Questions and Answers of College Accounting A Contemporary Approach 5th Edition

8. Why are international accounting standards important to management?
7. Does a business owner/manager need to worry about the separate entity assumption? Why or why not?
6. What is the role of the manager versus the accountant?
5. What would you tell a small business owner who says he does not see a need for an accounting system in his business because he closely supervises the day-to-day operations and knows exactly what
4. What kind of problems can you foresee if a business owner and/or manager does not have a basic knowledge of accounting?
3. Besides earning a profit, what other objectives might a business have? Can financial information play an important role in these objectives?
2. Why is financial information important?
1. As an owner or manager of a business, what questions would you ask to judge the firm’s performance, control operations, make decisions, and plan for the future?
12. What is the purpose of the Public Company Accounting Oversight Board?
11. What led to the passage of the Public Company Accounting Reform and Investor Protection Act of 2002?
10. What is the function of the Securities and Exchange Commission?
9. What groups consistently offer opinions about proposed FASB statements?
8. What is the purpose of the Financial Accounting Standards Board?
7. What are the three major areas of accounting?
6. What types of services do public accountants provide?
5. What is tax planning?
4. What are the major functions or activities performed by accountants in private industry?
3. What are the three types of business entities, and how do they differ?
2. Why is it important for business records to be separate from the records of the business’s owner or owners? What is the term accountants use to describe this separation of personal and business
1. What types of people or organizations are interested in financial information about a firm, and why are they interested in this information?
5. How is the ownership of a corporation different from that of a sole proprietorship?
4. What are the three types of business entities?
3. What is the purpose of the auditor’s report?
2. What does the accounting process involve?
1. What is the purpose of accounting?
6. An organization that has two or more owners who are legally responsible for the debts and taxes of the business is a:a. social entityb. partnershipc. sole proprietorshipd. corporation
5. You plan to open a business with two of your friends. You would like to form a corporation, but your friends prefer the partnership form of business. What are some of the advantages of the
4. A nonprofit organization such as a public school is a(n):a. social unitb. economic unitc. social entityd. economic entity
3. How are generally accepted accounting principles developed?
2. Why are generally accepted accounting principles needed?
1. What are generally accepted accounting principles?
6. As the owner of a small business, you have decided to expand your locations.In order to expand, you must apply for a loan. What type of information will you need to provide to the lender?
5. One requirement for becoming a CPA is to pass the:a. Final CPA Examinationb. SEC Accounting Examinationc. Uniform CPA Examinationd. State Board Examination
4. Which organization has the final say on financial accounting issues faced by publicly owned corporations?a. Securities and Exchange Commissionb. Federal Trade Commissionc. U.S. Treasury
3. What are financial statements?
2. Why is accounting called the “language of business”?
1. What are the names of three accounting job positions?
1-6 Define the accounting terms new to this chapter
1-5 Describe the process used to develop generally accepted accounting principles.
1-4 Compare and contrast the three types of business entities.
1-3 Identify the users of financial information.
1-2 Identify and discuss career opportunities in accounting.
1-1 Define accounting.
7. Why is it useful for management to compare a firm’s financial statements with financial information from other companies in the same industry?
6. The latest income statement prepared at Patel Company shows that net sales increased by 10 percent over the previous year and selling expenses increased by 25 percent. Do you think that management
5. Should a manager be concerned if the balance sheet shows a large increase in current liabilities and a large decrease in current assets? Explain your answer.
4. Why is it important to compare the financial statements of the current year with those of prior years?
3. For the last three years, the balance sheet of Smith Hardware Center, a large retail store, has shown a substantial increase in merchandise inventory. Why might management be concerned about this
2. Spectrum Company had an increase in sales and net income during its last fiscal year, but cash decreased and the firm was having difficulty paying its bills by the end of the year. What factors
1. Why should management be concerned about the efficiency of the end-of-period procedures?
18. Gomez Company had a current ratio of 2.0 in 2018 and 2.2 in 2019. Does this signify an improvement or decline in Gomez Company’s liquidity from 2018 to 2019?
17. Kagan Company’s inventory turnover ratio was nine times in 2018 and eight times in 2019.Did Kagan Company sell its inventory more quickly, or more slowly, in 2019 compared to 2018?
16. What are the steps in the accounting cycle?
15. If the owner invests additional capital in the business during the month, how would that new investment be shown in the financial statements?
14. Various adjustments made at Acres Company are listed below. Which of the adjustments would normally be reversed?a. Adjustment for accrued payroll taxes expenseb. Adjustment for supplies usedc.
13. On December 31, Klien Company made an adjusting entry debiting Interest Receivable and crediting Interest Income for $300 of accrued interest. What reversing entry, if any, should be recorded for
12. What types of adjustments are reversed?
11. If the totals of the adjusted trial balance Debit and Credit columns are equal, but the postclosing trial balance does not balance, what is the likely cause of the problem?
10. What types of accounts, permanent or temporary, appear on the postclosing trial balance?
9. What is the purpose of the postclosing trial balance?
8. What account balances or other amounts are included on two different financial statements for the period? Which statements are involved?
7. What information is provided by the statement of owner’s equity?
6. How do current liabilities and long-term liabilities differ?
5. Give examples of some current assets that usually are classified as Current Assets on the balance sheet.
4. What is the purpose of the balance sheet?
3. What are operating expenses?
2. Which section of the income statement contains information about the purchases made during the period and the beginning and ending inventories?
1. Give an example of an expense that is classified as Other Expense in the income statement.
7. Give the sequence in which the following journal entries are posted to the accounts.a. adjusting entriesb. entries to close expense accountsc. entries to close revenue accountsd. reversing entries
6. Describe the entry that would be made to close the Income Summary account in each of the following cases. The owner of the firm is Jan Hanson.a. There is net income of $58,000.b. There is a net
5. Which of the following should have a debit balance in the adjusted trial balance?a. Sales Returns and Allowancesb. Purchases Discountsc. Salaries Payabled. Unearned Rental Income
4. Immediately after closing entries are posted, which of the following types of accounts will have zero balances? Select all that apply.a. asset accountsb. expense accountsc. liability accountsd.
3. Why would a fax machine used in the office not be considered a current asset?
2. What journal entry(ies) is (are) made in the adjustment column for beginning and ending inventories?
1. Explain the difference between a single-step income statement and a multiple-step income statement. Which is normally favored?
6. At the end of the previous accounting period, an adjusting entry to record accrued employer’s payroll taxes was made. Reversing entries were not made for the current accounting period. What
5. The current ratio is:a. current liabilities divided by current assets.b. the sum of cash, accounts receivable, and notes receivable divided by current liabilities.c. current assets divided by
4. A reversing entry is made for an endof-period adjustment that recorded:a. estimated bad debts for the period.b. an accrued expense that involves future cash payments.c. a transfer of an amount
3. What do the four steps in the closing process accomplish?EXERCISES
2. Which adjusting entries should be reversed?
1. Why do adjusting entries need detailed explanations in the general journal?
6. Assume that a business listed the Freight In account in the Operating Expense section of the income statement. What is the effect on net purchases? On total operating expenses? On net income from
5. How should purchases returns and allowances be shown on the income statement?a. As Other Incomeb. As an addition to the delivered cost of purchasesc. As a deduction from the delivered cost of
4. Which of the following is not a current asset?a. Merchandise inventoryb. A note receivable due in 11 monthsc. Prepaid insurance covering the next eight monthsd. A note receivable due in 13 months
3. What is gross profit on sales?EXERCISES
2. What is the distinction between current liabilities and long-term liabilities?
1. Why are financial statements prepared in classified form?
13-7 Journalize and post reversing entries.
13-6 Prepare a postclosing trial balance.
13-5 Journalize and post the closing entries.
13-4 Journalize and post the adjusting entries.
13-3 Prepare a classified balance sheet from the worksheet.
13-2 Prepare a statement of owner’s equity from the worksheet.
13-1 Prepare a classified income statement from the worksheet.
21. How does the worksheet help the accountant to prepare financial statements more efficiently?
20. Unearned Fees Income is classified as which type of account?
19. What is the alternative method of handling unearned income?
18. What adjustment is made to record income earned during a period?
17. How is unearned income recorded when it is received?
16. What is unearned income? Give two examples of items that would be classified as unearned income.

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