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Exam 17: Understanding Accounting and Financial Information

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Question 151

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A lower than average inventory turnover ratio indicates excellent inventory management practices.

A) True
B) False

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Question 152

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When Bark Three Times Pet Store sells inventory,the value of the cost of goods sold reported on the income statement will depend on which inventory valuation method it uses.

A) True
B) False

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Question 153

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The _____ account on the Balance Sheet shows profits that the firm has reinvested in the company.

The Barkley Company has recorded its unpaid bill for supplies under a current liabilities account on the balance sheet.This payment will be due to the supplier in less than a year.

The most liquid asset is:

Mini-Case Minnie A.Wright-Hoff works as an accountant for Double Entry Doors,Inc.Her company sells and installs oversized garage doors needed by large vehicles.Most of Minnie's work involves helping department heads and other decision-makers by measuring and reporting costs for their departments,and by identifying areas where departments are exceeding their budgets.However,as one of only three accountants employed by Double Entry Doors,Minnie is something of a "jill-of-all-trades" in terms of her accounting assignments.For example,she recently spent several hours summarizing all of the financial data in account ledgers to see if the information was correct and balanced.Her efforts revealed no problems,so she is now ready to start working on the firm's financial statements.Minnie is interested in this part of the accounting cycle because she likes to be one of the first to know the "bottom line" her company will report.She knows that she and the other accountants who work on these statements can influence the results by the choices they make about the way they report certain items. -Minnie knows that Double Entry has a lot of short-term debt coming due in the next year,and wants to make sure that the company will have the ability to make the required payments.Given a troubling downturn in construction activity over the past couple of months,she is not confident that Double Entry can count on selling its current inventory of doors before the debt comes due.Which of the following ratios would be most relevant to Minnie?

The Barkley Company's balance sheet shows: what the business owns,minus what the business owes,equals the book value (or,net worth)of the business.

The Financial Accounting Standards Board only sets standards for accountants in the private sector;however,government accountants have no universally accepted procedures that they must follow.

Mini-Case Minnie A.Wright-Hoff works as an accountant for Double Entry Doors,Inc.Her company sells and installs oversized garage doors needed by large vehicles.Most of Minnie's work involves helping department heads and other decision-makers by measuring and reporting costs for their departments,and by identifying areas where departments are exceeding their budgets.However,as one of only three accountants employed by Double Entry Doors,Minnie is something of a "jill-of-all-trades" in terms of her accounting assignments.For example,she recently spent several hours summarizing all of the financial data in account ledgers to see if the information was correct and balanced.Her efforts revealed no problems,so she is now ready to start working on the firm's financial statements.Minnie is interested in this part of the accounting cycle because she likes to be one of the first to know the "bottom line" her company will report.She knows that she and the other accountants who work on these statements can influence the results by the choices they make about the way they report certain items. -The fact that Minnie wants to determine the "bottom line" for Double Entry Doors means that she is particularly interested in preparing her firm's:

The Internal Revenue Service is responsible for establishing accounting standards used by accountants working in government accounting.

Bookkeeping is part of the accounting cycle,but accounting goes far beyond the activities involved in bookkeeping.

Bark Three Times Pet Store established a line of credit with its local banker and used (borrowed)$85,000 against it to purchase its first year's inventory.Since it is required to repay the money before the end of its fiscal year,the company's accountant lists this liability with the current liabilities on the balance sheet.

A firm's financial statements represent a health report regarding the condition of the firm.

_______ refers to the value that stockholders or owners have in a company.

An accountant who has a bachelor's degree,two years of experience in internal auditing and who has passed an exam by the Institute of Internal Auditors can become recognized as a certified internal auditor.

There are two major financial statements prepared at the completion of the accounting cycle: the journal and the ledger.

When companies owe money to creditors,suppliers,and others,these outstanding amounts are recorded on the balance sheet as _________.

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

The debt to owners' equity ratio is a common type of liquidity ratio.

Liquidity refers to how quickly liabilities must be paid.