Question 1

Cost of goods sold would not be found on a single-step income statement.

Accepted Answer

A) True 
 B)False

Question 2

Expensing a building in the year of purchase represents an abuse of which of the following accounting conventions?

Accepted Answer

A)  Full disclosure 
B)  Cost-benefit 
C)  Conservatism 
D)  Consistency 
A)  Full disclosure 
B)  Cost-benefit 
C)  Conservatism 
D)  Consistency

Question 3

A material item is one that is likely to affect a user's decision.

Accepted Answer

A) True 
 B)False

Question 4

Freight paid on goods shipped to customers is classified as a selling expense.

Accepted Answer

A) True 
 B)False

Question 5

An advantage of accounting information is that it provides exact and completely reliable measures.

Accepted Answer

A) True 
 B)False

Question 6

Other revenues and expenses appears as a separate section on a single-step income statement.

Accepted Answer

A) True 
 B)False

Question 7

One of the three objectives of financial reporting established by the FASB is to provide information useful in assessing cash flow prospects.

Accepted Answer

A) True 
 B)False

Question 8

On a multistep income statement, other revenues and expenses are a component of income from operations.

Accepted Answer

A) True 
 B)False

Question 9

Goodwill would appear in which balance sheet section?

Accepted Answer

A)  Investments 
B)  Property, plant, and equipment 
C)  Current assets 
D)  Intangible assets 
A)  Investments 
B)  Property, plant, and equipment 
C)  Current assets 
D)  Intangible assets

Question 10

Which of the following should be classified as an intangible asset?

Accepted Answer

A)  Land held for future use 
B)  Accounts receivable 
C)  Buildings 
D)  Trademark 
A)  Land held for future use 
B)  Accounts receivable 
C)  Buildings 
D)  Trademark

Question 11

For a merchandising company, the difference between net sales and operating expenses is called gross margin.

Accepted Answer

A) True 
 B)False

Question 12

The matching rule precludes the cost of inventory from being expensed until the inventory has been sold.

Accepted Answer

A) True 
 B)False

Question 13

Contributed capital is shown on a corporate balance sheet as two amounts: the par value of the issued stock and additional paid-in capital.

Accepted Answer

A) True 
 B)False

Question 14

Use this information to answer the following question.   The total dollar amount of assets to be classified as current assets is

Accepted Answer

A)  $252,000. 
B)  $238,000. 
C)  $294,000. 
D)  $244,000. 
A)  $252,000. 
B)  $238,000. 
C)  $294,000. 
D)  $244,000.

Question 15

The lower-of-cost-or-market method of accounting for inventories follows the convention of

Accepted Answer

A)  full disclosure. 
B)  materiality. 
C)  conservatism. 
D)  cost-benefit. 
A)  full disclosure. 
B)  materiality. 
C)  conservatism. 
D)  cost-benefit.

Question 16

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

Accepted Answer

A)  0.75. 
B)  1.00. 
C)  1.13. 
D)  2.22. 
A)  0.75. 
B)  1.00. 
C)  1.13. 
D)  2.22.

Question 17

Use this balance sheet and income statement for the first year of operations for Layton Novelties to answer the following question. Use ending balances whenever average balances are required for computing ratios.   Laytan Navelties
Income St-tement
Far the Year Ended December 31, 2010
$\begin{array}{lr}
\text { Net sales } & \$ 80,000 \
\text { Cost of goods sold } & 32,000 \
\text { Gross margin } & \$ 48,000 \
\text { Operating expenses } & 26,400\\text { Net income }&\$21,600
\end{array}$ The profit margin for Layton Novelties is

Accepted Answer

A)  30 percent. 
B)  75 percent. 
C)  60 percent. 
D)  27 percent. 
A)  30 percent. 
B)  75 percent. 
C)  60 percent. 
D)  27 percent.

Question 18

General-purpose external financial statements that are divided into subcategories are called classified financial statements.

Accepted Answer

A) True 
 B)False

Question 19

The Securities and Exchange Commission instituted rules requiring the chief executive officers and chief financial officers of all publicly traded companies to certify that, to their knowledge, the quarterly and annual statements that their companies file with the SEC are

Accepted Answer

A)  100 percent accurate and contain no misstatements, errors, or mistakes. 
B)  accurate and complete. 
C)  subject to interpretation due to the many accounting rules and regulations. 
D)  not to be used except by individuals working for the company. 
A)  100 percent accurate and contain no misstatements, errors, or mistakes. 
B)  accurate and complete. 
C)  subject to interpretation due to the many accounting rules and regulations. 
D)  not to be used except by individuals working for the company.

Question 20

An advantage of the single-step income statement is that it is less complex than the multistep form.

Accepted Answer

A) True 
 B)False

Exam 5: Financial Reporting and Analysis

Cost of goods sold would not be found on a single-step income statement.

Expensing a building in the year of purchase represents an abuse of which of the following accounting conventions?

A material item is one that is likely to affect a user's decision.

Freight paid on goods shipped to customers is classified as a selling expense.

An advantage of accounting information is that it provides exact and completely reliable measures.

Other revenues and expenses appears as a separate section on a single-step income statement.

One of the three objectives of financial reporting established by the FASB is to provide information useful in assessing cash flow prospects.

On a multistep income statement, other revenues and expenses are a component of income from operations.

Goodwill would appear in which balance sheet section?

Which of the following should be classified as an intangible asset?

For a merchandising company, the difference between net sales and operating expenses is called gross margin.

The matching rule precludes the cost of inventory from being expensed until the inventory has been sold.

Contributed capital is shown on a corporate balance sheet as two amounts: the par value of the issued stock and additional paid-in capital.

Use this information to answer the following question. The total dollar amount of assets to be classified as current assets is

The lower-of-cost-or-market method of accounting for inventories follows the convention of

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

General-purpose external financial statements that are divided into subcategories are called classified financial statements.

The Securities and Exchange Commission instituted rules requiring the chief executive officers and chief financial officers of all publicly traded companies to certify that, to their knowledge, the quarterly and annual statements that their companies file with the SEC are

An advantage of the single-step income statement is that it is less complex than the multistep form.

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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