Questions and Answers of Accounting What The Numbers Mean

It means that revenues have been earned from selling products or providing services but that the accounts receivable from those revenues have not yet been collected or if the receivables have been
It means that transactions affecting the income statement also affect the owners' equity section of the balance sheet as well as the asset and/or liability sections of the balance sheet.
It means that all expenses incurred in generating revenue for the period are subtracted from those revenues to determine net income. Matching does not mean that revenues equal expenses.
It means that revenues and expenses are recognized in the accounting period in which they are earned or incurred, even though cash is received or paid in a different accounting period.
It means that there may be both qualitative (for example, workforce morale) and quantitative (for example, opportunity cost) factors that are not reflected in the financial statements.
The difference between the total amount invested by the owners and the par value or stated value of the stock issued. a. Accumulated depreciation b. Balance sheet c. Accrued liabilities d. Current
Outflows or using up of assets or incurrence of liabilities during a period from delivering or producing goods, rendering services, or carrying out other activities that constitute the entity's major
The financial statement that is a list of the entity's assets, liabilities, and owners' equity at a point in time. a. Accumulated depreciation b. Balance sheet c. Accrued liabilities d. Current
A document distributed to stockholders that contains the financial statements for the fiscal year of the reporting firm with the report of the external auditor's examination of the financial
A distribution of earnings to the owners of a corporation. a. Accumulated depreciation b. Balance sheet c. Accrued liabilities d. Current assets e. Current liabilities f. Merchandise inventory g.
An arbitrary value assigned to a share of stock when the corporation is organized. a. Accumulated depreciation b. Balance sheet c. Accrued liabilities d. Current assets e. Current liabilities f.
Net income available to the common stockholders divided by the average number of shares of common stock outstanding during the period. a. Accumulated depreciation b. Balance sheet c. Accrued
Items held by an entity for sale to potential customers in the normal course of business. a. Accumulated depreciation b. Balance sheet c. Accrued liabilities d. Current assets e. Current liabilities
Inflows of cash or increases in other assets, or settlement of liabilities during a period from delivering or producing goods, rendering services, or other activities that constitute the entity's
Cash and those assets likely to be converted to cash or used to benefit the entity within one year of the balance sheet date. a. Accumulated depreciation b. Balance sheet c. Accrued liabilities d.
Cumulative net income that has not been distributed to the owners of a corporation as dividends. a. Accumulated depreciation b. Balance sheet c. Accrued liabilities d. Current assets e. Current
The difference between gross profit and operating expenses. Also referred to as operating income and earnings from operations. a. Accumulated depreciation b. Balance sheet c. Accrued liabilities d.
Increases in net assets from incidental transactions and other events affecting an entity during a period except those that result from revenues or investments by owners. a. Accumulated depreciation
A presumption that the entity will continue in existence for the indefinite future. a. Accumulated depreciation b. Balance sheet c. Accrued liabilities d. Current assets e. Current liabilities f.
Net sales less cost of goods sold. a. Accumulated depreciation b. Balance sheet c. Accrued liabilities d. Current assets e. Current liabilities f. Merchandise inventory g. Revenues h. Expenses i.
Which of the following is not a correct expression of the accounting equation?a. Assets — Liabilities = Owners’ equityb. Net assets = Liabilities + Owners’ equityc. Assets = Liabilities +
Partnerships, as contrasted with corporations, can be characterized as being relativelya. easier to form, less risky to be an owner of, and easier to raise large amounts of capital for.b. easier to
The owners’ equity section of a balance sheet contains two major components:a. Common Stock and Additional Paid-in Capital.b. Paid-in Capital and Retained Earnings.c. Common Stock and Retained
Which of the following accounts is not an asset?a. Cash.d. Equipment.b. Inventory.e. Land.c. Accounts Payable.
Which of the following financial statement descriptions is inaccurate?a. Balance Sheet—shows the organization’s financial position for a period of time.b. Income Statement—shows what the
If total assets were $21,000 and total liabilities were $12,000 at the beginning of the year, and if net income for the year was $5,000, what is total owners’ equity at the end of the year?a.
At the beginning of the year, owners’ equity totaled $119,000. During the year, net income was $35,000 and dividends of $29,000 were declared and paid. Owners’ equity at the end of the year wasa.
The principle stating that all expenses incurred while earning revenues should be identified with the revenues when they are earned and reported for the same time period is thea. cost principle.b.
Corporate annual reports do not ordinarily includea. a transmittal letter from the president or chairman of the board of directors.b. financial statements for the most recent year.c. explanatory
Which of these is not a limitation of financial statements?a. Qualitative data are not reflected in financial statements.b. Market values of assets are not generally reported.c. Estimates are
Identify accounts by category and financial statement(s) Listed here are a number of financial statement captions. Indicate in the spaces to the right of each cap- tion the category of each item and
Identify accounts by category and financial statement(s) Listed here are a number of financial statement captions. Indicate in the spaces to the right of each cap- tion the category of each item and
Calculate retained earnings From the following data, calculate the retained earn- ings balance as of December 31, 2009: Retained earnings, December 31, 2008... $311,800 Cost of equipment purchased
Calculate retained earnings From the following data, calculate the retained earn- ings balance as of December 31, 2008: Retained earnings, December 31, 2009... Decrease in total liabilities during
Calculate dividends using the accounting equation At the beginning of its cur- rent fiscal year, Willie Corp.'s balance sheet showed assets of $12,400 and liabilities of $7,000. During the year,
Calculate net income (or loss) using the accounting equation At the beginning of the current fiscal year, the balance sheet for Davis Co. showed liabilities of $320,000. During the year liabilities
Calculate cash available upon liquidation of business Circle-Square, Ltd., is in the process of liquidating and going out of business. The firm's balance sheet shows $22,800 in cash, accounts
Calculate cash available upon liquidation of business Kimber Co. is in the process of liquidating and going out of business. The firm’s accountant has provided the following balance sheet and
Understanding and analyzing financial statement relationships—sales/service LO 2y 3, 4 organization Pope’s Garage had the following accounts and amounts in its financial statements on December
Understanding and analyzing financial statement relationships-merchandising organization Gary's TV had the following accounts and amounts in its financial statements on December 31, 2009. Assume that
Prepare an income statement, balance sheet, and statement of changes in owners' equity; analyze results The following information was obtained from the records of Breanna, Inc.:Except as otherwise
Transaction analysis-nonquantitative Indicate the effect of each of the following transactions on total assets, total liabilities, and total owners' equity. Use + for increase, - for decrease, and
Complete the balance sheet A partially completed balance sheet for Blue Co., Inc., as of January 31, 2009, follows. Where amounts are shown for various items, the amounts are correct.Required:Using
Complete the balance sheet using cash flow data Following is a partially completed balance sheet for Epsico, Inc., at December 31, 2009, together with com- parative data for the year ended December
Understanding income statement relationships-Levi Strauss & Co. Following are selected data from the November 26, 2006, and November 27, 2005, consolidated balance sheets and income statements
Understanding income statement relationships-Home Depot, Inc. Selected data from the January 28, 2007, and January 29, 2006, consolidated balance sheets and income statements for the years then ended
Prepare a personal balance sheet and projected income statement; explain financial statement relationships.a. Prepare a personal balance sheet for yourself as of today. Work at identifying your
How to calculate and interpret margin and turnover using the DuPont model.
The significance and calculation of working capital, the current ratio, and the acid-test ratio.
It means that almost everything is relative, so comparison of individual and group trends is important when making judgments about performance.
It means that the economic outcome (the amount of return) is related to the input (the investment) utilized to produce the return.
It means that investors and others can evaluate the economic performance of a firm, and make comparisons between firms, by using this ratio.
It means that a better understanding of ROI is achieved by knowing about the profitability from sales (margin) and the efficiency with which assets have been used (turnover) to generate sales.
It means that the focus is changed from return on total assets to return on the portion of total assets provided by the owners of the firm.
It means that the firm has enough cash, and/or is likely to soon collect enough cash, to pay its liabilities that are now, or soon will be, due for payment.
It means that the company is following the industry; it does not necessarily mean that the company is doing better than the industry because the company's higher ROE may be caused by its use of
The percentage of net income to net sales. a. Ratio b. Trend analysis C. Rate of return d. Interest m. j. Turnover k. Return on equity 1. Working capital Liquidity e. Principal n. Current ratio f.
The amount of money invested or borrowed. a. Ratio b. Trend analysis C. Rate of return d. Interest m. j. Turnover k. Return on equity 1. Working capital Liquidity e. Principal n. Current ratio f.
The difference between current assets and current liabilities. a. Ratio b. Trend analysis C. Rate of return d. Interest m. j. Turnover k. Return on equity 1. Working capital Liquidity e. Principal n.
The percentage of net income divided by average owners' equity for the fiscal period in which the net income was earned. a. Ratio b. Trend analysis C. Rate of return d. Interest m. j. Turnover k.
An indication of a firm's ability to meet its current financial obligations. a. Ratio b. Trend analysis C. Rate of return d. Interest m. j. Turnover k. Return on equity 1. Working capital Liquidity
The quotient of sales divided by the average assets for the year or some other fiscal period. a. Ratio b. Trend analysis C. Rate of return d. Interest m. j. Turnover k. Return on equity 1. Working
Evaluation of data patterns over time. a. Ratio b. Trend analysis C. Rate of return d. Interest m. j. Turnover k. Return on equity 1. Working capital Liquidity e. Principal n. Current ratio f. Risk
The income or expense from investing or borrowing money. a. Ratio b. Trend analysis C. Rate of return d. Interest m. j. Turnover k. Return on equity 1. Working capital Liquidity e. Principal n.
A calculation of return on investment made by multiplying margin by turnover. a. Ratio b. Trend analysis C. Rate of return d. Interest m. j. Turnover k. Return on equity 1. Working capital Liquidity
The ratio of the sum of cash (including temporary cash investments) and accounts receivable to current liabilities. a. Ratio b. Trend analysis C. Rate of return d. Interest m. j. Turnover k. Return
Return on investment (ROI) can be described or computed in each of the following ways excepta. Amount invested / Amount of return ROI. =b. Net income / Average total assets = ROI.c. (Net income /
Working capital includes all of the following accounts except Accounts Payable.a. b. Cash. C. Accumulated Depreciation.d. Merchandise Inventory.
Which of the following would not decrease working capital?a. A decrease in Cash.b. An increase in Accounts Payable. C. An increase in Merchandise Inventory.d. A decrease in Accounts Receivable.
Assume that Kulpa Company has a current ratio of 0.7. Which of the following transactions would increase this ratio?a. Purchasing merchandise inventory on credit.b. Selling merchandise inventory at
The current ratio isa. 1.05.b. 1.5. C. 1.55.d. 2.0. BAREFOOT INDUSTRIES Balance Sheet and Income Statement Data At December 31, 2009, and for the Year Then Ended Assets Cash.... Accounts receivable.
The acid-test ratio isa. 1.05.b. 1.5. C. 1.55.d. 2.0. BAREFOOT INDUSTRIES Balance Sheet and Income Statement Data At December 31, 2009, and for the Year Then Ended Assets Cash.... Accounts
The amount of working capital that would remain if $400 of land was purchased on January 1, 2010, with the use of $200 cash and $200 of long-term debt isa. $200.b. $400. C. $600.d. $900. BAREFOOT
Assume that both total assets and total owners' equity were the same on December 31, 2008, as on December 31, 2009. The margin, ROI, ROE, and turnover area. 10 percent, 20 percent, 60 percent, 2.0.b.
Compare investment alternatives Two acquaintances have approached you about investing in business activities in which each is involved. Julie is seeking $560 and Sam needs $620. One year from now
Compare investment alternatives A friend has $4,800 that has been saved from her part-time job. She will need her money, plus any interest earned on it, in six months and has asked for your help in
Compare investment alternatives You have two investment opportunities. One will have a 10% rate of return on an investment of $500; the other will have an 11% rate of return on principal of $700. You
Compare investment alternatives You have accumulated $8,000 and are looking for the best rate of return that can be earned over the next year. A bank savings account will pay 6%. A one-year bank
ROI analysis using DuPont modela. Firm A has a margin of 12%, sales of $600,000, and ROI of 18%. Calculate the firm's average total assets.b. Firm B has net income of $78,000, turnover of 1.3, and
ROI analysis using DuPont modela. Firm D has net income of $83,700, sales of $2,790,000, and average total assets of $1,395,000. Calculate the firm's margin, turnover, and ROI.b. Firm E has net
Calculate ROE At the beginning of the year, the net assets of Carby Co. were $346,800. The only transactions affecting owners' equity during the year were net income of $42,300 and dividends of
Calculate margin, net income, and ROE For the year ended December 31, 2009, Ebanks, Inc., earned an ROI of 12%. Sales for the year were $96 million, and average asset turnover was 2.4. Average
Effect of transactions on working capital and current ratio Management of Riv- ers Co. anticipates that its year-end balance sheet will show current assets of $12,639 and current liabilities of
Effect of transactions on working capital and current ratio Evans, Inc., had current liabilities at November 30 of $137,400. The firm's current ratio at that date was 1.8. Required:a. Calculate the
Calculate profitability measures using annual report data Using data from the financial statements of Intel Corporation in the appendix, calculatea. ROI for 2006. Round your percentage answers to one
Calculate profitability and liquidity measures Presented here are the compara- tive balance sheets of Hames, Inc., at December 31, 2009 and 2008. Sales for the year ended December 31, 2009, totaled
Calculate and analyze liquidity measures Following are the current asset and current liability sections of the balance sheets for Freedom, Inc., at January 31, 2009 and 2008 (in millions):Required:a.
Calculate and analyze liquidity measures Following are the current asset and current liability sections of the balance sheets for Calketch, Inc., at August 31, 2009 and 2008 (in millions):Required:a.
Applications of ROI using DuPont model; manufacturing versus service firm Manyops, Inc., is a manufacturing firm that has experienced strong competition in its traditional business. Management is
ROI analysis using DuPont model Charlie's Furniture Store has been in busi- ness for several years. The firm's owners have described the store as a "high-price, high-service" operation that provides
Analysis of liquidity and profitability measures of Motorola, Inc. The following summarized data (amounts in millions) are taken from the December 31, 2006 and 2005, comparative financial statements
Analysis of liquidity and profitability measures of Dell, Inc. The following data (amounts in millions) are taken from the February 3, 2006, and January 28, 2005, comparative financial statements of
The expansion of the basic accounting equation to include revenues and expenses.
How the expanded accounting equation stays in balance after every transaction.
How the income statement is linked to the balance sheet through owners' equity.
The meaning of the bookkeeping terms journal, ledger, T-account, account balance, debit, credit, and closing the books.
That the bookkeeping system is a mechanical adaptation of the expanded accounting equation.
How to analyze a transaction, prepare a journal entry, and determine the effects of the transaction on the financial statements.
The five questions of transaction analysis.
What does it mean to determine “what kind of account” an account is?

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