Accounting Review

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Quiz 8

1. Financial reporting provides information that is useful in each of the following situations except:
   
   
   1. making investment and credit decisions
   2. assessing cash flow prospects.
   3. making employment decisions.
   4. assessing business resources, claims to those resources, and changes in them.


2. Accounting information is said to be useful if it is:
   
   
   1. timely and biased.
   2. relevant and reliable.
   3. relevant and uncertain.
   4. accurate and faithful.


3. To ignore an amount because it is small in relation to the financial statements taken as a whole is an application of:
   
   
   1. materiality.
   2. conservatism.
   3. full disclosure.
   4. comparability.


4. Accounting is concerned with providing information to decision makers. The overall framework of rules within accountants work to provide this information is best described as:
   
   
   1. business transactions.
   2. data processing;
   3. generally accepted accounting principles.
   4. income tax laws.


5. A note receivable due in two years normally would be classified as:
   
   
   1. a current asset.
   2. an investment.
   3. property, plant, and equipment.
   4. an intangible asset.


6. The current portion of long-term debt is normally classified as:
   
   
   1. current assets.
   2. current liabilities.
   3. long-term liabilities.
   4. owner’s equity.


7. A disadvantage of the single-step income statement is that:
   
   
   1. gross margin from sales is not disclosed separately.
   2. other revenues and expenses are separated from operating items.
   3. interest expense is not disclosed.
   4. the cost of goods sold cannot be determined.


8. Which of the following ratios is a measure of liquidity?
   
   
   1. Return on equity
   2. Return on assets
   3. Profit margin
   4. Current ratio


9. Net income is a component in determining each of the following ratios except:
   
   
   1. profit margin.
   2. return on assets.
   3. debt to equity.
   4. return on equity.


10. If a company has a profit margin of 4.0 percent and an asset turnover of 3.0 times, its return on assets is approximately:
    
    
    1. 1.3 percent.
    2. 3.0 percent.
    3. 4.0 percent.
    4. 12.0 percent.

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