chap005 - Chapter 005: Communicating and Interpreting...

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Chapter 005: Communicating and Interpreting Accounting Information True / False Questions 1. 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.: 1 2. For information to be reliable it should be accurate, unbiased, and verifiable. TRUE AACSB Tag: Relative Thinking Difficulty: Medium L.O.: 1 3. 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.: 1 4. The Sarbanes-Oxley Act is intended to strengthen financial reporting and corporate governance for public companies. TRUE AACSB Tag: Ethics Difficulty: Medium L.O.: 1 5-1
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Chapter 005: Communicating and Interpreting Accounting Information 5. 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.: 1 6. 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.: 2 7. 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.: 2 8. 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.: 2 5-2
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Chapter 005: Communicating and Interpreting Accounting Information 9. Intangible assets have no physical existence and a short life. FALSE AACSB Tag: Relative Thinking Difficulty: Medium L.O.: 3 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.: 3 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.: 3 12. Par value is a legal amount per share established by the board of directors. TRUE AACSB Tag: Relative Thinking Difficulty: Easy L.O.: 3 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.: 3 5-3
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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
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This note was uploaded on 11/18/2011 for the course ACCOUNTING BAD 1 taught by Professor Ginalord during the Spring '11 term at Santa Rosa.

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chap005 - Chapter 005: Communicating and Interpreting...

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