To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank,visit visithttp://downloadslide.blogspot.com http://downloadslide.blogspot.com Chapter 005: Communicating and Interpreting Accounting Information True / False Questions The users of accounting information are decision makers such as investors, creditors, and financial analysis who provide investment advice TRUE AACSB Tag: Relative Thinking Difficulty: Easy L.O.: For information to be reliable it should be accurate, unbiased, and verifiable TRUE AACSB Tag: Relative Thinking Difficulty: Medium L.O.: Independent auditors are advisors who analyze financial and other economic information to formulate forecasts and stock recommendations FALSE AACSB Tag: Relative Thinking Difficulty: Easy L.O.: The Sarbanes-Oxley Act is intended to strengthen financial reporting and corporate governance for public companies TRUE AACSB Tag: Ethics Difficulty: Medium L.O.: 5-1 ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank,visit visithttp://downloadslide.blogspot.com http://downloadslide.blogspot.com Chapter 005: Communicating and Interpreting Accounting Information Financial analysts perform the basic analysis of a company's financial reports in order to make earnings projections TRUE AACSB Tag: Relative Thinking Difficulty: Easy L.O.: A form 10-Q is a brief unaudited report for a quarter normally containing a summary income statement and balance sheet TRUE AACSB Tag: Communications Difficulty: Easy L.O.: The financial statements of all public companies, both large and small, must follow generally accepted accounting principles as well as the Securities and Exchange Commission's accounting rules FALSE AACSB Tag: Communications Difficulty: Medium L.O.: Form 10-K is the annual report that must be filed with the Securities and Exchange Commission (SEC) by publicly traded companies TRUE AACSB Tag: Communications Difficulty: Easy L.O.: 5-2 ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank,visit visithttp://downloadslide.blogspot.com http://downloadslide.blogspot.com Chapter 005: Communicating and Interpreting Accounting Information Intangible assets have no physical existence and a short life FALSE AACSB Tag: Relative Thinking Difficulty: Medium L.O.: 10 The materiality constraint holds that amounts that are of low significance need not be recorded nor reported FALSE AACSB Tag: Relative Thinking Difficulty: Medium L.O.: 11 The conservatism constraint means that assets and revenues should not be overstated and that liabilities and expenses should not be understated TRUE AACSB Tag: Relative Thinking Difficulty: Medium L.O.: 12 Par value is a legal amount per share established by the board of directors TRUE AACSB Tag: Relative Thinking Difficulty: Easy L.O.: 13 Gross profit is an important profit measure for companies that sell inventory because it shows the profit left from net sales after all operating expenses have been deducted FALSE AACSB Tag: Relative Thinking Difficulty: Medium L.O.: 5-3 ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank,visit visithttp://downloadslide.blogspot.com http://downloadslide.blogspot.com Chapter 005: Communicating and Interpreting Accounting Information 14 Income tax expense for continuing operations is shown as a deduction from operating income and then any tax effect connected to an extraordinary item is shown parenthetically so the item is added to or deducted from after tax income from operations at a net of tax amount TRUE AACSB Tag: Relative Thinking Difficulty: Hard L.O.: 15 The operating activities section of the statement of cash flows can be prepared under either the direct or indirect method TRUE AACSB Tag: Relative Thinking Difficulty: Medium L.O.: 16 We calculate return on equity (ROE) by dividing operating income by average common stockholders' equity FALSE AACSB Tag: Relative Thinking Difficulty: Medium L.O.: 17 A company's return on equity (ROE) that has been increasing over the past three years means the company has generated greater profit for the common stockholders TRUE AACSB Tag: Relative Thinking Difficulty: Medium L.O.: 5-4 ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank,visit visithttp://downloadslide.blogspot.com http://downloadslide.blogspot.com Chapter 005: Communicating and Interpreting Accounting Information 18 An increase in return on equity (ROE), over the three most recent years reported, can be a signal that a company has not invested in modernization of plant and equipment or research and development which in the long run might lead to declining profits TRUE AACSB Tag: Relative Thinking Difficulty: Hard L.O.: 19 Return on equity (ROE) is really a combination of three separate ratios which explain what drives ROE up or down TRUE AACSB Tag: Relative Thinking Difficulty: Medium L.O.: 20 In comparing Wal-Mart to Abercrombie & Fitch, Wal-Mart would be a better example of a low-cost strategy company that relies on efficient asset management to keep costs low and investment in assets low TRUE AACSB Tag: Relative Thinking Difficulty: Hard L.O.: Multiple Choice Questions 21 The comparability principle assumes that A users can compare financial data across businesses B accounting data should be based on objective data and transactions C accounting data should be supported by appropriate documents when possible D information can be compared over time because similar accounting methods have been applied from year to year AACSB Tag: Relative Thinking Difficulty: Medium L.O.: 5-5 ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank,visit visithttp://downloadslide.blogspot.com http://downloadslide.blogspot.com Chapter 005: Communicating and Interpreting Accounting Information 22 For accounting information to be useful, it must be: A consistent and comparable B relevant and reliable C comparable and reliable D relevant and consistent AACSB Tag: Relative Thinking Difficulty: Easy L.O.: 23 Conservatism requires that special care must be taken to avoid A overstating assets and liabilities and understating revenues and expenses B understating assets and liabilities and overstating revenues and expenses C overstating assets and revenues and understating liabilities and expenses D understating assets and revenues and overstating liabilities and expenses AACSB Tag: Relative Thinking Difficulty: Medium L.O.: 24 The primary responsibility for the information reported by a company rests with A the Internal Revenue Service B the company's auditors C the local city council D the company's management AACSB Tag: Relative Thinking Difficulty: Easy L.O.: 5-6 ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank,visit visithttp://downloadslide.blogspot.com http://downloadslide.blogspot.com Chapter 005: Communicating and Interpreting Accounting Information 25 The primary purpose of hiring a public accounting firm to examine the financial statements of the company is A to provide a forecast of future earnings B to assure no fraud has been committed by the company's management C to provide credibility and assurance that the financial information conforms with generally accepted accounting principles in all material respects D to detect all accounting errors made by the accounting system and employees AACSB Tag: Ethics Difficulty: Medium L.O.: 26 The Securities and Exchange Commission (SEC) is empowered to the following: A set reporting standards for firms with publicly traded debt or equity securities B bring enforcement actions against company executives and auditors for accounting related violations C force companies to use a specific auditor D bring enforcement actions against company executives and auditors for accounting related violations and set reporting standards for firms with publicly traded debt or equity securities AACSB Tag: Ethics Difficulty: Hard L.O.: 27 In an attempt to restore investor confidence, Congress passed the Public Accounting Reform and Investor Protection Act otherwise known as the A Safe Investment Practices Act B National Investment Protection Act C Sarbanes-Oxley Act D Accounting Protection Act AACSB Tag: Ethics Difficulty: Medium L.O.: 5-7 ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank,visit visithttp://downloadslide.blogspot.com http://downloadslide.blogspot.com Chapter 005: Communicating and Interpreting Accounting Information 28 When the actual earnings reported exceed the expected earnings for a company, what typically occurs? A There is no stock price reaction because forecasts of earnings almost never reflect actual results B There is a favorable reaction by the market C There is an unfavorable reaction by the market D The difference will be paid to shareholders in the form of dividends AACSB Tag: Relative Thinking Difficulty: Medium L.O.: 29 Which of the following describes the conservatism constraint? A Avoid overstating assets and revenues and avoid understating expenses and liabilities B The benefits of accounting for and reporting information should outweigh the costs C Amounts that are large enough to influence a user's decisions D Differences due to long-standing and accepted accounting and reporting in a particular industry AACSB Tag: Relative Thinking Difficulty: Easy L.O.: 30 Which of the following is false? A Relevance is the characteristic of accounting information that says the information would make a difference in a user's decision B Accounts receivable would normally be classified as a current asset C Accumulated depreciation would normally appear in the income statement D The matching principle holds that all expenses incurred in the generation of revenue should be recognized in the same period as the revenue is earned AACSB Tag: Relative Thinking Difficulty: Medium L.O.: 5-8 ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank,visit visithttp://downloadslide.blogspot.com http://downloadslide.blogspot.com Chapter 005: Communicating and Interpreting Accounting Information 31 Materiality, cost-benefit, and conservatism are A Qualitative characteristics B Elements of financial statements C Accounting principles D Guiding principles for communicating useful information AACSB Tag: Relative Thinking Difficulty: Easy L.O.: 32 The Securities and Exchange Commission's (SEC) report that is required to be filed if any special event occurs that is material in amount is the A Form 10K B Form 8K C Form 10Q D Prospectus AACSB Tag: Ethics Difficulty: Medium L.O.: 33 In what order are current assets usually reported on the balance sheet? A From the most liquid to the least liquid B From the least liquid to the most liquid C In alphabetical order of accounts D From the largest balance to the smallest balance AACSB Tag: Communications Difficulty: Easy L.O.: 5-9 ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank,visit visithttp://downloadslide.blogspot.com http://downloadslide.blogspot.com Chapter 005: Communicating and Interpreting Accounting Information 34 Which of the following is not commonly classified as a current asset? A Accounts receivable B Property and equipment C Merchandise inventory D Office supplies inventory AACSB Tag: Communications Difficulty: Easy L.O.: 35 When a corporation issues stock at an amount over the par value, what account is used to record that amount received over par? A Common stock B Cash C Additional paid in capital D Retained earnings AACSB Tag: Relative Thinking Difficulty: Medium L.O.: 36 Contributed capital I usually shown as which two accounts? A Common stock and Additional paid in capital B Common stock and Retained earnings C Additional paid in capital and Retained earnings D Retained earnings and dividends AACSB Tag: Communications Difficulty: Easy L.O.: 5-10 ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank,visit visithttp://downloadslide.blogspot.com http://downloadslide.blogspot.com Chapter 005: Communicating and Interpreting Accounting Information 79 An extraordinary item is A the amount reflected on the income statement for adjustments made to balance sheet accounts when applying different accounting principles B the result of the disposal of a major segment of the business C a gain or loss that is both unusual in nature and infrequent in occurrence D a prediction of earnings for future accounting periods AACSB Tag: Relative Thinking Difficulty: Medium L.O.: Chapter Supplement Essay Questions 80 Compute each of the following amounts: A Assume total liabilities are $40,000, total stockholders' equity $75,000, and all assets, other than current assets, total $50,000 What would be the amount of current assets? B If earnings per share is $2.50 and the number of shares of capital stock outstanding is 6,000, then what would net income be? A ($40,000 + $30,000) / ($150,000) = 47 (to solve for stockholders' equity, subtract total liabilities $70,000 from the $220,000 of total assets) B $2.50 6,000 shares = $15,000 net income AACSB Tag: Analytic Difficulty: Hard L.O.: 5-25 ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank,visit visithttp://downloadslide.blogspot.com http://downloadslide.blogspot.com Chapter 005: Communicating and Interpreting Accounting Information 81 Three transactions are listed below For each transaction, indicate whether each increased (+), decreased ( ) or have no effect (NE) on current assets, current liabilities and cash flows from operating activities A Recorded sales on account of $54,000 B Recorded sales for cash of $12,000 C Purchased inventory on account for $22,000 A Current assets +, Current liabilities NE, Cash flows from operating activities NE B Current assets +, Current liabilities NE, Cash flows from operating activities + C Current assets +, Current liabilities +, Cash flows from operating activities NE AACSB Tag: Analytic Difficulty: Medium L.O.: 82 The balance sheet for Glenwood Corporation at December 31, 2011, showed the following subtotals: Based on the above data, give the following amounts: A.$140,000 + $420,000 + $70,000 = $630,000 B $210,000 $80,000 = $130,000 C $420,000 $120,000 = $300,000 D $210,000 + $420,000 = $630,000 AACSB Tag: Analytic Difficulty: Hard L.O.: 5-26 ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank,visit visithttp://downloadslide.blogspot.com http://downloadslide.blogspot.com Chapter 005: Communicating and Interpreting Accounting Information 83 Ridgetop Corporation reported the following amounts on its balance sheet at December 31, 2009: On January 1, 2009, total assets were $2,000,000, total liabilities were $1,200,000 and total equity was $800,000 Calculate East's return on equity $100,000 ($900,000 + $800,000/2) = 11.8% AACSB Tag: Analytic Difficulty: Medium L.O.: 5-27 ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank,visit visithttp://downloadslide.blogspot.com http://downloadslide.blogspot.com Chapter 005: Communicating and Interpreting Accounting Information 84 Complete the following balance sheet by entering the appropriate amounts in the blanks provided A $40,000 ($90,000 Total Assets $35,000 Carrying Value of Building $15,000 Cash) B $25,000 ($60,000 Building $35,000 Book Value) C $90,000 (Must equal to F.) D $ 2,000 ($25,000 Current liabilities $11,000 Accounts Payable $12,000 Notes payable) E $40,000 ($25,000 Contributed capital + $15,000 Retained earnings) F $90,000 ($50,000 Total Liabilities + $40,000 Total Stockholders' Equity) AACSB Tag: Relative Thinking Difficulty: Hard L.O.: 5-28 ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank,visit visithttp://downloadslide.blogspot.com http://downloadslide.blogspot.com Chapter 005: Communicating and Interpreting Accounting Information 85 FocusMore, Inc., had the following alphabetical list of accounts taken from its adjusted trial balance at December 31, 2010: Required: Prepare a multiple step income statement for 2010 (Include gross profit, but ignore income taxes.) 5-29 ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank,visit visithttp://downloadslide.blogspot.com http://downloadslide.blogspot.com Chapter 005: Communicating and Interpreting Accounting Information AACSB Tag: Analytic Difficulty: Medium L.O.: 5-30 ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank,visit visithttp://downloadslide.blogspot.com http://downloadslide.blogspot.com Chapter 005: Communicating and Interpreting Accounting Information 86 The following data were taken from the adjusted trial balance of Kent Corporation Required: Prepare a classified balance sheet in good form at December 31, 2009 (Ignore income taxes) 5-31 ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank,visit visithttp://downloadslide.blogspot.com http://downloadslide.blogspot.com Chapter 005: Communicating and Interpreting Accounting Information 5-32 ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank,visit visithttp://downloadslide.blogspot.com http://downloadslide.blogspot.com Chapter 005: Communicating and Interpreting Accounting Information AACSB Tag: Analytic Difficulty: Hard L.O.: 87 In 2011, Jeffrey Company disposed of a segment of its business and incurred a pretax loss on the disposal of $40,000 In the same year, a flood caused $15,000 of damages to the building The flood damage qualified as an extraordinary item Income from continuing operations before taxes was $100,000 for 2011 and the 20 percent tax rate applied to all of the items above Prepare a partial income statement starting with income from continuing operations before taxes for the year 2011 and concluding with net income AACSB Tag: Analytic Difficulty: Medium L.O.: 5-33 ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank,visit visithttp://downloadslide.blogspot.com http://downloadslide.blogspot.com Chapter 005: Communicating and Interpreting Accounting Information 88 Dakota Equipment, Inc issued 4,000 shares of its $1 par value common stock for $20 per share on January 1, 2010 On the same day, the company purchased a piece of land valued at $10,000 and a building valued at $40,000 The yearly depreciation on the building is $2,000 Required: Prepare the general journal entries to record the stock issue and the purchase of the land and building on January and the depreciation expense on December 31, 2010 AACSB Tag: Analytic Difficulty: Medium L.O.: 5-34 ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank,visit visithttp://downloadslide.blogspot.com http://downloadslide.blogspot.com Chapter 005: Communicating and Interpreting Accounting Information 89 Twin Lakes, Inc reported the following December 31 amounts in its financial statements: Compute the following for the 2010: A Net profit margin B Asset turnover C Financial leverage D Return on equity A ($28.0/$250.0) = 112 or 11.2% B ($250.0/$85.0) = 2.94 C ($85.0/$38.0) = 2.24 D ($28.0/$38.0) = 737 or 73.7% AACSB Tag: Analytic Difficulty: Medium L.O.: 5-35 ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank,visit visithttp://downloadslide.blogspot.com http://downloadslide.blogspot.com Chapter 005: Communicating and Interpreting Accounting Information 90 Discount Toys is a retail toy store The following are selected figures from their income statement (in millions): A Compute the following ratios for 2009, 2008 and 2007: Net profit margin, Asset turnover, Financial leverage, and Return on equity B Write a short essay explaining what has happened to the return on equity for Discount Toys and discuss the causes of changes in the ratio for the three years A Net profit margin 3.6% in 2009, 2.4% in 2008, (1.2%) in 2007; Asset turnover 1.39 in 2009, 1.46 in 2008, 1.41 in 2007; Financial leverage 2.30 in 2009, 2.23 in 2008, 1.97 in 2007; Return on equity 11.4% in 2009, 7.6% in 2008, (3.3%) in 2007 B Discount Toys has improved its asset turnover ratio slightly from 2007 to 2008 but it dropped in 2009 as sales decreased while average assets increased indicating less efficient asset management in 2009 Discount Toys has a fairly high financial leverage ratio and it continues to rise indicating that they use a great deal of debt to finance their assets An increase in this ratio usually indicates that debt is rising faster than the investment in assets so the debt to equity ratio is increasing The profit margin has improved from a negative 1.2% in 2004 to a positive 3.6% in 2009 The improvement in their net profit margin may indicate they have been better at controlling their costs thereby improving profit margins even though sales dropped in 2009 Since ROE is a negative (3.2%) in 2007 compared to the negative net profit margin of (1.2%) in 2007, it demonstrates negative financial leverage The ROE is a larger negative ratio because of the use of so much debt in financing the company's assets In 2008 and 2009 when the net profit margin was positive, it led to a significantly higher ROE than the reported profit margins in those years, demonstrating the ability to generate a better return for the stockholders through the use of leverage Note: in 2009 Discount Toys reported a $315 million gain from the IPO of Toys-Japan which makes their profit margin and return ratios look better than they would with only the results of operating income reflected in their bottom line AACSB Tag: Analytic Difficulty: Hard L.O.: 5-36 ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank,visit visithttp://downloadslide.blogspot.com http://downloadslide.blogspot.com Chapter 005: Communicating and Interpreting Accounting Information 91 The following information was taken from the income statement and balance sheet of The Mickey Company for the years 2008 and 2009 (in millions): Compute the following ratios for 2009: Net profit margin, Asset turnover, Financial leverage, and Return on equity Net profit margin (2,345/30,752) = 076 or 7.6% Asset turnover (30,752/51,945) = 59 Financial leverage (51,945/24,936) = 2.08 Return on equity (2,345/24,936) = 094 or 9.4% AACSB Tag: Analytic Difficulty: Medium L.O.: Matching Questions 92 Listed below are the essential characteristics of accounting information This list is followed by a series of related statements Match each statement with the appropriate characteristics Immaterial amounts need not be separately reported or disclosed Decision makers who need financial information, such as an investor or creditor Cost of developing an accounting analysis is $500 and its usefulness to decision makers is valued at $10 Receiver of financial statements, such as stockholders, creditors, or financial consultants Users Cost-benefit constraint Users Materiality AACSB Tag: Relative Thinking Difficulty: Hard L.O.: 5-37 ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank,visit visithttp://downloadslide.blogspot.com http://downloadslide.blogspot.com Chapter 005: Communicating and Interpreting Accounting Information 93 Assume Doran Corporation has an accounting year end of December 31 For each statement listed, indicate the preferred heading date by entering the appropriate letter in the space provided Statement of Cash flows Statement of Stockholders' equity Income statement Balance sheet As of December 31, 2009 For the Year Ended December 31, 2009 For the Year Ended December 31, 2009 For the Year Ended December 31, 2009 AACSB Tag: Relative Thinking Difficulty: Medium L.O.: 94 This question focuses on the financial statements Match the statement to the description Reports retained earnings and changes in contributed capital Reports the results of operations Statement of partners' equity Income statement Statement of stockholders' equity Statement of cash flows Balance sheet Does not apply to a corporation Reports cash inflows and outflows Reports financial position AACSB Tag: Relative Thinking Difficulty: Easy L.O.: 5-38 ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank,visit visithttp://downloadslide.blogspot.com http://downloadslide.blogspot.com Chapter 005: Communicating and Interpreting Accounting Information 95 Match the following conceptual definitions with the elements of financial statements Probable future economic benefits owned by the entity from past transactions::Assets Decrease in net assets from peripheral or incidental transactions Outflows, using up of assets, or incurrence of liabilities for delivery of goods or services Cash received during the accounting period Increase in net assets from peripheral or incidental transactions Residual interest of owners after all debts are paid Probable future sacrifices of economic benefits as a result of past transactions; involves transfer of assets or services Inflows of net assets or settlements of liabilities from the sale of goods and services; based on the ongoing operations Cash actually paid out during the accounting period Expenses Gains Stockholders' Equity Sources of cash (cash inflows) Revenues Liabilities Uses of cash (cash outflows) Losses AACSB Tag: Relative Thinking Difficulty: Medium L.O.: 96 Match the following terms with their definitions Information that is accurate, unbiased, and verifiable A gain or loss that is unusual in nature and infrequent in occurrence Auditors' statement that the financial statements are fair presentations in all material respects in conformity with GAAP Total assets minus total liabilities Accumulated earnings minus accumulated dividends Results from the disposal of a major segment of a business and is reported net of tax effects Government agency that regulates financial disclosures for publicly traded companies Retained earnings Extraordinary item Stockholders' equity SEC Reliable information Discontinued operations Unqualified audit report (clean opinion) AACSB Tag: Relative Thinking Difficulty: Medium L.O.: 5-39 ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e ... andtest testbank, bank, visit visithttp://downloadslide.blogspot.com http://downloadslide.blogspot.com Chapter 005: Communicating and Interpreting Accounting Information 22 For accounting information... ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank, visit visithttp://downloadslide.blogspot.com... ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank, visit visithttp://downloadslide.blogspot.com