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? - ANS ✓$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? - ANS ✓In 2014, a company provides services to a customer for
which cash will be collected the next year (2015).
Which category on the statement of cash flows summarizes cash receipts
and payments to owners and creditors of the company? - ANS ✓Cash flows
from financing activities
Where would an investor find a summary of a company's significant
accounting policies? - ANS ✓In the notes to financial statements
Which assurance does an external audit report provide for its readers? -
ANS ✓The company's financial statements fairly reflect its financial position
Match each accounting term with its definition. - ANS ✓Reliable =
Information that can be verified
Relevant = Information having to do with the matter at hand
Material = Information that is important enough to make a difference
Conservatism = Information related to recognizing losses as they occur
WGU C213
, 2
WGU
Order the steps in the decision cycle from first (1) to last (5). - ANS ✓1.
Prepare financial statements
2.Analyze financial statements
3.Gather information
4. Make decision
5. Implement decision
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? - ANS ✓11.0
What does it mean if a company has a debt ratio of 101.5%? - ANS ✓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? - ANS ✓Continual decrease in sales
Which two cash flow adequacy ratios represent a cash cow? - ANS
✓$6,991/$5,486
$5,220/$1,875
Which formula yields a cash times interest earned ratio of 11? - ANS ✓Cash
before interest and taxes of $11,000 / cash paid for interest of $1,000
Which form of debt should be reported in the long-term liability category? -
ANS ✓Notes payable expected to be paid in 18 months
WGU C213
, 3
WGU
Which two values affect the measurement of net income? - ANS ✓Ordinary
gains and losses
Operating expenses
Which two items' subtotals are included in a multi-step income statement? -
ANS ✓Gross profit
Income from operations
What was the 2012 net profit amount if the 2013 pro-forma net profit of
$187,000 was based on a 22% increase? - ANS ✓$153,279
What is a common category in a statement of cash flows? - ANS ✓Cash from
investing activities
Which cash flow category would include "cash received from investors"? -
ANS ✓Cash from financing activities
Which item is an investing activity? - ANS ✓Cash payments for purchase of
plant assets
What impact does the sale of equipment have on the statement of cash
flows? - ANS ✓Increase in cash from investing activities
What is known about the direct and indirect methods of preparing
statements of cash flow? - ANS ✓The indirect method is more popular among
large U.S. companies
Which two examples represent financial statement errors? - ANS ✓The
accounting department miscalculates the payroll tax due at year-end, resulting in
an inaccurate liability
The accountant unintentionally records amounts as revenue that were prepaid
by customers but not yet earned
WGU C213
, 4
WGU
Which internal control is intended to ensure that a company does not
mistakenly pay a supplier for an invoice that includes more items than
were actually received? - ANS ✓The inventory department counts and inspects
items as received and forwards the receiving record to accounts payable.
What are two common reasons for managers to manipulate reported
earnings? - ANS ✓They are feeling pressured to meet internal sales goals.
They are preparing to qualify for a bank loan.
Which two requirements must accounting firms that audit public
companies meet under the SarbanesOxley Act? - ANS ✓Firms must not
provide certain nonaudit services to audit clients, such as management functions
or legal services.
Firms must report to and be retained by the audit committee rather than the CFO
or other company management.
Which two requirements must management of public companies meet
under the Sarbanes-Oxley Act? - ANS ✓They must provide an assessment of
the effectiveness of internal controls with each annual report.
They must support a stronger board and audit committee.
Which two actions do internal auditors perform to assist in maintaining the
integrity of financial statements? - ANS ✓They search for and investigate
fraud.
They review financial records and internal controls.
What is a significant role of the U.S. Securities and Exchange Commission
(SEC) in financial reporting? - ANS ✓They ensure that financial statement
users are provided with reliable information to use in decision making.
What does management accounting provide? - ANS ✓The insight that
management needs so the business can perform more effectively
WGU C213
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