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Exam 17: Understanding Accounting and Financial Information

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Question 21

True/False

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At present,accounting software packages have proven to be too complex and expensive to be useful for owners of small businesses.

A) True
B) False

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Question 22

Multiple Choice

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On December 31,2010,Virginia Laboratories had assets of $235,000 and owners' equity of $84,000.We can conclude that on December 31,2010,Virginia Laboratories balance sheet showed:

A) Total liabilities of $151,000.
B) Suffered a net loss of $151,000.
C) Experienced a cash inflow of $319,000.
D) Paid a dividend of $3.00 per share.

E) A) and B)
F) All of the above

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Question 23

Multiple Choice

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Earnings per share,return on sales,and return on equity are examples of:

Cash flow statements identify three sources of cash receipts and disbursements: Assets,liabilities and owners' equity.

Which of the following is an area of importance in accounting?

The income statement reports the difference between a firm's assets and its liabilities as of a certain date.

Julio borrowed money from a close friend to obtain a liquor license for his pub,and gave him a written promise to repay the amount within six months.Julio should list this business debt as an operating expense on his pub's balance sheet.

________ measures the speed of inventory moving through the firm and its conversion into sales.

A business manager who keeps his/her customers satisfied can be successful without having a great deal of knowledge about accounting practices.

A firm's annual report is a yearly statement of the financial condition,progress,and expectations of the organization during one year.

What is the difference between a profit [net income after taxes] on an income statement and the cash balance reflected at the bottom of the statement of cash flows?

An important difference between accounting and other business functions,such as marketing and management,is that:

Preferred Pet Care,Inc.a mobile veterinary care clinic has more appointments than it ever expected to have when it opened its doors.Each week it orders more vaccines,antibiotics,and preventive care supplies from a major veterinary supplier,with the understanding that it will pay for these supplies in one month's time.Most of the company's clients are elderly and on fixed incomes,and often do not pay for services for two or more months.This is not a problem because as long as the company continues to increase its appointments,it will create profits and growth.

The net income of a firm can change significantly depending upon the specific accounting procedures that are used for depreciation and inventory valuation.

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?

Bark Three Times Pet Store's accountant has recorded the following: Total current assets = $60,000,including Cash = $24,000;Accounts Receivable = $20,000;and,Inventory = $16,000.Total assets = $230,000;Total current liabilities = $48,000;and,Total current and long-term liabilities = $98,000.The store's current ratio = 1.25.The store's acid-test ratio = .92.

The income statement computes net income by subtracting liabilities from assets.

The inventory turnover ratio for all firms should be greater than 2 times.

Activity ratios measure the effectiveness of the firm's management in using its various resources to achieve profits.

Miko is preparing her homework for her accounting class.She is uncertain as to the proper handling of patents and copyrights on a firm's financial statements.Which of the following is correct?