Test Bank — Financial Accounting, 6th Edition (Rich, 2024), Chapters 1-12 | All Chapters Covered

TEST BANK
Financial Accounting
Jay S. Rich, Jeff Jones, and Linda A. Myers
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6th Edition
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AP
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, TABLE OF CONTENTS
Financial Accounting (6th Edition)
Jay S. Rich, Jeff Jones, and Linda A. Myers
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Chapter 1 Accounting and the Financial Statements

Chapter 2 The Accounting Information System
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Chapter 3 Accrual Accounting

Chapter 4 Internal Control and Cash

Chapter 5 Sales and Receivables
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Chapter 6 Cost of Goods Sold and Inventory

Chapter 7 Operating Assets
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Chapter 8 Current and Contingent Liabilities

Chapter 9 Long-Term Liabilities
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Chapter 10 Stockholders’ Equity

Chapter 11 The Statement of Cash Flows
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Chapter 12 Financial Statement Analysis
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,Name: Class: Date:

Ch 01 Accounting and the Financial Statements
1. Internal users of accounting information include present creditors and management.
a. True
b. False
ANSWER: False
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2. Creditors use accounting information to evaluate whether to loan money to a company.
a. True
b. False
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ANSWER: True

3. The purpose of financial reporting is to provide economic information to investors, creditors, and other financial
statement users.
a. True
b. False
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ANSWER: True

4. Investing is the business activity that measures a company's ability to generate cash from its revenue and expense
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activities.
a. True
b. False
ANSWER: False
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5. The three main business activities are financing, operating, and investing.
a. True
b. False
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ANSWER: True

6. The owners of a sole proprietorship, a partnership, and corporations have limited liability.
a. True
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b. False
ANSWER: False

7. There are more corporations than sole proprietorships and partnerships in the United States.
a. True
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b. False
ANSWER: False

8. The four basic financial statements are the income statement, retained earnings statement, balance sheet, and statement
of cash flows.
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a. True
b. False
ANSWER: True

9. Stockholders' equity is composed of two main sources: liabilities and contributed capital.
a. True
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, Name: Class: Date:

Ch 01 Accounting and the Financial Statements
b. False
ANSWER: False

10. The first step in preparing the classified balance sheet is to list the assets in order of liquidity.
a. True
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b. False
ANSWER: False

11. Stockholders' equity is composed of contributed capital and retained earnings.
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a. True
b. False
ANSWER: True
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12. The classifications in the balance sheet are to help users determine how a company obtained its resources.
a. True
b. False
ANSWER: True
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13. Contributed capital is the residual interest that remains after deducting liabilities from stockholders' equity.
a. True
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b. False
ANSWER: False

14. Current assets include cash, inventory, equipment, supplies, and accounts receivable.
a. True
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b. False
ANSWER: False

15. In the stockholders' equity section of a classified balance sheet, a distinction is made between the amounts invested by
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owners and the amounts financed by creditors.
a. True
b. False
ANSWER: False
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16. One primary purpose of the classified balance sheet is to help users evaluate the working capital of a company.
a. True
b. False
ANSWER: True
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17. Three common categories of long-term assets are property, plant, and equipment; long-term investments;
and intangible and other noncurrent assets.
a. True
b. False
ANSWER: True

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