Question 1

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 _______________.

Accepted Answer

A)  the assistance of the Government Accounting Standards Board
B)  the services of a certified internal auditor
C)  the services of a senior executive at the IRS
D)  the services of an independent auditorE) All of the above
F) A) and B)

Question 2

Cash revenues from the sale of new cars at Pete's Auto Emporium would be listed as a cash inflow from operations on Pete's statement of cash flows.

Accepted Answer

A) True 
 B)False

Question 3

A loan officer at Southwest Bank is considering a loan application from Preferred Pet Care,Inc.He is concerned about the company's ability to make payments on the loan.The loan officer is likely to be interested in Preferred Pet Care's statement of cash flows.

Accepted Answer

A) True 
 B)False

Question 4

Carole Grand and Bonnie Lamore run a shuttle service from Western Illinois to the busy Chicago O'Hare airport.Last month,they recorded the following:  If 25% of their net income is paid to the government in taxes,what is their net income after taxes?

Accepted Answer

A)  $1410.00
B)  $1160.00
C)  $682.00
D)  $870.00E) A) and D)
F) A) and C)

Question 5

Phil O'Keefe is opening a small sports store in his town.At the advice of a friend who is a bookkeeper,he keeps the receipts of everything he purchases for the business in the bottom drawer of his desk,along with all other business expenses,such as his retail license,his rent expense,and insurance expense.You suggest that ________.

Accepted Answer

A)  Phil continues with this procedure,but only until the store opens,at which time he will need an additional drawer for his sales transactions.
B)  Phil invests some time in exploring an accounting system that will make it easier to classify and summarize accounting information.
C)  Phil continues with this procedure because there is very little difference between one expense and another.
D)  Phil stops wasting valuable time saving the receipts because accountants only record sales transactions.E) B) and D)
F) A) and D)

Question 6

When an accountant "writes off" the cost of a tangible asset over its estimated lifetime,it is called depreciation.

Accepted Answer

A) True 
 B)False

Question 7

An important difference between accounting and other business functions,such as marketing and management,is that:

Accepted Answer

A)  Accounting functions must be performed by an "outsider" rather than by an employee of the business) in order to avoid conflicts of interest.
B)  Accounting offers us insight into whether the business is financially sound.
C)  Accounting involves mainly clerical activities and thus requires very little analysis.
D)  Accounting deals exclusively with numbers.E) None of the above
F) A) and B)

Question 8

The inventory turnover ratio measures the speed of inventory moving through the firm and its conversion into sales.

Accepted Answer

A) True 
 B)False

Question 9

In the course of their jobs,bookkeepers:

Accepted Answer

A)  Interpret accounting data.
B)  Approve decisions about major expenditures.
C)  Record business transactions.
D)  Prepare financial statements.E) A) and B)
F) B) and C)

Question 10

Carole Grand and Bonnie Lamore run a shuttle service from Western Illinois to the busy Chicago O'Hare airport.Last month,they recorded the following:  Carole and Bonnie's gross profit for the past month was:

Accepted Answer

A)  $682.00
B)  Carole: $341.00;Bonnie: $341.00
C)  $1250.00
D)  $2750.00E) All of the above
F) A) and B)

Question 11

Financial accounting is used to provide information and analysis managers within the organization can use to assist them in decision-making.

Accepted Answer

A) True 
 B)False

Question 12

You have just calculated the acid-test ratio for Peak Performance Sporting Goods [acid test ratio = 1.0].As a loan officer for the local bank,you are called into your boss's office to interpret the results of this ratio.Which of the following statements best reflects an understanding of these results?

Accepted Answer

A)  A company with an acid-test ratio = 1.0 demonstrates the ability to operate very conservatively.The bank should anticipate that this firm will always be able to meet its short-term liabilities.
B)  This company is already having problems meeting its short-term liabilities.
C)  An acid-test ratio = 1.0 means that this firm has $1.00 in current assets for every $2.00 in current liabilities.Peak Performance is a well-run operation,as long as it can continue to sell-off its inventory.
D)  An acid test ratio = 1.0 tells us that without adequate inventory turnover,this company may represent a higher risk.Peak Performance's acid test ratio shows that the firm maintains $1.00 in current assets for every $1.00 in current liabilities.E) C) and D)
F) All of the above

Question 13

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:

Accepted Answer

A)  liquidity ratios.
B)  leverage ratios.
C)  activity ratios.
D)  profitability ratios.E) B) and C)
F) B) and D)

Question 14

After recording a business's transactions,bookkeepers usually classify the recorded transactions into groups with common characteristics.

Accepted Answer

A) True 
 B)False

Question 15

The income statement reports the difference between a firm's assets and its liabilities as of a certain date.

Accepted Answer

A) True 
 B)False

Question 16

Thoroughly describe each of six parts of the accounting cycle.

Accepted Answer

Part 1 requires the bookkeeper or accoun...

Question 17

In spite of his assertions that he carried-out fraud alone,convicted investment advisor Bernard Madoff's independent auditor is now under investigation.The auditor is accused of not doing his job.Rather than verify Madoff's company records,the F.B.I claims that he "rubber-stamped" the records.Knowing what you have learned about the importance of auditing,which of the following statements do you understand to be most accurate?

Accepted Answer

A)  Investment firms should always hire private accountants.Public accountants do not have enough information about the firm to prepare audits.
B)  Independent auditors only prepare audits for not-for-profit firms.Madoff hired the wrong professional for the job.
C)  Independent auditors must follow strict rules,including new rules put in place by the Sarbanes-Oxley Act.
D)  The Sarbanes-Oxley Act does not institute rules of practice for independent auditors.Independent auditors follow strict rules created by the AICPA,American Institute of Certified Public Accountants.E) B) and C)
F) B) and D)

Question 18

The books where accounting data are first entered are called ledgers.

Accepted Answer

A) True 
 B)False

Question 19

Financial accounting involves activities such as preparing budgets and measuring production costs.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following ratios is a liquidity ratio?

Accepted Answer

A)  inventory turnover ratio
B)  acid-test ratio
C)  debt to owners' equity ratio
D)  basic earnings per shareE) All of the above
F) B) and C)

Exam 17: Understanding Accounting and Financial Information

A loan officer at Southwest Bank is considering a loan application from Preferred Pet Care,Inc.He is concerned about the company's ability to make payments on the loan.The loan officer is likely to be interested in Preferred Pet Care's statement of cash flows.

Correct Answer
verified

Financial accounting involves activities such as preparing budgets and measuring production costs.

Correct Answer
verified

Correct Answer
verified

The books where accounting data are first entered are called ledgers.

Correct Answer
verified

Correct Answer
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In the course of their jobs,bookkeepers:

Correct Answer
verified

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:

Correct Answer
verified

Thoroughly describe each of six parts of the accounting cycle.

Correct Answer
verified
Part 1 requires the bookkeeper or accoun...
View Answer

Cash revenues from the sale of new cars at Pete's Auto Emporium would be listed as a cash inflow from operations on Pete's statement of cash flows.

Correct Answer
verified

When an accountant "writes off" the cost of a tangible asset over its estimated lifetime,it is called depreciation.

Correct Answer
verified

Financial accounting is used to provide information and analysis managers within the organization can use to assist them in decision-making.

Correct Answer
verified

Which of the following ratios is a liquidity ratio?

Correct Answer
verified

After recording a business's transactions,bookkeepers usually classify the recorded transactions into groups with common characteristics.

Correct Answer
verified

The inventory turnover ratio measures the speed of inventory moving through the firm and its conversion into sales.

Correct Answer
verified

The income statement reports the difference between a firm's assets and its liabilities as of a certain date.

Correct Answer
verified

Correct Answer
verified

Carole Grand and Bonnie Lamore run a shuttle service from Western Illinois to the busy Chicago O'Hare airport.Last month,they recorded the following: Carole and Bonnie's gross profit for the past month was:

Correct Answer
verified

Carole Grand and Bonnie Lamore run a shuttle service from Western Illinois to the busy Chicago O'Hare airport.Last month,they recorded the following: If 25% of their net income is paid to the government in taxes,what is their net income after taxes?

Correct Answer
verified

Correct Answer
verified

An important difference between accounting and other business functions,such as marketing and management,is that:

Correct Answer
verified

Exam 17: Understanding Accounting and Financial Information

A loan officer at Southwest Bank is considering a loan application from Preferred Pet Care,Inc.He is concerned about the company's ability to make payments on the loan.The loan officer is likely to be interested in Preferred Pet Care's statement of cash flows.

Correct AnswerverifiedShow Answer

Financial accounting involves activities such as preparing budgets and measuring production costs.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The books where accounting data are first entered are called ledgers.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In the course of their jobs,bookkeepers:

Correct AnswerverifiedShow Answer

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:

Correct AnswerverifiedShow Answer

Thoroughly describe each of six parts of the accounting cycle.

Correct AnswerverifiedPart 1 requires the bookkeeper or accoun...View AnswerShow Answer

Cash revenues from the sale of new cars at Pete's Auto Emporium would be listed as a cash inflow from operations on Pete's statement of cash flows.

Correct AnswerverifiedShow Answer

When an accountant "writes off" the cost of a tangible asset over its estimated lifetime,it is called depreciation.

Correct AnswerverifiedShow Answer

Financial accounting is used to provide information and analysis managers within the organization can use to assist them in decision-making.

Correct AnswerverifiedShow Answer

Which of the following ratios is a liquidity ratio?

Correct AnswerverifiedShow Answer

After recording a business's transactions,bookkeepers usually classify the recorded transactions into groups with common characteristics.

Correct AnswerverifiedShow Answer

The inventory turnover ratio measures the speed of inventory moving through the firm and its conversion into sales.

Correct AnswerverifiedShow Answer

The income statement reports the difference between a firm's assets and its liabilities as of a certain date.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Carole Grand and Bonnie Lamore run a shuttle service from Western Illinois to the busy Chicago O'Hare airport.Last month,they recorded the following: Carole and Bonnie's gross profit for the past month was:

Correct AnswerverifiedShow Answer

Carole Grand and Bonnie Lamore run a shuttle service from Western Illinois to the busy Chicago O'Hare airport.Last month,they recorded the following: If 25% of their net income is paid to the government in taxes,what is their net income after taxes?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

An important difference between accounting and other business functions,such as marketing and management,is that:

Correct AnswerverifiedShow Answer

Correct Answer
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Part 1 requires the bookkeeper or accoun...
View Answer

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Correct Answer
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Correct Answer
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