What does accounting focus on?
The impact a business's activities have on its overall financial performance
Which report summarizes cash
... [Show More] collections and cash expenditures from operating, investing, and financing activities over a period of time?
Statement of cash flows
Which users would have a primary concern with an organization's ability to provide healthcare benefits?
Employees
Which body regulates a certified public accounting firm's audit practices when the firm is auditing a large publicly traded company?
The Public Company Accounting Oversight Board (PCAOB)
What has had the most significant impact on accounting practices?
Information technology
What two items of information are revealed on the balance sheet?
Choose 2 answers
Ownership.
Debt
Which term is defined as the residual interest in the net assets of a company?
Owners' equity
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?
$350 million
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?
In 2014, a company provides services to a customer for which cash will be collected the next year (2015).
Which category on the statement of cash flows summarizes cash receipts and payments to owners and creditors of the company?
Cash flows from financing activities
Where would an investor find a summary of a company's significant accounting policies?
In the notes to financial statements
Which assurance does an external audit report provide for its readers?
The company's financial statements fairly reflect its financial position
Reliable
Information that can be verified
Relevant
Information having to do with the matter at hand
Material
Information that is important enough to make a difference
Conservatism
Information related to recognizing losses as they occur
steps in the decision cycle
1 Prepare financial statements.
2 Analyze financial statements.
3 Gather information.
4 Make decision.
5 Implement decision
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?
11.0
What is consistent with a continual decline in gross profit if the firm's cost of goods sold remains the same?
Continual decrease in sales
Which two cash flow adequacy ratios represent a cash cow?
$6,991/$5,486. $5,220/$1,875.
Which formula yields a cash times interest earned ratio of 11?
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?
Notes payable expected to be paid in 18 months
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?
Equipment will increase $200,000, and cash will decrease $200,000.
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?
Prepaid insurance will increase $6,000, and cash will decrease $6,000.
Which two values affect the measurement of net income?
Choose 2 answers
Ordinary gains and losses . Operating expenses
Which two items' subtotals are included in a multi-step income statement?
Choose 2 answers
Gross profit. Income from operations
A furniture company using accrual accounting purchased 20 sofas in November 2011. In December 2011, 8 of the 20 sofas were sold to customers. The customers all signed contracts agreeing to pay half the amount owed in February 2012 and the remaining half in March 2012. At the time of sale, the company was reasonably sure the customers would pay the amount owed.
The furniture company pays its salespeople a commission on each sofa sold, with commissions for December 2011 sales paid in January 2012.
The furniture company paid $3,000 for advertising that ran in the local newspaper in November 2011.
In which month should advertising costs be expensed?
November 2011
On May 1, 2011, a company using accrual accounting purchased equipment costing $500,000. It expects the equipment to have a useful life of five years. At the time of purchase, the company also purchased a one-year insurance policy on this equipment, which cost $6,000.
How much insurance expense should the company have recognized for the year ending in 2011?
$4,000
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, it focused on obtaining the financing needed to start its operations. In February of year 1, the company sold inventory costing $25,000 for $75,000 cash.
In February of year 1, the company provided technology-related services worth $10,000. Customers paid a total of $4,000 in cash for these services and promised to pay the remainder the following month.
What will be the total impact of these services provided on the company's balance sheet other than an increase in cash of $4,000?
Choose 2 answers
Accounts receivable will increase $6,000. Retained earnings will increase $10,000.
What was the 2012 net profit amount if the 2013 pro-forma net profit of $187,000 was based on a 22% increase?
$153,279
What is a common category in a statement of cash flows?
Cash from investing activities
Which cash flow category would include "cash received from investors"?
Cash from financing activities
Which item is an investing activity?
Cash payments for purchase of plant assets
What impact does the sale of equipment have on the statement of cash flows?
Increase in cash from investing activities
What is known about the direct and indirect methods of preparing statements of cash flow?
The indirect method is more popular among large U.S. companies
A company's statement of cash flows includes the following cash transactions:
Sales 1,250,000
Inventory Purchase -750,000
Property and Equipment Purchase -270,000
Interest Payment on Long-Term Debt -25,000
Payment of Wages -315,000
Payment of Rent -40,000
Borrowing Long-Term Debt 200,000
Payment of Cash Dividends -15,000
Repurchase of Treasury Stock -40,000
Total Cash Flows -5,000
Assuming the company uses US GAAP standards, what is the total cash flow from financing activities?
$145,000
Which two examples represent financial statement errors?
Choose 2 answers
The accounting department miscalculates the payroll tax due at year-end, resulting in an inaccurate liability. & The accountant unintentionally records amounts as revenue that were prepaid by customers but not yet earned.
Which internal control is intended to ensure that a company does not mistakenly pay a supplier for an invoice that includes more items than were actually received?
The inventory department counts and inspects items as received and forwards the receiving record to accounts payable.
What are two common reasons for managers to manipulate reported earnings?
Choose 2 answers
They are feeling pressured to meet internal sales goals. They are preparing to qualify for a bank loan. [Show Less]