Financial Information for Managers Study Guide Questions
Course Introduction
Financial Information for Managers equips students with the skills necessary to interpret, analyze, and utilize financial data for effective decision-making within organizations. The course covers essential concepts in financial accounting and managerial accounting, including the preparation and understanding of key financial statements, budgeting, cost analysis, and financial performance evaluation. Students will learn how to use financial information to assess organizational health, support strategic planning, and communicate financial insights to stakeholders, enabling them to make informed managerial decisions in a dynamic business environment.
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Using Financial Accounting Information The Alternative to Debits and Credits 10th Edition by Gary
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Chapter 1: Accounting As a Form of Communication
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Sample Questions
Q1) Which of the following best describes the term "equity"?
A)The amount of total profits earned by a business since it began operations
B)The amount of interest or claim that the owners have in the business
C)The economic resources of a business entity
D)The cumulative profits earned by a business less any dividends distributed
Answer: B
Q2) Which one of the following financial statements reports an entity's financial position at a specific date?
A)Balance sheet
B)Statement of retained earnings
C)Income statement
D)Both the income statement and the balance sheet
Answer: A
Q3) The concept that assumes that an entity is not in the process of liquidation is _________________________.
Answer: going concern
Q4) Business entities and non-business entities are both organized to earn a profit.
A)True
B)False
Answer: False
Page 3
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Chapter 2: Financial Statements and the Annual Report
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Sample Questions
Q1) Tavella Co.applies the consistency convention.What does this mean?
A)Tavella Co.uses the same names for all its expenses as its competitors.
B)Tavella Co.has selected certain accounting principles that can never be changed.
C)Tavella Co.applies the same accounting principles each accounting period.
D)Tavella Co.applies the same accounting principles as its competitors.
Answer: C
Q2) The amount of a transaction may be immaterial by company standards but still be considered significant by financial statement users.
A)True
B)False
Answer: True
Q3) Which of the following is a noncurrent asset?
A)Land
B)Accounts receivable
C)Cash
D)None of these are correct
Answer: A
Q4) Equipment is classified as a ____________________ asset on the balance sheet.
Answer: noncurrent
4
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Chapter 3: Processing Accounting Information
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Sample Questions
Q1) Not all recognizable events are supported by a standard source document.
A)True
B)False
Answer: True
Q2) A debit is a negative entry.
A)True
B)False
Answer: False
Q3) If the landlord has rent _________,then the tenant has rent _________.
A)revenue;revenue
B)revenue;expense
C)expense;revenue
D)expense;expense
Answer: B
Q4) Various transactions may change the amount and composition of the assets and liabilities,but the ____________________________ must balance after each transaction.
Answer: balance sheet or trial balance or journal entry
Q5) Liabilities and stockholders' equity are ____________________ by debits.
Answer: decreased
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Chapter 4: Income Measurement and Accrual Accounting
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Sample Questions
Q1) The one asset account that never requires adjustment at the end of the period is
Q2) Windstar Corp.purchased supplies at a cost of $6,000 during the year.At December 31,supplies on hand are $1,400.Supplies expense for the year was $5,200.How much were supplies on hand at January 1?
A)$2,200
B)$11,200
C)$1,400
D)$600
Q3) Based on its income for the month,Reel Company estimates that federal income taxes for the month of May will be $11,000.What is the effect of the adjustment on the financial statements?
A)Increase retained earnings
B)Increase income taxes expense
C)Increase net income
D)Decrease income taxes payable
Q4) Balance sheet accounts are called real accounts.
A)True
B)False
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Chapter 5: Inventories and Cost of Goods Sold
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Sample Questions
Q1) Explain the relationship between the valuation of inventory and income measurement as it relates to the balance sheet and the income statement.
Q2) If the direct method is used to prepare the Operating Activities category of the statement of cash flows,the amount of cash paid to suppliers of inventory is shown as an addition in this section of the statement.
A)True
B)False
Q3) If Roki uses the LIFO method,the cost of goods sold for June would be
A)$1,354.00.
B)$2,200.00.
C)$2,272.50.
D)$2,296.08.
Q4) Describe how the inventories of manufacturers differ from the inventories of retailers.
Q5) According to the IRS's LIFO conformity rule,a company that chooses LIFO to report net income to its stockholders may not use LIFO in preparing its tax return.
A)True
B)False
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Chapter 6: Cash and Internal Control
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Sample Questions
Q1) While reconciling the checking account,an accountant with Sonic Corporation noticed that an error had been made in recording a check received by the company.Sonic recorded the receipt as $729,and the correct amount of the check was $279.Which of the following reconciling adjustments is required?
A)Add $450 to the company's book balance
B)Deduct $450 from the company's book balance
C)Add $450 to the bank statement balance
D)Deduct $450 from the bank statement balance
Q2) Which of the following items would not be a reconciling item?
A)Canceled checks
B)NSF checks
C)Outstanding checks
D)Deposits in transit
Q3) The clerk in the accounting department records both purchases and payments of invoices.
A)Adheres to sound internal control procedures
B)Violates sound internal control procedures
C)Neither strengthens nor violates internal control
Q4) A(n)__________ is a form sent by the purchasing department to the supplier.
Q5) What is meant by "cash equivalents"?
Page 8
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Chapter 7: Receivables and Investments
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Sample Questions
Q1) See the data for Lynx Corp. If Lynx Corp.uses the aging of accounts receivable approach to estimate its bad debts,what will be the net realizable value of its accounts receivable after the adjustment for bad debts expense?
A)$140,000
B)$156,000
C)$167,000
D)$184,000
Q2) An increase in accounts receivable is reported on the statement of cash flows under the indirect method as an addition.
A)True
B)False
Q3) Which of the following statements is true regarding dividend income?
A)Dividend income is accrued at year-end.
B)Dividend income is reported on the income statement.
C)Dividend income appears in the Stockholders' Equity section of the balance sheet.
D)Dividend income is recognized by companies that own debt securities.
Q4) Identify two methods of accelerating cash from sales.
Q5) The maker of a note recognizes __________ on its income statement.
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Chapter 8: Operating Assets: Property, Plant, and Equipment, and Intangibles
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Sample Questions
Q1) Fill in the table shown below indicating the period of time over which each intangible asset should be amortized,and indicate the amount of amortization expense that should be reported for 2017.
\[\begin{array} { | l | c | c | }
\hline & \text { Goodwill } & \text { Trademark } \\
\hline \text { Cost } & \$ 80,000 & \$ 55,000 \\
\hline \text { Date of purchase } & \text { June } 30,2017 & \text { January } 1,2017 \\
\hline \text { Legal life } & \text { Forever } & 20 \text { years } \\
\hline \text { Useful life } & 60 \text { years } & 10 \text { years } \\
\hline \text { 2017 Am ontization expense } & & \\
\hline
\end{array}\]
Q2) Burgess Company purchased an asset on January 1,2015,for $10,000.The asset was expected to have a ten-year life and a $1,000 salvage value.The company uses the straight-line method of depreciation.On January 1,2017,the company determines that the asset will last only five more years.Calculate the amount of depreciation for 2017.
Q3) Distinguish between tangible and intangible operating assets.
Q4) Explain what costs are included in the acquisition cost of operating assets.
Page 10
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Chapter 9: Current Liabilities, Contingencies, and the Time
Value of Money
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Sample Questions
Q1) Below are three notes payable:
\[\begin{array} { l l l l } & \text { Note Face Value (Principal) } & \text { Rate } & \text { Term } \\
\text { 1. } & \$ 30,000 & 4 \% & 6 \text { years } \\
\text { 2. } & 30,000 & 6 \% & 4 \text { years } \\
\text { 3. } & 30,000 & 8 \% & 3 \text { years }
\end{array}\] Required
Part 1.For each of the notes,calculate the simple interest due at the end of the term.
Part 2.Now assume that the interest on the notes is compounded annually.Calculate the amount of interest due at the end of the term for each note.
Part 3.Finally,assume that the interest on the notes is compounded semiannually.Calculate the amount of interest due at the end of the term for each note.
Part 4.What conclusion can you draw from a comparison of your results of each of the three scenarios?
Q2) What is meant by the term current maturities of long-term debt in the Current Liabilities section of the balance sheet?
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Chapter 10: Long-Term Liabilities
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Sample Questions
Q1) The attitude of the Financial Accounting Standards Board toward deferred tax liabilities is that they are
A)an amount that results in a future obligation and meets the definition of a liability.
B)a bookkeeping item that is used merely to maintain equality of the accounting equation.
C)not true liabilities because the balance increases every year.
D)not payable in the immediate future so it is not necessary to record them.
Q2) All liabilities that are not classified as current liabilities are classified as
Q3) The effective interest rate method of amortization amortizes the discount or premium in a manner that produces a constant amount of interest expense from period to period.
A)True
B)False
Q4) When a bond issue is retired early,the amount of unamortized discount or premium is not considered in the calculation of a gain or loss.
A)True
B)False
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Chapter 11: Stockholders Equity
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Sample Questions
Q1) Which accounts are used by a sole proprietorship that are not used by a corporation?
Q2) The number of shares issued less the number of shares held as treasury stock is the number of __________.
Q3) Chad Darrow,CFO of your company,is considering constructing a deal with Extreme Industries,whereby stock is issued in exchange for an asset (custom extrusion equipment valued at $400,000 by an outside appraiser).The stock to be exchanged is a new class of preferred stock that has not yet been traded in the open market.He has asked that you draft a memo to Marc Lyon,CEO,about the valuation of the asset to be used in the exchange.In your memo,address the reporting amount for the asset and how fair market value could be determined.
Q4) With respect to the statement of cash flows,
A)retirement and repurchase of stock is a financing activity.
B)a stock split is a financing activity.
C)a stock dividend is an investing activity.
D)the declaration of a cash dividend account is an operating activity.
Q5) Explain the differences between a partnership and sole proprietorship.Include in your discussion whether either is considered a separate legal entity.
Q6) The annual dividend amount divided by the annual net income is the __________.
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Chapter 12: The Statement of Cash Flows
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Sample Questions
Q1) Which method of preparing the Operating Activities section of a statement of cash flows reports major classes of gross cash receipts and cash payments for revenues and expenses?
A)The direct method
B)The indirect method
C)Both the direct method and indirect methods
D)Neither the direct method nor the indirect method
Q2) If the December 31,2017,balance of accounts receivable is higher than the January 1,2017,balance,then the amount of cash collections will be less than the sales on account for the year.
A)True
B)False
Q3) Which of the following is not a financing activity?
A)Issuing bonds for cash
B)Selling an investment in IBM stock for cash
C)Purchasing a company's own stock (treasury stock)for cash
D)Making a cash payment to repay a bank loan
Q4) A decrease in retained earnings indicates that a cash dividend has been paid.
A)True
B)False
Page 14
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Chapter 13: Financial Statement Analysis
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Sample Questions
Q1) Refer to the financial information for St.Petersburg Corporation.
Required
Calculate the earnings per share for St.Petersburg for 2018 and 2017 assuming an average of 100,000 common shares were outstanding during 2018 and an average of 80,000 common shares were outstanding during 2017.Explain the change as it probably relates to the market value of the stock.
Q2) Sandy Shores,Inc.reported the following amounts in its financial statements: \(\begin{array}{lrr}&2018&2017\\
\text { Average merchandise inventory } & \$ 200,000 & \$ 120,000 \\
\text { Cost of goods sold } & 4,000,000 & 3,000,000 \end{array}\)From 2017 to 2018,the company's management of inventory is
A)declining,because the number of days' sales in inventory is getting larger.
B)increasing,because the number of days' sales in inventory is getting larger.
C)declining,because the number of days' sales in inventory is getting smaller.
D)increasing,because the number of days' sales in inventory is getting smaller.
Q3) What do profitability ratios measure? Explain.
Q4) What would be at least three reasons for a decrease in inventory turnover? Explain.
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Chapter 14: International Financial Reporting Standards
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Sample Questions
Q1) In countries,like Japan and much of Europe,fewer differences between the amount of income reported to stockholders and that reported to the taxing authorities exist than in the United States.
A)True
B)False
Q2) Which of the following is a true statement about the terms used on the balance sheet?
A)U.S.GAAP requires a standard set of terms on the balance sheet.
B)IFRS require a standard set of terms on the balance sheet.
C)Terminology is consistent across all countries.
D)Neither IFRS nor U.S.GAAP requires a standard set of terms on the balance sheet.
Q3) No single explanation can be given for the divergence of accounting standards.
A)True
B)False
Q4) According to the text,in economies like those that made up the former Soviet Union,accounting standards are relatively less complex due to the fact that they are just beginning to be developed.
A)True
B)False
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