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Exam 5: Communicating and Interpreting Accounting Information

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Question 61

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Which of the following statements is false?

A) The board of directors meets with the external auditors to discuss management's compliance with their financial reporting obligations.
B) The external auditors are selected by the Securities & Exchange Commission (SEC) .
C) The Securities & Exchange Commission (SEC) requires publically traded companies to have their financial statements audited by an independent accountant.
D) The external auditors assume some responsibility with respect to the fairness of the financial statements.

E) C) and D)
F) B) and D)

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Question 62

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Preparers of the statement of cash flow must choose the direct or indirect method for each activity section of the statement.

A) True
B) False

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Question 63

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The following income statement was reported for Bauer Inc. for the first year of operations ending December 31, 2016 reported (in thousands of dollars): Requirement: A.Calculate gross profit percentage. B.Calculate net profit margin. C.Calculate earnings per share if there are 200,000 shares of common stock outstanding.

Twin Lakes, Inc. reported the following December 31 amounts in its financial statements: Requirements: Compute the following for the 2017 ratios: A.Gross profit percentage B.Net profit margin C.Total asset turnover D.Return on assets

Which of the following tasks does the Financial Accounting Standards Board (FASB) perform?

The Financial Accounting Standards Board (FASB) oversees the work of the Public Company Accounting Oversight Board (PCAOB).

The mission of the Securities & Exchange Commission (SEC) is to develop generally accepted accounting principles.

Farrell Company has rent expense, wages expense, and utilities expense. Where will the company present these expenses on the income statement?

Which of the following statements is correct?

The Callie Company has provided the following information: Operating expenses were $231,000; Cost of goods sold was $376,000; Net sales were $940,000; Interest expense was $32,000; Gain on sale of a building was $76,000; Income tax expense was $151,000. What was Callie's income from operations (operating income) ?

Which of the following transactions will decrease both the return on assets ratio and the total asset turnover ratio?

The Willie Company has provided the following information: Operating expenses were $345,000; Income from operations was $415,000; Net sales were $1,100,000; Interest expense was $71,000; Loss from sale of investments was $87,000; Income tax expense was $58,000. What was Willie's net income?

Huron has provided the following year-end balances: Cash, $25,000 Patents, $7,900 Accounts receivable, $9,300 Property, plant, and equipment, $98,700 Prepaid insurance, $3,600 Accumulated depreciation, $10,000 Inventory, $37,000 Retained earnings, 15,500 Trademarks, $12,600 Accounts payable, $8,000 Goodwill, $11,000 How much are Huron's current assets?

The following data were taken from the adjusted trial balance of Kent Corporation. Requirement: Prepare a classified balance sheet in good form at December 31, 2016. (Ignore income taxes).

The return on assets ratio may increase when sales increase.

FocusMore, Inc., had the following list of accounts taken from its adjusted trial balance at December 31, 2016: Required: Prepare a multiple step income statement for the year ended December 31, 2016. (Include gross profit, but ignore income taxes.)

Determine the effect of the following transactions on the identified financial statement components and ratios. Code your answers as follows: A: If the transaction results in an increase in the financial statement component or ratio. B: If the transaction results in a decrease in the financial statement component or ratio. C: If the transaction does not affect the financial statement component or ratio. Transaction 1: A company paid for research and development costs incurred to develop a patent. Net income _____ Property, plant, and equipment _____ Stockholders' equity _____ Net profit margin ratio _____ Transaction 2: Inventory was purchased on account. Net income _____ Current assets _____ Current liabilities _____ Return on assets ratio _____

Harley Company has provided the following selected financial information. What is Harley's 2016 net profit margin (rounded) ?

Determine the effect of the following transactions on the identified financial statement components and ratios. Code your answers as follows: A: If the transaction results in an increase in the financial statement component or ratio. B: If the transaction results in a decrease in the financial statement component or ratio. C: If the transaction does not affect the financial statement component or ratio. Transaction 1: A company accrued interest expense at year-end. Net income _____ Assets _____ Stockholders' equity _____ Total asset turnover ratio _____ Transaction 2: A company declared and paid dividends to stockholders. Net income _____ Assets _____ Stockholders' equity _____ Return on assets ratio _____