Accounting for Decision Making Exam #1

Cost accounting is a subset of which of the following? - correct answer Managerial accounting The officer of a corporation responsible for the firm's published financial statements would be most concerned about pronouncements of the: - correct answer FASB Which of the following are qualified to express an auditor's opinion about an entity's financial statements? - correct answer A Certified Public Accountant Which classification of accounting is most concerned with the use of economic and financial information to plan and control many of the activities of the entity? - correct answer Managerial accounting Which of the following statements about the Financial Accounting Standards Board is correct? - correct answer The FASB follows a due process procedure that permits input from interested parties before a standard is issued. The ethical concept of integrity means that an individual must: - correct answer attempt to be honest and forthright in dealings and communications with others The authoritative financial accounting standards-setting body in the United States is presently the: - correct answer Financial Accounting Standards Board (FASB) Which of the following is not an example of a decision or informed judgment that a potential employee could make from accounting information? - correct answer Personnel turnover statistics (i.e., hiring and terminations) Accounting can be defined as: - correct answer the process of identifying, measuring, and communicating economic information about an organization for the purpose of making decisions and informed judgments. Major classifications of accounting activity would not include: - correct answer financial accounting, national accounting, cost accounting Consolidated financial statements report financial position, results of operations, and cash flows for: - correct answer a parent corporation and its subsidiaries. Which of the following accounting methods accomplishes much of the matching of revenues and expenses? - correct answer Accrual accounting. The balance sheet equation can be represented by: - correct answer Assets - Liabilities = Stockholders' Equity, Net Assets = Stockholders' Equity, Assets = Liabilities + Stockholders' Equity The Statement of Cash Flows: - correct answer shows how cash changed during the period. Stockholders' equity refers to which of the following? - correct answer The ownership right of the stockholder(s) of the entity. The going concern concept refers to a presumption that: - correct answer the entity will continue to operate in the foreseeable future. The balance sheet might also be called: - correct answer Statement of Financial Position. The principle of consistency means that: - correct answer the effect of any change in an accounting method will be disclosed in the financial statements or notes thereto. The principle of full disclosure pertains to: - correct answer The entity fully discloses all necessary information to prevent a reasonably astute user of financial statements from being misled. The purpose of the income statement is to show the: - correct answer net income or net loss for the period covered by the statement. Financial statement ratios support informed judgments and decision making most effectively: - correct answer when the trend of entity data is compared to the trend of industry data. When comparing entity financial ratios with industry ratios: - correct answer relative values at a point in time may not be significant. Which of the following is a universally accepted measure of profitability? - correct answer Return on investment. A firm has an ROI of 15%, turnover of 3, and sales of $12 million. The firm's margin is: - correct answer 5%; 15% = ? * 3 Solve for missing number: 15% divided by 3 = 5% Return on equity: - correct answer relates net income and stockholders' equity. An advantage of the DuPont model for calculating ROI is that: - correct answer it focuses on asset utilization as well as net income. Which of the following accounts is part of working capital? - correct answer Merchandise Inventory A firm's net income for the year was $800,000. Average assets totaled $6 million, and average liabilities totaled $1.2 million. Return on equity was: - correct answer 16.7% $800,000/($6,000000 - $1,200,000) = 16.67% Another term for return on investment is: - correct answer Return on assets.