Question 1

When it comes to the treatment of depreciation and valuation of inventory, generally accepted accounting principles .

Accepted Answer

A)  provide almost no guidance to accountants
B)  allow accountants to choose among different methods for depreciation and for the valuation of inventory
C)  require accountants to use only one specific method of depreciation, but permit several methods of inventory valuation
D)  require accountants to use one specific method for valuing inventory, but permit several methods for depreciating fixed assets

Question 2

Which of the following is a key step in the accounting cycle?

Accepted Answer

A)  Recording information into journals
B)  Collecting data from customers
C)  Forecasting expenses and revenues
D)  Preparing the advertising message

Question 3

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

Accepted Answer

A)  Revenue
B)  Gross margin
C)  Net income
D)  Cost of goods sold

Question 4

The purpose of a trial balance is to:

Accepted Answer

A)  Affirm whether the figures in the account ledgers are correct and balanced.
B)  Prepare a mock up of a real balance sheet.
C)  Review the income statement accounts.
D)  Meet a reporting requirement of the Securities and Exchange Commission (SE
C)  .

Question 5

is the accounting practice of recording each transaction in two places in the accounting journal.

Accepted Answer

A)  Double-entry bookkeeping
B)  Trial balancing
C)  Account matching
D)  Entry duplication

Question 6

Tyler works as an accountant for a mid-sized retail store. He has just completed a trial balance that resulted in no unexpected problems. Tyler's next task is likely to be:

Accepted Answer

A)  Conducting the full audit.
B)  Preparing a tax return for the company.
C)  Preparing the store's balance sheet and other major financial statements.
D)  Presenting the trial balance to the company owners.

Question 7

A balance sheet lists assets in order of their .

Accepted Answer

A)  Dollar value, from smallest to largest
B)  Date of acquisition, with the most recently acquired assets listed first
C)  Liquidity, with the most liquid assets listed first
D)  Income generating ability

Question 8

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 .

Accepted Answer

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.

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

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.

Question 11

Accountants not only provide financial information to the firm, they:

Accepted Answer

A)  Replace the firm's need for managers.
B)  Also provide information regarding competitors.
C)  Assist in interpreting that information.
D)  Design the computer information systems. C

Question 12

Assets are economic resources that are owned by a firm.

Accepted Answer

A) True 
 B)False  True

Question 13

Carole Grand and Bonnie Lamore run a shuttle service from Western Illinois to the busy Chicago O'Hare airport. Last month, they recorded the following:  Carole and Bonnie's gross profit for the past month was:

Accepted Answer

A)  $682.00
B)  Carole: $341.00; Bonnie: $341.00
C)  $1250.00
D)  $2750.00

Question 14

The income statement reports the difference between a firm's assets and its liabilities as of a certain date.

Accepted Answer

A) True 
 B)False

Question 15

Independent audits are prepared by accountants within the organization to ensure that proper accounting procedures are followed.

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

Net Profit refers to:

Accepted Answer

A)  The result of deducting liabilities from the assets of the firm.
B)  The result of subtracting cost of good sold from revenues.
C)  The result of deducting depreciation expense from revenues.
D)  The net earnings after the deduction of all expenses, including tax expense.

Question 18

The is an accounting statement that reports the financial condition of a firm at a specific point in time.

Accepted Answer

A)  income statement
B)  balance sheet
C)  statement of cash flows
D)  trial balance

Question 19

The balance sheet reflects the fact that assets equal the sum of liabilities and owners' equity.

Accepted Answer

A) True 
 B)False

Question 20

The acid-test ratio emphasizes the ability to convert inventory quickly into cash.

Accepted Answer

A) True 
 B)False  True

Exam 17: Understanding Accounting and Financial Information

When it comes to the treatment of depreciation and valuation of inventory, generally accepted accounting principles .

Correct Answer
verified

Which of the following is a key step in the accounting cycle?

Correct Answer
verified

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

Correct Answer
verified

The purpose of a trial balance is to:

Correct Answer
verified

is the accounting practice of recording each transaction in two places in the accounting journal.

Correct Answer
verified

Tyler works as an accountant for a mid-sized retail store. He has just completed a trial balance that resulted in no unexpected problems. Tyler's next task is likely to be:

Correct Answer
verified

A balance sheet lists assets in order of their .

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

Accountants not only provide financial information to the firm, they:

Correct Answer
verified
C

Assets are economic resources that are owned by a firm.

Correct Answer
verified
True

Carole Grand and Bonnie Lamore run a shuttle service from Western Illinois to the busy Chicago O'Hare airport. Last month, they recorded the following: Carole and Bonnie's gross profit for the past month was:

Correct Answer
verified

The income statement reports the difference between a firm's assets and its liabilities as of a certain date.

Correct Answer
verified

Independent audits are prepared by accountants within the organization to ensure that proper accounting procedures are followed.

Correct Answer
verified

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

Correct Answer
verified

Net Profit refers to:

Correct Answer
verified

The is an accounting statement that reports the financial condition of a firm at a specific point in time.

Correct Answer
verified

The balance sheet reflects the fact that assets equal the sum of liabilities and owners' equity.

Correct Answer
verified

The acid-test ratio emphasizes the ability to convert inventory quickly into cash.

Correct Answer
verified
True

Exam 17: Understanding Accounting and Financial Information

When it comes to the treatment of depreciation and valuation of inventory, generally accepted accounting principles .

Correct AnswerverifiedShow Answer

Which of the following is a key step in the accounting cycle?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The purpose of a trial balance is to:

Correct AnswerverifiedShow Answer

is the accounting practice of recording each transaction in two places in the accounting journal.

Correct AnswerverifiedShow Answer

Tyler works as an accountant for a mid-sized retail store. He has just completed a trial balance that resulted in no unexpected problems. Tyler's next task is likely to be:

Correct AnswerverifiedShow Answer

A balance sheet lists assets in order of their .

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Accountants not only provide financial information to the firm, they:

Correct AnswerverifiedC

Assets are economic resources that are owned by a firm.

Correct AnswerverifiedTrue

Carole Grand and Bonnie Lamore run a shuttle service from Western Illinois to the busy Chicago O'Hare airport. Last month, they recorded the following: Carole and Bonnie's gross profit for the past month was:

Correct AnswerverifiedShow Answer

The income statement reports the difference between a firm's assets and its liabilities as of a certain date.

Correct AnswerverifiedShow Answer

Independent audits are prepared by accountants within the organization to ensure that proper accounting procedures are followed.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Net Profit refers to:

Correct AnswerverifiedShow Answer

The is an accounting statement that reports the financial condition of a firm at a specific point in time.

Correct AnswerverifiedShow Answer

The balance sheet reflects the fact that assets equal the sum of liabilities and owners' equity.

Correct AnswerverifiedShow Answer

The acid-test ratio emphasizes the ability to convert inventory quickly into cash.

Correct AnswerverifiedTrue

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C

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True

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True