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accounting > Practice Exam > Flashcards

Practice Exam Flashcards

1
Q

Which account is not closed at the end of the year?

A

Cost of Goods Sold

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2
Q

Appropriate way to present date for a balance sheet

A

December 31, 2010

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3
Q

The statement which shows the operating, investing, and financing activities of a business is the:

A

Statement of cash flows

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4
Q

What does the debt to total assets ratio measure?

A

Solvency

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5
Q

For information to be considered relevant, it should:

A

Be timely

Confirm or correct prior expectations

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6
Q

Which ratio measures the percentage of assets financed by creditors rather than by stockholders?

A

Debt to total assets ratio

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7
Q

If a company receives cash from a customer before performing services for the customer, then:

A

Assets increase and liabilities increase

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8
Q

Bucky Company purchases supplies on account

A

Increase assets, increase liabilties

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9
Q

What is the purpose of closing entries?

A

To transfer net income and dividends to retained earings

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10
Q

Accrued expense adjustment

A

expenses overstated

liabilities overstated

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11
Q

A company worried about their cash levels

A

LIFO

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12
Q

under the perpetual method, buyers include the shipping cost they pay in ______________

A

inventory

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13
Q

Prepaid expenses adjustment

A

Understated expenses

Overstated assets

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14
Q

Deferred revenue adjustments

A

understated net income

overstated liabilities

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15
Q

Depreciation used to

A

evenly expense benefit of having that asset

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16
Q

Earings per share and gross profit rate are_______________

A

profitability ratios

17
Q

FOB shipping point, who pays?

A

Buyer

18
Q

Inventory turnover ratio:

A

COGS / Average Inventory

19
Q

Net Sales

A

Sales - Sales r&a - sales discounts = net sales

20
Q

Gross profit

A

Sales - sales r&a - sales discounts - cost of goods sold = gross profit

21
Q

Profitability ratios

A

How much money the company is making (EPS)

22
Q

Liquidity ratios

A

Ability to pay short-term obligations

Currenr ratio, working capital

23
Q

Solvency ratios

A

Ability ro survive

Debt to total assets ratio

24
Q

Steps in determing inventory quantities

A
  1. Take a physical inventory of goods on hand
  2. Determine the ownership of goods in transit or on consignment
25
Q

Primary basis of accounting for inventories:

A

Cost

26
Q

Ending inventory under FIFO

A

closest to current value

27
Q

Inventory under LIFO

A

farthest from current value

28
Q

LIFO results in

A

lower net income

lower income taxes

29
Q

Beginning Retained earnings to Ending formula

A

Beginning retained earnings

+ Net income

  • Dividends

= Ending retained earnings

30
Q

Working capital: analyzing liquidity

A

Positive working capital provides liquidity (can pay off short-term liabilities)

negative working capital - could go bankrupt; does not necessarily mean a company has liquidity problems

31
Q

Current ratio: analyzing liquidity

A

Current ratio is a more reliable indicator of liquidity than working capital

97:1 - for every 1 dollar of current liabilities, they have 97 cents of assets

*could be innaccurate because it depends what kind of current assets it has - cash or inventory?

32
Q

Debt to total assets ratio: analyzing solvency

A

Measures the amount of financing provided by creditors

Higher the percentage - more riskier the company is and may be unable to pay off debts

33
Q

Free Cash Flow =

A

Cash provided by operations

  • capital expenditures
  • cash dividends

= Free Cash Flow

34
Q

Earings per share: analyzing profitability

A

Shows how much income is earned per each share of common stock

Can be used for year-to-year comparrisons but not accros companies

35
Q

Gross Profit Rate: Analyzing Profitability

A

Measures how much a company profits off the sale of its inventory

Shows how much a company is able to mark up their inventory & how cheaply they can purchase the inventory

*Can compare year-to-year and within the same industry

36
Q

Receiving a bank loan

A

Notes payable is creditted

37
Q

Other revenues and gains

A

Interest revenue

Dividend revenue

Rent Revenue

Gain - from sale of PP&E

38
Q

Other Expenses and Losses

A

Interest expense

Casualty losses - vandalism and accidents

Loss - from sale of PP&E

Loss - from strikes

accounting (31 decks)

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