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Exam 17: Understanding Accounting and Financial Information

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Question 121

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The accounting profession follows generally accepted accounting principles as defined by ___________________.

A) the GAAP
B) the PCAOB Public Company Accounting Oversight Board)
C) the FASB Financial Accounting Standards Board)
D) the Sarbanes-Oxley Act

E) C) and D)
F) None of the above

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Question 122

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A lower than average inventory turnover ratio indicates excellent inventory management practices.

A) True
B) False

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Question 123

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The accounting profession is divided into 5 key working areas,two of which are:

Julio borrowed money from a close friend to obtain a liquor license for his pub,and gave him a written promise to repay the amount within six months.Julio should list this business debt as an operating expense on his pub's balance sheet.

Explain the meaning of the fundamental accounting equation and its relation to the Balance Sheet.If it is helpful,create an example using numbers.

At present,accounting software packages have proven to be too complex and expensive to be useful for owners of small businesses.

When reviewing the Balance Sheet for Preferred Pet Care,Inc. ,a mobile small animal care business,Julian noted the following information: Company assets totaling $3.5 million,and liabilities totaling $1.3 million.On paper,the net worth owner's equity) for this business = ____________.

Heather works in the accounting department of Colorado Manufacturing.Today she will use the firm's ledger to summarize information that was posted over the most recent time period.Her goal is to determine if the accounts are balanced as required by the double-entry method of bookkeeping.To be sure they are correct,Heather will prepare an) :

The Barkley Company's balance sheet shows: what the business owns,minus what the business owes,equals the book value or,net worth)of the business.

At this point in time,Bark Three Times Pet Store's balance sheet shows $100,000 in assets and $90,000 in liabilities.The company's accounting system will show the owners' equity as $190,000.

All firms with more than four employees should have a full-time accountant.

As an accountant,Joe Billing's responsibilities include:

The return on sales ratio measures a firm's use of leverage.

During a period of rising prices,using FIFO first in,first out) inventory valuation method will result in ________ net income figures than would LIFO last in,first out) .

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

Rent,depreciation,and salaries are examples of:

Banks are likely to request a firm's balance sheet when determining whether or not to loan money to the firm.However,banks would have little interest in the firm's income statement since it covers a short period of time.

Oklahoma Chemicals plans to use its computers to post information from journals to the ledger instantaneously.One obvious benefit of this technology is:

The balance sheet reflects the fact that assets equal the sum of liabilities and owners' equity.

_______ refers to the value that stockholders or owners have in a company.