WGU C213. PRE-ASSESSMENT: ACCOUNTING FOR DECISION MAKERS PVAC Graded A+

What does accounting focus on? - ANSWER The impact a business's activities have on its overall financial performance Which report summarizes cash collections and cash expenditures from operating, investing, and financing activities over a period of time? - ANSWER Statement of cash flows Which users would have a primary concern with an organization's ability to provide healthcare benefits? - ANSWER Employees Which body regulates a certified public accounting firm's audit practices when the firm is auditing a large publicly traded company? - ANSWER The Public Company Accounting Oversight Board (PCAOB) What has had the most significant impact on accounting practices? - ANSWER Information technology What two items of information are revealed on the balance sheet? Choose 2 answers - ANSWER Ownership. Debt Which term is defined as the residual interest in the net assets of a company? - ANSWER Owners' equity A corporation has total liabilities of $300 million, total owners' equity of $100 million, and current assets of $50 million. What is the value of the firm's long-term assets? - ANSWER $350 million Which situation should result in revenue recognition on the income statement for the year ending 12/31/14 if the firm is using accrual-basis accounting? - ANSWER In 2014, a company provides services to a customer for which cash will be collected the next year (2015). Which category on the statement of cash flows summarizes cash receipts and payments to owners and creditors of the company? - ANSWER Cash flows from financing activities Where would an investor find a summary of a company's significant accounting policies? - ANSWER In the notes to financial statements Which assurance does an external audit report provide for its readers? - ANSWER The company's financial statements fairly reflect its financial position Reliable - ANSWER Information that can be verified Relevant - ANSWER Information having to do with the matter at hand Material - ANSWER Information that is important enough to make a difference Conservatism - ANSWER Information related to recognizing losses as they occur steps in the decision cycle - ANSWER 1 Prepare financial statements. 2 Analyze financial statements. 3 Gather information. 4 Make decision. 5 Implement decision Partial financial information for a company is as follows: Current assets $36,543 Total assets $58,719 Current liabilities $24,824 Total liabilities $48,561 Stockholders' equity $10,158 Sales $46,997 Net Income $ 3,761 Market value of shares $41,316 What is the price-earnings (PE) ratio for this company? - ANSWER 11.0 What is consistent with a continual decline in gross profit if the firm's cost of goods sold remains the same? - ANSWER Continual decrease in sales Which two cash flow adequacy ratios represent a cash cow? - ANSWER $6,991/$5,486. $5,220/$1,875. Which formula yields a cash times interest earned ratio of 11? - ANSWER Cash before interest and taxes of $11,000 / cash paid for interest of $1,000 Which form of debt should be reported in the long-term liability category? - ANSWER Notes payable expected to be paid in 18 months In January of year 1, a company began doing business as a corporation in order to sell technology-related accessories and services. During its first month of operations, the following events occurred: January 1 The corporation received $1,000,000 in cash in exchange for stock issued to stockholders. January 3 The corporation borrowed $250,000 from bank. The loan is a four-year loan with an interest rate of 12 percent, payable each year on January 1 beginning in year 2. January 5 The corporation purchased equipment to be used in the business for $200,000 cash. January 8 The corporation purchased inventory costing $200,000 by paying $120,000 in cash. The remainder was put on credit accounts with suppliers. January 15 The corporation hired five employees. Each employee will be paid $1,000 at the end of each month. January 30 The corporation paid $6,000 cash for a one-year insurance policy. The policy period will begin on February 1, year 1. What will be the impact of the January 5 event on the company's balance sheet on that date? - ANSWER Equipment will increase $200,000, and cash will decrease $200,000. In January of year 1, a company began doing business as a corporation in order to sell technology-related accessories and services. During its first month of operations, the following events occurred: January 1 The corporation received $1,000,000 in cash in exchange for stock issued to stockholders. January 3 The corporation borrowed $250,000 from a bank. The loan is a four-year loan with an interest rate of 12 percent, payable each year on January 1 beginning in year 2. January 5 The corporation purchased equipment to be used in the business for $200,000 cash. January 8 The corporation purchased inventory costing $200,000 by paying $120,000 in cash. The remainder was put on credit accounts with suppliers. January 15 The corporation hired five employees. Each employee will be paid $1,000 at the end of each month. January 31 The corporation paid $6,000 cash for a one-year insurance policy. The policy period will begin on February 1, year 1. What will be the impact of the January 31 event on the company's balance sheet on that date? - ANSWER Prepaid insurance will increase $6,000, and cash will decrease $6,000. Which two values affect the measurement of net income? Choose 2 answers - ANSWER Ordinary gains and losses . Operating expenses Which two items' subtotals are included in a multi-step income statement? Choose 2 answers - ANSWER Gross profit. Income from operations A furniture company using accrual accounting purchased 20 sofas in November 2011. In December 2011, 8 of the 20 sofas were sold to customers. The customers all signed contracts agreeing to pay half the amount owed in February 2012 and the remaining half in March 2012. At the time of sale, the company was reasonably sure the customers would pay the amount owed. The furniture company pays its salespeople a commission on each sofa sold, with commissions for December 2011 sales paid in January 2012. The furniture company paid $3,000 for advertising that ran in the local newspaper in November 2011. In which month should advertising costs be expensed? - ANSWER November 2011 On May 1, 2011, a company using accrual accounting purchased equipment costing $500,000. It expects the equipment to have a useful life of five years. At the time of purchase, the company also purchased a one-year insurance policy on this equipment, which cost $6,000. How much insurance expense should the company have recognized for the year ending in 2011? - ANSWER $4,000 In January of year 1, a company began doing business as a corporation in order to sell technology-related accessories and services. During its first month of operations, it focused on obtaining the financing needed to start its operations. In February of year 1, the company sold inventory costing $25,000 for $75,000 cash. In February of year 1, the company provided technology-related services worth $10,000. Customers paid a total of $4,000 in cash for these services and promised to pay the remainder the following month. What will be the total impact of these services provided on the company's balance sheet other than an increase in cash of $4,000? Choose 2 answers - ANSWER Accounts receivable will increase $6,000. Retained earnings will increase $10,000. What was the 2012 net profit amount if the 2013 pro-forma net profit of $187,000 was based on a 22% increase? - ANSWER $153,279 What is a common category in a statement of cash flows? - ANSWER Cash from investing activities Which cash flow category would include "cash received from investors"? - ANSWER Cash from financing activities Which item is an investing activity? - ANSWER Cash payments for purchase of plant assets What impact does the sale of equipment have on the statement of cash flows? - ANSWER Increase in cash from investing activities What is known about the direct and indirect methods of preparing statements of cash flow? - ANSWER The indirect method is more popular among large U.S. companies A company's statement of cash flows includes the following cash transactions: Sales 1,250,000 Inventory Purchase -750,000 Property and Equipment Purchase -270,000 Interest Payment on Long-Term Debt -25,000 Payment of Wages -315,000 Payment of Rent -40,000 Borrowing Long-Term Debt 200,000 Payment of Cash Dividends -15,000 Repurchase of Treasury Stock -40,000 Total Cash Flows -5,000 Assuming the company uses US GAAP standards, what is the total cash flow from financing activities? - ANSWER $145,000 Which two examples represent financial statement errors? Choose 2 answers - ANSWER The accounting department miscalculates the payroll tax due at year-end, resulting in an inaccurate liability. & The accountant unintentionally records amounts as revenue that were prepaid by customers but not yet earned. Which internal control is intended to ensure that a company does not mistakenly pay a supplier for an invoice that includes more items than were actually received? - ANSWER The inventory department counts and inspects items as received and forwards the receiving record to accounts payable. What are two common reasons for managers to manipulate reported earnings? Choose 2 answers - ANSWER They are feeling pressured to meet internal sales goals. They are preparing to qualify for a bank loan. Which two requirements must accounting firms that audit public companies meet under the Sarbanes-Oxley Act? Choose 2 answers - ANSWER Firms must not provide certain nonaudit services to audit clients, such as management functions or legal services. Firms must report to and be retained by the audit committee rather than the CFO or other company management. Which two requirements must management of public companies meet under the Sarbanes-Oxley Act? Choose 2 answers - ANSWER They must provide an assessment of the effectiveness of internal controls with each annual report. They must support a stronger board and audit committee. Which two actions do internal auditors perform to assist in maintaining the integrity of financial statements? Choose 2 answers - ANSWER They search for and investigate fraud. They review financial records and internal controls. What is a significant role of the U.S. Securities and Exchange Commission (SEC) in financial reporting? - ANSWER They ensure that financial statement users are provided with reliable information to use in decision making What does management accounting provide?