Question 1

If a firm has a debt to owners' equity ratio of .54 (or 54%)  we can conclude that:

Accepted Answer

A)   it has relied more on debt than equity to finance its operations.
B)   the firm is likely to have trouble paying its short-term debts when they come due.
C)   its total liabilities are less than its owners' equity.
D)   the firm has expenses that are exactly 54% of its gross profit.E) None of the above
F) B) and C) C

Question 2

Net profit refers to:

Accepted Answer

A)   the result of deducting liabilities from the assets of the firm.
B)   the result of subtracting cost of good sold from revenues.
C)   the result of deducting depreciation expense from revenues.
D)   the net earnings after the deduction of all expenses, including tax expense.E) B) and C)
F) C) and D)

Question 3

A debt to owners' equity ratio of 25% indicates that a firm has more debt than equity.

Accepted Answer

A) True 
 B)False

Question 4

An income statement reports what a company owns and owes on a certain day.

Accepted Answer

A) True 
 B)False

Question 5

Brand names such as Coca-Cola and McDonald's are examples of intangible assets.

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

A)   ratio analysis as a means of evaluating the performance of a firm.
B)   relying on the recommendations of tax accountants to find ways of reducing the taxes owed by a business organization.
C)   publishing financial information about a firm on the Internet.
D)   allowing an accounting firm to do both consulting and auditing work for the same company.E) All of the above
F) A) and B)

Question 7

The McGowan Group wants to know the value of its owners' equity. It will total its assets and subtract its liabilities.

Accepted Answer

A) True 
 B)False  True

Question 8

The __________ sets accounting standards used in government accounting.

Accepted Answer

A)   Federal Accounting Review Board
B)   Governmental Accounting Standards Board
C)   Academy of Public Sector Accountants
D)   Federal Reserve BoardE) A) and B)
F) A) and C)

Question 9

The sixth and final step in the accounting cycle involves:

Accepted Answer

A)   performing a trial balance to verify that the accounting statements are internally consistent.
B)   auditing the books to ensure that they were prepared according to generally accepted accounting principles.
C)   preparing the income statement.
D)   analyzing major accounting statements to evaluate the financial condition of the firm.E) B) and D)
F) B) and C)

Question 10

Bookkeeping is part of the accounting cycle, but accounting goes far beyond the activities involved in bookkeeping.

Accepted Answer

A) True 
 B)False

Question 11

Accounting involves both the recording and the interpreting of financial events.

Accepted Answer

A) True 
 B)False

Question 12

Discuss the role of an independent auditor. Provide information about the types of accounting activities they perform and the recent laws that have emerged to help guide them as they do their job.

Accepted Answer

Auditors can be either private or public...

Question 13

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 14

Identify and explain the differences between LIFO and FIFO inventory valuation methods. What would be the difference in gross margin using FIFO versus LIFO?

Accepted Answer

FIFO stands for first-in, first-out. Thi...

Question 15

Accounting is not important for nonprofit organizations since financial data is not critical to their success.

Accepted Answer

A) True 
 B)False  False

Question 16

The accounting cycle usually involves the work of both the bookkeeper and the accountant.

Accepted Answer

A) True 
 B)False

Question 17

Financial accounting and managerial accounting are similar in that they both provide information intended primarily for people inside the organization.

Accepted Answer

A) True 
 B)False

Question 18

A tax accountant is responsible for preparing tax returns and developing tax strategies.

Accepted Answer

A) True 
 B)False

Question 19

Before starting his landscape business, Andrew took a marketing class at the local community college. He decided that his time would be better utilized in this class because if he could learn to sell his services well, the revenues and profits would follow. Your assessment of his plan might include which of the following:

Accepted Answer

A)   Andrew understands that marketing is the life-blood of the company, and he is right on track with his approach.
B)   Andrew has elected to operate like a virtual company and leave various parts of the business including accounting, environmental trends scanning, and management to outsourcers.
C)   Andrew knows that increasing revenues will always keep the business profitable and in a positive cash position.
D)   Andrew needs to realize that the ability to understand and interpret financial statements provided by his accountant might enhance his profits.E) All of the above
F) None of the above

Question 20

The __________ is a six-step procedure that results in the preparation and analysis of the major financial statements.

Accepted Answer

A)   double-entry method
B)   financial management process
C)   financial performance appraisal
D)   accounting cycleE) A) and B)
F) B) and C)

Exam 17: Understanding Accounting and Financial Information

If a firm has a debt to owners' equity ratio of .54 (or 54%) we can conclude that:

Correct Answer
verified
C

Net profit refers to:

Correct Answer
verified

A debt to owners' equity ratio of 25% indicates that a firm has more debt than equity.

Correct Answer
verified

An income statement reports what a company owns and owes on a certain day.

Correct Answer
verified

Brand names such as Coca-Cola and McDonald's are examples of intangible assets.

Correct Answer
verified

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

Correct Answer
verified

The McGowan Group wants to know the value of its owners' equity. It will total its assets and subtract its liabilities.

Correct Answer
verified
True

The __________ sets accounting standards used in government accounting.

Correct Answer
verified

The sixth and final step in the accounting cycle involves:

Correct Answer
verified

Bookkeeping is part of the accounting cycle, but accounting goes far beyond the activities involved in bookkeeping.

Correct Answer
verified

Accounting involves both the recording and the interpreting of financial events.

Correct Answer
verified

Discuss the role of an independent auditor. Provide information about the types of accounting activities they perform and the recent laws that have emerged to help guide them as they do their job.

Correct Answer
verified
Auditors can be either private or public...
View Answer

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

Correct Answer
verified

Identify and explain the differences between LIFO and FIFO inventory valuation methods. What would be the difference in gross margin using FIFO versus LIFO?

Correct Answer
verified
FIFO stands for first-in, first-out. Thi...
View Answer

Accounting is not important for nonprofit organizations since financial data is not critical to their success.

Correct Answer
verified
False

The accounting cycle usually involves the work of both the bookkeeper and the accountant.

Correct Answer
verified

Financial accounting and managerial accounting are similar in that they both provide information intended primarily for people inside the organization.

Correct Answer
verified

A tax accountant is responsible for preparing tax returns and developing tax strategies.

Correct Answer
verified

Correct Answer
verified

The __________ is a six-step procedure that results in the preparation and analysis of the major financial statements.

Correct Answer
verified

Exam 17: Understanding Accounting and Financial Information

If a firm has a debt to owners' equity ratio of .54 (or 54%) we can conclude that:

Correct AnswerverifiedC

Net profit refers to:

Correct AnswerverifiedShow Answer

A debt to owners' equity ratio of 25% indicates that a firm has more debt than equity.

Correct AnswerverifiedShow Answer

An income statement reports what a company owns and owes on a certain day.

Correct AnswerverifiedShow Answer

Brand names such as Coca-Cola and McDonald's are examples of intangible assets.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The McGowan Group wants to know the value of its owners' equity. It will total its assets and subtract its liabilities.

Correct AnswerverifiedTrue

The __________ sets accounting standards used in government accounting.

Correct AnswerverifiedShow Answer

The sixth and final step in the accounting cycle involves:

Correct AnswerverifiedShow Answer

Bookkeeping is part of the accounting cycle, but accounting goes far beyond the activities involved in bookkeeping.

Correct AnswerverifiedShow Answer

Accounting involves both the recording and the interpreting of financial events.

Correct AnswerverifiedShow Answer

Discuss the role of an independent auditor. Provide information about the types of accounting activities they perform and the recent laws that have emerged to help guide them as they do their job.

Correct AnswerverifiedAuditors can be either private or public...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Identify and explain the differences between LIFO and FIFO inventory valuation methods. What would be the difference in gross margin using FIFO versus LIFO?

Correct AnswerverifiedFIFO stands for first-in, first-out. Thi...View AnswerShow Answer

Accounting is not important for nonprofit organizations since financial data is not critical to their success.

Correct AnswerverifiedFalse

The accounting cycle usually involves the work of both the bookkeeper and the accountant.

Correct AnswerverifiedShow Answer

Financial accounting and managerial accounting are similar in that they both provide information intended primarily for people inside the organization.

Correct AnswerverifiedShow Answer

A tax accountant is responsible for preparing tax returns and developing tax strategies.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The __________ is a six-step procedure that results in the preparation and analysis of the major financial statements.

Correct AnswerverifiedShow Answer

Correct Answer
verified
C

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
True

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Auditors can be either private or public...
View Answer

Correct Answer
verified

Correct Answer
verified
FIFO stands for first-in, first-out. Thi...
View Answer

Correct Answer
verified
False

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified