Chapter 17 Quiz

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Question #1

A ________ is a specialized accounting book, where transactions are categorized according to type. For example, all utility transactions are recorded in the same category.

A trial balance

B balance sheet

C journal

D ledger

Question #2

A FIFO would provide the least profit.

B LIFO would provide the most profit.

C LIFO or FIFO will produce the same amount of profit.

D FIFO would provide the most profit.

Question #3

Quinn is an accountant employed by CCDL Enterprises. Recently, she has spent much of her time working on defining measures of costs for the production department and checking to ensure that various departments are staying within their budgets. Quinn is a

A public accountant whose work is mainly concerned with auditing.

B private accountant whose work is mainly concerned with managerial accounting.

C public accountant whose work is mainly concerned with financial accounting.

D private accountant whose work is mainly concerned with financial accounting.

Question #4

Resources that a firm owns are called

A equities.

B assets.

C revenues.

D credits.

Question #5

The top managers of Pages and Pages Bookstores want to indicate to the firm’s shareholders how effectively they have managed the company. Perhaps the most meaningful way to do this would be by reporting strong

A liquidity ratios.

B activity ratios.

C leverage ratios.

D profitability ratios.

Question #6

Which of the following is an example of a financial transaction?

A A firm purchases a fire insurance policy.

B A manager reviews the financial statements prepared by an accountant.

C A potential customer accesses a firm’s web page.

D An internal auditor discovers an error in a firm’s inventory valuation

Question #7

During a period of rising prices, if a firm desires to report a low gross profit figure in hopes of reducing their income tax liability, the firm will use the ________ inventory valuation method.

A LIFO (last-in, first-out)

B sliding scale

C average cost

D FIFO (first-in, first-out)

Question #8

The ________ ratio helps determine the ability of a firm to repay its short-term debts even if it has difficulty selling its inventory.

A required reserve

B cash flow

C acid-test

D diluted current asset

Question #9

Use the fundamental accounting equation to solve the following: Assets minus liabilities equals

A gross margin.

B cash reserves.

C owners’ equity.

D net income.

Question #10

The preparation of financial statements for people outside the firm (creditors, unions, suppliers, and others) is the goal of

A cost accounting.

B auditing.

C managerial accounting.

D financial accounting.

Question #11

As Jaime was packing to return to college after his summer vacation, he realized that he owned many valuable things such as a laptop computer, a speaker system, and a Blu-ray player. An accountant would list all of these as Jaime’s

A owners’ equity

B intangibles.

C liabilities.

D assets.

Question #12

The most liquid asset is

A accounts payable.

B cash.

C sales.

D owners’ equity.

Question #13

Mini-Case

Minnie A. Wright-Hoff works as an accountant for Double Entry Doors, Inc. Her company sells and installs oversized garage doors needed by large vehicles. Most of Minnie’s work involves helping department heads and other decision makers by measuring and reporting costs for their departments, and by identifying areas where departments are exceeding their budgets. However, as one of only three accountants employed by Double Entry Doors, Minnie is something of a “jill-of-all-trades” in terms of her accounting assignments. For example, she recently spent several hours summarizing all of the financial data in account ledgers to see if the information was correct and balanced. Her efforts revealed no problems, so she is now ready to start working on the firm’s financial statements. Minnie is interested in this part of the accounting cycle because she likes to be one of the first to know the “bottom line” her company will report. She knows that she and the other accountants who work on these statements can influence the results by the choices they make about the way they report certain items.

The last major task Minnie completed before getting ready to prepare the firm’s financial statements was the preparation of the

A internal audit.

B master budget.

C cash budget.

D trial balance.

Question #14

The main reason an accountant would conduct a trial balance is to

A obtain an estimate of the amount of taxes the firm owes.

B determine whether account figures in the ledger are correct and balanced.

C ensure the audit was done correctly.

D verify the validity of last year’s balance sheet before beginning the next accounting cycle.

Question #15