an accrual basis? A. In the statement of operations B. In the statement of earnings C. Operating activities section of the statement of cash flows D. Investing activities section of the statement of cash flows

A. 0.143

What is the asset turnover ratio for year 2 rounded to the nearest 1/1000? A. 0.143 B. 0.158 C. 0.125 D. 2.0

B. Net sales divided by average total assets

What is the formula for the asset turnover ratio? A. Net sales divided by average accounts receivable B. Net sales divided by average total assets C. Average assets divided by net sales

D. Cost of goods sold divided by average inventory

What is the formula for the inventory turnover ratio? A. Cost of goods sold divided by net sales B. 365 divided by average inventory C. Average inventory multiplied by cost of goods sold D. Cost of goods sold divided by average inventory

C. Net income divided by net sales

What is the formula for the profit margin ratio? A. Net income divided by average total assets B. Gross profit divided by sales C. Net income divided by net sales D. Net income divided by average shareholders' equity

A. Net credit sales divided by average accounts receivable (net).

What is the formula for the receivables turnover ratio? A. Net credit sales divided by average accounts receivable (net). B. Average accounts receivable divided by average total assets C. Net credit sales divided by average total assets D. Average accounts receivable(net) divided by net credit sales

A. gains B. revenues C. tax expense D. expenses

What items must be removed from continuing operations and reported separately for a discontinued operation? (select all that apply) A. gains B. revenues C. tax expense D. expenses E. assets F. liabilities

2. Service revenue

What revenue does ABC Tax Advisors receive? 1. Sales revenue 2. Service revenue

1. Sales revenue

What revenue does Best Buy receive? 1. Sales revenue 2. Service revenue

B. Financing

What type of activities involve cash inflows and outflows from transactions with creditors and owners? A. Investing B. Financing C. Operating

A. Correct the error in the year discovered

When a company discovers an immaterial error in a year subsequent to the year the error is made, what is the proper course of action? A. Correct the error in the year discovered B. Correct the error in the year discovered and include a note to the financial statements C. Ignore the error

A. Reverse the erroneous journal entry and record the correct entry

When an immaterial error is discovered in the same year it is made before the financial statements are issued, what is the appropriate course of action? A. Reverse the erroneous journal entry and record the correct entry B. Reverse the erroneous journal entry, record the correct entry, include a note to the financial statements, and report the error to the authorities C. Reverse the erroneous journal entry, record the correct entry, and include a note to the financial statements

C. Signing a note payable in exchange for land

Which is a significant noncash activity? A. Receiving proceeds from sale of stock B. Collecting on customer accounts C. Signing a note payable in exchange for land D. Repurchasing common stock

A. Profit margin on sales C. Return on equity D. Return on assets

Which of the following are commonly used to assess a company's profitability? (select all that apply) A. Profit margin on sales B. Quick ratio C. Return on equity D. Return on assets E. Current ratio

B. acquiring land by issuing common stock C. acquiring equipment by issuing a long-term note

Which of the following are significant noncash activities? (select all that apply) A. issuing common stock for cash B. acquiring land by issuing common stock C. acquiring equipment by issuing a long-term note D. selling land

B. Accounting principle

Which of the following is a category of accounting change? A. Liability classification B. Accounting principle C. Asset classification D. Accounting structure

B. Reporting entity

Which of the following is a category of accounting change? A. Reporting class B. Reporting entity C. Liability classification D. Entity classification

C. Basic earnings per share

Which of the following is computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding? A. Return on equity B. Price to earnings C. Basic earnings per share D. Diluted earnings per share

B. accumulated other comprehensive income

Which of the following is disclosed on the balance sheet? A. net income B. accumulated other comprehensive income C. earnings per share D. other comprehensive income

A. Revenues related to primary revenue-generating activities B. Expenses related to primary revenue-generating activities

Which of the following items are included in calculating operating income? (select all that apply) A. Revenues related to primary revenue-generating activities B. Expenses related to primary revenue-generating activities C. Expenses related to peripheral activities D. Revenues related to peripheral activities

A. Administrative expenses B. Revenues C. Selling expenses

Which of the following items are reported as components of operating income for most manufacturing and merchandising companies? (select all that apply) A. Administrative expenses B. Revenues C. Selling expenses D. Interest expense

B. Statement of Operations

Which of the following terms is also used as a heading for an income statement? A. Statement of Performance Indicators B. Statement of Operations C. Statement of Business Activities D. Statement of Cash Flows

Restructuring

___________ costs include costs associated with shutdown or relocation of facilities.