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Exam 5: Communicating and Interpreting Accounting Information

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Question 51

Multiple Choice

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Which of the following statements is false?

A) A decrease in the total asset turnover ratio results in a decrease in the return on assets ratio.
B) An increase in average total assets results in a decrease in both the total asset turnover ratio and return on assets ratio.
C) A decrease in the total asset turnover ratio results in a decrease in the net profit margin ratio.
D) An increase in the net profit margin ratio results in an increase in the return on assets ratio.

E) A) and C)
F) None of the above

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Question 52

Multiple Choice

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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 before taxes?

A) $564,000.
B) $188,000.
C) $377,000.
D) $232,000.

E) A) and C)
F) None of the above

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Question 53

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

The return on assets ratio is affected by both the net profit margin ratio and the total asset turnover ratio.

Describe the return on assets ratio and the DuPont approach for calculating return on assets.

The Nellie Company has provided the following information: Operating expenses were $115,000; Gross profit was $629,000; Cost of goods sold was $470,000; Interest expense was $17,000; Income tax expense was $199,000. What was Nellie's operating income?

The summary of significant accounting policies is a required financial statement disclosure.

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 gross profit?

Which of the following are primarily responsible for the information provided in a company's financial statements?

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 is Huron's stockholders' equity?

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 issued common stock at a price in excess of par value. Revenues _____ Assets _____ Stockholders' equity _____ Return on assets ratio _____ Transaction 2: A company recorded depreciation expense at year-end. Net income _____ Assets _____ Stockholders' equity _____ Total asset turnover ratio _____

What additional information is required to be presented on the same page as the income statement?

The form 10-K is the annual report that publically traded companies must file with the Securities & Exchange Commission (SEC).

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

Anthony Inc. reported the following amounts on its 2016 and 2017 income statements: Requirements: A.Compute the gross profit percentage for years 2016 and 2017. B.Provide at least two potential causes for the change in Anthony's gross profit percentage.

The gross profit percentage is calculated by dividing net sales by gross profit.

The Securities & Exchange Commission requires publically traded companies to have their financial statements audited by their internal auditors.

Which of the following tasks is not performed by the Securities & Exchange Commission (SEC) ?

Which of the following statements is correct?

Which of the following would not typically be disclosed in the notes to the financial statements?