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Exam 16: Understanding Accounting and Financial Information

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Question 1

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Carlisle Communications is preparing its cash flow statement.Among other things,this statement will show:

A) net income from operations after taxes.
B) general expenses and operating expenses.
C) cash inflows and cash outflows that resulted from financing activities.
D) the total owners' equity for the firm.

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Question 2

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Prattville Manufacturing has applied for a short-term loan with CIBC.The loan officers of the bank are likely to look carefully at Prattville's liquidity ratios before they decide to grant the loan.

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Question 3

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The LIFO method of inventory valuation assumes that the newest items in inventory are sold first.

The supplier of coffee beans to the local coffee shop now demands to be paid on a cash basis for all purchases.The supplier has done this because:

Tickets sold for the Rolling Stones concert are considered to be the net income for the concert promoter.

Debts that are due in one year or less are classified as:

As Hector was packing to return to Simon Fraser University after his summer vacation,he realized that he owned many valuable things such as a laptop computer,stereo system,and DVD player.An accountant would list all of these as Hector's:

Liabilities are what the firm owes to others.

Gross margin represents the amount a firm earns by buying (or making)and selling merchandise.

(p.507.)If the economy began experiencing a prolonged period of deflation in which the costs of most goods were actually falling,many firms would find that the LIFO method of inventory valuation would result in higher reported profits.

Leverage ratios are concerned with the extent to which a firm relies on borrowed funds in its operations.

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

All of the following are steps included in the accounting cycle Except:

Over the past month,Monica noted that she disbursed $6,347 in payments for operations in her travel agency and received $6,189 in cash receipts for services rendered.She had no cash receipts or disbursements from investments or financing activities.Thus,Monica had a:

Jim works in the accounting department at the Brunswick Sunflower Corporation,where it is his job to record all transactions into journals.After completing this task,the next step in the accounting process is to:

Explain the difference between current,capital,and intangible assets.Give two examples of each of these different types of assets.

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

The books where accounting data are first entered are called ledgers.

Keith will be graduating from Acadia University this year.He has accumulated $18,000 dollars in student loans during his four years at college.An accountant would classify the loans as:

Current liabilities are payments due in one year or less.