Question 1

Explain the three basic financial statements and show how they reflect the activity and financial condition of a business.

Accepted Answer

Accounting summarizes the results of a f

Question 2

If a corporation has gross profit of $151 660 and total operating expenses of $130 685, then net income is $20 975.

Accepted Answer

A) True 
 B)False

Question 3

At Lexi Corp., sales revenue is $20 million, the cost of goods sold is $14 million, operating expenses are $3 million, and income taxes are $1 million. What is the company's net income?

Accepted Answer

A)  $6 million 
B)  $17 million 
C)  $16 million 
D)  $2 million 
E)  The answer cannot be computed with the information provided. 
A)  $6 million 
B)  $17 million 
C)  $16 million 
D)  $2 million 
E)  The answer cannot be computed with the information provided.

Question 4

The matching principle states that

Accepted Answer

A)  expenses will be matched with revenues to determine net income for an accounting period. 
B)  the costs of goods sold must match the total expenses of the firm. 
C)  the firm needs to match the assets and liabilities in order to record the transaction in its journal. 
D)  revenue recognition occurs before the earnings cycle is completed. 
E)  the total receipts must match the expenditures for a given period of time. 
A)  expenses will be matched with revenues to determine net income for an accounting period. 
B)  the costs of goods sold must match the total expenses of the firm. 
C)  the firm needs to match the assets and liabilities in order to record the transaction in its journal. 
D)  revenue recognition occurs before the earnings cycle is completed. 
E)  the total receipts must match the expenditures for a given period of time.

Question 5

Last year, Mainline Corporation's gross profit was $5 million, its net income was $2 million, and operating expenses were $1 million. Its owners' equity is $100 million. Its return on equity is therefore 2 percent.

Accepted Answer

A) True 
 B)False

Question 6

The earnings cycle is complete under two conditions: ________ and ________.

Accepted Answer

A)  revenue recognition; matching 
B)  the sale is complete; the customer has paid the company 
C)  at least two years have passed; the customer has paid the company 
D)  the sale is complete; the customer has promised to pay the company 
E)  the cost of goods sold has been determined; operating revenues exceed operating expenses 
A)  revenue recognition; matching 
B)  the sale is complete; the customer has paid the company 
C)  at least two years have passed; the customer has paid the company 
D)  the sale is complete; the customer has promised to pay the company 
E)  the cost of goods sold has been determined; operating revenues exceed operating expenses

Question 7

A company has an assets-to-liabilities ratio of 3:2 and total assets worth $6 million. What is its owners' equity?

Accepted Answer

A)  $1 million 
B)  $2 million 
C)  $3 million 
D)  $9 million 
E)  $12 million 
A)  $1 million 
B)  $2 million 
C)  $3 million 
D)  $9 million 
E)  $12 million

Question 8

A(n) ________ ratio estimates the risk associated with investing in a firm.

Accepted Answer

A)  financial 
B)  solvency 
C)  managerial 
D)  activity 
E)  none of these 
A)  financial 
B)  solvency 
C)  managerial 
D)  activity 
E)  none of these

Question 9

Which of the following financial statements is designed primarily for internal use of the corporation managers (e.g., the production manager)?

Accepted Answer

A)  Income statements 
B)  Statement of retained earnings 
C)  Budget 
D)  Balance sheets 
E)  Statements of cash flow 
A)  Income statements 
B)  Statement of retained earnings 
C)  Budget 
D)  Balance sheets 
E)  Statements of cash flow

Question 10

Marlin wants to calculate the inventory turnover ratio for his company. He has the following information: beginning inventory = $30 000; ending inventory = $20 000; the cost of goods sold = $100 000. From this he concludes that the inventory turnover ratio is 4.0.

Accepted Answer

A) True 
 B)False

Question 11

________ is the ability of a firm to finance an investment through borrowed funds.

Accepted Answer

A)  Liquidity 
B)  Leverage 
C)  Solvency 
D)  Profitability 
E)  Activity 
A)  Liquidity 
B)  Leverage 
C)  Solvency 
D)  Profitability 
E)  Activity

Question 12

What is a controller?

Accepted Answer

A controller is the person who

Question 13

Suppose a company unexpectedly receives a huge order for its main product. To cope with this, the owner borrows money to rent an additional facility to fill the orders and to pay the temporary workers who will produce the large order. The owner does this hoping that the additional costs will be more than covered by the revenue from selling the additional units of the product. Which ratio will be most affected by these decisions?

Accepted Answer

A)  The short-term solvency ratio 
B)  The long-term solvency ratio 
C)  The profitability ratio 
D)  The activity ratio 
E)  The equity ratio 
A)  The short-term solvency ratio 
B)  The long-term solvency ratio 
C)  The profitability ratio 
D)  The activity ratio 
E)  The equity ratio

Question 14

Arthur's primary responsibility as an auditor is

Accepted Answer

A)  publishing the audit report results in the Financial Post. 
B)  preparing budgets for the forthcoming year. 
C)  ensuring the firm's accounting practices adhere to generally accepted accounting principles. 
D)  collecting taxes. 
E)  determining that the company actually has the inventory that it says it has. 
A)  publishing the audit report results in the Financial Post. 
B)  preparing budgets for the forthcoming year. 
C)  ensuring the firm's accounting practices adhere to generally accepted accounting principles. 
D)  collecting taxes. 
E)  determining that the company actually has the inventory that it says it has.

Question 15

What is an asset?

Accepted Answer

Any economic resourc

Question 16

Which term is used to identify how quickly assets can be converted into cash?

Accepted Answer

A)  Acid-test ratio 
B)  Activity 
C)  Accounts receivable 
D)  Current ratio 
E)  Liquidity 
A)  Acid-test ratio 
B)  Activity 
C)  Accounts receivable 
D)  Current ratio 
E)  Liquidity

Question 17

A(n) ________ examines a company's accounting system to determine whether its financial reports fairly present its operations.

Accepted Answer

A)  tax analysis 
B)  preliminary examination 
C)  company-wide analysis 
D)  portfolio analysis 
E)  audit 
A)  tax analysis 
B)  preliminary examination 
C)  company-wide analysis 
D)  portfolio analysis 
E)  audit

Question 18

Who are the users of financial statements? Why would they be interested in these statements?

Accepted Answer

- Business managers: to set goals, devel

Question 19

Al Rosen is working as a private investigator of white-collar crimes. He is

Accepted Answer

A)  a GAAP accountant. 
B)  a financial scanner. 
C)  a whistleblower. 
D)  an auditor. 
E)  a forensic accountant. 
A)  a GAAP accountant. 
B)  a financial scanner. 
C)  a whistleblower. 
D)  an auditor. 
E)  a forensic accountant.

Question 20

What happens to assets, liabilities, and owners' equity when a company is operating profitably?

Accepted Answer

Assets increase faster than li

Explain the three basic financial statements and show how they reflect the activity and financial condition of a business.

If a corporation has gross profit of $151 660 and total operating expenses of $130 685, then net income is $20 975.

At Lexi Corp., sales revenue is $20 million, the cost of goods sold is $14 million, operating expenses are $3 million, and income taxes are $1 million. What is the company's net income?

The matching principle states that

Last year, Mainline Corporation's gross profit was $5 million, its net income was $2 million, and operating expenses were $1 million. Its owners' equity is $100 million. Its return on equity is therefore 2 percent.

The earnings cycle is complete under two conditions: and .

A company has an assets-to-liabilities ratio of 3:2 and total assets worth $6 million. What is its owners' equity?

A(n) ________ ratio estimates the risk associated with investing in a firm.

Which of the following financial statements is designed primarily for internal use of the corporation managers (e.g., the production manager)?

Marlin wants to calculate the inventory turnover ratio for his company. He has the following information: beginning inventory = $30 000; ending inventory = $20 000; the cost of goods sold = $100 000. From this he concludes that the inventory turnover ratio is 4.0.

________ is the ability of a firm to finance an investment through borrowed funds.

What is a controller?

Arthur's primary responsibility as an auditor is

What is an asset?

Which term is used to identify how quickly assets can be converted into cash?

A(n) ________ examines a company's accounting system to determine whether its financial reports fairly present its operations.

Who are the users of financial statements? Why would they be interested in these statements?

Al Rosen is working as a private investigator of white-collar crimes. He is

What happens to assets, liabilities, and owners' equity when a company is operating profitably?

Understanding the Canadian Business System

The Environment of Business

Conducting Business Ethically and Responsibly

Entrepreneurship, Small Business, and New Venture Creation

The Global Context of Business

Managing the Business Enterprise

Organizing the Business Enterprise

Managing Human Resources and Labour Relations

Motivating, Satisfying, and Leading Employees

Operations Management, Productivity, and Quality

Understanding Marketing Principles and Developing Products

Pricing, Promotion, and Distributing Products

Money and Banking

Finacial Decisions and Risk Management

Filters

Exam 11: Understanding Accounting

Explain the three basic financial statements and show how they reflect the activity and financial condition of a business.

If a corporation has gross profit of $151 660 and total operating expenses of $130 685, then net income is $20 975.

At Lexi Corp., sales revenue is $20 million, the cost of goods sold is $14 million, operating expenses are $3 million, and income taxes are $1 million. What is the company's net income?

The matching principle states that

Last year, Mainline Corporation's gross profit was $5 million, its net income was $2 million, and operating expenses were $1 million. Its owners' equity is $100 million. Its return on equity is therefore 2 percent.

The earnings cycle is complete under two conditions: ________ and ________.

A company has an assets-to-liabilities ratio of 3:2 and total assets worth $6 million. What is its owners' equity?

A(n) ________ ratio estimates the risk associated with investing in a firm.

Which of the following financial statements is designed primarily for internal use of the corporation managers (e.g., the production manager)?

Marlin wants to calculate the inventory turnover ratio for his company. He has the following information: beginning inventory = $30 000; ending inventory = $20 000; the cost of goods sold = $100 000. From this he concludes that the inventory turnover ratio is 4.0.

________ is the ability of a firm to finance an investment through borrowed funds.

What is a controller?

Arthur's primary responsibility as an auditor is

What is an asset?

Which term is used to identify how quickly assets can be converted into cash?

A(n) ________ examines a company's accounting system to determine whether its financial reports fairly present its operations.

Who are the users of financial statements? Why would they be interested in these statements?

Al Rosen is working as a private investigator of white-collar crimes. He is

What happens to assets, liabilities, and owners' equity when a company is operating profitably?

Understanding the Canadian Business System

The Environment of Business

Conducting Business Ethically and Responsibly

Entrepreneurship, Small Business, and New Venture Creation

The Global Context of Business

Managing the Business Enterprise

Organizing the Business Enterprise

Managing Human Resources and Labour Relations

Motivating, Satisfying, and Leading Employees

Operations Management, Productivity, and Quality

Understanding Marketing Principles and Developing Products

Pricing, Promotion, and Distributing Products

Money and Banking

Finacial Decisions and Risk Management

Filters

The earnings cycle is complete under two conditions: and .