Question 1

Which of the following would most likely increase the net profit margin ratio?

Accepted Answer

A)   An increase in the unit selling price.
B)   A decrease in the overall sales volume.
C)  An increase in operating expenses.
D)  An increase in cost of goods solD.An increase in the unit selling price will increase net income by a greater amount proportionately relative to the increase in net sales.E) B) and D)
F) B) and C)

Question 2

The gross profit percentage decreases when operating expenses increase.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following are not part of disclosure notes to the financial statements?

Accepted Answer

A)   Descriptions of the significant accounting methods applied in the company's financial statements.
B)   Additional detail of income taxes payable reported in the balance sheet.
C)  Names of executive officers and the salaries for each officer listed.
D)  Commitments under long-term supply agreements to buy inventory and equipment.E) C) and D)
F) A) and B)

Question 4

In which of the following classifications would cash dividend payments to stockholders be reported?

Accepted Answer

A)   Operating activities.
B)   Financing activities.
C)  Investing activities.
D)  Stockholder activities.E) A) and D)
F) C) and D)

Question 5

Net sales plus cost of goods sold is reported on the income statement as income from continuing operations.

Accepted Answer

A) True 
 B)False

Question 6

The return on assets ratio may increase when sales increase.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following statements does not accurately describe the effect of the sale of inventory at a profit on the financial statements?

Accepted Answer

A)   Income from operations and current assets both increase.
B)   Operating income and gross profit both increase.
C)  Net income and earnings per share both increase.
D)  Current assets do not change and stockholders' equity increases.E) All of the above
F) A) and C)

Question 8

Which of the following statements is false when a company sells inventory costing $900 for $1,500 cash?

Accepted Answer

A)   Current assets increase $600.
B)   Gross profit increases $1,500.
C)  Stockholders' equity increases $600.
D)  Net sales increases $1,500.E) B) and C)
F) A) and D)

Question 9

Which of the following statements is correct?

Accepted Answer

A)   Accumulated depreciation is the amount of depreciation on the income statement.
B)   Current liabilities are debts expected to be paid within one year.
C)  Current assets are resources of a company that might include cash and copyrights.
D)  Patents, goodwill, and deferred revenues are classified as intangible assets on the balance sheet.E) A) and D)
F) C) and D)

Question 10

Sales by major product category is a required financial statement disclosure.

Accepted Answer

A) True 
 B)False

Question 11

Inventories are reported on the balance sheet as a current asset.

Accepted Answer

A) True 
 B)False

Exam 5: Communicating and Interpreting Accounting Information

The return on assets ratio may increase when sales increase.

Correct Answer
verified

The gross profit percentage decreases when operating expenses increase.

Correct Answer
verified

Sales by major product category is a required financial statement disclosure.

Correct Answer
verified

Which of the following statements does not accurately describe the effect of the sale of inventory at a profit on the financial statements?

Correct Answer
verified

Which of the following are not part of disclosure notes to the financial statements?

Correct Answer
verified

Which of the following would most likely increase the net profit margin ratio?

Correct Answer
verified

Net sales plus cost of goods sold is reported on the income statement as income from continuing operations.

Correct Answer
verified

Inventories are reported on the balance sheet as a current asset.

Correct Answer
verified

Which of the following statements is false when a company sells inventory costing $900 for $1,500 cash?

Correct Answer
verified

Which of the following statements is correct?

Correct Answer
verified

In which of the following classifications would cash dividend payments to stockholders be reported?

Correct Answer
verified

Exam 5: Communicating and Interpreting Accounting Information

The return on assets ratio may increase when sales increase.

Correct AnswerverifiedShow Answer

The gross profit percentage decreases when operating expenses increase.

Correct AnswerverifiedShow Answer

Sales by major product category is a required financial statement disclosure.

Correct AnswerverifiedShow Answer

Which of the following statements does not accurately describe the effect of the sale of inventory at a profit on the financial statements?

Correct AnswerverifiedShow Answer

Which of the following are not part of disclosure notes to the financial statements?

Correct AnswerverifiedShow Answer

Which of the following would most likely increase the net profit margin ratio?

Correct AnswerverifiedShow Answer

Net sales plus cost of goods sold is reported on the income statement as income from continuing operations.

Correct AnswerverifiedShow Answer

Inventories are reported on the balance sheet as a current asset.

Correct AnswerverifiedShow Answer

Which of the following statements is false when a company sells inventory costing $900 for $1,500 cash?

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

In which of the following classifications would cash dividend payments to stockholders be reported?

Correct AnswerverifiedShow Answer

Correct Answer
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