Exam 5: Financial Reporting and Analysis

Income from operations is the difference between gross margin and operating expenses.

The following lettered items represent a classification scheme for a multistep income statement. In the blank next to each account, write the letter indicating to which category it belongs. a. Revenues b. Cost of goods sold c. Selling expenses d. General and administrative expenses e. Other revenues and expenses f. Not on income statement _____ 1. Interest Income _____ 2. Accumulated Depreciation _____ 3. Sales Returns and Allowances _____ 4. Inventories _____ 5. Company President's Salary _____ 6. Utilities Expense for Store _____ 7. Interest Expense _____ 8. Freight-Out Expense _____ 9. Office Salaries Expense for Headquarters _____ 10. Interest Receivable

Natural resources, such as coal mines and oil wells, are classified as intangible assets.

Which type of account is cost of goods sold?

Positive operating income will result if gross margin exceeds

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

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

Which of the following appears on the balance sheet?

The qualitative characteristic of faithful representation contains all the following features except

A different set of financial statements usually is prepared for each user.

The cost-benefit convention holds that the benefits to be gained from providing accounting information should be less than the costs of providing it.

The convention of consistency pertains to the use of the same accounting principles by firms in the same industry.

The investments category on the balance sheet normally includes investments that are intended to be held for a short period of time.

Use this information to answer the following question. If the income statement were prepared in a multistep form, operating expenses would be

Interest paid on debt would be entered on the multistep income statement in the category called

The main difference among the balance sheets of the sole proprietorship, the partnership, and the corporation is found in the owner's equity section.

The profit margin equals

One of the three objectives of financial reporting established by the FASB is to provide information that is useful to potential customers.

The main difference between intangible assets and property, plant, and equipment is the length of the asset's life.

Use the following information to calculate the liquidity and profitability ratios listed below. Round to two decimal places. Average owner's equity \ 9,250 Net income \ 1,500 Average total assets 18,000 Net sales 15,625 Current assets 11,250 Total liabilities 8,750 Current liabilities 7,500 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