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Exam 17: Understanding Accounting and Financial Information

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Question 81

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Phil O'Keefe is opening a small sports store in his town.At the advice of a friend who is a bookkeeper,he keeps the receipts of everything he purchases for the business in the bottom drawer of his desk,along with all other business expenses,such as his retail license,his rent expense,and insurance expense.You suggest that _______.

A) Phil continues with this procedure,but only until the store opens,at which time he will need an additional drawer for his sales transactions
B) Phil invests some time in exploring an accounting system that will make it easier to classify and summarize accounting information
C) Phil continues with this procedure because there is very little difference between one expense and another
D) Phil stops wasting valuable time saving the receipts because accountants only record sales transactions

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

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Question 82

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In addition to the tasks of recording and classifying accounting information,the best accounting software programs currently available for small businesses have the ability to make financial decisions,thus eliminating the need for owners of small businesses to consult with accountants or understand accounting terminology.

A) True
B) False

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Question 83

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

Net income is simply the difference between revenue and cost of goods sold.

Double-entry bookkeeping can help identify a recording error made by a bookkeeper.

In the Making Ethical Decisions box titled,"Would You Cook the Books?," the situation provides the student with an ethical dilemma that might present itself to an accounting professional.The story focuses on: Is it ethical to __________________________

Churches,schools,and charitable organizations all hire accountants.

Carlisle Communications is preparing its statement of cash flows.Among other things,this statement will show:

The Barkley Company balance sheet shows the following items: Accounts payable totaling $50,000;salaries payable totaling $65,000,and notes payable totaling $100,000.These are liabilities,or money that the firm owes others.

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?

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

Citywide Insurance Corporation's internal accountants can prepare an audit for the company.

A firm's ________ reports the profit or loss for the firm over a specified time period.

Peak Performance Sporting Goods Company continues to perform well in spite of an economic recession.Company executives credit this to the strong partnerships it enjoys with category killer and large discount chains.Last week Peak Performance reported basic EPS [earnings per share] = $.80/share.If the firm has 4,000,000 shares outstanding,net income after taxes for the same period = _____.

The Sarbanes-Oxley Act strengthens the protection for whistleblowers who report wrongful actions of company officers.

A bookkeeper's first task is to:

Oklahoma Chemicals plans to use its computers to post information from journals to the ledger instantaneously.One obvious benefit of this technology is:

Costas Calendar Company's Statement of Cash Flows showed the following activities for the year ended December 31,2010: The year end cash balance for this firm is:

Olivia is a public accountant.She prepares monthly financial statements for her client,Chick's Auto Body Shop.Presently,though,she must summarize the data in the accounting ledgers to determine if the figures are correct and balanced.Olivia will prepare a statement of cash flows in order to complete this step of the cycle.

Because each business is unique,the accounting profession recognizes that the accounting principles followed by one company may need to be completely different from the accounting principles followed by another firm.