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Exam 17: Understanding Accounting and Financial Information

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Question 131

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Talk Time Communications is considering the purchase of a new satellite. The firm believes the satellite will help generate future earnings. In addition, the firm recognizes the tax benefits of a lower net income provided by the annual ________ of the asset.

A) inventory valuation
B) declining balance
C) appreciation
D) depreciation

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

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Question 132

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

A) True
B) False

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Question 133

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The statement of cash flows calculates cash flows from operations, investing activities, and financing activities.

Which of the following ratios is a liquidity ratio?

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

GAAP refers to a set of standards concerning accounting principles that were established by the Financial Accounting Standards Board.

Revenue on the income statement represents the dollar amount of what is received for goods sold, services rendered, and/or from other revenue sources.

A firm's financial statements represent a health report regarding the condition of the firm.

Barkatorium Pet Supplies' owner is concerned with how his business decisions affect the bottom line. This is another way of saying that he is concerned with the impact of his decisions on net income after taxes.

Sun Smarts Solar installs solar panels in large newly constructed buildings. The company employs several expert installers who work on a full-time basis. Although the installation team works every day, the company pays them at the end of the month, for the previous month's work. Employee salaries are recorded as ________ on Sun Smarts's balance sheet.

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

Sales receipts, purchase orders, and payroll records are all examples of accounting transactions that would be recorded by a(n)

The firm's most valuable assets are listed at the top of its balance sheet.

During a period of rising prices, using FIFO (first-in, first-out) inventory valuation method will result in ________ net income figures than would LIFO (last-in, first-out) .

FIFO is a method of inventory valuation that assumes the items most recently purchased are also the items that are sold first.

Stockholders of Marshall Manufacturing are concerned about irregularities in the firm's accounting system. One approach to identify problems in the records of the company would be to have a(n) ________ performed.

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

The Newport Company balance sheet shows the following items: accounts payable totaling $60,000; salaries payable totaling $85,000; and notes payable totaling $120,000. These are liabilities, or money that the firm owes others.

Careful consideration of the use of computers in accounting indicates that computers

The sixth and final step in the accounting cycle involves