Question 1

In terms of the evolving role of CPAs, which of the following is not true?

Accepted Answer

A)  Accountants are increasingly being asked for advice on broad issues including business development and the evaluation of strategic opportunities. 
B)  There are now fewer restrictions imposed by geographical boundaries. 
C)  CPAs continue to rely on face-to-face interactions at occasional professional meetings. 
D)  Accountants are increasingly serving as project managers. 
E)  Accountants need to know the nature of the client's business and its competitive environment. 
A)  Accountants are increasingly being asked for advice on broad issues including business development and the evaluation of strategic opportunities. 
B)  There are now fewer restrictions imposed by geographical boundaries. 
C)  CPAs continue to rely on face-to-face interactions at occasional professional meetings. 
D)  Accountants are increasingly serving as project managers. 
E)  Accountants need to know the nature of the client's business and its competitive environment.

Question 2

Jerry wants to calculate gross profit for his business. Which formula should he use?

Accepted Answer

A)  Operating expenses minus income taxes 
B)  Sales revenue minus income taxes 
C)  Sales revenue minus operating expenses 
D)  Sales revenue minus cost of goods sold 
E)  Operating income minus income taxes 
A)  Operating expenses minus income taxes 
B)  Sales revenue minus income taxes 
C)  Sales revenue minus operating expenses 
D)  Sales revenue minus cost of goods sold 
E)  Operating income minus income taxes

Question 3

What is the difference between "profit" and "cash flow"?

Accepted Answer

A)  Profit refers to what is left after expenses have been subtracted from revenues, while cash flow refers to cash receipts and cash payments. 
B)  A firm cannot make a profit unless its cash flow is positive. 
C)  A firm can maximize its profit only at the expense of cash flow. 
D)  A firm can maximize its cash flow only at the expense of its profit. 
E)  There is no real difference between profit and cash flow. 
A)  Profit refers to what is left after expenses have been subtracted from revenues, while cash flow refers to cash receipts and cash payments. 
B)  A firm cannot make a profit unless its cash flow is positive. 
C)  A firm can maximize its profit only at the expense of cash flow. 
D)  A firm can maximize its cash flow only at the expense of its profit. 
E)  There is no real difference between profit and cash flow.

Question 4

What is the accounting equation?

Accepted Answer

Assets = L

Question 5

What is the difference between public and private accountants?

Accepted Answer

Public accountants work in accounting fi

Question 6

What is a statement of cash flows?

Accepted Answer

A statement of cash

Question 7

An audit involves an examination of a firm's accounting system to determine whether the financial reports fairly present its financial operations.

Accepted Answer

A) True 
 B)False

Question 8

What is the purpose of computing the current ratio?

Accepted Answer

A)  To provide investors with some measurement of the returns they can expect from their investment 
B)  To measure the extent to which a firm is financed through borrowed money 
C)  To measure how much cash the firm has 
D)  To measure the firm's ability to meet emergency demands for cash 
E)  To measure the firm's ability to meet its current obligations out of its current assets 
A)  To provide investors with some measurement of the returns they can expect from their investment 
B)  To measure the extent to which a firm is financed through borrowed money 
C)  To measure how much cash the firm has 
D)  To measure the firm's ability to meet emergency demands for cash 
E)  To measure the firm's ability to meet its current obligations out of its current assets

Question 9

If a firm has $1 000 000 in retained earnings, what does this mean?

Accepted Answer

A)  That the firm had $2 000 000 at the beginning of year but paid out $1 000 000 during the year in dividends 
B)  That the company is owed $1 000 000 by its creditors but has not yet collected the money 
C)  That the firm has $1 000 000 in the bank 
D)  That the company's net profits less its dividend payments equals $1 000 000 
E)  That the company has saved $1 000 000 during the period since the last balance sheet was made up 
A)  That the firm had $2 000 000 at the beginning of year but paid out $1 000 000 during the year in dividends 
B)  That the company is owed $1 000 000 by its creditors but has not yet collected the money 
C)  That the firm has $1 000 000 in the bank 
D)  That the company's net profits less its dividend payments equals $1 000 000 
E)  That the company has saved $1 000 000 during the period since the last balance sheet was made up

Question 10

Delavan Company has fixed assets of $5 billion, current assets of $2 billion, long-term liabilities of $2 billion, current liabilities of $1 billion, and owners' equity of $2 billion. What is Delavan's debt-to-equity ratio?

Accepted Answer

A)  1.5 
B)  0.9 
C)  1.2 
D)  0.4 
E)  0.8 
A)  1.5 
B)  0.9 
C)  1.2 
D)  0.4 
E)  0.8

Question 11

Paid-in capital is

Accepted Answer

A)  a debt that must be paid within the year. 
B)  the process of distributing the cost of an asset over its useful life. 
C)  the amount paid for an existing business above the value of its other assets. 
D)  a debt that is not due for at least one year. 
E)  additional money, above proceeds from a stock sale, paid directly to a firm by its owners. 
A)  a debt that must be paid within the year. 
B)  the process of distributing the cost of an asset over its useful life. 
C)  the amount paid for an existing business above the value of its other assets. 
D)  a debt that is not due for at least one year. 
E)  additional money, above proceeds from a stock sale, paid directly to a firm by its owners.

Question 12

Streeter & Sons is a regional service company that has been in business for a few years, but has not employed a controller or anyone else full-time to keep track of its financial state. The company needs to take a good look at its financial state to determine whether it needs to make any changes in its practices, in order to prevent possible financial meltdown. Which of the following, if true, would strengthen the case that Streeter & Sons will be able to meet its current financial obligations?

Accepted Answer

A)  The company has high levels of accounts payable. 
B)  The company's liabilities exceed its assets. 
C)  The company currently has a negative cash flow. 
D)  The company needs to expand its number of customers. 
E)  The company has more assets than it has liabilities. 
A)  The company has high levels of accounts payable. 
B)  The company's liabilities exceed its assets. 
C)  The company currently has a negative cash flow. 
D)  The company needs to expand its number of customers. 
E)  The company has more assets than it has liabilities.

Question 13

What is an audit?

Accepted Answer

An audit is a systematic exami

Question 14

Under which condition is owners' equity negative?

Accepted Answer

A)  Credits exceed debits. 
B)  Assets are greater than liabilities. 
C)  Assets and liabilities are equal. 
D)  Debits exceed credits. 
E)  Liabilities are greater than assets. 
A)  Credits exceed debits. 
B)  Assets are greater than liabilities. 
C)  Assets and liabilities are equal. 
D)  Debits exceed credits. 
E)  Liabilities are greater than assets.

Question 15

What does a balance sheet show?

Accepted Answer

The information on a balance sheet shows

Question 16

Streeter & Sons is a regional service company that has been in business for a few years, but has not employed a controller or anyone else full-time to keep track of its financial state. The company needs to take a good look at its financial state to determine whether it needs to make any changes in its practices, in order to prevent possible financial meltdown. Which of the following, if true, would strengthen the case that Streeter & Sons has too much debt?

Accepted Answer

A)  The company has grown only slowly since its beginning. 
B)  The company's customer base has steadily increased in the last few years. 
C)  The company is out-competing other similar companies in the area. 
D)  The company's current liabilities are higher than its current and fixed assets. 
E)  The company has built up a substantial amount of owners' equity. 
A)  The company has grown only slowly since its beginning. 
B)  The company's customer base has steadily increased in the last few years. 
C)  The company is out-competing other similar companies in the area. 
D)  The company's current liabilities are higher than its current and fixed assets. 
E)  The company has built up a substantial amount of owners' equity.

Question 17

With fixed assets of $4 billion and current assets of $1.7 billion, Realm Company has long-term liabilities of $2 billion and current liabilities of $0.34 billion. What is Realm's current ratio?

Accepted Answer

A)  0.85 
B)  2 
C)  2 .44 
D)  5 
E)  11.76 
A)  0.85 
B)  2 
C)  2 .44 
D)  5 
E)  11.76

Question 18

A balance sheet would not be able to help a manager answer which question?

Accepted Answer

A)  Is it a good time to try to grow the business? 
B)  Can the company survive if a period of low revenues happens? 
C)  Does the company have an excessive number of employees? 
D)  Is the company able to take on more debt? 
E)  What is the total value of all of the company's assets? 
A)  Is it a good time to try to grow the business? 
B)  Can the company survive if a period of low revenues happens? 
C)  Does the company have an excessive number of employees? 
D)  Is the company able to take on more debt? 
E)  What is the total value of all of the company's assets?

Question 19

Gross profit percentages don't vary much across industries, with most companies making about 6 percent.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following is correct with regard to auditing?

Accepted Answer

A)  An audit focuses specifically on whether the inventory the company claims it has is actually there. 
B)  Companies do not normally have to supply audited financial statements when they apply for loans or when selling stock. 
C)  Audits determine if the firm has controls in place to prevent errors or fraud from going undetected. 
D)  Auditors generally do not have to examine documents such as cancelled cheques, payroll record, and cash receipts in order to conduct their audit. 
E)  Auditors ensures that the financial state of the company will be accurately reported. 
A)  An audit focuses specifically on whether the inventory the company claims it has is actually there. 
B)  Companies do not normally have to supply audited financial statements when they apply for loans or when selling stock. 
C)  Audits determine if the firm has controls in place to prevent errors or fraud from going undetected. 
D)  Auditors generally do not have to examine documents such as cancelled cheques, payroll record, and cash receipts in order to conduct their audit. 
E)  Auditors ensures that the financial state of the company will be accurately reported.

In terms of the evolving role of CPAs, which of the following is not true?

Jerry wants to calculate gross profit for his business. Which formula should he use?

What is the difference between "profit" and "cash flow"?

What is the accounting equation?

What is the difference between public and private accountants?

What is a statement of cash flows?

An audit involves an examination of a firm's accounting system to determine whether the financial reports fairly present its financial operations.

What is the purpose of computing the current ratio?

If a firm has $1 000 000 in retained earnings, what does this mean?

Delavan Company has fixed assets of $5 billion, current assets of $2 billion, long-term liabilities of $2 billion, current liabilities of $1 billion, and owners' equity of $2 billion. What is Delavan's debt-to-equity ratio?

Paid-in capital is

What is an audit?

Under which condition is owners' equity negative?

What does a balance sheet show?

With fixed assets of $4 billion and current assets of $1.7 billion, Realm Company has long-term liabilities of $2 billion and current liabilities of $0.34 billion. What is Realm's current ratio?

A balance sheet would not be able to help a manager answer which question?

Gross profit percentages don't vary much across industries, with most companies making about 6 percent.

Which of the following is correct with regard to auditing?

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

In terms of the evolving role of CPAs, which of the following is not true?

Jerry wants to calculate gross profit for his business. Which formula should he use?

What is the difference between "profit" and "cash flow"?

What is the accounting equation?

What is the difference between public and private accountants?

What is a statement of cash flows?

An audit involves an examination of a firm's accounting system to determine whether the financial reports fairly present its financial operations.

What is the purpose of computing the current ratio?

If a firm has $1 000 000 in retained earnings, what does this mean?

Delavan Company has fixed assets of $5 billion, current assets of $2 billion, long-term liabilities of $2 billion, current liabilities of $1 billion, and owners' equity of $2 billion. What is Delavan's debt-to-equity ratio?

Paid-in capital is

What is an audit?

Under which condition is owners' equity negative?

What does a balance sheet show?

With fixed assets of $4 billion and current assets of $1.7 billion, Realm Company has long-term liabilities of $2 billion and current liabilities of $0.34 billion. What is Realm's current ratio?

A balance sheet would not be able to help a manager answer which question?

Gross profit percentages don't vary much across industries, with most companies making about 6 percent.

Which of the following is correct with regard to auditing?

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