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Exam 17: Understanding Accounting and Financial Information

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Question 101

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In large companies,certified internal auditors are usually responsible for preparing tax returns and developing tax strategies for businesses.

A) True
B) False

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Question 102

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With increased computer technology,the ability to read and understand financial statements is no longer an important skill for managers.

A) True
B) False

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Question 103

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

Stockholders of the Sasha Deal Company are concerned about irregularities in the firm's accounting system.One approach to identify problems in the records of the company would be to have a(n) ________ performed.

The Barkley Company has several automobiles that are used in the business.Recently,the owners were told that even though the government permits the firm to depreciate the vehicles,it is not a deductible expense on the income statement.

Patents and copyrights are classified as ___________ on the Balance Sheet.

Bridget Cartier has privately invested $100,000 in Jacques and Jacqueline's Idaho Ski Resort.The business will use the money to purchase new ski lift chairs.$100,000 will be recorded on the balance sheet as part of the owners' equity account.In order to keep the accounts balanced,the balance sheet will also show:

Citywide Insurance Corporation's internal accountants can prepare an audit for the company.

The basic earnings per share and the diluted earnings per share would have quite different values for a firm that relied heavily on preferred stock and convertible debt securities to acquire funds.

An accountant who works for a single business or government agency is referred to as a:

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

The current ratio is a good indicator of the degree to which a firm relies on borrowed funds in its operations.

Monica noted that she disbursed $6,347 in payments for operations in her travel agency and received $6,189 in cash receipts for services rendered.She had no cash receipts or disbursements from investments or financing activities.Thus,Monica had a:

One of the key financial statements prepared in the fifth step of the accounting cycle is:

Blast-off Airlines is a recent start-up commuter airline that flies between eight regional cities on the east coast.Although it has attracted numerous investors who see value in the company's service,it does not pay dividends.Last year,the firm claimed profits of $4,800,000,which will be used to purchase an additional commuter plane.The Balance Sheet accounts that will show this affect are:

Fraudulent accounting practices do not just occur in firms who do not have on site accountants.According to the Legal Briefcase box provided in your textbook,illegal and questionable accounting practices have been the demise of some large multi-national corporations.The professionals assigned to investigate these improprieties are:

All firms with more than four employees should have a full-time accountant.

Although managers who work for large firms must know something about accounting,people who run small businesses only need to know the basics of bookkeeping.

A firm's basic earnings per share measures how much profit was earned for each dollar invested by the firm's owners.

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