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Exam 17: Understanding Accounting and Financial Information

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Question 91

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The fundamental accounting equation is as follows: Assets = Liabilities + Owners' equity.

A) True
B) False

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Question 92

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FIFO and LIFO are two common

A) depreciation strategies.
B) ways to structure a balance sheet.
C) inventory valuation methods.
D) current ratios.

E) None of the above
F) All of the above

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Question 93

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The cost of goods sold includes all the costs of buying and keeping merchandise available for sale.

The balance sheet, the statement of cash flows, and the ________ are three key financial statements prepared by accountants.

Green Goddess Lawn Services will refer to its income statements to determine whether it was profitable, or whether it lost money over the past year.

The area of accounting that provides managers inside the organization with information they need to make decisions is called

Accounting is an easy subject for people to understand because almost everyone is exposed to basic accounting concepts in their everyday life.

Good decisions are based on good information. Organizations need accounting-to provide good financial information.

One of the statements prepared in the accounting cycle is the statement of cash flows.

Government organizations such as the IRS and other government regulatory agencies are interested in a firm's accounting information in order to help the firm strategize about ways to cut costs in order to minimize net income before taxes.

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

The basic earnings per share ratio does not take stock options, warrants, and preferred stock into account.

Gross profit represents profit after the deduction of cost of goods sold, and before the deduction of all other selling expenses, general expenses, and tax expense.

Which of the following responses is the best and most comprehensive? "A company's accounting information is useful to ________."

Peak Performance Sporting Goods Company continues to perform well. Company executives credit this to the strong partnerships it enjoys with category killer and large discount chains. Last week Peak Performance reported basic EPS [earnings per share] = $.80/share. If the firm has 4,000,000 shares outstanding, net income after taxes for the same period =

What is the difference between a profit (net income after taxes) on an income statement and the cash balance reflected at the bottom of the statement of cash flows?

After recording a business's transactions, bookkeepers usually classify the recorded transactions into groups with common characteristics.

The current ratio is found by dividing the firm's total assets by its total liabilities.

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

As the burden of taxes grows, the role of the auditor becomes increasingly important to the organization.