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__________ earnings per share measures the amount of profit a firm earns per share of outstanding common stock when preferred stock,stock options,warrants and convertible debt securities are also taken into account.


A) Basic
B) Diluted
C) Restricted
D) Broad-based

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

Correct Answer

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


A) will soon eliminate all of the accounting functions
B) are tools to help the accountant perform his or her job
C) are of little use to small-business owners that need accounting services
D) have a very limited use in accounting due to inadequate privacy controls

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

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A(n) _________ is a yearly published statement of the financial condition,progress and expectations of an organization.


A) balance sheet
B) independent audit
C) mission statement
D) annual report

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

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The job of reviewing and evaluating the records used to prepare a company's financial statements is referred to as auditing.

A) True
B) False

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


A) Generate sales with a given level of current assets.
B) Utilize current assets profitably.
C) Pay its bills in the short run.
D) Effectively use borrowed funds.

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

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CPA Experts,Inc. ,a well-known public accounting firm has enjoyed a long-standing relationship with one of its clients,Generation Technologies,Inc.Recently,at a company-wide gala,the CEO of Generation Technologies announced that CPA Experts has performed the firm's independent audits for the past ten years,and he is looking forward to exploring other services that CPA Experts has to offer,including financial consulting."After all," he exclaims,"A recent magazine article called CPA Experts the 'profitability geniuses '!" As a senior accountant for Generation Technologies,how do you advise your CEO?


A) You inform the CEO that in order to remain competitive,Generation Technologies needs to utilize the expertise of professional accounting firms who can deliver new and innovative techniques for cutting costs and improving profitability.
B) You explain that it would create a conflict of interest to have both internal and external accountants.
C) You inform the CEO about Sarbanes-Oxley rulings concerning the utilization of the same firm for auditing and consulting.
D) You explain that hiring CPA Experts,Inc.to perform consulting would constitute a more in-depth partnership.Generally Accepted Accounting Principles would require Generation Technologies to purchase stock in CPA Experts.

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

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Accounting,as the language of business,is solely concerned with providing information useful to managers of profit-seeking firms.

A) True
B) False

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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.

A) True
B) False

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


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

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

Correct Answer

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Jeremy operates his own small business,but he doesn't want to be bothered with accounting information.He tells his friends,"All I need accounting for is to prepare my income tax return for my business.I'll hire someone to do that for me." Jeremy's attitude would be disastrous if he managed a large firm,but is a reasonable view for a small business owner.

A) True
B) False

Correct Answer

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In businesses that handle a lot of perishable items (such as supermarkets)the actual movement of goods through inventory most closely resembles the LIFO inventory valuation technique.

A) True
B) False

Correct Answer

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The sixth and final step in the accounting cycle involves:


A) Performing a trial balance to verify that the accounting statements are internally consistent.
B) Auditing the books to ensure that they were prepared according to generally accepted accounting principles.
C) Preparing the income statement.
D) Analyzing major accounting statements to evaluate the financial condition of the firm.

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

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Banks are likely to request a firm's balance sheet when determining whether or not to loan money to the firm.However,banks would have little interest in the firm's income statement since it covers a short period of time.

A) True
B) False

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Which of the following would be classified as a general expense on an income statement?


A) Salaries paid to salespeople
B) Dividends paid to stockholders
C) Payments made for insurance
D) Costs associated with an advertising campaign

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

Correct Answer

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A(n) __________ provides accounting services to individuals or firms on a fee basis.


A) contract accountant
B) account agent
C) public accountant
D) independent accountant

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

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A __________ is a specialized accounting book,where transactions are categorized according to type.For example,all utility transactions are recorded in the same category.


A) journal
B) trial balance
C) ledger
D) balance sheet

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

Correct Answer

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


A) Merchandise that has been held in inventory for the longest period of time.
B) Most recent merchandise purchased by the firm.
C) Actual units customers purchased.
D) Merchandise the firm acquired at the lowest cost.

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

Correct Answer

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Recent accounting scandals raised serious questions about the legitimacy of an accounting firm performing both auditing and consulting work for the same company.

A) True
B) False

Correct Answer

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The Sarbanes-Oxley Act prohibits accounting firms from providing certain non-auditing work (such as consulting services)to companies they audit.

A) True
B) False

Correct Answer

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Cindy is concerned because during the past four months her company has experienced difficulty in paying its bills on time.She knows if this continues,the firm will have difficulties in accomplishing its goals.Cindy is concerned with:


A) asset disbursement.
B) cash flow.
C) profit and loss.
D) inventory valuation.

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

Correct Answer

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