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Exam 17: Understanding Accounting and Financial Information

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Question 191

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Use the fundamental accounting equation to solve the following: Assets minus liabilities equals:

A) net income.
B) gross margin.
C) owners' equity.
D) cash reserves.

E) B) and C)
F) A) and D)

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Question 192

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A firm's annual report is a yearly statement of the financial condition,progress,and expectations of the organization during one year.

A) True
B) False

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Question 193

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The _____ shows the assets,liabilities,and owners' equity of a firm,at a specific point in time.

Gross profit represents profit after the deduction of cost of goods sold,and before the deduction of all other selling expenses,general expenses,and tax expense.

An) __________ provides accounting services to individuals or firms on a fee basis.

If the economy began experiencing a prolonged period of deflation in which the prices of most goods are falling,many firms would find that the LIFO method of inventory valuation would result in higher reported profits.

Scott Drilling Contractors recently issued a corporate bond on which it expects to pay interest for the next twenty years.Scott would record this as a __________ on its balance sheet.

Martha is a member of a conservative political group that wants to identify and publicize examples of wasteful government spending.The type of accounting information Martha and her group will follow most closely is provided by certified public accountants.

Depreciation is a systematic write-off of the cost of a tangible asset that is listed on ___________.

Important provisions of the Sarbanes-Oxley Act:

Mike is the head of the accounting department at Micro flash.After completing the trial balance,he will proceed with the preparation of the balance sheet,the income statement and the statement of cash flows.

Minnie knows that Double Entry has a lot of short-term debt coming due in the next year,and wants to make sure that the company will have the ability to make the required payments.Given a troubling downturn in construction activity over the past couple of months,she is not confident that Double Entry can count on selling its current inventory of doors before the debt comes due.Which of the following ratios would be most relevant to Minnie?

According to generally accepted accounting principles GAAP),a firm must use the inventory valuation method that most accurately reflects the actual movement of goods through its inventory.

Citizens and special interest groups often have interest in the information generated by government accounting.

Good decisions are based on good information.Organizations need accounting-to provide good financial information.

There are two major financial statements prepared at the completion of the accounting cycle: the journal and the ledger.

Generally the higher the risk involved in an activity,the ________ the rate of return expected by investors.

10^th Generation Electronics had two transformers in its inventory,one purchased in February for $11,800 and the other acquired in September for $13,300.In December,they sold one of the transformers to Ram Enterprises for $16,400 and reported a gross profit of $3,100.10^th Generation Electronics evidently uses the ________ inventory valuation method.

Although managers who work for large firms must know something about accounting,people who run small businesses only need to know the basics of bookkeeping.

Managers who are concerned about keeping costs under control should be very interested in the information and advice provided by their company's managerial accountants.