C213 Practice test

What does accounting focus on? The impact a business's activities have on its relationships with customers The impact a business's activities have on the environment The impact a business's activities have on its public image The impact a business's activities have on its overall financial performance - correct answer The impact a business's activities have on its overall financial performance What was the 2012 net profit amount if the 2013 pro-forma net profit of $187,000 was based on a 22% increase? $228,140 $182,975 $153,279 $145,860 - correct answer $153,279 Which report summarizes cash collections and cash expenditures from operating, investing, and financing activities over a period of time? Statement of cash flows Summary of cash receipts Cash flow schedule Cash receipts and disbursements sheet - correct answer Statement of cash flows Which users would have a primary concern with an organization's ability to provide healthcare benefits? Competitors Vendors Employees Suppliers - correct answer Employees Which benefit does a corporation gain by following Generally Accepted Accounting Principles (GAAP)? A decrease in the amount of net income it reports An increase in its comparability to other companies An increase in the amount of assets it reports A decrease in its income tax obligations - correct answer An increase in its comparability to other companie Which body regulates a certified public accounting firm's audit practices when the firm is auditing a large publicly traded company? The Financial Accounting Standards Board (FASB) Another certified public accounting (CPA) firm The Internal Revenue Service (IRS) The Public Company Accounting Oversight Board (PCAOB) - correct answer The Public Company Accounting Oversight Board (PCAOB) What has had the most significant impact on accounting practices? Certification requirements Mobile computing Information technology New product innovations - correct answer Information technology What two items of information are revealed on the balance sheet? Choose 2 answers Debt Revenues Ownership Costs Expenses - correct answer Revenues Expenses Which term is defined as the residual interest in the net assets of a company? Liabilities Owners' equity Revenues Operating income - correct answer Owners' equity A corporation has total liabilities of $300 million, total owners' equity of $100 million, and current assets of $50 million.What is the value of the firm's long-term assets? $250 million $350 million $400 million $450 million - correct answer $350 million Which situation should result in revenue recognition on the income statement for the year ending 12/31/14 if the firm is using accrual-basis accounting? In 2014, a company provides services to a customer for which cash will be collected the next year (2015). In 2014, a company collects cash from a customer for services it provided in the previous year (2013). In 2014, a company collects cash from a customer for services it will provide next year (2015). In 2014, a company enters into a contract whereby it agrees to provide services to a customer next year (2015). - correct answer In 2014, a company provides services to a customer for which cash will be collected the next year (2015). Accrual accounting - correct answer ***Accrual accounting is a method of accounting where revenues and expenses are recorded WHEN THEY ARE EARNED (service performed), regardless of when the money is actually received or paid. *** For example, you would record revenue when a project is complete, rather than when you get paid. This method is more commonly used than the cash method. Which category on the statement of cash flows summarizes cash receipts and payments to owners and creditors of the company? Cash flows from business activities Cash flows from financing activities Cash flows from investing activities Cash flows from operating activities - correct answer Cash flows from financing activities Cash Flow from Financing Activities - correct answer Cash Flow from Financing Activities is the net amount of funding a company generates in a given time period, used to finance its business. Finance activities include the issuance and repayment of equity. ... Types include: cash, common, preferred, stock, property, issuance and repayment of debt. Cash Flow from Investing Activities - correct answer Cash Flow from Investing Activities is the section of a company's cash flow statement. ... that displays how much money has been used in (or generated from) making investments in a specific time period. Investing activities include purchases of long-term assets (such as property, plant and equipment) Where would an investor find a summary of a company's significant accounting policies? In the income statement In the balance sheet In the notes to financial statements In the statement of cash flows - correct answer *** In the NOTES to financial statements *** The first note in almost every company's financial report gives you the information you need to understand the accounting policies used to develop the financial statements. This note explains the accounting rules the company used to develop its numbers. The note is usually called the "Summary of significant accounting policies." Which assurance does an external audit report provide for its readers? The company will generate net income The company's financial statements fairly reflect its financial position The company will be a good credit risk The company will generate positive cash flows - correct answer The company's financial statements fairly reflect its financial position 14 Match each accounting term with its definition. Answer options may be used more than once or not at all. Reliable Material Conservatism Relevant - correct answer Reliable -- Information that can be verified. Material -- Information related to recognizing losses as they occur. Conservatism -- Information that is important enough to make a difference Relevant -- Information having to do with the matter at hand Partial financial information for a company is as follows: Current assets $36,543 Total assets $58,719 Current liabilities $24,824 Total liabilities $48,561 Stockholders' equity $10,158 Sales $46,997 Net Income $ 3,761 Market value of shares $41,316 What is the price-earnings (PE) ratio for this company? - correct answer 10.985 --- 11.0 What does it mean if a company has a debt ratio of 101.5%? The company has 1.5% more total liabilities than net income. The company has 1.5% more total liabilities than total assets. The company has 1.5% more total liabilities than gross sales. The company has 1.5% more current liabilities than current assets. - correct answer The company has 1.5% more total liabilities than total assets. What is consistent with a continual decline in gross profit if the firm's cost of goods sold remains the same? Continual increase in taxes Continual decrease in sales Continual increase in interest Continual decrease in salaries - correct answer Continual decrease in sales