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Exam 17: Understanding Accounting and Financial Information

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Question 21

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With increased computer technology,the ability to read and understand financial statements is no longer an important skill for managers.

A) True
B) False

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Question 22

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The Chapter 17 Reaching Beyond Our Borders box discusses the future of international accounting standards.In summary,the message is:

A) GAAP Generally Accepted Accounting Standards) created and established in the U.S.will be adopted worldwide by 2014.
B) Accounting professionals do not see an immediate need to standardize accounting practices globally due to the fact that patents and other legal measures are not standardized.
C) Due to the fact that global markets continue to rise in economic importance,the accounting field is working on integrating GAAP with IFRS International Financial Reporting Standards) .
D) It has been established that most U.S.accountants will refuse to acknowledge the IFRS standards because U.S.accounting firms mostly represent companies that do business domestically.

E) B) and C)
F) A) and D)

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Question 23

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The cash a firm raised from issuing new debt or equity capital would be reported on a statement of cash flows.

Retailers attempt to sell older merchandise before more recently acquired merchandise is sold.The assumptions made by the __________ method of inventory valuation are most consistent with this approach.

The reports and financial statements prepared by accountants:

A company's income statement is important to accountants and other stakeholders.It reveals:

Blast-off Airlines is a recent start-up commuter airline that flies between eight regional cities on the east coast.Although it has attracted numerous investors who see value in the company's service,it does not pay dividends.Last year,the firm claimed profits of $4,800,000,which will be used to purchase an additional commuter plane.The Balance Sheet accounts that will show this affect are:

The Balance Sheet for Renuvation LLC shows assets totaling $107,000 and liabilities totaling $75,000.Which of the following statements is correct?

A journal is where the initial record of a day's transactions is entered.

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

Preferred Pet Care,Inc.successfully took out a loan for $130,000 from Southwest Bank.It used $80,000 of this loan to pay-off an existing loan that had a higher interest rate,and purchased X-ray equipment with the remaining funds.These events were noted as financing and investing activities on its balance sheet.

Assets are listed on the balance sheet in order of liquidity,with the most liquid assets listed first.

The two major classes of operating expenses are current expenses and long-term expenses.

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:

Potential investors are interested in both a firm's balance sheet and income statement when evaluating whether or not to invest in a firm.

The basic earnings per share and the diluted earnings per share would have quite different values for a firm that relied heavily on preferred stock and convertible debt securities to acquire funds.

Jim works in the accounting department at the Kansas Sunflower Corporation,where it is his job to record all transactions into journals.After completing this task,the next step in the accounting process is to:

When creating the income statement,which of the following statements is accurate?

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

Leverage ratios are concerned with the extent to which a firm relies on borrowed funds in its operations.