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Accounting software for small businesses has become so sophisticated that most small business owners will never need to consult with an actual accountant or understand accounting information themselves.

A) True
B) False

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A(n) ________ is an evaluation and unbiased opinion about the accuracy of a firm's financial statements.


A) internal audit
B) annual report
C) independent audit
D) certified audit

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

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Once a trial balance has been prepared, the next step of the accounting cycle involves


A) posting the information to the correct ledger accounts.
B) completing a balance sheet and ratio analysis.
C) preparing financial statements such as the balance sheet, income statement, and statement of cash flows.
D) classifying the transactions into logical categories.

E) All of the above
F) A) and B)

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When reviewing the balance sheet for Portable Pet Care, Inc., a mobile small animal care business, Ricky noted the following information: Company assets totaling $3.5 million, and liabilities totaling $1.3 million. On paper, the net worth (owners' equity) for this business =


A) $2.2 million.
B) $4.8 million.
C) $3.5 million.
D) $0.2 million.

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

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As a certified public accountant, you would be working in the area of managerial accounting.

A) True
B) False

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

A) True
B) False

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The current ratio is used to evaluate a firm's ability to pay its short-term debts.

A) True
B) False

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True

As mentioned in the Adapting to Change box, accountants that search for fraudulent activities are called forensic accountants.

A) True
B) False

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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.

A) True
B) False

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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.

A) True
B) False

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In an effort to maintain a competitive advantage, firms do not share accounting information with people outside of the firm.

A) True
B) False

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False

During periods of rising prices, firms that want to report more attractive profits would tend to favor the FIFO technique of inventory valuation.

A) True
B) False

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Andrea is preparing her homework for her accounting class. She is uncertain as to the proper handling of patents and copyrights on a firm's financial statements. Which of the following is correct?


A) Patents and copyrights are included with the firm's intangible assets on the balance sheet.
B) Patents and copyrights are included with the firm's long-term liabilities on the balance sheet.
C) Patents and copyrights are included with the firm's cost of goods sold on the income statement.
D) Patents and copyrights are included with the firm's fixed assets on the balance sheet.

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

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Quinn is an accountant employed by CCDL Enterprises. Recently, she has spent much of her time working on defining measures of costs for the production department and checking to ensure that various departments are staying within their budgets. Quinn is a


A) public accountant whose work is mainly concerned with auditing.
B) public accountant whose work is mainly concerned with financial accounting.
C) private accountant whose work is mainly concerned with managerial accounting.
D) private accountant whose work is mainly concerned with financial accounting.

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

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Managers who are concerned about keeping costs under control should be very interested in the information and advice provided by their company's managerial accountants.

A) True
B) False

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The balance sheet for Greeley Contracting shows assets totaling $207,000 and liabilities totaling $95,000. Which of the following statements is correct?


A) Owners' equity equals $182,000.
B) Current assets are worth $92,000.
C) Net income for the period is $112,000.
D) Owners' equity equals $112,000.

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

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Day-by-Day Calendar Company's statement of cash flows showed the following activities for the year ended December 31, 2019: Day-by-Day Calendar Company's statement of cash flows showed the following activities for the year ended December 31, 2019:   The year-end cash balance for this firm is: A)  $7,000.00 B)  $53,000.00 C)  $23,000.00 D)  $30,000.00 The year-end cash balance for this firm is:


A) $7,000.00
B) $53,000.00
C) $23,000.00
D) $30,000.00

E) B) and D)
F) All of the above

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The company controller asked Jade to determine if it could borrow more money for an expansion project. When she calculated a leverage ratio, she determined that the company already had 1.5 times as much debt as equity. Do you agree with her assessment that the company should back off with borrowing more funds at this time?


A) Yes, but if the company would increase sales, it could go ahead with borrowing more funds.
B) Not necessarily. She should investigate the debt to equity ratios of other firms in the same industry.
C) Yes, but the firm should pursue equity investment until the ratio equals 1:1.
D) Not necessarily. In poor economic times, it is good financial strategy for a firm to be highly leveraged.

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

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


A) income statement
B) statement of retained earnings
C) statement of changes in financial position
D) trial balance

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

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A

Jeremy thinks his business will be successful as long as he just keeps his customers satisfied. He does NOT need to have a great deal of knowledge about accounting practices.

A) True
B) False

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