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Exam 17: Understanding Accounting and Financial Information

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Question 171

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

A) True
B) False

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Question 172

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The accounting cycle is a six-step procedure that results in the preparation and analysis of major financial statements.

A) True
B) False

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Question 173

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Peak Performance Sporting Goods Company continues to perform well. 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 =

________ measures the speed of inventory moving through the firm and its conversion into sales.

As a bank loan officer, you are considering a loan application by Peak Performance Sporting Goods. The company has provided you with the following information from its balance sheet Peak Performance's current ratio is:

According to the Adapting to Change box, the SEC is determined to crack down on and punish those accused of fraud. However, so many auditors and CPAs are trained in how to search for fraud that there are too many cases to prosecute.

In order to calculate the current ratio for your firm, you divide the total value of current assets by

Retailers attempt to sell older merchandise before more recently acquired merchandise is sold. The assumptions made by the ________ method of inventory valuation are most consistent with this approach.

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

Sydney is a member of a conservative political group that wants to identify and publicize examples of wasteful government spending. The type of accounting information Sydney and her group will follow most closely is provided by certified public accountants.

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

Use the fundamental accounting equation to solve the following: Assets minus liabilities equals

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

A firm's annual report is a yearly statement of the financial condition, progress, and expectations of an organization.

Damian, a recent college graduate with a degree in accounting, is helping a newly formed construction company set up its accounting system. Although the company had purchased accounting software, Damian wants to make certain that future reports will distinguish between current liabilities and long-term liabilities. In the future, he will need to know the amount of total current liabilities in order to

What is the difference between a journal and a ledger? How are journals and ledgers incorporated into the accounting cycle?

The fundamental accounting equation states: Assets = ________.

________ measures the amount of profit earned by a company for each share of outstanding common stock.

________ involves the review and evaluation of the records that are used to prepare the organization's financial statements.

Personalized Products is a small manufacturing firm specializing in custom-order tool and die work. A computerized accounting system would help Personalized Products by