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ACC548-FinalExam.docx

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ACC 561 Final Exam
The statement of cash flows is used for _____.
A. showing the relationship of net income to changes in current assets
B. determining a company’s acceptable level of debt financing
C. revealing commitments that may restrict future courses of action
D. evaluating the creditworthiness of the organization
Nonoperating items on the income statement _____.
A. appear only on corporate income statements
B. appear on the income statement immediately after gross profit
C. are revenues and expenses arising from adjusting entries
D. reflect the effects of financial management decisions
The difference between a single-step and multiple-step income statement is that a single-
step income statement _____.
A. groups all revenues together and all expenses together, whereas a multiple-step income
statement separates certain revenues and expenses from each other and presents
subtotals
B. calculates net income using one method, whereas a multiple-step income statement
calculates net income using two or more methods
C. calculates gross profit and operating income, whereas a multiple-step income statement
does not
D. shows only 1 year's net income, whereas a multiple-step income statement shows
multiple years' net income
Which one of the following statements is true?
A. The statement of cash flows reports the cash receipts but not cash payments of an
entity over a period of time.
B. Both the statement of cash flows and the income statement determine the net income
for a company.

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Page 2 of 9
C. Transactions affecting the sale and the purchase or production of goods and services
are reported in the financing activities section of the statement of cash flows.
D. Investing activities in the statement of cash flows include acquiring and selling long-
term assets.
The _____ accounting convention uses the acquisition cost minus depreciation in valuing an
asset on the balance sheet.
A. continuity
B. conservatism
C. cost-benefit
D. materiality
A new corporation issuing a common, no-par value stock for cash would include a journal
entry a debit to _____.
paid-in capital and a credit to retained earnings.
cash and a credit to common stock.
retained earnings and a credit to cash.
cash and a credit to retained income.
Which type of organization would most likely have work-in-process inventory?
A. A retail store
B. A manufacturing company
C. A service organization
D. A real-estate investment trust
_____ is a measure of income or profit divided by the investment required to obtain that
income or profit.
Return on sales

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Page 3 of 9
Return on investment
Residual income
Capital turnover
The following information is available for the Peter Company: Sales $150,000 Invested
Capital 156,250 ROI 10% The return on sales is _____.
10.00%
62.50%
10.42%
none of these answers is correct
The following information is available for the Peter Company:
Sales: $500,000
Invested capital: $312,500
ROI: 10%
The return on sales is _____.
A. 10.00%
B. 6.250%
C. 1.000%
D. 62.50%
Speedo Company's revenues are $300 on invested capital of $240. Expenses are currently
70% of sales. If Angelo Company can reduce its invested capital by 20%, return on
investment will be _____.
75%

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