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Exam 17: Understanding Accounting and Financial Information

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Question 71

True/False

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The accounting cycle usually involves the work of both the bookkeeper and the accountant.

A) True
B) False

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Question 72

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Mini-Case Minnie A.Wright-Hoff works as an accountant for Double Entry Doors,Inc.Her company sells and installs oversized garage doors needed by large vehicles.Most of Minnie's work involves helping department heads and other decision-makers by measuring and reporting costs for their departments,and by identifying areas where departments are exceeding their budgets.However,as one of only three accountants employed by Double Entry Doors,Minnie is something of a "jill-of-all-trades" in terms of her accounting assignments.For example,she recently spent several hours summarizing all of the financial data in account ledgers to see if the information was correct and balanced.Her efforts revealed no problems,so she is now ready to start working on the firm's financial statements.Minnie is interested in this part of the accounting cycle because she likes to be one of the first to know the "bottom line" her company will report.She knows that she and the other accountants who work on these statements can influence the results by the choices they make about the way they report certain items. -Double Entry Door's suppliers maintained very stable prices for many years,but Minnie has noticed that the cost of doors has been rising steadily for the past few years.She is concerned that,given the company's current accounting methods of basing its cost on the most recent doors purchased,this will result in a much lower net income than in the past.The most likely reason for her concern is that Double Entry has apparently been using:

A) The FIFO inventory valuation method to determine its cost of goods sold.
B) A great deal of equity financing to purchase the doors.
C) The LIFO inventory valuation method to determine its cost of goods sold.
D) A depreciation method based on the average value of inventory.

E) None of the above
F) A) and C)

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Question 73

True/False

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The accounting book that provides all the information about a single account in one place is called the ledger.

Discuss the role of an independent auditor.Provide information about the types of accounting activities they perform and the recent laws that have emerged to help guide them as they do their job.

Which financial statement reports the company's revenues and selling costs over a period of time?

Assets are listed on the balance sheet in order of liquidity,with the most liquid assets listed first.

GAAP refers to a set of standards concerning accounting principles that were established by the Financial Accounting Standards Board.

________ measures the amount of profit earned by a company for each share of outstanding common stock.

Jim works in the accounting department at the Kansas Sunflower Corporation,where it is his job to record all transactions into journals.After completing this task,the next step in the accounting process is to:

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.

At this point in time,Bark Three Times Pet Store's balance sheet shows $100,000 in assets and $90,000 in liabilities.The company's accounting system will show the owners' equity as $190,000.

The basic earnings per share ratio does not take stock options,warrants,and preferred stock into account.

Accounting information is not relevant for nonprofit organizations.

Many businesses now use computers and accounting software to simplify the mechanical aspects involved in accounting.

Independent audits are prepared by accountants within the organization to ensure that proper accounting procedures are followed.

The Barkley Company has recorded its unpaid bill for supplies under a current liabilities account on the balance sheet.This payment will be due to the supplier in less than a year.

Assets are reported on the firm's balance sheet.

Rapidly growing companies often buy increasing amounts of merchandise from suppliers on credit,and then sell the goods to their customers on credit.These companies sometimes have difficulty repaying their suppliers when customers who buy on credit don't pay on time.Firms that experience this difficulty need to do a better job of:

Rent,depreciation,and salaries are examples of:

While reviewing the books at his firm,Chad Cooper noticed discrepancies between how the firm recorded revenues last year and how it elected to record revenues during the recent quarter of the current year.As a recent business graduate,Chad felt confident that the changes needed clarification.To get another opinion,Chad suggested to the company's controller that the firm solicit ______________.