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Exam 17: Understanding Accounting and Financial Information

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Question 1

True/False

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A firm that takes on too much debt could experience problems repaying its lenders or meeting promises made to stockholders.

A) True
B) False

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Question 2

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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) B) and C)

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Question 3

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The job of reviewing and evaluating the records used to prepare a company's financial statements is referred to as auditing.

FIFO is a method of computing net cash flows by subtracting financial inflows from financial outflows.

A ___________ provides a summary of cash coming into and money going out of a firm from operations activities,financing activities,and investing activities.

__________ is the accounting practice of recording each transaction in two places in the accounting journal.

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?

Marshall McBride inherited $10,000 from his Great Aunt Marth A.He invested $5,000 in a new start-up venture,10^th Generation,Inc. ,and the other $5,000 in Major Chemicals,Inc,a well-known chemical company that's been around for years.Yesterday,he gathered the following information from the financial statements of these companies At this time,Marshall's return on equity is:

Johnson Products is a small manufacturing firm specializing in custom-order tool and die work.A computerized accounting system would help Johnson Products by:

Which of the following agencies would have the greatest impact on the methods used to record,classify,summarize,and interpret accounting information for the State of Kentucky's Department of Transportation?

Double-entry bookkeeping requires that every transaction be recorded in two places.

Liquidity refers to how fast an asset can be converted to cash.

A business manager who keeps his/her customers satisfied can be successful without having a great deal of knowledge about accounting practices.

The last major task Minnie completed before getting ready to prepare the firm's financial statements was the preparation of the:

Monica noted that she disbursed $6,347 in payments for operations in her travel agency and received $6,189 in cash receipts for services rendered.She had no cash receipts or disbursements from investments or financing activities.Thus,Monica had a:

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

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

Courtney McRae started the Row-Your-Boat paddle boat and row boat business at a nearby lake resort.She wanted to combine her accounting degree with her love of the outdoors and fishing.One of her first business purchases was a computerized accounting system.She learned in her college classes that a good software system will eliminate accounting cycle steps and the time it takes for her to interpret the results.As she put it,"It should make the decisions for me!"

For the past several years,Bill Reynolds has retained accountant Chelsea Jones for help in preparing his personal income tax forms.Bill's boss recommended Chelsea because she had done a good job setting-up the company's new accounting system.Bill is very satisfied with Chelsea's work and feels that the fees she charges are quite reasonable.Chelsea would be classified as an) :

Many business decisions are made in hopes of improving a firm's "bottom line." Which of the following financial statements will reveal a firm's "bottom line"?