_______ accounting serves internalusers, whereas_______ accounting serves external users.

A.

Managerial; financial

B.

Managerial; advisory

C.

Financial; managerial

D.

Investigative; forensic

E.

Public; financial

Generally accepted accounting principles(GAAP) that govern the content and form of financial reports are established by the_______.

A.

Financial Accounting Standards Board(FASB)

B.

International Accounting Standards Board(IASB)

C.

Sarbanes-Oxley Act(SOX)

D.

Federal Accounting Review Board(FARB)

E.

Financial Reporting Council(FRC)

Which of the following is the accountingequation?

A.

Liabilities= Owners' Equity+ Assets

B.

Owners' Equity= Liabilities+ Assets

C.

Assets= Liabilities+ Owners' Equity

D.

Assets= Liabilities- Owners' Equity

E.

Assets Liabilities= Owners' Equity

In the accountingequation, which of the following would be characterized as aliability?

A.

Grant Industries has finished goods inventory in its warehouse valued at$205,000.

B.

Grant Industries owns a manufacturing facility valued at approximately$1.3 million.

C.

Grant Industries has a mortgage on its manufacturing facility in the amount of$750,000.

D.

Grant Industries has outstanding invoices for products shipped to customers in the amount of$343,000.

E.

Grant Industries has profits earned by and reinvested in the company of nearly$3.2 million.

HeritageMechanical's balance sheet at the end of the year shows assets of$675,000 andowners' equity of$366,000. Which of the following can be assumed on the basis of thisinformation?

A.

The company has liabilities of$1,041,000.

B.

The company earned a gross profit during the year.

C.

The company has liabilities of$309,000.

D.

Thecompany's liabilities exceed its assets.

E.

The company has a net worth of$309,000.

On afirm's balancesheet, which of the following would be characterized as an intangibleasset?

A.

Cash

B.

Merchandise inventory

C.

Land

D.

Accounts receivable

E.

Patents

On afirm's balancesheet, which of the following would be characterized as a fixedasset?

A.

Accounts receivable

B.

Merchandise inventory

C.

Goodwill

D.

Marketable securities

E.

Manufacturing equipment

The three basic financial statements prepared by accountants are the_______.

A.

balancesheet, budget, and income statement

B.

balancesheet, incomestatement, and statement of cash flows

C.

profit-and-loss statement,budget, and income statement

D.

balancesheet, statement of retainedearnings, and statement of cash flows

E.

balancesheet, budget, and statement of cash flows

Which of the following financial statements would report whether the firm earned a profit or incurred a loss during a specific period oftime?

A.

Income statement

B.

Balance sheet

C.

Statement of retained earnings

D.

Operating budget

E.

Statement of cash flows

The ease with which an asset can be converted to cash is known as_______.

A.

leverage

B.

depreciation

C.

liquidity

D.

equity

E.

fluidity

Funds that flow into a business from the sale of its goods or services are known as_______.

A.

equity

B.

liability

C.

assets

D.

capital

E.

revenues

Which of the following would be displayed on afirm's balancesheet?

A.

Profits, expenses, and revenues

B.

Operatingincome, netincome, and operating expenses

C.

Cost ofrevenues, cost of goodssold, and gross profit

D.

Income, expenses, and profits

E.

Assets, liabilities, andowners' equity

An office supply store maintains a supply ofpaper, toner, pencils andpens, and other items available for sale to customers. On thefirm's balancesheet, the inventory would be classified as_______.

A.

long-term liabilities

B.

a current asset

C.

a current liability

D.

owners' equity

E.

an intangible asset

Which of the following equations would be used to calculate afirm's grossprofit?

A.

Operating income- income taxes

B.

Revenue- cost of revenues

C.

Assets- liabilities

D.

Assets- equity

E.

Net sales total assets

Which of the following is the BEST description of cost of goodssold?

A.

The direct costs attributable to the production of the goods sold by a company

B.

Costs incurred by an organization from buying and sellingstocks, bonds,property, equipment, and other productive assets

C.

The costs of bad debts incurred by a firm when accounts receivable are not paid

D.

Incremental reductions in the value of an asset with the passage of time

E.

The sum of the revenues that flow into a business less the costs of those revenues

When LaShandra graduates from medical school nextyear, she will have accumulated over$200,000 in student loans. If an accountant prepared a personal balance sheet forLaShandra, these student loans would be listed as_______ on the balance sheet.

A.

intangible assets

B.

current liability

C.

retained earnings

D.

current asset

E.

along-term liability

The principle of_______ suggests that accountants and managers should provide not only financial data but also its interpretation and explanations for that data.

A.

full disclosure

B.

revenue recognition

C.

cost

D.

materiality

E.

matching

Current assets current liabilities represents afirm's _______.

A.

profitability ratio

B.

current ratio

C.

gross profit

D.

owners' equity

E.

inventory turnover ratio

A large property development firm takes out a mortgage on an office complex it owns so that it can purchase raw land upon which it intends to build a shopping mall. This is an example of_______.

A.

leverage

B.

the cost of revenues

C.

liquidity

D.

revenue recognition

E.

depreciation

Which of the following financial ratios would BEST measure afirm's ability to pay its immediatedebts?

A.

Debt-to-equity ratio

B.

Accounts receivable turnover ratio

C.

Short-term solvency ratio

D.

Profitability ratio

E.

Earnings per share

Which of the following BEST summarizes the purpose of examining acompany's currentratio?

A.

To measure thecompany's ability to pay immediate debts

B.

To determine the extent to which a firm is financed through borrowed funds

C.

To determine if thecompany's revenues are increasing faster than its costs

D.

To measure the efficiency with which a firm is using assets or resources to perform an activity

E.

To assess how much of a return an investor may reasonably expect onhis/her investment

Which of the following ratios would be used to determine the size of the dividend that a firm can payshareholders?

A.

Debt-to-earnings ratio

B.

Profit margin

C.

Earnings per share

D.

Return on equity

E.

Current ratio

Which of the following is the equation used to determine earnings pershare?

A.

Net income Total assets

B.

Net income Number of shares of common stock

C.

Net income Shareholders' equity

D.

Revenue- Cost of goods sold

E.

Total debt Total equity

As a generalrule, the_______ afirm's currentratio, the_______ the risk to investors or creditors.

A.

better; worse

B.

lower; higher

C.

higher; higher

D.

lower; lower

E.

higher; lower

Gibson Goods has currentassets, including cash and accountsreceivable, of$377,000. It owes$190,000 inshort-term debt, including trade credit and accounts payable. What is its currentratio?

A.

1.98

B.

0.50

C.

3.77

D.

2.01

E.

$187,000