TEST BANK FOR CORNERSTONE OF FINANCIAL ACCOUNTING 3RD EDITION BY RICH

TEST BANK FOR CORNERSTONE OF FINANCIAL ACCOUNTING 3RD EDITION BY RICH. There are more corporations than sole proprietorships and partnerships in the United States. ANS: F PTS: 1 DIF: Difficulty: Easy OBJ: LO: 1-1 NAT: BUSPROG: Communication STA: AICPA FN-Reporting | ACBSP-APC-01-Purpose KEY: Bloom's: Knowledge NOT: 1 min. 2. The three main business activities are financing, operating, and investing. ANS: T PTS: 1 DIF: Difficulty: Easy OBJ: LO: 1-2 NAT: BUSPROG: Communication STA: AICPA FN-Reporting | ACBSP-APC-03-Business Forms KEY: Bloom's: Knowledge NOT: 1 min. 3. Internal users of accounting information include present creditors and management. ANS: F PTS: 1 DIF: Difficulty: Easy OBJ: LO: 1-1 NAT: BUSPROG: Communication STA: AICPA FN-Reporting | ACBSP-APC-01-Purpose KEY: Bloom's: Knowledge NOT: 1 min. 4. The income statement summarizes the assets, liabilities and stockholders’ equity for a period of time. ANS: F PTS: 1 DIF: Difficulty: Easy OBJ: LO: 1-3 NAT: BUSPROG: Communication STA: AICPA FN-Reporting | ACBSP-APC-09-Financial Statement KEY: Bloom's: Knowledge NOT: 1 min. 5. The four basic financial statements are the Income Statement, Statement of Retained Earnings, Balance Sheet, and Statement of Cash Flows. ANS: T PTS: 1 DIF: Difficulty: Easy OBJ: LO: 1-3 NAT: BUSPROG: Communication STA: AICPA FN-Reporting | ACBSP-APC-09-Financial Statement KEY: Bloom's: Knowledge NOT: 1 min. 6. The amount of earnings distributed to stockholders can be found in the income statement as an expense. ANS: F PTS: 1 DIF: Difficulty: Moderate OBJ: LO: 1-5 | LO: 1-6 NAT: BUSPROG: Communication STA: AICPA FN-Reporting | ACBSP-APC-09-Financial Statement KEY: Bloom's: Knowledge NOT: 1 min. 7. Stockholders' equity is composed of two main sources: liabilities and contributed capital. Full file at http://testbankinstant.CH/Test-Bank-for-Cornerstones-ofFinancial-Accounting-3rd-Edition-by-Rich ANS: F PTS: 1 DIF: Difficulty: Easy REF: CS1-2 OBJ: LO: 1-4 NAT: BUSPROG: Communication STA: AICPA FN-Reporting | ACBSP-APC-09-Financial Statement KEY: Bloom's: Knowledge NOT: 1 min. 8. The first step in preparing the classified balance sheet is to list the assets in order of liquidity. ANS: F PTS: 1 DIF: Difficulty: Moderate REF: CS1-2 OBJ: LO: 1-4 NAT: BUSPROG: Communication STA: AICPA FN-Reporting | ACBSP-APC-09-Financial Statement KEY: Bloom's: Knowledge NOT: 1 min. 9. The only financial statement that reports the retained earnings balance at the end of the period is the Statement of Retained Earnings. ANS: F PTS: 1 DIF: Difficulty: Moderate OBJ: LO: 1-4 | LO: 1-6 NAT: BUSPROG: Communication STA: AICPA FN-Reporting | ACBSP-APC-09-Financial Statement KEY: Bloom's: Knowledge NOT: 1 min. 10. An income statement provides information at one specific point in time, while the other basic financial statements provide information on activities that occur over a period of time. ANS: F PTS: 1 DIF: Difficulty: Moderate OBJ: LO: 1-5 NAT: BUSPROG: Communication STA: AICPA FN-Reporting | ACBSP-APC-09-Financial Statement KEY: Bloom's: Knowledge NOT: 1 min. 11. When an entity's stock issuances exceed its expenses for a period of time, the entity will report net income. ANS: F PTS: 1 DIF: Difficulty: Moderate REF: CS1-3 OBJ: LO: 1-5 NAT: BUSPROG: Communication STA: AICPA FN-Measurement | ACBSP-APC-09-Financial Statement KEY: Bloom's: Knowledge NOT: 1 min. 12. Contributed capital is the residual interest that remains after deducting liabilities from stockholders' equity. ANS: F PTS: 1 DIF: Difficulty: Moderate REF: CS1-2 OBJ: LO: 1-4 NAT: BUSPROG: Communication STA: AICPA FN-Reporting | ACBSP-APC-09-Financial Statement KEY: Bloom's: Knowledge NOT: 1 min. 13. The four steps in preparing the Income Statement are: 1) Prepare heading, 2) List the revenues of the company, 3) List the expenses of the company, 4) List the dividends of the company. ANS: F PTS: 1 DIF: Difficulty: Moderate REF: CS1-3 OBJ: LO: 1-5 NAT: BUSPROG: Communication STA: AICPA FN-Reporting | ACBSP-APC-09-Financial Statement Full file at http://testbankinstant.CH/Test-Bank-for-Cornerstones-ofFinancial-Accounting-3rd-Edition-by-Rich KEY: Bloom's: Knowledge NOT: 1 min. 14. Stockholders equity is composed of contributed capital and retained earnings. ANS: T PTS: 1 DIF: Difficulty: Moderate OBJ: LO: 1-4 NAT: BUSPROG: Communication STA: AICPA FN-Reporting | ACBSP-APC-09-Financial Statement KEY: Bloom's: Knowledge NOT: 1 min. 15. The primary objective of internal auditors who are employees of the company is to provide assurance to the company’s stockholders that the financial statements are fairly presented. ANS: F PTS: 1 DIF: Difficulty: Easy OBJ: LO: 1-9 NAT: BUSPROG: Communication STA: AICPA FN-Reporting | ACBSP-APC-01-Purpose KEY: Bloom's: Knowledge NOT: 1 min. 16. The independent auditor's report conveys whether or not the business is a good investment. ANS: F PTS: 1 DIF: Difficulty: Moderate OBJ: LO: 1-9 NAT: BUSPROG: Communication STA: AICPA FN-Reporting | ACBSP-APC-01-Purpose KEY: Bloom's: Knowledge NOT: 1 min. 17. The Statement of Cash Flows shows cash inflows and cash outflows for a period of time. ANS: T PTS: 1 DIF: Difficulty: Moderate OBJ: LO: 1-7 NAT: BUSPROG: Communication STA: AICPA FN-Reporting | ACBSP-APC-09-Financial Statement KEY: Bloom's: Knowledge NOT: 1 min. 18. Because the four financial statements are interrelated (i.e., there is a natural progression from one financial statement to another), the balance sheet should be prepared first. ANS: F PTS: 1 DIF: Difficulty: Moderate OBJ: LO: 1-8 NAT: BUSPROG: Communication STA: AICPA FN-Reporting | ACBSP-APC-09-Financial Statement KEY: Bloom's: Knowledge NOT: 1 min. 19. The company's annual report includes an audit report, notes to the financial statements, but not management's discussion and analysis. ANS: F PTS: 1 DIF: Difficulty: Moderate OBJ: LO: 1-9 NAT: BUSPROG: Communication STA: AICPA FN-Reporting | ACBSP-APC-01-Purpose KEY: Bloom's: Knowledge NOT: 1 min. 20. Investing is the business activity that measures the company’s ability to generate cash from its revenue and expense activities. ANS: F PTS: 1 DIF: Difficulty: Easy Full file at http://testbankinstant.CH/Test-Bank-for-Cornerstones-ofFinancial-Accounting-3rd-Edition-by-Rich OBJ: LO: 1-2 NAT: BUSPROG: Communication STA: AICPA FN-Reporting | ACBSP-APC-03-Business Forms KEY: Bloom's: Knowledge NOT: 1 min. 21. The owners of a sole proprietorship, partnership and corporations have limited liability. ANS: F PTS: 1 DIF: Difficulty: Easy OBJ: LO: 1-1 NAT: BUSPROG: Communication STA: AICPA FN-Reporting | ACBSP-APC-01-Purpose KEY: Bloom's: Knowledge NOT: 1 min. 22. The purpose of financial reporting is to provide economic information to investors, creditors, and other financial statement users. ANS: T PTS: 1 DIF: Difficulty: Easy OBJ: LO: 1-1 NAT: BUSPROG: Communication STA: AICPA FN-Reporting | ACBSP-APC-01-Purpose KEY: Bloom's: Knowledge NOT: 1 min. 23. Creditors use accounting information to evaluate whether to loan money to a company. ANS: T PTS: 1 DIF: Difficulty: Easy OBJ: LO: 1-1 NAT: BUSPROG: Communication STA: AICPA FN-Reporting | ACBSP-APC-01-Purpose KEY: Bloom's: Knowledge NOT: 1 min. 24. Current assets include all of the following: cash, inventory, equipment, supplies, and accounts receivable. ANS: F PTS: 1 DIF: Difficulty: Easy OBJ: LO: 1-4 NAT: BUSPROG: Communication STA: AICPA FN-Reporting | ACBSP-APC-09-Financial Statement KEY: Bloom's: Knowledge NOT: 1 min. 25. Current liabilities are typically listed in the order in which they will be paid. ANS: T PTS: 1 DIF: Difficulty: Moderate OBJ: LO: 1-4 NAT: BUSPROG: Communication STA: AICPA FN-Reporting | ACBSP-APC-09-Financial Statement KEY: Bloom's: Knowledge NOT: 1 min. 26. Three common categories of long-term assets are: 1) property, plant, and equipment, 2) long-term investments, and 3) intangibles. ANS: T PTS: 1 DIF: Difficulty: Easy REF: CS1-2 OBJ: LO: 1-4 NAT: BUSPROG: Communication STA: AICPA FN-Reporting | ACBSP-APC-09-Financial Statement KEY: Bloom's: Knowledge NOT: 1 min. 27. In the stockholders' equity section of a classified balance sheet, a distinction is made between amounts invested by owners and amounts financed by creditors. Full file at http://testbankinstant.CH/Test-Bank-for-Cornerstones-ofFinancial-Accounting-3rd-Edition-by-Rich ANS: F PTS: 1 DIF: Difficulty: Moderate REF: CS1-2 OBJ: LO: 1-4 NAT: BUSPROG: Communication STA: AICPA FN-Reporting | ACBSP-APC-09-Financial Statement KEY: Bloom's: Knowledge NOT: 1 min. 28. One primary purpose of a classified balance sheet is to help users evaluate the working capital of a company. ANS: T PTS: 1 DIF: Difficulty: Easy OBJ: LO: 1-4 NAT: BUSPROG: Communication STA: AICPA FN-Reporting | ACBSP-APC-09-Financial Statement KEY: Bloom's: Knowledge NOT: 1 min. 29. The classifications in the balance sheet are to help users determine how a company obtained its resources. ANS: T PTS: 1 DIF: Difficulty: Easy REF: CS1-2 OBJ: LO: 1-4 NAT: BUSPROG: Communication STA: AICPA FN-Reporting | ACBSP-APC-09-Financial Statement KEY: Bloom's: Knowledge NOT: 1 min. 30. The current ratio is useful in determining a company's ability to pay obligations when they become due. ANS: T PTS: 1 DIF: Difficulty: Moderate OBJ: LO: 1-4 NAT: BUSPROG: Communication STA: AICPA FN-Reporting | ACBSP-APC-23-Financial Statement Analysis KEY: Bloom's: Knowledge NOT: 1 min. 31. Income from operations includes interest revenue and interest expense because these items are considered to be operating in nature. ANS: F PTS: 1 DIF: Difficulty: Moderate OBJ: LO: 1-5 NAT: BUSPROG: Communication STA: AICPA FN-Reporting | ACBSP-APC-09-Financial Statement KEY: Bloom's: Knowledge NOT: 1 min. 32. Net loss reduces a company's retained earnings balance. ANS: T PTS: 1 DIF: Difficulty: Moderate REF: CS1-4 OBJ: LO: 1-6 NAT: BUSPROG: Communication STA: AICPA FN-Reporting | ACBSP-APC-09-Financial Statement KEY: Bloom's: Knowledge NOT: 1 min. 33. Dividend payments appear on the Statement of Retained Earnings. ANS: T PTS: 1 DIF: Difficulty: Moderate REF: CS1-3 | CS1-4 OBJ: LO: 1-6 NAT: BUSPROG: Communication STA: AICPA FN-Reporting | ACBSP-APC-09-Financial Statement. 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