Penn Foster Acc 113E Financial Accounting All Chaper Exams for final exam
A firm has an ROI of 15%, turnover of 3, and sales of $12 million. The firm's margin is
15% = ? × 3 Solve for missing number: 15% divided by 3 = 5%
What are the requirements for practicing as a CPA?
A CPA has to have met the educational and experience requirements, passed the comprehensive four-part examination, and been issued a license by a state board of accountancy to practice as a Certified Public Accountant.
Which of the following people is qualified to express an auditor's opinion about an entity's financial statements?
A certified public accountant
What does a credit entry represent?
A credit entry represents a decrease in asset and expense accounts and an increase in liability, stockholders' equity, and revenue accounts.
What does a debit entry represent?
A debit entry represents an increase in asset and expense accounts and a decrease in liability, stockholders' equity, or revenue accounts.
Recognizes revenues and expenses as they occur
Accrual Accounting
The chief accounting officer of a corporation is its _______.
Controller
A subset of managerial accounting that relates to the determination and accumulation of product, process, or service costs
Cost Accounting
A group authorized by the U.S. Congress to establish cost accounting standards for government contractors
Cost Accounting Standards Board (CASB)
Which classification of accounting relates to the determination and accumulation of product, process, or service costs?
Cost accounting
Cash and those assets that are likely to be converted to cash or used to benefit the entity within one year of the balance sheet date
Current Assets
Due to be paid within one year of the balance sheet date
Current Liabilities
According to current US generally accepted accounting principles and auditing standards, what should the financial statements of an entity show?
Current generally accepted accounting principles and auditing standards require that the financial statements of an entity show the following for the reporting period: financial position at the end of the period, earnings for the period, cash flows during the period, and investments by and distributions to owners (stockholders) during the period.
The cost of an asset that's used up over its useful life
Depreciation
Distribution of earnings to the stockholders of a corporation
Dividend
Reports an entity's financial position at a point in time and/or its results of operations and cash flows for a period of time
Financial Accounting
Summarizes the entity's revenues, expenses, gains, and losses for a period of time
Income statement
Income foregone because an opportunity to earn income was not pursued
Opportunity Cost
_______ is a way to calculate which investment would be better.
Return on investment
How is return on investment calculated?
Return on investment is calculated by dividing net income by average total assets.
The most significant legislation affecting the accounting profession since 1933 was the _______ of 2002.
Sarbanes-Oxley Act (SOX)
Which of the following statements about the Financial Accounting Standards Board is correct?
The FASB follows a due process procedure that permits input from interested parties before a standard is issued.
What's the meaning of the cost principle?
The cost principle refers to the fact that transactions are recorded at their original cost to the entity as measured in dollars.
_______ is an alternative to the T-account and journal entry models.
The horizontal financial statement relationship model
The ethical concept of independence means that an accountant employed by
an auditing firm can't own any stock in the company being audited.
Integrity is an ethical concept meaning that a person
attempts to be honest and forthright in dealings and communications with others.
The _______ lists a firm's assets, liabilities, and owners' equity at a point in time.
balance sheet
The _______ statement summarizes the entity's activities producing income (or loss) for a period of time.
income
The acid-test ratio is also known as the _______.
quick ratio
The distinction between a current asset and other assets is based on
when the asset is expected to be converted to cash or used to benefit the entity.
Firm V has a current ratio of 1.9 and current assets of $136,800. Calculate Firm V's current liabilities and working capital.
$136,800 current assets ÷ 1.9 current ratio = $72,000 current liabilities $136,800 current assets - $72,000 current liabilities = $64,800 working capital
Martin & Associates borrowed $15,000 on April 1, 2022, at 8% interest, with both principal and interest due on March 31, 2023. How much should be in the firm's interest payable account on December 31, 2022?
$15,000 × 8% = $1,200 per year; $1,200 × 9 ÷ 12 months = $900
Firm X has a net income of $18,000, sales of $300,000, and average total assets of $125,000. Calculate Firm X's margin, turnover, and return on investment (ROI).
$18,000 net income ÷ $300,000 sales = 6% margin $300,000 sales ÷ $125,000 average total assets = 2.4 turnover 6% margin × 2.4 turnover = 14.4% ROI, or $18,000 net income ÷ $125,000 average total assets = 14.4% ROI
A firm's net income for the year was $800,000. Average assets totaled $6 million, and average liabilities totaled $1.2 million. Return on equity was
$800,000 ÷ ($6,000,000 - $1,200,000) = 16.67%
What's a journal?
A journal is a chronological record of transactions recorded as they occur.
How can a managerial accountant become a CMA?
A managerial accountant or cost accountant can earn the Certified Management Accountant (CMA) designation by passing a broad two-part examination. Each part of the CMA examination is given in a computer-based format and consists of three hours of descriptive questions and two 30-minute essay questions.
The process of identifying, measuring, and communicating economic information about an organization for the purpose of making decisions and informed judgments
Accounting
_______ is defined as the process of identifying, measuring, and communicating economic information about an organization for the purpose of making decisions and informed judgments.
Accounting
The _______ is a transient document that communicates the details of specific amendments to the FASB Codification and explains the basis for the Board's decisions.
Accounting Standards Update (ASU)
Amendments to the FASB Codification (The FASB doesn't consider Updates as authoritative in their own right.))
Accounting Standards Update (Update or ASU
Which of the following accounting methods accomplishes much of the matching of revenues and expenses?
Accrual accounting
_______ is based on when an economic activity or transaction occurred rather than when the cash receipt or payment takes place.
Accrual accounting
The amount of depreciation expense recognized over time; a contra asset—an amount that's deducted from the cost of the related asset on the balance sheet
Accumulated Depreciation
_______ include accruals and reclassifications.
Adjustments
Distributed to shareholders and other interested parties; contains the financial statements, notes, management's discussion and analysis of financial and operating factors, and report of the external auditor's examination
Annual Report
Probable future economic benefits obtained or controlled by an entity as a result of past transactions or events
Assets
The financial statements of an entity examined by an independent third party
Audit
"Assets = Liabilities + Owner's Equity" is the _______ equation.
Balance Sheet
Cash receipts or disbursements of an entity
Cash Flow
Professional designation earned by passing an examination and meeting certain experience requirements
Certified Management Accountant (CMA)
Having _______ means being honest and forthright.
Integrity
What does it mean to state that the trend of data is frequently more important than the data itself?
It means that a comparison of trends is important when making judgments about performance.
What does it mean to associate economic performance with a rate of return?
It means that the economic outcome (the amount of return) is related to the input (the investment) used to produce the return.
What's the significance of using return on equity to evaluate a firm's financial performance?
It means that the focus is changed from return on total assets to return on the portion of total assets provided by the stockholders of the firm.
What does it mean when you say "a balance sheet has been prepared for an organization"?
It means that the organization's financial position at a point in time has been determined and summarized.
What's meant by the statement "the books are in balance"?
It means that the sum of all accounts with debit balances in the ledger equals the sum of all accounts with credit balances in the ledger. Done
Which of the following is true regarding a fiscal year?
It's frequently selected based on the firm's operating cycle.
Which of the following is true about a journal?
It's where transactions are initially recorded.
Economic and financial information used internally to plan and control many of the activities of an entity and to support the management decision-making process
Managerial Accounting
Expenditure incurred to generate revenue to be deducted from revenue generated during the period for which the results are being reported
Matching Concept
At the beginning of the year, paid-in capital was $164 and retained earnings was $94. During the year, the stockholders invested $48 and dividends of $12 were declared and paid. Retained earnings at the end of the year were $104. Net income for the year was
Net income= Retained earnings at the end of the year-retained earnings at the beginning of the year+dividend Net income= $104-$94+$12 = $22 Beginning RE + NI - DIV = Ending RE, or $94 + ? - $12 = $104. Solve for the missing net income = $104 - $94 + $12 = $22
_______ refers to an accountant's desire to have a given transaction recorded the same way in all situations.
Objectivity
At the beginning of the year, paid-in capital was $164 and retained earnings was $94. During the year, the stockholders invested $48 and dividends of $12 were declared and paid. Retained earnings at the end of the year were $104. Total stockholders' equity at the end of the year was
Paid-in capital + retained earnings = total stockholders' equity $164 + $48 + $104 = $316
What's the function of public accountants?
Public accountants perform professional services for clients principally in the areas of auditing, tax, and consulting services. Consulting services include financial advisory services, assurance services, and information systems design and installation services.
A firm's net income is $630,000 on sales of $63 million. Average assets for the period were $14 million. For the year, what was ROI margin and turnover
ROI= Net Income/Avg Assets = .045=4.5% Margin= Net Income/Sales =.01 or 1% Turnover = Sales/Avg Assets = 4.5
Cumulative net income that hasn't been distributed to the stockholders of a corporation as dividends
Retained Earnings
Which of the following statements about the Public Company Accounting Oversight Board (PCAOB) is correct?
The PCAOB has the authority to set and enforce auditing and ethics standards for public companies.
What was the significance of the Securities Act of 1933 and the Securities Exchange Act of 1934?
The Securities Act of 1933 and the Securities Exchange Act of 1934 were applicable to securities offered for sale in interstate commerce. These laws were significant because they gave the Securities and Exchange Commission (SEC) the authority to establish accounting principles to be followed by companies whose securities had to be registered with the SEC. Done
What does the "going concern" concept refer to? Why is it important?
The going concern concept refers to the presumption that the entity will continue to operate in the future—that it isn't being liquidated. This continuity assumption is necessary because the amounts shown on the balance sheet for various assets don't reflect the liquidation value of those assets.
If a firm borrowed money on a six-month bank loan, the firm's working capital immediately after obtaining the loan would be _______ relative to its working capital just prior to the loan.
The same
A/An _______ can be a partnership, corporation, proprietorship, or group of corporations.
accounting entity
Current and _______ ratios are frequently used to determine liquidity needs.
acid-test
Depreciation expense is added back to net income because, even though it was deducted as an expense in determining net income, depreciation expense didn't require using _______.
cash
The left side of the "T" format is debit and the right side is _______.
credit
A transaction posted to the left side of an account is called a/an _______.
debit entry
A current ratio of 6.0 is usually an indication that the firm
hasn't made the most productive use of its assets.
In _______ accounting, economic and financial information is used to plan and control many of the activities of the entity.
managerial
Return on equity relates _______ for the year to the average owner's equity for the year.
net income earned
The purpose of the income statement is to show the
net income or net loss for the period covered by the statement.
Another term used for stockholders' equity is
net worth.
The time frame associated with an income statement or balance sheet is a
point in time in the past.
The easiest way to get started in a business activity is to establish a
proprietorship.
A journal is sometimes referred to as
the book of original entry.
Give an example of a transaction.
Examples will vary but must involve some sort of economic interchange; for example, you've agreed to pay tuition fees in exchange for online classes.
_______ issued 168 Statements of Financial Accounting Standards (SFAS) that established standards of accounting and reporting for particular issues.
FASB
A single source of all U.S. GAAP since July 2009; presents U.S. GAAP in a uniform and logical order, with approximately 90 major accounting topics
FASB Accounting Standards Codification (FASB Codification)
The authoritative financial accounting standards-setting body in the United States is the
Financial Accounting Standards Board (FASB)
A body responsible for establishing US generally accepted accounting principles
Financial Accounting Standards Bureau (FASB)
_______ evaluate various financial characteristics of a company.
Financial ratios
Which of the following is an objective of financial reporting by business enterprises?
Financial reporting should provide information about the economic resources of an enterprise, the claims to those resources, and changes in those resources.
Pronouncements of the Financial Accounting Standards Board (FASB) that constitute appropriate accounting for various transactions used for reporting financial position and results of operations to investors and creditors
Generally Accepted Accounting Principles (GAAP)
Standards for auditing established by the Auditing Standards Board of the American Institute of Certified Public Accountants
Generally Accepted Auditing Standards (GAAS)
Why is it stated that generally accepted accounting principles aren't a set of rules to be blindly followed?
Generally accepted accounting principles sometimes permit alternative ways of accounting for identical transactions, thus requiring professional judgment; these principles are still evolving.
Net sales less cost of goods sold; sometimes called gross margin
Gross Profit
The balance in the wages payable account increased from $24,400 at the beginning of the month to $30,000 at the end of the month. Wages accrued during the month totaled $122,000. Which of the following is correct?
To solve this, we need to understand that the Wages Payable account is a liability account that records the amount of wages the company owes to its employees. When wages are accrued, they increase the Wages Payable account. When wages are paid, they decrease the Wages Payable account. $30,000 - $24,400 = $5,600 Wages Paid = $122,000 - $5,600 = $116,400 The total wages expense for the month is the total wages accrued, which is $122,000. This is not one of the options given. $24,400 + $122,000 − $30,000 = $116,400
_______ are first recorded in a journal and then posted to an account in the ledger.
Transactions
_______ is the efficiency with which a firm's assets are used in the revenue-generating process.
Turnover
What's working capital?
Working capital is the difference between current assets (such as accounts receivable and merchandise inventory) and current liabilities.
What does it mean to "determine what kind of account it is"?
You're being asked whether the account is for an asset, a liability, stockholders' equity element, revenue, or expense.
