Question 1

Bark Three Times Pet Store recently hired an accountant to make sense of each day's transactions, and keep better financial records for the business. The accountant showed the owner that the ledger in a computerized accounting system would automatically take entries and post them to the correct accounts in the ledger, making the bookkeeping tasks much easier.

Accepted Answer

A) True 
 B)False

Question 2

Becky Hunter is an accountant employed by FAF Enterprises. Recently she has spent much of her time working on defining measures of costs for the production department and checking to ensure that various departments are staying within their budgets. Becky is a:

Accepted Answer

A)  Public accountant whose work is mainly concerned with auditing.
B)  Public accountant whose work is mainly concerned with financial accounting.
C)  Private accountant whose work is mainly concerned with managerial accounting.
D)  Private accountant whose work is mainly concerned with financial accounting.E) A) and D)
F) A) and C)

Question 3

The current ratio is used to evaluate a firm's ability to pay its short-term debts.

Accepted Answer

A) True 
 B)False

Question 4

You have just calculated the acid-test ratio for Peak Performance Sporting Goods [acid test ratio = 1.0]. As a loan officer for the local bank, you are called into your boss's office to interpret the results of this ratio. Which of the following statements best reflects an understanding of these results?

Accepted Answer

A)  A company with an acid-test ratio = 1.0 demonstrates the ability to operate very conservatively. The bank should anticipate that this firm will always be able to meet its short-term liabilities.
B)  This company is already having problems meeting its short-term liabilities.
C)  An acid-test ratio = 1.0 means that this firm has $1.00 in current assets for every $2.00 in current liabilities. Peak Performance is a well- run operation, as long as it can continue to sell-off its inventory.
D)  An acid test ratio = 1.0 tells us that without adequate inventory turnover, this company may represent a higher risk. Peak Performance's acid test ratio shows that the firm maintains $1.00 in current assets for every $1.00 in current liabilities.E) A) and B)
F) A) and C)

Question 5

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.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following responses is the best and most comprehensive? "A company's accounting information is useful to ."

Accepted Answer

A)  Managers within the firm, exclusively
B)  Marketing research firms for pricing insights
C)  Primarily the IRS and other government agencies that regulate the firm
D)  Managers, owners, creditors, employees, and the governmentE) B) and D)
F) B) and C)

Question 7

It is always better for a firm to have a high inventory turnover ratio than a low turnover ratio.

Accepted Answer

A) True 
 B)False

Question 8

Accounting is not important for nonprofit organizations since financial data is not critical to their success.

Accepted Answer

A) True 
 B)False

Question 9

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

Accepted Answer

A)  higher
B)  more meaningful
C)  lower
D)  less helpfulE) A) and B)
F) B) and C)

Question 10

refers to how quickly an asset can be converted into cash.

Accepted Answer

A)  Liquidity
B)  Velocity
C)  Fundability
D)  AccessibilityE) B) and C)
F) A) and D)

Question 11

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

Accepted Answer

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

Question 12

The sets accounting standards used in government accounting.

Accepted Answer

A)  Federal Accounting Review Board
B)  Governmental Accounting Standards Board
C)  Academy of Public Sector Accountants
D)  Federal Reserve BoardE) B) and D)
F) A) and D)

Question 13

The higher the risk of a particular investment, the greater the expected rate of return required by investors.

Accepted Answer

A) True 
 B)False

Question 14

The shows how the capital is structured in the business, including the value of assets and the amount the firm owes at a specific point in time.

Accepted Answer

A)  income statement
B)  balance sheet
C)  statement of cash flows
D)  trial balanceE) All of the above
F) B) and C)

Question 15

Debts owed by a business are called .

Accepted Answer

A)  revenues
B)  liabilities
C)  equities
D)  assetsE) A) and B)
F) A) and C)

Question 16

Which of the following is an example of a financial transaction?

Accepted Answer

A)  A firm purchases a fire insurance policy.
B)  An internal auditor discovers an error in a firm's inventory valuation.
C)  A potential customer accesses a firm's Web page.
D)  A manager reviews the financial statements prepared by an accountant.E) B) and C)
F) A) and D)

Question 17

Taylor Casual, a chain of retail clothing stores, wants to assure investors and other outsiders that its financial statements are accurate. One way to do so would be to hire a public accounting firm to:

Accepted Answer

A)  Produce an internal audit.
B)  Take over all of its accounting functions.
C)  Provide a "generally accepted practices" endorsement.
D)  Perform an independent audit.E) B) and C)
F) A) and B)

Question 18

Costas Calendar Company's Statement of Cash Flows showed the following activities for the year ended December 31, 2009:  The year end cash balance for this firm is:

Accepted Answer

A)  $7,000.00
B)  $53,000.00
C)  $23,000.00
D)  $30,000.00E) C) and D)
F) B) and D)

Question 19

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

Accepted Answer

A)  Expense structuring
B)  Depreciation
C)  Capital budgeting
D)  Gross margin allocationE) A) and B)
F) A) and C)

Question 20

A major part of a bookkeeper's job is to interpret financial data and suggest strategies for improving the firm.

Accepted Answer

A) True 
 B)False

Exam 17: Understanding Accounting and Financial Information

The higher the risk of a particular investment, the greater the expected rate of return required by investors.

Correct Answer
verified

It is always better for a firm to have a high inventory turnover ratio than a low turnover ratio.

Correct Answer
verified

Becky Hunter is an accountant employed by FAF Enterprises. Recently she has spent much of her time working on defining measures of costs for the production department and checking to ensure that various departments are staying within their budgets. Becky is a:

Correct Answer
verified

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

Correct Answer
verified

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.

Correct Answer
verified

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

Correct Answer
verified

Which of the following is an example of a financial transaction?

Correct Answer
verified

A major part of a bookkeeper's job is to interpret financial data and suggest strategies for improving the firm.

Correct Answer
verified

Debts owed by a business are called .

Correct Answer
verified

The current ratio is used to evaluate a firm's ability to pay its short-term debts.

Correct Answer
verified

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

Correct Answer
verified

Which of the following responses is the best and most comprehensive? "A company's accounting information is useful to ."

Correct Answer
verified

Accounting is not important for nonprofit organizations since financial data is not critical to their success.

Correct Answer
verified

Costas Calendar Company's Statement of Cash Flows showed the following activities for the year ended December 31, 2009: The year end cash balance for this firm is:

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

The shows how the capital is structured in the business, including the value of assets and the amount the firm owes at a specific point in time.

Correct Answer
verified

The sets accounting standards used in government accounting.

Correct Answer
verified

Taylor Casual, a chain of retail clothing stores, wants to assure investors and other outsiders that its financial statements are accurate. One way to do so would be to hire a public accounting firm to:

Correct Answer
verified

refers to how quickly an asset can be converted into cash.

Correct Answer
verified

Exam 17: Understanding Accounting and Financial Information

The higher the risk of a particular investment, the greater the expected rate of return required by investors.

Correct AnswerverifiedShow Answer

It is always better for a firm to have a high inventory turnover ratio than a low turnover ratio.

Correct AnswerverifiedShow Answer

Becky Hunter is an accountant employed by FAF Enterprises. Recently she has spent much of her time working on defining measures of costs for the production department and checking to ensure that various departments are staying within their budgets. Becky is a:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following is an example of a financial transaction?

Correct AnswerverifiedShow Answer

A major part of a bookkeeper's job is to interpret financial data and suggest strategies for improving the firm.

Correct AnswerverifiedShow Answer

Debts owed by a business are called .

Correct AnswerverifiedShow Answer

The current ratio is used to evaluate a firm's ability to pay its short-term debts.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following responses is the best and most comprehensive? "A company's accounting information is useful to ."

Correct AnswerverifiedShow Answer

Accounting is not important for nonprofit organizations since financial data is not critical to their success.

Correct AnswerverifiedShow Answer

Costas Calendar Company's Statement of Cash Flows showed the following activities for the year ended December 31, 2009: The year end cash balance for this firm is:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The shows how the capital is structured in the business, including the value of assets and the amount the firm owes at a specific point in time.

Correct AnswerverifiedShow Answer

The sets accounting standards used in government accounting.

Correct AnswerverifiedShow Answer

Taylor Casual, a chain of retail clothing stores, wants to assure investors and other outsiders that its financial statements are accurate. One way to do so would be to hire a public accounting firm to:

Correct AnswerverifiedShow Answer

refers to how quickly an asset can be converted into cash.

Correct AnswerverifiedShow Answer

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