1. What does accounting focus on?
O The impact a business's activities have on its public image
O The impact a business's activities have on its
... [Show More] relationship with customers
O The impact a business's activities have on the environment
O The impact a business's activities have on its overall financial performance
O The impact a business's activities have on its overall financial performance
2. Which report summarizes cash collections and cash expenditures from operating, investing, and financing activities over a period of time?
O Statement of Cash Flows
O Cash flow schedule
O Summary of cash receipts
O Cash receipts and disbursements
O Statement of Cash Flows
00:05
01:30
3. Which users would have a primary concern with an organization's ability to provide healthcare benefits?
O Suppliers
O Employees
O Vendors
O Competitors
O Employees
4. Which benefit does a corporation gain by following Generally Accepted Accounting Principals (GAAP)?
O An increase in the amount of assets it reports
O A decrease in its income tax obligations
O A decrease in the amount of net income it reports
O An increase in its comparability to other companies
O An increase in its comparability to other companies
5. Which body regulates a certified public accounting firm's audit practices when the firm is auditing a large publicly traded company?
O Another certified accounting firm (CPA)
O The Public Company Accounting Oversight Board (PCAOB)
O The internal revenue service (IRS)
O The financial accounting standards board (FASB)
O The Public Company Accounting Oversight Board (PCAOB)
6. What has had the most significant impact on accounting practices?
O New product innovations
O Mobile computing
O Certification requirements
O Information Technology
O Information Technology
7. What two items of information are revealed on the balance sheet?
Choose 2 answers
O Costs
O Revenues
O Debt
O Expenses
O Ownership
O Debt
O Ownership
8. Which term is defined as the residual interest in the net assets of a company?
O Owner's Equity
O Revenues
O Operating Income
O Liabilities
O Owner's Equity
9. A corporation has total liabilities of $300 million, total owners' equity of $100 million, and current assets of $50 million.
What is the value of the firm's long-term assets?
O $250 million
O $350 million
O $400 million
O $450 million
Assets = Liabilities + Equity
x + 50m = 300m + 100m
Solving for x = 350m
O $350 million
10. Which situation should result in revenue recognition on the income statement for the year ending 12/31/14 if the firm is using accrual-basis accounting?
O In 2014, a company collects cash from a customer for services it will provide next year (2015)
O In 2014, a company collects cash from a customer for services it provided in the previous year (2013)
O In 2014, a company enters into a contract whereby it agrees to provide services to a customer next year in (2015)
O In 2014, a company provide services to a customer for cash will be collected the next year (2015)
O In 2014, a company provide services to a customer for cash will be collected the next year (2015)
11. Which category on the statement of cash flows summarizes cash receipts and payments to owners and creditors of the company?
O Cash flows from business activities
O Cash flows from financing activities
O Cash flows from investing activities
O Cash flows from operating activities
O Cash flows from financing activities
12. Where would an investor find a summary of a company's significant accounting policies?
O In the income statement
O In the balance sheet
O In the statement of cash flows
O In the notes to financial statement
O In the notes to financial statement
00:02
01:30
13. Which assurance does an external audit report provide for its readers?
O The company will be a good credit risk
O The company's financial statement fairly reflecst it financial position
O The company will generate positive cash flows
O The company will generate net income
O The company's financial statement fairly reflects it financial position
14. Match each accounting term with its definition.
Answer options may be used more than once or not at all.
Conservatism
Material
Reliable
Relevant
Information having to do with the matter at hand
Information related to recognizing losses as they occur
Information that can be verified
Information that is important enough to make a difference
Conservatism: Information related to recognizing losses as they occur
Material: Information that is important enough to make a difference
Reliable: Information that can be verified
Relevant: Information having to do with the matter at hand
15. Order the steps in the decision cycle from first (1) to last (5).
-Analyze financial statements
-Gather information
-Implement decision
-Make decision
-Prepare financial statements
1. Prepare financial statements
2. Analyze financial statements
3. Gather information
4. Make decision
5. Implement decision
16. Partial financial information for a company is as follows:
Current assets $36,543
Total assets $58,719
Current liabilities $24,824
Total liabilities $48,561
Stockholders' equity $10,158
Sales $46,997
Net Income $ 3,761
Market value of shares $41,316
What is the price-earnings (PE) ratio for this company?
O 11.0
O 12.5
O 12.9
O 15.6
O 11.0
17. What does it mean if a company has a debt ratio of 101.5%
O The company has 1.5% more current liabilities than current assets
O The company has 1.5% more total liabilities than total assets
O The company has 1.5% more total liabilities than net income
O The company has 1.5% more total liabilities than gross sales
O The company has 1.5% more total liabilities than total assets
18. What is consistent with a continual decline in gross profit if the firm's cost of goods sold remains the same?
O Continual increase in taxes
O Continual increase in interest
O Continual decrease in salaries
O Continual decrease in sales
O Continual decrease in sales
19. Which two cash flow adequacy ratios represent a cash cow?
Choose 2
O $6,991/$5,486
O $4,510/$4,932
O $7,589/$9,210
O $5,220/$1,875
O $8,091/$9,374
$6,991/$5,486. $5,220/$1,875.
Which formula yields a cash times interest earned ratio of 11?
O Cash before interest and taxes of $11,000 / cash paid for acquisitions of $1,000.
O Cash before interest and taxes of $11,000 / cash paid for income taxes of $1,000.
O Cash before interest and taxes of $11,000 / cash from operations of $1,000.
O Cash before interest and taxes of $11,000 / cash paid for interest of $1,000.
O Cash before interest and taxes of $11,000 / cash paid for interest of $1,000.
Which form of debt should be reported in the long-term liability category?
O Accounts payable due in 30 days
O Salaries payable due in 2 weeks
O Unearned revenue that will be earned in 9 months
O Notes payable expected to be paid in 18 months
O Notes payable expected to be paid in 18 months
22. In January of year 1, a company began doing business as a corporation in order to sell technology-related accessories and services. During its first month of operations, the following events occurred:
January 1
The corporation received $1,000,000 in cash in exchange for stock issued to stockholders.
January 3
The corporation borrowed $250,000 from bank. The loan is a four-year loan with an interest rate of 12 percent, payable each year on January 1 beginning in year 2.
January 5
The corporation purchased equipment to be used in the business for $200,000 cash.
January 8
The corporation purchased inventory costing $200,000 by paying $120,000 in cash. The remainder was put on credit accounts with suppliers.
January 15
The corporation hired five employees. Each employee will be paid $1,000 at the end of each month.
January 30
The corporation paid $6,000 cash for a one-year insurance policy. The policy period will begin on February 1, year 1.
What will be the impact of the January 5 event on the company's balance sheet on that date?
O Cash will decrease $200,000, and loan payable will decrease $200,00
O Equipment will increase $200,000, and cash will decrease $200,000.
O Cash will decrease $200,000, and paid-in-capital will decrease $200,000.
O Equipment will increase $200,000, and retained earnings will decrease $200,000.
O Equipment will increase $200,000, and cash will decrease $200,000.
23. In January of year 1, a company began doing business as a corporation in order to sell technology-related accessories and services. During its first month of operations, the following events occurred:
January 1
The corporation received $1,000,000 in cash in exchange for stock issued to stockholders.
January 3
The corporation borrowed $250,000 from a bank. The loan is a four-year loan with an interest rate of 12 percent, payable each year on January 1 beginning in year 2.
January 5
The corporation purchased equipment to be used in the business for $200,000 cash.
January 8
The corporation purchased inventory costing $200,000 by paying $120,000 in cash. The remainder was put on credit accounts with suppliers.
January 15
The corporation hired five employees. Each employee will be paid $1,000 at the end of each month.
January 31
The corporation paid $6,000 cash for a one-year insurance policy. The policy period will begin on February 1, year 1.
What will be the impact of the January 31 event on the company's balance sheet on that date?
O Cash will decrease $6,000, and accounts receivable will increase $6,000.
O Prepaid insurance will decrease $6,000, and accounts payable will decrease $6,000.
O Cash will decrease $6,000, and paid-in capital will decrease $6,000.
O Prepaid insurance will increase $6,000, and cash will decrease $6,000.
O Prepaid insurance will increase $6,000, and cash will decrease $6,000. [Show Less]