Question 1

Which of the following statements regarding international financial reporting standards (IFRS)  is false?

Accepted Answer

A)   The reporting of extraordinary items is prohibited.
B)   Property, plant, and equipment can be reported on the balance sheet at either fair value or historical cost.
C)  The last-in first-out inventory method is permitted.
D)  Inventory write-downs are permitteD.The last-in first-out inventory method is prohibited under IFRS.

Question 2

Which of the following would not be classified as a current asset?

Accepted Answer

A)   Accounts receivable.
B)   Goodwill.
C)  Inventories.
D)  Non-trade receivables.

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

Which of the following results in an increase in the return on assets ratio?

Accepted Answer

A)   A decrease in the asset turnover ratio.
B)   An increase in the net profit margin ratio.
C)  Purchasing a building by signing a long-term mortgage payable.
D)  Using cash to purchase lanD.Return on assets is net income divided by average total assets or net profit margin ratio times asset turnover ratio. An increase in the net profit margin ratio therefore increases return on assets.

Question 5

The indirect method of reporting operating activities on the statement of cash flow begins with net income and adjusts for cash items.

Accepted Answer

A) True 
 B)False

Question 6

Polk Company suffered a loss from earthquake damage at its plant in Nebraska. The loss meets the criteria for an extraordinary item. Where will the company present the extraordinary item on the income statement?

Accepted Answer

A)   As a component of income from continuing operations.
B)   As a component of gross profit.
C)  After income from continuing operations but before net income.
D)  Prior to income from continuing operations before taxes.

Question 7

Which of the following statements is false when a company sells inventory costing $900 for $1,500 cash?

Accepted Answer

A)   Current assets increase $600.
B)   Gross profit increases $1,500.
C)  Stockholders' equity increases $600.
D)  Net sales increases $1,500.

Question 8

Complete the following balance sheet by entering the appropriate amounts in the blanks provided.

Accepted Answer

A. $40,000. ($90,000 Total Assets (F) - ...

Question 9

Which of the following is true?

Accepted Answer

A)   An extraordinary gain would increase income before taxes.
B)   Discontinued operations would be shown as a component of continuing operations on the income statement.
C)  Discontinued operations shown on the income statement will include that component's income or loss from operations from before its disposal.
D)  Results from discontinued operations may be used to predict future company results.

Question 10

The audit committee of the board of directors is responsible for maintaining the integrity of a company's financial statements and financial reporting.

Accepted Answer

A) True 
 B)False

Question 11

The return on assets ratio is calculated by dividing income from continuing operations by average total assets.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following statements is false?

Accepted Answer

A)   Gross profit percentage is calculated as gross profit divided by net sales.
B)   Gross profit should only be viewed for each reporting company and is not useful in comparing different companies in the same industry.
C)  Gross profit is calculated as net sales less cost of sales.
D)  A higher gross profit might be strategic in order to afford high research and development costs.

Question 13

Corporate governance refers to the procedures designed to ensure that the company is managed in the interest of the board of directors who oversee management.

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

Which of the following is not a responsibility of the chief executive officer (CEO)  and the chief financial officer (CFO) ?

Accepted Answer

A)   Overseeing the financial statement external audit.
B)   Ensuring the accuracy and completeness of all reports provided to the Securities & Exchange Commission (SE
C)  .
C)  The certification of the strength of the internal control system.
D)  The disclosure to the auditor committee of any frauds they are aware of.

Question 16

Which of the following best describes income from operations?

Accepted Answer

A)   It includes the results of discontinued operations.
B)   It includes extraordinary items.
C)  It is sales minus cost of goods sold and income tax expense.
D)  It is net sales minus cost of goods sold and operating expenses.

Question 17

Which of the following statements regarding international financial reporting standards (IFRS)  is false?

Accepted Answer

A)   Research and development costs are expensed.
B)   Research costs are expensed and development costs are capitalized.
C)  Cash payments for interest are reported on the cash flow statement as either an operating or financing cash flow.
D)  Reversal of inventory write-downs is permitteD.Development costs are capitalized under IFRS.

Question 18

The form 10-Q contains an unaudited set of quarterly financial statements.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following transactions results in a decrease in the return on assets ratio?

Accepted Answer

A)   Increasing the sales price of the products sold.
B)   An increase in the net profit margin ratio.
C)  Purchasing land by signing a long-term note payable.
D)  Collecting cash from an account receivable.

Question 20

Which of the following is not included as a primary part of the financial disclosure in Form 10-K?

Accepted Answer

A)   Financial data for a 5-year period.
B)   Management's opinion of the financial statements.
C)  Business operations and strategy.
D)  Four basic financial statements.

Exam 5: Communicating and Interpreting Accounting Information

Which of the following statements is false?

Correct AnswerverifiedShow Answer

Which of the following best describes income from operations?

Correct AnswerverifiedShow Answer

Corporate governance refers to the procedures designed to ensure that the company is managed in the interest of the board of directors who oversee management.

Correct AnswerverifiedShow Answer

The indirect method of reporting operating activities on the statement of cash flow begins with net income and adjusts for cash items.

Correct AnswerverifiedShow Answer

Which of the following statements is false when a company sells inventory costing $900 for $1,500 cash?

Correct AnswerverifiedShow Answer

Polk Company suffered a loss from earthquake damage at its plant in Nebraska. The loss meets the criteria for an extraordinary item. Where will the company present the extraordinary item on the income statement?

Correct AnswerverifiedShow Answer

Which of the following is not a responsibility of the chief executive officer (CEO) and the chief financial officer (CFO) ?

Correct AnswerverifiedShow Answer

Which of the following transactions results in a decrease in the return on assets ratio?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following would not be classified as a current asset?

Correct AnswerverifiedShow Answer

Complete the following balance sheet by entering the appropriate amounts in the blanks provided.

Correct AnswerverifiedA. $40,000. ($90,000 Total Assets (F) - ...View AnswerShow Answer

The audit committee of the board of directors is responsible for maintaining the integrity of a company's financial statements and financial reporting.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The return on assets ratio is calculated by dividing income from continuing operations by average total assets.

Correct AnswerverifiedShow Answer

Which of the following statements regarding international financial reporting standards (IFRS) is false?

Correct AnswerverifiedShow Answer

Which of the following is not included as a primary part of the financial disclosure in Form 10-K?

Correct AnswerverifiedShow Answer

Which of the following results in an increase in the return on assets ratio?

Correct AnswerverifiedShow Answer

Which of the following is true?

Correct AnswerverifiedShow Answer

The form 10-Q contains an unaudited set of quarterly financial statements.

Correct AnswerverifiedShow Answer

Which of the following statements regarding international financial reporting standards (IFRS) is false?

Correct AnswerverifiedShow Answer

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A. $40,000. ($90,000 Total Assets (F) - ...
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