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Exam 17: Understanding Accounting and Financial Information

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Question 81

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A debt to owners' equity ratio of 25% indicates that a firm has more debt than equity.

A) True
B) False

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Question 82

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Josephine has discovered her small business needs a better way to maintain accounting records and analyze business opportunities. Currently, she uses a manual accounting system. These days, any accounting program should do an excellent job of meeting her firm's accounting needs.

A) True
B) False

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Question 83

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The ________ sets accounting standards used in government accounting.

The LIFO method of inventory valuation assumes the newest items in inventory are sold first.

While reviewing the books at his firm, Colin noticed discrepancies between how the firm recorded revenues last year and how it elected to record revenues during the recent quarter of the current year. As a recent business graduate, Colin felt confident that the changes needed clarification. To get another opinion, Colin suggested to the company's controller that the firm solicit

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

The Barkatorium Pet Supplies accountant has recorded the following: Total current assets = $60,000, including Cash = $24,000; Accounts Receivable = $20,000; and Inventory = $16,000. Total assets = $230,000; Total current liabilities = $48,000; and Total current and long-term liabilities = $98,000. The store's current ratio = 1.25. The store's acid-test ratio = .92

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

A ________ summarizes all the data from the account ledgers to verify that they are correct and balanced.

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

Double Entry Door's suppliers maintained very stable prices for many years, but Minnie has noticed that the cost of doors has been rising steadily for the past few years. She is concerned that, given the company's current accounting methods of basing its cost on the most recent doors purchased, this will result in a much lower net income than in the past. The most likely reason for her concern is that Double Entry has apparently been using

________ is the monetary value that is received for goods sold, services rendered, and money received from other sources.

Liquidity refers to how quickly liabilities must be paid.

Mallory is running an income statement on her QuickBooks computer accounting program. Which of the following accounts will be used to calculate gross profit?

If the goal of a business is to pay lower taxes on its income during an inflationary period, it is likely to use the FIFO inventory costing method.

The purpose of the current ratio is to evaluate the firm's ability to

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

The LIFO method of inventory valuation bases the cost of goods sold on the cost of

If the economy began experiencing a prolonged period of deflation in which the prices of most goods are falling, many firms would find that the LIFO method of inventory valuation would result in higher reported profits.

Important provisions of the Sarbanes-Oxley Act