Question 1

One reason companies are motivated to disclose financial information to external decision makers is that it may lower financing and operating costs.

Accepted Answer

For example, when a company applies for a loan, the bank uses the company's financial statements to help determine the appropriate interest rate. Without this financial information, a company may have a higher cost of borrowing or not obtain the loan at all.

Question 2

All of the following are proper uses of financial accounting information by a company's board of directors except:
A) To review the results of operations
B) To evaluate future strategy
C) To assess management performance
D) To distribute buy/sell recommendations prior to company release of information

Accepted Answer

Providing buy or sell recommendations prior to release by the company is a type of fraud known as insider trading and is not a way that directors should use financial accounting information.

Question 3

To the nearest hundredth, what is the 2016 debt-to-equity ratio for The Grocer Company?
A) 2.41
B) 4.92
C) 1.77
D) 44.16

Accepted Answer

Debt-to-equity = Total liabilities / Total stockholders' equity
= $30,020/ $16,932 = 1.77
Stockholders' equity 2016 = $46,952 - 30,020= $16,932

Question 4

To the nearest hundredth of a percent, what is the return on equity ratio 2016 for FoodValu?
A) 21.48%
B) (61.89)%
C) (152.83)%
D) Not enough information is provided
Answer B

Accepted Answer

ROE = Net income / Average stockholders' equity
= $ (2,080) / [($4,042+ $2,680)/2] = $ (2,080) / $3,361 = (61.89)%
Stockholders' equity 2016 = $24,106 - $20,064 = $ 4,042
Stockholders' equity 2015 = $27,516 - $24,836 = $ 2,680

Question 5

Which one of the following is not a quality of relevant accounting information?
A) Timeliness
B) Predictive value
C) Feedback value
D) Understandability

Accepted Answer

Accounting information is relevant when it is timely, predictive about future performance and provides feedback value about the past. Accounting information can still be relevant, even though it may not be understandable to all users.

Question 6

Match each of the following terms (1-8) on the left with related explanations (A - H) on the right.
-Partnership
A) Corporations with stock traded on public exchanges
B) The common form of business ownership used by lawyers and CPAs
C) Lenders of resources
D) Designed primarily for decision makers outside of the company
E) Elected by the shareholders to oversee management
F) Owners of a corporation
G) Securities and Exchange Commission
H) Designed primarily for decision makers within the company

Accepted Answer

Partnerships are often the chosen form of business organization for professional service providers such as lawyers and CPAs, as they allow for shared decision-making, liability, and resources.

Question 7

Match the following decision makers with the most likely decisions they seek to answer from accounting information. Use each answer only onc
-Suppliers and customers
A) Corporations with stock traded on public exchanges
B) The common form of business ownership used by lawyers and CPAs
C) Lenders of resources
D) Designed primarily for decision makers outside of the company
E) Elected by the shareholders to oversee management
F) Owners of a corporation
G) Securities and Exchange Commission
H) Designed primarily for decision makers within the company

Accepted Answer

The answer of Match the following decision makers with the...

Question 8

Match the following decision makers with the most likely decisions they seek to answer from accounting information. Use each answer only onc
-Productions and operations
A) Corporations with stock traded on public exchanges
B) The common form of business ownership used by lawyers and CPAs
C) Lenders of resources
D) Designed primarily for decision makers outside of the company
E) Elected by the shareholders to oversee management
F) Owners of a corporation
G) Securities and Exchange Commission
H) Designed primarily for decision makers within the company

Accepted Answer

The answer of Match the following decision makers with the...

Question 9

Match the following decision makers with the most likely decisions they seek to answer from accounting information. Use each answer only onc
-Top management
A) Corporations with stock traded on public exchanges
B) The common form of business ownership used by lawyers and CPAs
C) Lenders of resources
D) Designed primarily for decision makers outside of the company
E) Elected by the shareholders to oversee management
F) Owners of a corporation
G) Securities and Exchange Commission
H) Designed primarily for decision makers within the company

Accepted Answer

The answer of Match the following decision makers with the...

Question 10

Match the following decision makers with the most likely decisions they seek to answer from accounting information. Use each answer only onc
-Marketing teams
A) Corporations with stock traded on public exchanges
B) The common form of business ownership used by lawyers and CPAs
C) Lenders of resources
D) Designed primarily for decision makers outside of the company
E) Elected by the shareholders to oversee management
F) Owners of a corporation
G) Securities and Exchange Commission
H) Designed primarily for decision makers within the company

Accepted Answer

The answer of Match the following decision makers with the...

Question 11

Match the following decision makers with the most likely decisions they seek to answer from accounting information. Use each answer only onc
-Liabilities
A) (I) for Income Statement
B) (B) for Balance Sheet and
C) (CF) for Statement of Cash Flow.

Accepted Answer

Liabilities are reported on the Balance Sheet, which provides a snapshot of a company's financial position at a specific point in time, including what it owes (liabilities) and owns (assets).

Question 12

Match the following decision makers with the most likely decisions they seek to answer from accounting information. Use each answer only onc
-Retained earnings
A) (I) for Income Statement
B) (B) for Balance Sheet and
C) (CF) for Statement of Cash Flow.

Accepted Answer

Retained earnings information is typically found on the Balance Sheet, as it represents the cumulative amount of net income earned by a company over time that has not been distributed to shareholders as dividends.

Quiz 1: Introducing Financial Accounting

One reason companies are motivated to disclose financial information to external decision makers is that it may lower financing and operating costs.

All of the following are proper uses of financial accounting information by a company's board of directors except:

To the nearest hundredth, what is the 2016 debt-to-equity ratio for The Grocer Company?

To the nearest hundredth of a percent, what is the return on equity ratio 2016 for FoodValu?

Which one of the following is not a quality of relevant accounting information?

Match each of the following terms (1-8) on the left with related explanations (A - H) on the right. -Partnership

Match the following decision makers with the most likely decisions they seek to answer from accounting information. Use each answer only onc -Suppliers and customers

Match the following decision makers with the most likely decisions they seek to answer from accounting information. Use each answer only onc -Productions and operations

Match the following decision makers with the most likely decisions they seek to answer from accounting information. Use each answer only onc -Top management

Match the following decision makers with the most likely decisions they seek to answer from accounting information. Use each answer only onc -Marketing teams

Match the following decision makers with the most likely decisions they seek to answer from accounting information. Use each answer only onc -Liabilities

Match the following decision makers with the most likely decisions they seek to answer from accounting information. Use each answer only onc -Retained earnings