Question 1

All the following are standards of accounting information except

Accepted Answer

A)  flexibility. 
B)  reliability. 
C)  understandability. 
D)  relevance. 
A)  flexibility. 
B)  reliability. 
C)  understandability. 
D)  relevance.

Question 2

Working capital measures

Accepted Answer

A)  the excess of current assets over current liabilities-what is on hand to continue business operations. 
B)  the ability to earn a satisfactory income. 
C)  the amount of debt in the company. 
D)  the profitability of the business. 
A)  the excess of current assets over current liabilities-what is on hand to continue business operations. 
B)  the ability to earn a satisfactory income. 
C)  the amount of debt in the company. 
D)  the profitability of the business.

Question 3

Which accounting convention could cause an overload of information for the financial statement user?

Accepted Answer

A)  Consistency 
B)  Conservatism 
C)  Full disclosure 
D)  Materiality 
A)  Consistency 
B)  Conservatism 
C)  Full disclosure 
D)  Materiality

Question 4

Which accounting term does not mean the same as the others?

Accepted Answer

A)  Retained earnings 
B)  Net worth 
C)  Capital 
D)  Owner's equity 
A)  Retained earnings 
B)  Net worth 
C)  Capital 
D)  Owner's equity

Question 5

Which of the following items is not shown on a single-step income statement?

Accepted Answer

A)  Cost of goods sold 
B)  Interest expense 
C)  Selling expenses 
D)  Gross margin 
A)  Cost of goods sold 
B)  Interest expense 
C)  Selling expenses 
D)  Gross margin

Question 6

The term net worth is a preferred over the term owner's equity because assets are recorded at original cost rather than at current value.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following is a measure of liquidity?

Accepted Answer

A)  Return on equity 
B)  Return on assets 
C)  Working capital 
D)  Profit margin 
A)  Return on equity 
B)  Return on assets 
C)  Working capital 
D)  Profit margin

Question 8

Even when no errors have been made, accounting is never 100 percent accurate because of the extensive use of estimates.

Accepted Answer

A) True 
 B)False

Question 9

On a corporate balance sheet, earned capital is also known as

Accepted Answer

A)  common stock. 
B)  paid-in capital. 
C)  retained earnings. 
D)  contributed capital. 
A)  common stock. 
B)  paid-in capital. 
C)  retained earnings. 
D)  contributed capital.

Question 10

Property, plant, and equipment could include all except

Accepted Answer

A)  intangible assets. 
B)  fixed assets. 
C)  plant assets. 
D)  operating assets. 
A)  intangible assets. 
B)  fixed assets. 
C)  plant assets. 
D)  operating assets.

Question 11

All of the following must certify that a public company's financial statements are accurate, complete, and not misleading, except for the

Accepted Answer

A)  chief financial officer. 
B)  director of human resources. 
C)  chief executive officer. 
D)  independent auditor. 
A)  chief financial officer. 
B)  director of human resources. 
C)  chief executive officer. 
D)  independent auditor.

Question 12

Use this information to answer the following question.   If the income statement were prepared in a multistep form, gross margin from sales would be

Accepted Answer

A)  $75,750. 
B)  $72,000. 
C)  $67,000. 
D)  $82,000. 
A)  $75,750. 
B)  $72,000. 
C)  $67,000. 
D)  $82,000.

Question 13

Which of the following accounting conventions would an accountant most likely apply when facing major uncertainties?

Accepted Answer

A)  Full disclosure 
B)  Conservatism 
C)  Materiality 
D)  Consistency 
A)  Full disclosure 
B)  Conservatism 
C)  Materiality 
D)  Consistency

Question 14

Use the following information to calculate the liquidity and profitability ratios listed below. Round to two decimal places.
 $\begin{array}{lrlr}
\text { Average owner's equity } & \$ 14,000 & \text { Net income } & \$ 2,100 \
\text { Average total assets } & 21,000 & \text { Net sales } & 17,500 \
\text { Current assets } & 15,000 & \text { Total liabilities } & 10,500 \
\text { Current liabilities } & 10,000 & &
\end{array}$ 
a. Current ratio
b. Working capital
c. Return on equity
d. Profit margin
e. Debt to equity ratio
f. Return on assets
g. Asset turnover

Accepted Answer

a. 1.5 ($15,000 ÷ $10,000)
b. $5,000 ($1

Question 15

Interest expense on a mortgage would be classified on a multistep income statement under the heading

Accepted Answer

A)  general and administrative expenses. 
B)  selling expenses. 
C)  cost of goods sold. 
D)  other revenues and expenses. 
A)  general and administrative expenses. 
B)  selling expenses. 
C)  cost of goods sold. 
D)  other revenues and expenses.

Question 16

The convention of full disclosure requires that financial statements present all the information relevant to users' understanding of the statements.

Accepted Answer

A) True 
 B)False

Question 17

Consistency in accounting means that a company uses the same generally accepted accounting principles from one accounting period to the next accounting period.

Accepted Answer

A) True 
 B)False

Question 18

Use this balance sheet and income statement to answer the following question. Use ending balances whenever average balances are required for computing ratios.     The asset turnover for Abner Systems is

Accepted Answer

A)  1.00 times. 
B)  1.33 times. 
C)  0.83 times. 
D)  1.20 times. 
A)  1.00 times. 
B)  1.33 times. 
C)  0.83 times. 
D)  1.20 times.

Question 19

Which of the following is not considered a selling expense?

Accepted Answer

A)  Cost of goods sold 
B)  Sales salaries expense 
C)  Freight-out expense 
D)  Insurance on the sales office 
A)  Cost of goods sold 
B)  Sales salaries expense 
C)  Freight-out expense 
D)  Insurance on the sales office

Question 20

Provision for income taxes appears in the income statements of sole proprietorships and partnerships.

Accepted Answer

A) True 
 B)False

Exam 5: Financial Reporting and Analysis

All the following are standards of accounting information except

Working capital measures

Which accounting convention could cause an overload of information for the financial statement user?

Which accounting term does not mean the same as the others?

Which of the following items is not shown on a single-step income statement?

The term net worth is a preferred over the term owner's equity because assets are recorded at original cost rather than at current value.

Which of the following is a measure of liquidity?

Even when no errors have been made, accounting is never 100 percent accurate because of the extensive use of estimates.

On a corporate balance sheet, earned capital is also known as

Property, plant, and equipment could include all except

All of the following must certify that a public company's financial statements are accurate, complete, and not misleading, except for the

Use this information to answer the following question. If the income statement were prepared in a multistep form, gross margin from sales would be

Which of the following accounting conventions would an accountant most likely apply when facing major uncertainties?

Interest expense on a mortgage would be classified on a multistep income statement under the heading

The convention of full disclosure requires that financial statements present all the information relevant to users' understanding of the statements.

Consistency in accounting means that a company uses the same generally accepted accounting principles from one accounting period to the next accounting period.

Use this balance sheet and income statement to answer the following question. Use ending balances whenever average balances are required for computing ratios. The asset turnover for Abner Systems is

Which of the following is not considered a selling expense?

Provision for income taxes appears in the income statements of sole proprietorships and partnerships.

Uses of Accounting Information and the Financial Statements

Analyzing Business Transactions

Measuring Business Income

Completing the Accounting Cycle

The Operating Cycle and Merchandising Operations

Internal Control

Inventories

Cash and Receivables

Current Liabilities and Fair Value Accounting

Long Term Assets

Contributed Capital

Long Term Liabilities

The Corporate Income Statement and the Statement of Stockholders Equity

The Statement of Cash Flows

Financial Performance Measurement

Partnerships

The Changing Business Environment-A Managers Pers

Cost Concepts and Cost Allocation

Costing Systems: Job Order Costing

Costing Systems Process Costing

Activity-Based Systems-Abm and Lean

Cost Behavior Analysis

The Budgeting Process

Performance Management and Evaluation

Standard Costing and Variance Analysis

Short Run Decision Analysis

Capital Investment Analysis

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