Question 1

An item is considered material if

Accepted Answer

A) it doesn't costs a lot of money. 
B) it is of a tangible good. 
C) its size is likely to influence the decision of an investor or creditor. 
D) the cost of reporting the item is greater than its benefits. 
A) it doesn't costs a lot of money. 
B) it is of a tangible good. 
C) its size is likely to influence the decision of an investor or creditor. 
D) the cost of reporting the item is greater than its benefits.

Question 2

For accounting purposes, business transactions should be kept separate from the personal transactions of the stockholders of the business.

Accepted Answer

A) True 
 B)False

Question 3

In the statement of cash flows, net cash provided by operating activities indicates the cash-generating capability of the company.

Accepted Answer

A) True 
 B)False

Question 4

The monetary unit assumption states that transactions that can be measured in terms of money should be recorded in the accounting records.

Accepted Answer

A) True 
 B)False

Question 5

The periodicity assumption states that the economic life of a business can be divided into

Accepted Answer

A) equal time periods. 
B) cyclical time periods. 
C) artificial time periods. 
D) perpetual time periods. 
A) equal time periods. 
B) cyclical time periods. 
C) artificial time periods. 
D) perpetual time periods.

Question 6

Garrison Company prepares quarterly reports, which it distributes to all stockholders and other entities that rely on its accounting information. Which of the following is the best term for the key assumption in financial reporting that Garrison is following?

Accepted Answer

A) Monetary unit assumption 
B) Going concern assumption 
C) Economic entity assumption 
D) Periodicity assumption. 
A) Monetary unit assumption 
B) Going concern assumption 
C) Economic entity assumption 
D) Periodicity assumption.

Question 7

For accounting information to have relevance, it must be

Accepted Answer

A) consistent. 
B) timely. 
C) verifiable. 
D) understandable. 
A) consistent. 
B) timely. 
C) verifiable. 
D) understandable.

Question 8

Profitability ratios measure the operating success of a company for a given period of time.

Accepted Answer

A) True 
 B)False

Question 9

Free cash flow is net cash provided by operating activities less dividends.

Accepted Answer

A) True 
 B)False

Question 10

When preparing financial statements, the accountant assumes that the business will stay in business for the foreseeable future.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following statements is true?

Accepted Answer

A) Earnings per share is an internal measure and is not used by stockholders. 
B) The denominator used in computing earnings per share represents the shares of common stock outstanding on the last day of the accounting period. 
C) Net income is not adjusted when computing earnings per share. 
D) By comparing earnings per share of a single corporation over time, a stockholder can evaluate the corporation's relative earnings performance. 
A) Earnings per share is an internal measure and is not used by stockholders. 
B) The denominator used in computing earnings per share represents the shares of common stock outstanding on the last day of the accounting period. 
C) Net income is not adjusted when computing earnings per share. 
D) By comparing earnings per share of a single corporation over time, a stockholder can evaluate the corporation's relative earnings performance.

Question 12

The going concern assumption is that the business will continue in operation long enough to carry out its existing objectives and commitments.

Accepted Answer

A) True 
 B)False

Question 13

A company can change to a new method of accounting if management can justify that the new method results in

Accepted Answer

A) more meaningful financial information. 
B) a higher net income. 
C) a lower net income for tax purposes. 
D) less likelihood of clerical errors. 
A) more meaningful financial information. 
B) a higher net income. 
C) a lower net income for tax purposes. 
D) less likelihood of clerical errors.

Question 14

Which of the following is not considered a measure of liquidity?

Accepted Answer

A) Current ratio 
B) Working capital 
C) Debt to assets ratio 
D) Each of these answer choices are liquidity measures 
A) Current ratio 
B) Working capital 
C) Debt to assets ratio 
D) Each of these answer choices are liquidity measures

Question 15

Both investors and creditors have an interest in a company's ability to generate favorable cash flows.

Accepted Answer

A) True 
 B)False

Question 16

The debt to assets ratio measures the percentage of assets financed by creditors.

Accepted Answer

A) True 
 B)False

Question 17

Mitchell Corporation has current assets of $1,600,000 million and current liabilities of $750,000. If they pay $350,000 of their accounts payable what will their new current ratio be?

Accepted Answer

A) 3.1:1 
B) 4.0:1 
C) 1.5:1 
D) 2.1:1 
A) 3.1:1 
B) 4.0:1 
C) 1.5:1 
D) 2.1:1

Question 18

A current asset is

Accepted Answer

A) the last asset purchased by a business. 
B) an asset which is currently being used to produce a product or service. 
C) usually found as a separate classification in the income statement. 
D) expected to be converted to cash or used in the business within a relatively short period of time. 
A) the last asset purchased by a business. 
B) an asset which is currently being used to produce a product or service. 
C) usually found as a separate classification in the income statement. 
D) expected to be converted to cash or used in the business within a relatively short period of time.

Question 19

What organization issues U.S. accounting standards?

Accepted Answer

A) Security Exchange Commission 
B) International Accounting Standards Committee 
C) International Auditing Standards Committee 
D) Financial Accounting Standards Board 
A) Security Exchange Commission 
B) International Accounting Standards Committee 
C) International Auditing Standards Committee 
D) Financial Accounting Standards Board

Question 20

The most generally accepted value used in accounting is market value.

Accepted Answer

A) True 
 B)False

Exam 2: A Further Look at Financial Statements

An item is considered material if

For accounting purposes, business transactions should be kept separate from the personal transactions of the stockholders of the business.

In the statement of cash flows, net cash provided by operating activities indicates the cash-generating capability of the company.

The monetary unit assumption states that transactions that can be measured in terms of money should be recorded in the accounting records.

The periodicity assumption states that the economic life of a business can be divided into

Garrison Company prepares quarterly reports, which it distributes to all stockholders and other entities that rely on its accounting information. Which of the following is the best term for the key assumption in financial reporting that Garrison is following?

For accounting information to have relevance, it must be

Profitability ratios measure the operating success of a company for a given period of time.

Free cash flow is net cash provided by operating activities less dividends.

When preparing financial statements, the accountant assumes that the business will stay in business for the foreseeable future.

Which of the following statements is true?

The going concern assumption is that the business will continue in operation long enough to carry out its existing objectives and commitments.

A company can change to a new method of accounting if management can justify that the new method results in

Which of the following is not considered a measure of liquidity?

Both investors and creditors have an interest in a company's ability to generate favorable cash flows.

The debt to assets ratio measures the percentage of assets financed by creditors.

Mitchell Corporation has current assets of $1,600,000 million and current liabilities of $750,000. If they pay $350,000 of their accounts payable what will their new current ratio be?

A current asset is

What organization issues U.S. accounting standards?

The most generally accepted value used in accounting is market value.

Introduction to Financial Statements

The Accounting Information System

Merchandising Operations and the Multiple-Step Income Statement

Reporting and Analyzing Inventory

Fraud, Internal Control, and Cash

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Liabilities

Reporting and Analyzing Stockholders Equity

Statement of Cash Flows

Financial Analysis: The Big Picture

Managerial Accounting

Job Order Costing

Process Costing

Activity-Based Costing

Cost-Volume-Profit

Cost-Volume-Profit Analysis: Additional Issues

Incremental Analysis

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Planning for Capital Investments

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