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Exam 17: Understanding Accounting and Financial Information

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Question 41

Multiple Choice

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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.

A) FIFO (first in,first out)
B) LIFO (last in,first out)
C) average costing
D) accelerated costing

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

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Question 42

Multiple Choice

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As a first step in the accounting cycle,_________ involves the recording of business transactions.

A) marketing
B) bookkeeping
C) auditing
D) economics

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

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Question 43

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The firm's most valuable assets are listed at the top of its balance sheet.

During a period of rising prices,the FIFO technique of inventory valuation will result in a lower net income figure than would the LIFO technique.

The balance sheet reports revenues and selling costs for a period of time.

An independent audit is an evaluation and unbiased opinion about the accuracy of a company's financial statements.

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

The Balance Sheet for Renuvation LLC shows assets totaling $107,000 and liabilities totaling $75,000.Which of the following statements is correct?

Jose just graduated from college with a bachelor's degree in accounting.He plans to go to work for the American Cancer Society as an accountant.Jose will be a(n) :

Double-entry bookkeeping requires that every transaction be recorded in two places.

The Barkley Company will refer to its income statements to determine whether it was profitable,or,whether it lost money over the past year.

If a firm has a debt to owners' equity ratio of .54 (or 54%) we can conclude that:

The reports and financial statements prepared by accountants:

Purchasing insurance,paying employees,and using supplies are examples of financial transactions.

Financial ratios that reflect the degree to which a firm relies on borrowed funds are called ________ ratios.

The Barkley Company is a fast growing start-up.The accountant calculated earnings per share = $.13.This information will provide him/her with insight into the firm's ability to pay dividends.

The current ratio is a type of ________ ratio.

Churches,schools,and charitable organizations all hire accountants.

April works in the accounting department at Henson's Tire & Auto.She is concerned that the company has been placing too many orders for office supplies and wants to look at all of the transactions involving the purchase of office supplies for the past several months.April can find such information by looking at the supplies account in the:

_________ is the systematic write-off of the value of a tangible asset over its useful life.