Learning Objective 1-5
1) Which of the following statements reports the line item Gross profit?
A) the single-step income statement
B) the multistep income statement
C) the single-step balance sheet
D) the multistep balance sheet
2) An audit opinion ________.
A) is a report prepared by a Certified Public Accountant (CPA) indicating the financial statements have been examined
B) is required by the Securities and Exchange Commission to accompany the financial statements of publicly-traded companies
C) is a report prepared by the Internal Revenue Service (IRS)
D) is two or more of these
3) Lox Stock & Bagel Company
a._____________________________
April 30, 2012
Cashb. $_________Accounts payable$2,000
Inventory1,610Notes payable15,000
Supplies300
Land10,000Common stock10,000
Building (net) 25,000 Retained earnings c.
$39,910 $39,910
From Lox Stock & Bagel Company's financial statement above, determine what form of organization it is.
A) Sole proprietorship
B) Partnership
C) Corporation
D) There is not enough information to tell.
4) The Securities and Exchange Commission (SEC) requires all publicly-traded corporations to file their 10-K reports using XBRL (Extensible Business Reporting Language).
5) The Securities and Exchange Commission (SEC) requires all publicly traded companies to file a report called the 10-K after the end of each company's fiscal year.
6) Many of the largest CPA firms are global and perform audits all over the world. Foreign countries have different accounting and auditing rules than the United States. If the CPA firm is performing an audit of a foreign company that trades its stock on a U.S. stock exchange, should the financial statements and the audit conform to U.S. generally accepted accounting principles and auditing rules or the foreign county's rules?
7) Review the following income statement for Up Against the Wall, a wallpaper store. Then answer the following questions.
Up Against the Wall
Income Statement
For the Month Ended July 31, 2012
Revenues$17,440
Cost of goods sold(6,975)
Gross profit$10,465
Expenses
Rent$ 1,650
Wages1,369
Advertising830
Total expenses(3,840)
Net income$6,625
a. What does gross profit represent?
b. Can you tell whether or not the expenses are reasonable compared to the amount of income?
c. Ms. Machier, the owner of Up Against the Wall, is looking for a partner. As a potential investor, does this income statement present a favorable or unfavorable impression of the success of the business?
d. What other information would you require before you invested in this business?