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Exam 16: Understanding Accounting and Financial Information

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Question 61

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The acid-test ratio is found by dividing inventory by cost of goods sold.

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Question 62

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The sixth 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.

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Question 63

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Art works as a private accountant for Conwell AeroSpace.He currently is considering the choice of an amortization method for some new manufacturing equipment.Art should realize that:

Owners' equity can be found by subtracting liabilities from assets.

Many managers are concerned with how their decisions affect the "bottom line" of their company's income statement.These managers are concerned with the impact of their decisions on net income.

Accounting provides information about the financial condition and operating performance of a firm.

Patents and copyrights are examples of intangible assets.

Assets are listed on the balance sheet according to their liquidity.

The inventory turnover ratio measures the speed of inventory moving through the firm and its conversion into sales.

Earnings per share,return on sales,and return on equity are all examples of:

Most businesses use computers to simplify the mechanical aspects involved in accounting.

ElecTech Industries had in inventory two transformers,one purchased in February for $11,800 and the other acquired in September for $13,300.In December,they sold one of the transformers to Ram Enterprises for $16,400 and reported a gross margin of $3,100.Tiger Industries evidently uses the ________ inventory valuation method.

There are five key working areas in accounting: financial accounting,managerial accounting,auditing,tax accounting,and governmental and not-for-profit accounting.

Accounting involves both the recording and the interpreting of financial events.

An income statement reports what a company owns and owes on a certain day.

The review and evaluation of the records of a firm that are used to prepare the organization's financial statements is referred to as _____.

A bookkeeper's first task is to:

The financial ratios that measure a firm's ability to pay its short-term debts are called:

We would expect the inventory turnover ratio for a ski shop to be _______ than the turnover for a convenience store.

________ is the dollar value of what is received for goods sold,services rendered and money received from other financial sources.