Question 1

Which of the following is expressed in terms of a percentage?

Accepted Answer

A) Return on equity 
B) Current ratio 
C) Asset turnover 
D) Working capital 
A) Return on equity 
B) Current ratio 
C) Asset turnover 
D) Working capital A

Question 2

The accounting convention that is most responsible for the increase in the number of notes to financial statements is

Accepted Answer

A) materiality. 
B) full disclosure. 
C) consistency. 
D) conservatism. 
A) materiality. 
B) full disclosure. 
C) consistency. 
D) conservatism. B

Question 3

The profit margin equals

Accepted Answer

A) net sales divided by net income. 
B) gross margin divided by net income. 
C) net income divided by gross margin. 
D) net income divided by revenues. 
A) net sales divided by net income. 
B) gross margin divided by net income. 
C) net income divided by gross margin. 
D) net income divided by revenues. D

Question 4

Using the following amounts taken from the balance sheet and income statement of a business,compute the measures listed below.After each answer,write "L" if it is a measure of liquidity or "P" if it is a measure of profitability.Round to two decimal places.
   a.Current ratio
b.Return on equity
c.Return on assets
d.Working capital

Accepted Answer

a.1.5 L ($30,000 @#LAT-DLM&  $20,000)
b.

Question 5

It is possible for an asset to be a current asset even though the expected conversion of that asset into cash is to be longer than one year.

Accepted Answer

A) True 
 B)False

Question 6

An investment is classified as short term or long term based on

Accepted Answer

A) whether the investment can be sold immediately. 
B) the length of time the investor expects to hold it. 
C) the purpose for which it is held. 
D) the dollar amount of the investment. 
A) whether the investment can be sold immediately. 
B) the length of time the investor expects to hold it. 
C) the purpose for which it is held. 
D) the dollar amount of the investment.

Question 7

Working capital measures

Accepted Answer

A) the excess of current assets over current liabilities-what is on hand to fund 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 fund 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 8

Accounting information contains numerous estimates,classifications,summarizations,judgments,and allocations.

Accepted Answer

A) True 
 B)False

Question 9

___________ is related to both the nature of an item and its size.

Accepted Answer

A) Neutrality 
B) Materiality 
C) Verifiability 
D) Timeliness 
A) Neutrality 
B) Materiality 
C) Verifiability 
D) Timeliness

Question 10

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 11

Although a garbage can that costs $25 is a long-term asset,it can be expensed because the amount is immaterial and will not affect anyone's decision making.

Accepted Answer

A) True 
 B)False

Question 12

Match between columns
                        Premises: A company forgoes hiring another full-time accountant,which would add only slightly to the financial statements' accuracy.
This convention best enhances comparability of financial statements between years.
A merger agreed on just after the balance sheet date nevertheless is reported in the notes to the financial statements.
A large company rounds its financial statement figures to the nearest $10,000.
A company uses lower-of-cost-or-market to value inventory.

Accepted Answer

The Answer of Conservatism and Full disclosure and Consistency and is...

Question 13

The objective of financial reporting established by the FASB is to provide information that is useful to potential customers.

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

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 National Textile is

Accepted Answer

A) 40 percent. 
B) 67 percent. 
C) 47 percent. 
D) 32 percent. 
A) 40 percent. 
B) 67 percent. 
C) 47 percent. 
D) 32 percent.

Question 16

Each of the following statements violates a concept or convention of accounting.Write the letter in the blank next to each statement corresponding to the concept or convention violated.
   _____ 1.A note to the financial statements indicating a change in inventory methods is omitted.
_____ 2.When management is unsure of which estimates to use in a given situation,the estimate resulting in the largest net income is always used.
_____ 3.In 20x5,a company uses straight-line depreciation and in 20x6 the company uses declining-balance depreciation.
_____ 4.A small company expenses all expenditures under $10,000.
_____ 5.A small company purchases a $50,000 computer to save $3,000 per year in bookkeeping wages.

Accepted Answer

The answer of Each of the following statements violates a...

Question 17

Which of the following does not include net income in its computation?

Accepted Answer

A) Debt to equity ratio 
B) Return on assets 
C) Return on equity 
D) Profit margin 
A) Debt to equity ratio 
B) Return on assets 
C) Return on equity 
D) Profit margin

Question 18

General-purpose external financial statements are not primarily intended for

Accepted Answer

A) management. 
B) investors. 
C) suppliers of goods and services. 
D) lending institutions. 
A) management. 
B) investors. 
C) suppliers of goods and services. 
D) lending institutions.

Question 19

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

Accepted Answer

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

Question 20

Classified balance sheets list accounts in alphabetical order.

Accepted Answer

A) True 
 B)False

Exam 4: Foundations of Financial Reporting and the Classified Balance Sheet

Which of the following is expressed in terms of a percentage?

The accounting convention that is most responsible for the increase in the number of notes to financial statements is

The profit margin equals

It is possible for an asset to be a current asset even though the expected conversion of that asset into cash is to be longer than one year.

An investment is classified as short term or long term based on

Working capital measures

Accounting information contains numerous estimates,classifications,summarizations,judgments,and allocations.

___________ is related to both the nature of an item and its size.

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

Although a garbage can that costs $25 is a long-term asset,it can be expensed because the amount is immaterial and will not affect anyone's decision making.

The objective of financial reporting established by the FASB is to provide information that is useful to potential customers.

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

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 National Textile is

Which of the following does not include net income in its computation?

General-purpose external financial statements are not primarily intended for

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

Classified balance sheets list accounts in alphabetical order.

Uses of Accounting Information and the Financial Statements

Measurement Concepts: Recording Business Transactions

Measuring Business Income: Adjusting the Accounts

Accounting for Merchandising Operations

Inventories

Cash and Internal Control

Receivables

Long-Term Assets

Current Liabilities and Fair Value Accounting

Long-Term Liabilities

Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

Managerial Accounting and Cost Concepts

Costing Systems: Job Order Costing

Costing Systems: Process Costing

Value-Based Systems: Activity-Based Costing and Lean Accounting

Cost-Volume-Profit Analysis

The Budgeting Process

Flexible Budgets and Performance Analysis

Standard Costing and Variance Analysis

Short-Run Decision Analysis

Capital Investment Analysis

Pricing Decisions, including Target Costing and Transfer Pricing

Quality Management and Measurement

Accounting for Unincorporated Businesses

Accounting for Investments

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