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Exam 17: Understanding Accounting and Financial Information

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Question 61

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Liabilities are reported on the income statement.

A) True
B) False

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Question 62

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Which financial statement reports the company's revenues and selling costs over a period of time?

A) income statement
B) balance sheet
C) statement of cash flows
D) trial balance

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

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Question 63

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Double-entry bookkeeping can help identify a recording error made by a bookkeeper.

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

Kelley's Kloset,LLC has applied for a business loan.Her prospective banker has requested information concerning the financial condition of her business.Which accounting discipline is responsible for providing accounting information to outside stakeholders?

Rapidly growing companies often buy increasing amounts of merchandise from suppliers on credit,and then sell the goods to their customers on credit.These companies sometimes have difficulty repaying their suppliers when customers who buy on credit don't pay on time.Firms that experience this difficulty need to do a better job of:

The acid-test ratio is found by dividing inventory by cost of goods sold.

Rent,salaries,insurance and depreciation are examples of the cost of goods sold.

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

McCartney Consulting Group is a management-consulting firm that provides its expertise to businesses that employ its services.Since it does not hold an inventory of goods or produce any goods itself:

Which of the following is an example of a financial transaction?

A firm's ________ reports the profit or loss for the firm over a specified time period.

Perry is responsible for recording sales transactions at Turncoat Enterprises.Perry's company utilizes _____________________,to help minimize entry errors.

The purpose of liquidity ratios is to indicate the degree to which a firm relies on borrowed funds in its operations.

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 ______________.

A balance sheet is composed of assets,liabilities,and revenues.

Harrison Manufacturing owns land worth $600,000 and has $130,000 worth of cash in its bank account.In the asset section of the balance sheet,Harrison lists its land holdings prior to listing its cash since it is a higher value.

The _______ ratio helps determine the ability of a firm to repay its short-term debts even if it has difficulty selling its inventory.

Martha is a member of a conservative political group that wants to identify and publicize examples of wasteful government spending.The type of accounting information Martha and her group will follow most closely is provided by certified public accountants.

Money received from tickets sold for the Rolling Stones concert is recorded as net income on the concert promoter's income statement.