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Exam 17: Understanding Accounting and Financial Information

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Question 161

Multiple Choice

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Monica noted that she disbursed $6,347 in payments for operations in her travel agency and received $6,189 in cash receipts for services rendered.She had no cash receipts or disbursements from investments or financing activities.Thus,Monica had a:

A) positive disbursement.
B) negative cash flow.
C) bad debt allowance.
D) tax credit payment.

E) All of the above
F) A) and C)

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Question 162

Multiple Choice

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The accounting scandals of the early 2000s led many people to question the legitimacy of:

A) Ratio analysis as a means of evaluating the performance of a firm.
B) Relying on the recommendations of tax accountants to find ways of reducing the taxes owed by a business organization.
C) Publishing financial information about a firm on the Internet.
D) Allowing an accounting firm to do both consulting and auditing work for the same company.

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

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Question 163

Multiple Choice

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Peak Performance Sporting Goods Company has collected the following information about itself and its competitors: Which of the following statements explains the importance of this information?

In the course of their jobs,bookkeepers:

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.

Peak Performance Sporting Goods Company has just applied for a bank loan in order to expand the business.Using the most recent Balance Sheet data provided by the company owner,you calculate that the company's current ratio is 2.5.In your presentation to the company boss,you remark:

The _____ account on the Balance Sheet shows profits that the firm has reinvested in the company.

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.

The cash a firm raised from issuing new debt or equity capital would be reported on a statement of cash flows.

Financial accountants prepare reports for owners,creditors,suppliers,and others outside of the organization.

Preferred Pet Care Clinic,Inc is a mobile veterinary care company that travels to its clients' homes to administer veterinary care to well and sick pets.Its business is booming,with a full schedule of appointments each week.On a weekly basis,the office manager orders a larger amount of vaccines,antibiotics,and other products from its suppliers with the understanding that it will pay for these supplies in one month's time.A sizeable percentage of Preferred Pet Care's clients are elderly persons who are on fixed incomes.These customers eventually pay their bills,but usually not upon receipt of service.It sometimes takes them upwards of two months to remit.As an accounting intern willing to advise the owner,which of the following statements is important to your analysis?

Blast-off Airlines is a recent start-up commuter airline that flies between eight regional cities on the east coast.Although it has attracted numerous investors who see value in the company's service,it does not pay dividends.Last year,the firm claimed profits of $4,800,000,which will be used to purchase an additional commuter plane.The Balance Sheet accounts that will show this affect are:

Inputs to the accounting system include sales documents.

The work of a certified management accountant is intended to enable people outside of the organization to make investment decisions.

Careful consideration of the use of computers in accounting indicates that computers ____________________.

An income statement reports what a company owns and owes on a certain day.

The preparation of financial statements for people outside the firm (creditors,unions,suppliers,and others) is the goal of:

Bark Three Times Pet Store established a line of credit with its local banker and used (borrowed)$85,000 against it to purchase its first year's inventory.Since it is required to repay the money before the end of its fiscal year,the company's accountant lists this liability with the current liabilities on the balance sheet.

There are five key working areas in accounting: financial accounting,managerial accounting,auditing,tax accounting,and government and not-for-profit accounting.

The top managers of Highbrow Bookstores want to indicate to the firm's shareholders how effectively they have managed the company.Perhaps the most meaningful way to do this would be by reporting strong: