Question 1

Which of the following terms characterizes the time period between the investment of cash in merchandise and the collection of cash from the sale of that merchandise?

Accepted Answer

A)  Operating cycle 
B)  Natural business year 
C)  Accounting period 
D)  Fiscal period

Question 2

An independent auditor's (CPA's) report is a guarantee that the financial statements are free from fraud or material error

Accepted Answer

A) True 
 B)False

Question 3

Jackson Transportation purchases many pieces of office furniture with an individual cost below $200 each.Jackson chooses to account for these expenditures as expenses when acquired rather than reporting them as property, plant, and equipment on its balance sheet.The company's accountant and independent CPA agree that no accounting principle has been violated.What accounting justification allows Jackson to expense the furniture?

Accepted Answer

A)  Conservatism 
B)  Matching 
C)  Materiality 
D)  Verifiability

Question 4

Use Rizwi Corporation's list of accounts at December 31, 2016 to answer the following question. Rizwi Corporation
List of Accounts at December 31, 2016
$\begin{array}{lrlr}
\text { Cash } & \$ 30,000 & \text { Accumulated depreciation } & \$ 12,000 \
\text { Merchandise inventory } & 14,000 &\text { Notes payable- } & 120,000 \
\text { Land } &  40,000&\text { Due12/31/2024 } & \
\text { Buildings } &  80,000&\text { Accounts payable } & 14,000 \
\text { Accounts receivable } &25,000& \text { Equipment } & 33,000 \
& & \text { Notes Payable- } & 14,000\
&&\text { Due07/01/2018 }\
\end{array}$ ? What is Rizwi Corp.'s current ratio?

Accepted Answer

A)  0.48 to 1 
B)  2.00 to 1 
C)  2.55 to 1 
D)  2.86 to 1

Question 5

The following balance sheet items from Fasoli, Inc.are listed for December 31, 2016: $$\begin{array} { l r } 
\text { Accounts payable } & \$ 32,650 \
\text { Interest payable } & 2,200 \
\text { Accounts receivable } & 26,500 \
\text { Land } & 250,000 \
\text { Accumulated depreciation-buil dings } & 40,000 \
\text { Marketable securities } & 15,000 \
\text { Merchandise inventory } & 112,900 \
\text { Accumulated depreciation-equipment } & 12,500 \
\text { Notes payable, due April } 15,2017 & 6,500 \
\text { Office supplies } & 200 \
\text { Notes payable, due December } 31,2020 & 251,630 \
\text { Paid-in capital in excess of par value } & 75,000 \
\text { Buil dings } & 150,000 \
\text { Patents } & 45,000 \
\text { Capital stock, } \$ 1 \text { par value } & 200,000 \
\text { Prepaid rent } & 3,800 \
\text { Cash } & 60,990 \
\text { Retained earnings } & 113,510 \
\text { Equipment } & 84,500 \
\text { Sal aries payable } & 7,400 \
\text { Income taxes payable } & 7,500
\end{array}$$
-Read the information about Fasoli, Inc.
Required:
Prepare the Assets section of the classified balance sheet.

Accepted Answer

The answer of The following balance sheet items from Fasoli,...

Question 6

Match the following characteristics with the statements about each qualitative characteristic's importance.
-Those willing to spend the time should be provided with comprehensible accounting information.

Accepted Answer

A) Consistency 
B) Materiality 
C) Conservatism 
D) Comparability 
E) Reliability
F)Relevance
G)Understandability

Question 7

​Current assets, other than cash, are expected to be sold or consumed beyond a company's normal operating cycle.

Accepted Answer

A) True 
 B)False

Question 8

Guinther & Sons, Inc.a retailer of men's clothing, earned a net profit of $77,000 for 2016.The balance sheet for Guinther & Sons includes the following items: $$\begin{array} { l r l r } 
\text { Cash } & \$ 29,000 & \text { Accounts receivable } & \$ 39,000 \
\text { Inventory } & 79,000 & \text { Prepaid insurance } & 3,000 \
\text { Land } & 90,000 & \text { Accounts payable } & 14,000 \
\text { Taxes payable } & 29,000 & \text { Capital stock } & 50,000 \
\text { Retained earnings } & 97,000 & \text { Long-term notes payable } & 43,000
\end{array}$$ ​
-Read the information for Guinther & Sons.Calculate the total amount of current assets for Guinther & Sons.

Accepted Answer

A)  $ 100,000 
B)  $ 147,000 
C)  $ 150,000 
D)  $ 249,000

Question 9

Matching
Identify whether the following investor questions are associated with (a) primary or (b) secondary financial reporting objectives.
-If I buy 50 shares of Apple, how much cash will I receive in dividends each year?

Accepted Answer

A) primary financial reporting objective 
B) secondary financial reporting objective

Question 10

From the following list, select the proper section from the statement of cash flows in which it would be classified.
-Received cash from selling goods to customers

Accepted Answer

A) Operating Activities 
B) Investing Activities 
C) Financing Activities

Question 11

What is the correct method for calculating working capital?

Accepted Answer

A)  Total Assets minus Total Liabilities 
B)  Current Assets minus Total Liabilities 
C)  Current Assets minus Current Liabilities 
D)  Current Assets plus Current Liabilities

Question 12

From the following list, select the proper section from the statement of cash flows in which it would be classified.
-Sold equipment no longer used in the business

Accepted Answer

A) Operating Activities 
B) Investing Activities 
C) Financing Activities

Question 13

Which of the following statements is true concerning external users of financial information?

Accepted Answer

A)  External users need detailed records of the business to make informed decisions. 
B)  External users are primarily responsible for the preparation of financial statements. 
C)  External users rely on the financial statements to help make informed decisions. 
D)  External users rely on management to tell them whether the company is a good investment

Question 14

Harrison Company calculated the following amounts concerning its financial information for the years ending December 31, 2017 and 2016: $\begin{array} { r r } &\underline { 2017 } & \underline { 2016 } \
\text {Current ratio }& 3.1 \text { to } 1 & 2.0 \text { to } 1 \
\text { Profit margin}& 22 \% & 18 \% \\end{array}$ ​
REQUIRED:
Suppose Harrison Company had a decrease in its cash account from 2016 to 2017.Would the other current asset amounts have increased or decreased? Explain.

Accepted Answer

The answer of Harrison Company calculated the following amounts concerning...

Question 15

____________________ is the quality of accounting information that makes it dependable in representing the events that it purports to represent.

Accepted Answer

The answer of ____________________ is the quality of accounting information...

Question 16

Match the following characteristics with the statements about each qualitative characteristic's importance.
-The accounting information must be information that could affect a decision.

Accepted Answer

A) Consistency 
B) Materiality 
C) Conservatism 
D) Comparability 
E) Reliability
F)Relevance
G)Understandability

Question 17

Match the selected items from a classified balance sheet and multiple-step income statement to the section in which they would appear on the classified balance sheet or the income statement.
-Land

Accepted Answer

A) Current Assets (balance sheet) 
B) Property, Plant, & Equipment (balance sheet) 
C) Current Liabilities (balance sheet) 
D) Long-term Liabilities (balance sheet) 
E) Stockholders' Equity (balance sheet)
F)Operating Revenue (income statement)
G)Operating Expenses (income statement)
H)Other Revenue & Expenses (income statement)
I)Income Taxes (income statement)

Question 18

Match the selected items from a classified balance sheet and multiple-step income statement to the section in which they would appear on the classified balance sheet or the income statement.
-Consulting revenues

Accepted Answer

A) Current Assets (balance sheet) 
B) Property, Plant, & Equipment (balance sheet) 
C) Current Liabilities (balance sheet) 
D) Long-term Liabilities (balance sheet) 
E) Stockholders' Equity (balance sheet)
F)Operating Revenue (income statement)
G)Operating Expenses (income statement)
H)Other Revenue & Expenses (income statement)
I)Income Taxes (income statement)

Question 19

In the independent auditors' report included with the annual report, management discusses the financial statements and provides the shareholders with explanations for certain amounts reported in the statements.

Accepted Answer

A) True 
 B)False

Question 20

____________________ is the quality of accounting information that makes it comprehensible to those willing to spend the necessary time.

Accepted Answer

The answer of ____________________ is the quality of accounting information...

Exam 2: Financial Statements and the Annual Report

Which of the following terms characterizes the time period between the investment of cash in merchandise and the collection of cash from the sale of that merchandise?

An independent auditor's (CPA's) report is a guarantee that the financial statements are free from fraud or material error

Match the following characteristics with the statements about each qualitative characteristic's importance. -Those willing to spend the time should be provided with comprehensible accounting information.

​Current assets, other than cash, are expected to be sold or consumed beyond a company's normal operating cycle.

Matching Identify whether the following investor questions are associated with (a) primary or (b) secondary financial reporting objectives. -If I buy 50 shares of Apple, how much cash will I receive in dividends each year?

From the following list, select the proper section from the statement of cash flows in which it would be classified. -Received cash from selling goods to customers

What is the correct method for calculating working capital?

From the following list, select the proper section from the statement of cash flows in which it would be classified. -Sold equipment no longer used in the business

Which of the following statements is true concerning external users of financial information?

____________________ is the quality of accounting information that makes it dependable in representing the events that it purports to represent.

Match the following characteristics with the statements about each qualitative characteristic's importance. -The accounting information must be information that could affect a decision.

Match the selected items from a classified balance sheet and multiple-step income statement to the section in which they would appear on the classified balance sheet or the income statement. -Land

Match the selected items from a classified balance sheet and multiple-step income statement to the section in which they would appear on the classified balance sheet or the income statement. -Consulting revenues

In the independent auditors' report included with the annual report, management discusses the financial statements and provides the shareholders with explanations for certain amounts reported in the statements.

____________________ is the quality of accounting information that makes it comprehensible to those willing to spend the necessary time.

Current assets, other than cash, are expected to be sold or consumed beyond a company's normal operating cycle.