Question 1

In 1987, the Securities and Exchange Commission (SEC) and the Financial Accounting Standards Board (FASB) required all publicly traded companies to include a statement of cash flows along with the balance sheet and income statement in their annual report.

Accepted Answer

A) True 
 B)False

Question 2

When Nathan applied for a loan to expand his sailboat business, the bank required that his financial statements be carefully examined by a CPA.The bank is requiring Nathan to have his financial statements _____.

Accepted Answer

A)   verified
B)   audited
C)   affirmed
D)   certified
E)   insuredF) A) and C)
G) A) and D)

Question 3

Richard Samonski does not understand the significance of the accounting equation.You explain its importance in the simplest way by saying that:

Accepted Answer

A)   as a result of each transaction, the total assets should equal the total liabilities plus owners' equity.
B)   as a result of most of the transactions, assets and liabilities are equal.
C)   owners' equity is not as important as assets and liabilities.
D)   it is just an exercise in accounting.
E)   as a result of each transaction, total liabilities should equal total assets plus owners' equity.F) B) and C)
G) None of the above

Question 4

Which of the following is true about CPAs?

Accepted Answer

A)   Almost everyone who does accounting work is a CPA.
B)   CPA standards are the same in every state.
C)   CPAs must participate in continuing education programs.
D)   Once an individual has become a CPA, no further work is necessary to retain the certification.
E)   The portions of the CPA examination are costing, taxing, budgeting, and billing.F) None of the above
G) B) and C)

Question 5

Often, the ones who are hurt when corporations cook the books are the firm's employees, investors, lenders, and suppliers.

Accepted Answer

A) True 
 B)False

Question 6

Without the audit function and GAAP, there would be very little oversight or supervision of corporate accounting practices.

Accepted Answer

A) True 
 B)False

Question 7

The standard form of the accounting equation is assets equal liabilities minus owners' equity.

Accepted Answer

A) True 
 B)False

Question 8

Why would managers, lenders, and investors compare current financial statements with those prepared for past accounting periods?

Accepted Answer

Managers, lenders, and investors often c...

Question 9

A person who wishes to practice accounting as a CPA must pass an exam prepared by the American Institute of Certified Public Accountants.

Accepted Answer

A) True 
 B)False

Question 10

The earnings statement is another term for the _____.

Accepted Answer

A)   balance sheet
B)   income statement
C)   statement of financial position
D)   owners' equity statement
E)   capital statementF) None of the above
G) A) and E)

Question 11

If a company has $50,000 of assets, which of the following could be true?

Accepted Answer

A)   It has -$50,000 in stockholders' equity and $100,000 in liabilities.
B)   The company has fewer assets than it does liabilities.
C)   It has $30,000 in liabilities and $80,000 in owners' equity.
D)   The company has more owners' equity than assets.
E)   It has $23,000 in owners' equity and $27,000 in liabilities.F) A) and B)
G) A) and E)

Question 12

Getting the total of cash, marketable securities, and receivables and then dividing that total by the current liabilities results in the _____.

Accepted Answer

A)   debt-to-equity ratio
B)   debt-to-assets ratio
C)   current ratio
D)   acid-test ratio
E)   inventory turnoverF) A) and C)
G) D) and E)

Question 13

The ease with which an asset can be converted into cash is referred to as its _____.

Accepted Answer

A)   liquidity
B)   profitability
C)   solvency
D)   convertibility
E)   capitalization capacityF) All of the above
G) B) and E)

Question 14

The industry average for the earnings per share ratio is $2.25 per share.

Accepted Answer

A) True 
 B)False

Question 15

Regina owns and operates her own bakery and coffee shop.Regina has no accounting training and has only three employees.How does she most likely handle the necessary accounting for her business?

Accepted Answer

A)   She does it herself because it takes little training or knowledge.
B)   She hires a private accountant to work for her and take care of the accounting functions.
C)   She has one of her part-time chefs do the accounting when he has time.
D)   She pays a public accountant to do the accounting for her business.
E)   She does nothing at all, because accounting is not necessary for businesses.F) C) and E)
G) A) and E)

Question 16

After the Sarbanes-Oxley Act was signed by the president, auditors and accountants can be imprisoned for up to ____ years for destroying financial documents and willful violations of the securities laws.

Accepted Answer

A)   fifty
B)   thirty
C)   twenty
D)   ten
E)   fiveF) A) and D)
G) A) and B)

Question 17

Ebony Jones is hired by Ruby Tuesday to help with budgeting, determining the costs of the firm's meal services, and recording transactions and creating financial statements.Ebony is a _____.

Accepted Answer

A)   private accountant
B)   budget manager
C)   public accountant
D)   clerk
E)   public auditorF) C) and E)
G) A) and B)

Question 18

The purpose of an audit is to ensure that financial statements have been prepared according to

Accepted Answer

A)   the particular company's standards.
B)   the industry's standards.
C)   generally accepted accounting principles.
D)   international accounting standards.
E)   the standards of certified public accountants.F) A) and B)
G) B) and E)

Question 19

The statement of financial position is also known as the balance sheet.

Accepted Answer

A) True 
 B)False

Question 20

What are the differences between managerial accounting and financial accounting? From a career standpoint, which type do you prefer and why?

Accepted Answer

Managerial accounting and financial acco...

Exam 15: Using Accounting Information