CH5 Flashcards
Which of the following tasks does the Financial Accounting Standards Board (FASB) perform?
The development of generally accepted accounting principles.
Which of the following are primarily responsible for the information provided in a company’s financial statements?
The chief executive officer (CEO) and the chief financial officer (CFO).
Which of the following are the responsibility of the chief executive officer (CEO) and the chief financial officer (CFO)?
- Ensuring the accuracy and completeness of all reports provided to the Securities & Exchange Commission (SEC).
- The certification of the strength of the internal control system.
- The disclosure to the audit committee of any frauds they are aware of.
Which of the following is the truths about the audit committee of the board of directors?
- They meet with the auditors to discuss management’s compliance with their financial reporting responsibilities.
- They are responsible for ensuring that processes are in place for maintaining the integrity of the financial statement preparation and reporting.
- They are responsible for hiring the company’s external auditors.
Which of the following is an objective of the external audit of a company’s financial statements?
To provide credibility that the financial statements are fairly presented.
Which of the following is not included as a primary part of the financial disclosure in Form 10-K?
- Summarized financial data for a 5-year period.
- Business operations and strategy.
- Four basic financial statements.
Net income (equation)
(total net income/sale)*100
Gross profit = X - Y or A+B (what is x and y)
Gross profit = Net Sales - Cost of sales
Gross profit =operating expenses + income from operations
Gross profit percentage (equation)
Gross profit percentage = Gross profit/net sale
ROA (return on assets equation)
Return on assets = Net Income/ Avg total asset
Net profit margin(equation)
Net profit marginal= Net income/ net sale
The Statement of Comprehensive Income includes items in which order?
Net income, Other comprehensive income items, Comprehensive income.
Components of other comprehensive income can be reported in combination with the:
Income statement
retained earnings
credit balance in its retained earnings account + net income - declared dividends
Which of the following best describes operating income?
It is net sales minus cost of goods sold and operating expenses.
Income before taxes (equation)
Income before taxes = net sales - cost of goods sold - operating expenses - interest expense +gain on sale
Nonoperating income (expense) =
Nonoperating income (expense) = the total of interest expense + loss from the sale of investments
Interest income is reported as nonoperating revenue. would not be used to calculate income from operations
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The earnings per share ($23.33) is net income ($280,000) divided by average number of shares of common stock outstanding during the year ([10,000 + 14,000] ÷ 2 = 12,000).
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Accumulated depreciation is a balance sheet account.
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the following statements regarding international financial reporting standards (IFRS) is true
- Common stock is titled as share capital.
- Property, plant, and equipment can be reported on the balance sheet at either fair value or historical cost.
- Development costs are capitalized.
- Paid-in capital is titled share premium.
- Cash payments for interest are reported on the cash flow statement as either an operating or financing cash flow.
- Reversal of inventory write-downs is required.
The total asset turnover ratio (equation)
The total asset turnover ratio = net sales / average total assets
Income from operations
Income from operations = net sales - cost of goods sold -operating expenses
