Test-Bank-for-Financial-Accounting-10th-Edition-by-Harrison - $14.99   Add to cart

Exam (elaborations)

Test-Bank-for-Financial-Accounting-10th-Edition-by-Harrison

Test-Bank-for-Financial-Accounting-10th-Edition-by-Harrison Chapter 1 The Financial Statements 1) Accounting is an information system that measures business activities. 2) Bookkeeping is the mechanical part of accounting. 3) Accounting is often called the language of business. 4) Accounting produces financial statements, which report information about a business entity. 5) The accounting process begins and ends with people making decisions. 6) Accounting information is used by investors and lenders, but not by regulatory bodies. 7) Habitat for Humanity does not use accounting information since they are not concerned about making a profit. 8) The business records of a sole proprietorship should include the proprietor's personal assets such as a house. 9) Accounting: A) measures business activities. B) processes data into reports and communicates the data to decision makers. C) is often called the language of business. D) is all of the above. 10) A disadvantage of general partnerships is: A) double taxation of distributed profits. B) the partnership's assets are commingled with each partner's personal assets. C) state rules and regulations must be followed. D) each partner may conduct business in the name of the entity and make agreements that legally bind all partners. 11) Which of the following statements is TRUE for a limited liability company? A) Members have unlimited liability for the debts of the business. B) Members have limited liability for the debts of the business. C) Only the limited partners have limited liability for the debts of the business. D) The general partner has unlimited liability for the debts of the business. 12) Which of the following statements is TRUE for a limited liability partnership? A) The partners all have limited liability for the debts of the partnership. B) The partners all have limited liability for the acts of the other partners. C) The general partner has unlimited liability for the debts of the partnership. D) The limited partners have unlimited liability for the debts of the partnership. 13) Which of the following statements is TRUE for a proprietorship? A) Legally, a proprietorship is separate from the proprietor. B) For accounting purposes, a proprietorship is separate from the proprietor. C) For accounting purposes, a proprietorship is not separate from the proprietor. D) A and B 14) Federal income taxes are paid by ________ in a limited liability company. A) the company B) limited partners only C) general partners only D) members 15) Which of the following statements is TRUE for a limited liability partnership? A) The partnership pays no federal income taxes. B) Only the limited partners pay federal income taxes on their shares of the partnership's profits. C) Only the general partner pays federal income taxes on his or her share of the partnership's profits. D) Only the members pay federal income taxes on their shares of the partnership's profits. 16) Which statement is TRUE about partnerships? A) Legally, a partnership is separate from the partners. B) A partnership has one capital account. C) For accounting purposes, a partnership is separate from the partners. D) For accounting purposes, a partnership is not separate from the partners. 17) Which of the following have unlimited liability for a company's debts? A) owners of a corporation B) members of a limited liability company C) limited partners in a limited liability partnership D) general partner in a limited liability partnership 18) Which of the following entities pays federal income taxes? A) limited liability partnership B) general partnership C) limited liability company D) corporation 19) The two types of accounting are: A) profit and nonprofit. B) financial and managerial. C) internal and external. D) bookkeeping and decision-oriented. 20) Decision makers who use accounting information include: A) creditors. B) the Internal Revenue Service. C) the Securities and Exchange Commission. D) all of the above. 21) The ________ is elected by the stockholders and is responsible for setting policy and appointing officers. A) board of directors B) chief executive officer (CEO) C) chief financial officer (CFO) D) advisory council 22) Which type of business organization transacts the most business and is the largest in terms of assets, income, and number of employees? A) Proprietorship B) Partnership C) Limited-liability company D) Corporation 23) The entity assumption does NOT apply to a: A) proprietorship. B) limited liability partnership. C) limited-liability company. D) The entity assumption applies to all the above. 24) Which of the following is a TRUE statement about the characteristics of partnerships? A) Limited partners have mutual agency and unlimited liability for the partnership's debts. B) General partners have mutual agency and limited liability for the partnership's debts. C) Net income and loss of the partnership "flows through" to the partners. D) The partnership agreement must be in writing. 25) Owners of an LLC are called: A) partners. B) proprietors. C) members. D) stockholders. 26) Advantages of a corporation include: A) each stockholder can enter into agreements that legally bind all the stockholders. B) the double taxation of distributed profits. C) limited liability of the stockholders for the corporation's debts. D) each stockholder can conduct business in the name of the corporation. 27) Shareholders of a corporation: A) have limited liability for the corporation's debts. B) have unlimited liability for the corporation's debts. C) have unlimited liability for the actions of other stockholders. D) receive dividends from the corporation without having to pay tax on the distribution. 28) An important fact to consider when determining how to organize a business is that: A) members of an LLC have unlimited liability and are taxed like members of a partnership. B) for accounting purposes, a proprietorship is a distinct entity from the proprietor. C) the records of a partnership can include each partner's personal assets and debts. D) the proprietor and the proprietorship are separate legal entities. 1.2 Learning Objective 1-2 1) Generally accepted accounting principles, or GAAP, are the rules and procedures established by the Securities and Exchange Commission. 2) The SEC establishes international financial reporting standards. 3) The fundamental qualitative characteristics of accounting information are relevance and reliability. 4) Another name for the continuity assumption is the going-concern assumption. 5) Following U.S. GAAP, the carrying value of a building can be increased to its fair value. 6) Accounting is moving in the direction of reporting more and more assets and liabilities at their fair values. 7) Since we live in a global economy, all countries have adopted the same accounting standards for business transactions. 8) Characteristics of faithfully representative information do NOT include: A) complete. B) neutral. C) accurate. D) relevant. 9) Enhancing qualitative characteristics of accounting information do NOT include: A) comparability. B) verifiability. C) timeliness. D) materiality. 10) The process of verifying accounting information in financial statements is undertaken by: A) the Securities and Exchange Commission. B) internal auditors only. C) external auditors only. D) internal and external auditors. 11) Information must be sufficiently transparent so that it makes sense to reasonably informed users of the financial statements, such as creditors. This qualitative characteristic of information is called: A) verifiability. B) faithful representative. C) relevant. D) understandability. 12) A company uses LIFO to determine the cost of goods sold each year. This inventory method always results in the lowest possible net income. This is an example of: A) cost benefit constraint. B) materiality. C) verifiability. D) consistency. 13) The fair value of a plant asset is equal to: A) the amount the business could sell the asset for. B) the amount of cash paid plus the dollar value of noncash consideration given in exchange for the plant asset at acquisition. C) the amount of cash paid plus the loan taken out to finance the purchase of the plant asset. D) the amount a company can receive for the asset when sold in order to go out of business. 14) In 1960, Johnson Company purchased a building for $100,000. In 2013, a real estate professional says the building has a fair value of $1,000,000. In 2013, a similar building down the street recently sold for $900,000. What value is reported for the building on the balance sheet at December 31, 2013? A) $100,000 B) $550,000 C) $900,000 D) $1,000,000 15) Which statement is FALSE? A) International Financial Reporting Standards are used by many countries in the world. B) U.S. Generally Accepted Accounting Principles are used by many countries in the world. C) The Financial Accounting Standards Board is working with the International Accounting Standards Board to develop similar accounting standards. D) For many years, U.S. Generally Accepted Accounting Principles were considered to be the superior set of accounting standards in the world. 16) In order to compare the financial statements of Toyota Corporation to the financial statements of General Motors, it would be preferable to use _________. A) U.S. Generally Accepted Accounting Principles for General Motors and International Financial Reporting Standards for Toyota. B) U.S. Generally Accepted Accounting Principles for both companies. C) International Financial Reporting Standards for both companies. D) U.S. Generally Accepted Accounting Principles for Toyota Corporation and International Financial Reporting Standards for General Motors. 17) The International Accounting Standards Board is responsible for establishing: A) the code of professional conduct for accountants. B) the Securities and Exchange Commission. C) Generally Accepted Accounting Principles used in the United States. D) International Financial Reporting Standards. 18) Which of the following statements is FALSE? A) The Securities and Exchange Commission is investigating whether all U.S. public companies should adopt International Financial Reporting Standards. B) The advantage of a uniform set of global accounting standards is that financial statements from a U.S. company will be comparable to those of a foreign company. C) In the long run, a uniform set of global accounting standards will reduce the costs of doing business globally. D) With a uniform set of global accounting standards, companies will have to produce multiple versions of their financial statements. 19) Which of the following is a CORRECT statement about GAAP and IFRS? A) IFRS prefers valuing assets at historical cost while GAAP prefers using fair value. B) IFRS is more "rules-based" than GAAP. C) The FASB and the IASB are working towards convergence of standards. D) The SEC will require all companies to use IFRS beginning in 2013. 20) To be useful, accounting information must have the fundamental qualitative characteristics of: A) comparability and relevance. B) relevance and faithful representation. C) materiality and understandability. D) faithful representation and timeliness. 21) All of the following are true statements about the entity assumption EXCEPT for: A) the entity assumption draws a sharp boundary around each entity. B) the transactions of the business cannot be combined with the transactions of the owner. C) the entity assumption ensures that the business will continue indefinitely. D) under the entity assumption, the entity is any organization that stands apart as a separate economic unit. 22) Verifiability means that the information: A) is timely and understandable. B) is understandable. C) must be capable of being checked for accuracy, completeness and reliability. D) is material and relevant. 23) The accounting assumption that states that the business, rather than its owners, is the reporting unit is the: A) entity assumption. B) going concern assumption. C) stable-monetary-unit assumption. D) historical cost assumption. 24) The stable monetary unit assumption: A) ensures that accounting records and statements are based on the most reliable data available. B) holds that the entity will remain in operation for the foreseeable future. C) maintains that each organization or section of an organization stands apart from other organizations and individuals. D) enables accountants to ignore the effect of inflation on the accounting records. 25) Historical cost: A) is determined for each asset on a yearly basis. B) is equal to the amount of cash paid less the dollar value of all non-cash consideration given in the exchange. C) is a verifiable measure that is relatively free from bias. D) is the amount that the business could sell the asset for. 26) The principle stating that assets acquired by the business should be recorded at their actual cost on the date of purchase is the: A) historical cost principle. B) objectivity principle. C) reliability principle. D) stable dollar principle. 27) The relevant measure of the value of the assets of a company that is going out of business is the: A) liquidating value. B) inflation-adjusted book value. C) historical cost. D) book value. 28) The CEO of Clarkson Company owns a vacation home in Hawaii. Clarkson Company owns a factory in Detroit where they are headquartered. Which of these properties is considered an asset(s) of the business? A) Only the vacation home in Hawaii B) Only the factory in Detroit C) Both the vacation home in Hawaii and the factory in Detroit D) Neither the vacation home in Hawaii nor the factory in Detroit 29) A construction company paid $80,000 cash for equipment used in the business. At the time of purchase, the equipment had a list price of $90,000. When the balance sheet was prepared, the fair value of the equipment was $83,000. At what amount should the equipment be reported on the balance sheet of the company? A) $80,000 B) $83,000 C) $85,000 D) $90,000 30) If a company prepares its financial statements three years after the end of their accounting period, they have violated the qualitative characteristic of: A) understandability. B) timeliness. C) verifiability. D) materiality. 31) Below is a list of qualitative characteristics of accounting. Following the list is a series of descriptive phrases. A) faithful representation B) timeliness C) relevance D) comparability E) verifiability F) understandability 1.3 Learning Objective 1-3 1) The word "payable" always signifies a liability. 2) The accounting equation must always be in balance. 3) Owners' equity is called stockholders' equity for a corporation. 4) Stockholders' equity is the stockholders' interest in the assets of the corporation. 5) The accounting equation shows the relationship among assets, liabilities and net income. 6) Revenues are cash distributions to the stockholders. 7) Expenses are decreases in retained earnings that result from operations. 8) The basic component of paid-in capital is common stock. 9) The calculation of ending retained earnings considers beginning retained earnings, current year net income or net loss, and stockholders' equity. 10) The two main components of stockholders' equity are paid-in capital and dividends. 11) Long-term debt is a liability that is payable beyond one year from the date of the financial statements. 12) David Company has total assets of $500,000 and total liabilities of $180,000. David Company's stockholders' equity must therefore be $680,000. 13) The Clarke Company had beginning retained earnings of $20,000, net income of $5,000, and declared and paid dividends of $1,000. Therefore, the ending retained earnings is $25,000. 14) All of the following are expenses EXCEPT for: A) Cost of Goods Sold. B) Depreciation Expense. C) Salary Expense. D) Dividends. 15) Which of the following statements is TRUE? A) Dividends are expenses of a business. B) Dividends reduce retained earnings. C) Dividends increase retained earnings. D) Dividends reduce net income. 16) The accounting equation can be stated as: A) Assets Stockholders' Equity = Liabilities. B) Assets -Liabilities = Stockholders' Equity. C) Assets = Liabilities - Stockholders' Equity. D) Assets - Stockholders' Equity Liabilities = Zero. 17) Another way to state the accounting equation is: A) Assets = Liabilities Paid-in Capital - Common Stock. B) Assets Liabilities = Stockholders' Equity. C) Assets = Liabilities Paid-in Capital Retained Earnings. D) Assets = Liabilities - Paid-in Capital - Dividends. 18) Liabilities are: A) a form of paid-in capital. B) future economic benefits to which a company is entitled. C) debts payable to outsiders called creditors. D) the outflow of resources that decrease common stock. 19) Examples of liabilities include: A) accounts payable and dividends. B) accounts payable and common stock. C) investments and note payable. D) accounts payable and note payable. 20) The assets of a company: A) must equal the liabilities of the company. B) include property, plant, and equipment and accounts payable. C) represent economic resources that are expected to produce a future benefit. D) include short-term investments and notes payable. 21) The owners' equity of any business is equal to: A) revenues minus expenses. B) assets minus liabilities. C) assets plus liabilities. D) paid-in capital plus assets. 22) The major types of transactions that affect retained earnings are: A) paid-in capital and common stock. B) assets and liabilities. C) revenues, expenses, and dividends. D) revenues and liabilities. 23) Which of the following increases retained earnings? A) Net loss B) Net income C) Expenses D) Dividends 24) Receivables are classified as: A) increases in earnings. B) decreases in earnings. C) liabilities. D) assets. 25) Net income: A) is calculated by subtracting total expenses and total dividends from total revenues. B) occurs when total revenues are less than total expenses. C) is often referred to as the "bottom line" on an income statement. D) decreases total stockholders' equity. 26) Revenues are: A) decreases in assets resulting from delivering goods or services to customers. B) increases in liabilities resulting from delivering goods or services to customers. C) increases in retained earnings resulting from delivering goods or services to customers. D) decreases in retained earnings resulting from delivering goods or services to customers. 27) Property, plant and equipment does NOT include: A) buildings. B) land. C) machinery. D) patent. 28) Expenses of a business include: A) sales and cash equivalents. B) common stock and rent expense. C) cost of goods sold and salaries expense. D) retained earnings and utilities expense. 29) Net income is computed as: A) revenues - expenses - dividends. B) revenues expenses. C) revenues - expenses. D) revenues - expenses dividends. 30) When total expenses exceed total revenues, the result is: A) a net profit. B) a net loss. C) a dividend. D) excess cash. 31) An entity's equity consists of two accounts, Amy Jones, Capital, and Mindy Lenz, Capital. This indicates the entity is a: A) proprietorship. B) corporation. C) not-for-profit. D) partnership. 32) Which of the following must be added to beginning Retained Earnings to compute ending Retained Earnings? A) Net income B) Expenses C) Dividends D) All of the above 33) At the end of the current accounting period, account balances were as follows: Cash, $25,000; Accounts Receivable, $40,000; Common Stock, $18,000; Retained Earnings, $14,000. Liabilities for the period were: A) $13,000. B) $20,000. C) $27,000. D) $33,000. 34) On January 1, 2015, total assets for Wininger Technologies were $135,000; on December 31, 2015, total assets were $155,000. On January 1, 2015, total liabilities were $110,000; on December 31, 2015, total liabilities were $115,000. What is the amount of the change and the direction of the change in Wininger Technologies' stockholders' equity for 2015? A) Decrease of $15,000 B) Increase of $15,000 C) Increase of $30,000 D) Decrease of $30,000 35) Revenues were $150,000, expenses were $140,000, and cash dividends declared and paid were $5,000. What was the net income and the change in retained earnings for the period? A) Net income was $10,000; the change in retained earnings was $10,000. B) Net income was $150,000; the change in retained earnings was $15,000. C) Net income was $10,000; the change in retained earnings was $5,000. D) Net income was $150,000; the change in retained earnings was $145,000. 36) Golden Company had the following accounts and balances at the end of the year. What are total assets at the end of the year? Cash $74,000 Accounts Payable $12,000 Common Stock $21,000 Cost of Goods Sold $85,000 Dividends Declared and Paid $12,000 Operating Expenses $12,000 Accounts Receivable $50,000 Inventory $40,000 Long-term Notes Payable $33,000 Revenues $90,000 Salaries Payable $24,000 A) $74,000 B) $114,000 C) $124,000 D) $164,000 37) Census Company had the following accounts and balances at the end of the year. What are total liabilities at the end of the year? Cash $74,000 Accounts Payable $12,000 Common Stock $21,000 Cost of Goods Sold $85,000 Dividends Declared and Paid $12,000 Operating Expenses $12,000 Accounts Receivable $50,000 Inventory $40,000 Long-term Notes Payable $33,000 Revenues $90,000 Salaries Payable $24,000 A) $12,000. B) $45,000. C) $66,000. D) $69,000. 38) Beck Company had the following accounts and balances at the end of the year. What is net income or net loss for the year? Cash $74,000 Accounts Payable $12,000 Common Stock $21,000 Cost of Goods Sold $85,000 Dividends Declared and Paid $12,000 Operating Expenses $12,000 Accounts Receivable $50,000 Inventory $40,000 Long-term Notes Payable $33,000 Revenues $90,000 Salaries Payable $24,000 A) Net income of $90,000. B) Net income of $78,000. C) Net loss of $7,000. D) Net income of $5,000. 39) Seidner Company had the following account balances at the end of the first year of operations: Revenues $99,000 Cost of Goods Sold $40,000 Salaries Expense $13,000 Dividends Declared and Paid $12,000 Utilities Expense $11,000 Advertising Expense $10,000 Short-term Investments $20,000 Cash $30,000 Land $50,000 Common Stock $50,000 What is the amount of net income or net loss for the year? A) $25,000 B) $35,000 C) $65,000 D) $75,000 40) Lorna Company has the following account balances at the end of the first year of operations: Accounts Payable $37,000 Revenues $99,000 Cost of Goods Sold $40,000 Salaries Expense $13,000 Dividends Declared and Paid $12,000 Utilities Expense $11,000 Advertising Expense $10,000 Short-term Investments $20,000 Cash $30,000 Land $50,000 Common Stock $50,000 What is the ending balance in Retained Earnings? A) $13,000 B) $23,000 C) $25,000 D) $53,000 41) Gerald Company has the following account balances at the end of the first year of operations: Revenues $99,000 Cost of Goods Sold $40,000 Salaries Expense $13,000 Dividends Declared and Paid $12,000 Utilities Expense $11,000 Advertising Expense $10,000 Short-term Investments $20,000 Cash $30,000 Land $50,000 Common Stock $50,000 What are total assets at the end of the first year? A) $30,000 B) $50,000 C) $100,000 D) $199,000 42) Michael Company reports the following account balances at the end of the first year of operations: Revenues $99,000 Cost of Goods Sold $40,000 Salaries Expense $13,000 Dividends Declared and Paid $12,000 Utilities Expense $11,000 Advertising Expense $10,000 Short-term Investments $20,000 Cash $30,000 Land $50,000 Common Stock $50,000 What are total liabilities at the end of the first year? A) $37,000 B) $50,000 C) $62,000 D) $100,000 1) Net income is the profit left over after subtracting expenses and dividends from revenues and gains. 2) The balance sheet is also called the statement of financial position. 3) Every corporation must pay dividends every year. 4) The balance sheet is organized in terms of the organization's operating, investing, and financing activities. 5) The amount of cash received on the sale of the company's stock in excess of par value is called retained earnings. 6) The statement of cash flows measures operating performance. 7) A balance sheet reports the company's financial position over a period of time. 8) What is an accounts payable? A) It is a liability for goods or services purchased on credit and supported by a written agreement. B) It is a liability for goods or services purchased on credit and supported by the credit standing of the purchaser. C) It is an amount of money to be received from a supplier. D) It is an asset arising from the sale of goods or services on credit. 9) Which financial statement answers the following question: What is the company's financial position? A) statement of cash flows B) income statement C) statement of retained earnings D) balance sheet 10) Which financial statement answers the following question: What is the company's operating performance over the past year? A) statement of cash flows B) income statement C) statement of retained earnings D) balance sheet 11) Which financial statement reports cash payments and cash receipts over a period of time? A) statement of retained earnings B) income statement C) balance sheet D) statement of cash flows 12) A company reports the purchase of equipment for $1,000,000 in cash. On a statement of cash flows, this is a(n) example of: A) cash outflow from financing activity. B) cash outflow from operating activity. C) cash outflow from investing activity. D) noncash activity. 13) All of the following will appear on the income statement EXCEPT for: A) assets. B) expenses. C) gains. D) revenues. 14) Cost of goods sold: A) is considered a selling expense. B) is the direct cost of the product sold. C) is classified as revenue on the income statement. D) is the same as gross profit. 15) A company issues common stock for $100,000. On a statement of cash flows, this will be reported as a(n): A) financing cash flow. B) investing cash flow. C) operating cash flow. D) noncash activity. 16) A company's interest expense for the period is reported on the: A) balance sheet. B) income statement. C) statement of cash flows. D) statement of retained earnings. 17) The CORRECT data flow from one financial statement to the next is: A) statement of retained earnings, income statement, balance sheet, statement of cash flows. B) balance sheet, statement of retained earnings, income statement, statement of cash flows. C) statement of retained earnings, income statement, statement of cash flows, balance sheet. D) income statement, statement of retained earnings, balance sheet, statement of cash flows. 18) If an investor wants to know a company's cash balance at the end of the year, this balance is reported on the: A) balance sheet. B) statement of cash flows. C) income statement. D) A and B. 19) Cash dividends declared: A) decrease revenue on the income statement. B) decrease retained earnings on the statement of retained earnings. C) increase expenses on the income statement. D) decrease operating activities on the statement of cash flows. 20) When analyzing a company's income statement, a fact to remember is that: A) cost of sales is another term for gross profit. B) operating expenses are the costs of everyday operations such as selling expenses. C) companies are not allowed to offset items such as interest income and interest expense against each other. D) net sales is equal to sales revenue less cost of goods sold. 21) An investor wishing to assess the reasons for a change in retained earnings over a period of a year would probably examine the: A) statement of cash flows and the income statement. B) income statement only. C) balance sheet. D) statement of retained earnings. 22) A potential investor interested in predicting the earnings of a company in the future should examine the: A) Balance Sheet only. B) Income Statement only. C) Statement of Retained Earnings. D) statement of Retained Earnings and Balance Sheet. 23) Which statement(s) reports the revenues, gains, expenses, and losses of an entity? A) Balance sheet B) Statement of cash flows and income statement C) Statement of retained earnings and statement of operations D) Income statement 24) Which financial statement is dated at the moment in time when the accounting period ends? A) Balance sheet B) Income statement C) Statement of retained earnings and income statement D) Statement of cash flows 25) The income statement: A) is not dated. B) must cover only a month in time. C) covers a defined period of time. D) reports the results of operations since the inception of the business. 26) An example of an operating expense is: A) cost of goods sold. B) sales returns. C) sales commissions paid to employees. D) interest expense. 27) Which is the CORRECT order for items to appear on the income statement? A) Revenues, operating expenses, net income B) Cost of goods sold, revenues, net income C) Revenues, net income, operating expenses D) Interest expense, revenues, operating income 28) The portion of net income that the company has kept over a period of years and not used for dividends is called: A) common stock. B) retained earnings. C) revenue. D) gross profit. 29) A company sells travel mugs online for $9. They purchase the mugs for $4 and charge the customers $2 for shipping and handling. Cost of goods sold per mug is: A) $0. B) $2. C) $4. D) $6. 30) A net loss occurs when: A) not enough cash exists. B) total revenues exceed total expenses. C) total expenses and losses exceed total revenues and gains. D) total revenues and dividends exceed total expenses and losses. 31) The balance sheet is also known as the: A) statement of profit and loss. B) operating statement. C) assets statement. D) statement of financial position. 32) The balance sheet reports information about: A) revenues, expenses, and equity. B) liabilities, equity, and expenses. C) assets, revenues, and liabilities. D) assets, liabilities, and owners' equity. 33) On the statement of retained earnings: A) a net loss is shown in parentheses as a deduction. B) net income decreases retained earnings. C) dividends declared increase retained earnings. D) dividends paid increase retained earnings. 34) The net income shown on the income statement also appears on the: A) balance sheet and operations statement. B) statement of retained earnings. C) statement of cash flows, using the indirect method. D) B and C. 35) The balance sheet contains the: A) amount of net income or net loss. B) beginning balance in retained earnings. C) ending balance in retained earnings. D) amount of cash dividends paid to stockholders. 36) With regard to cash dividends: A) they must be paid on a yearly basis. B) the Board of Directors of the corporation determines if a dividend will be paid. C) developmental-stage companies will pay large dividends to their shareholders. D) a corporation must have enough paid-in capital and cash to pay dividends. 37) Which financial statement must be prepared before the others? A) Statement of cash flows B) Income statement C) Balance sheet D) Statement of retained earnings 38) A company's balance sheet: A) is dated for a period of time. B) has three main categories of assets. C) has two main categories of liabilities. D) lists liabilities before assets. 39) Current assets are assets expected to be converted to cash, sold, or consumed within the next: A) 12 months or within the business's normal operating cycle if longer than a year. B) 12 months or within the business's normal operating cycle if less than a year. C) 6 months. D) 24 months. 40) Equipment would appear on the: A) balance sheet with the long-term assets. B) income statement with the revenues. C) income statement with the operating expenses. D) balance sheet with the current assets. 41) Accumulated depreciation is normally associated with which asset on the Balance Sheet? A) Inventory B) Accounts receivable C) Land D) Property, plant and equipment 42) Current assets listed in the order of liquidity are: A) accounts receivable, inventory, cash and cash equivalents. B) cash and cash equivalents, accounts receivable, short-term investments, inventory. C) cash and cash equivalents, short-term investments, accounts receivable, inventory. D) marketable securities, cash and cash equivalents, accounts receivable, inventory. 43) Notes payable (due in 60 days) would appear on the balance sheet as a: A) current liability. B) current asset. C) long-term asset. D) long-term liability. 44) Which statement below is FALSE? A) Income taxes payable are tax debts owed to the government. B) Accrued liabilities can include liabilities for salaries and utilities. C) Short-term investments include stocks and bonds of other companies. D) Prepaid expenses include accrued interest payable. 45) The current portion of a long-term note payable is classified on the balance sheet as a: A) current asset. B) current liability. C) long-term asset. D) long-term liability. 46) Which of the following is a CORRECT statement about long-term assets? A) Accumulated depreciation increases the cost of property, plant, and equipment on the balance sheet. B) Intangible assets are long-term assets with no physical form. C) Long-term investments can never be sold by the company. D) Other long-term assets include supplies. 47) Which statement about the statement of cash flows is FALSE? A) Operating activities should be the company's main source of cash. B) Purchases and sales of long-term assets are financing cash flows. C) The payment of a dividend is a financing cash flow. D) The payment of a note payable is a financing activity. 48) What is the proper order for the different categories of cash flows reported on the statement of cash flows? A) Financing activities, investing activities, and operating activities B) Operating activities, investing activities, and financing activities C) Operating activities, financing activities, and investing activities D) Investing activities, financing activities, and operating activities 49) All of the following would be considered investing activities on the statement of cash flows EXCEPT for: A) purchase of land for cash. B) the sale of equipment for cash. C) the payment of cash dividends. D) the purchase of equipment for cash. 50) Examples of financing activities on the statement of cash flows do NOT include: A) payment of note payable. B) payment of dividends. C) repurchase of company's own stock. D) loaning money to an employee. 51) Which of the following would be considered a financing activity that decreases cash on the statement of cash flows? A) The company pays a long-term loan. B) The company sells common stock. C) The company purchases a building. D) The company pays its monthly utility bill. 52) A company's main source of cash should be: A) operating activities. B) financing activities. C) investing activities. D) noncash investing and financing activities. 53) On a statement of cash flows, cash receipts are reported as: A) positive amounts. B) negative amounts. C) in parentheses. D) operating activities only. 54) All of the following line items are found on the income statement EXCEPT for: A) cost of goods sold. B) interest expense. C) operating expense. D) dividends declared. 55) All of the following line items are found on the balance sheet EXCEPT for: A) current maturities of long-term debt. B) accounts payable. C) treasury stock. D) dividends declared. 56) All of the following line items are found on the Statement of Cash Flows EXCEPT for: A) net cash used by investing activities. B) net cash provided by operating activities. C) net cash used by financing activities. D) total stockholders' equity. 57) Current assets as reported on the Balance Sheet do NOT include: A) cash equivalents. B) inventory. C) prepaid insurance. D) goodwill. 58) Current liabilities as reported on the balance sheet do NOT include: A) current maturities of long-term debt. B) income taxes payable. C) salaries payable. D) treasury stock. 59) Stockholders' equity as reported on the Balance Sheet does NOT include: A) short-term investments. B) common stock. C) retained earnings. D) additional paid-in capital. 1.5 Learning Objective 1-5 1) The ending balance of Retained Earnings is reported on the: A) Balance Sheet only. B) Statement of Retained Earnings only. C) Income Statement. D) A and B. 2) The ending balance of Cash is reported on the: A) Balance Sheet only. B) Statement of Retained Earnings only. C) Statement of Cash Flows only. D) A and C. 3) The income statement is used to prepare the: A) Statement of Retained Earnings only. B) Statement of Cash Flows only. C) balance sheet only. D) Statement of Retained Earnings and Statement of Cash Flows. 4) The Statement of Retained Earnings is used to prepare the: A) Income Statement. B) Statement of Assets. C) Statement of Cash Flows. D) Balance Sheet. 5) On the Statement of Cash Flows, the ending balance of cash is also found on the: A) Statement of Retained Earnings. B) Balance Sheet. C) Income Statement. D) Statement of Stockholders' Equity. 6) After preparing the Statement of Retained Earnings, the next statement to prepare is the: A) Income Statement. B) Statement of Dividends and Distributions. C) Statement of Cash Flows. D) Balance Sheet. 7) After preparing the Balance Sheet, the next statement to prepare is the: A) Income Statement. B) Statement of Retained Earnings. C) Statement of Cash Flows. D) Statement of Stockholders' Equity. 8) Dividends declared are reported on the: A) Income Statement. B) Statement of Retained Earnings. C) Balance Sheet. D) Statement of Assets. 9) The net loss for a company is reported on the: A) Statement of Cash Flows. B) Statement of Retained Earnings. C) Income Statement. D) all of the above. 10) Potter Company reports the following line items: Long-Term Notes Payable $50,000 Accounts Receivable $28,000 Accounts Payable $37,000 Building $55,000 Cash and Cash Equivalents $80,000 Salaries Expense $20,500 Common Stock $22,000 Interest Payable $1,500 Land $40,000 Short-term Investments $5,000 Income Taxes Payable $10,000 Equipment $59,500 Supplies $5,000 Service Revenue $99,000 Supplies Expense $18,000 Utilities Expense $8,500 Income Tax Expense $10,000 What is net income? A) $22,000 B) $42,000 C) $62,500 D) $99,000 11) Connar Company reports the following accounts and balances at year end: Long-term Note Payable $150,000 Accounts Receivable $28,000 Accounts Payable $37,000 Building $55,000 Cash and Cash Equivalents $80,000 Salaries Expense $20,500 Common Stock $22,000 Interest Payable $1,500 Land $40,000 Short-term Investments $5,000 Income Taxes Payable $10,000 Equipment $59,500 Supplies $5,000 Service Revenue $99,000 Supplies Expense $18,000 Utilities Expense $8,500 Income Tax Expense $10,000 What is the total amount of current assets at the end of the year? A) $80,000 B) $108,000 C) $118,000 D) $128,000 12) Wetzel Company has the following accounts and balances at the end of the fiscal year: Long-term Note Payable $150,000 Accounts Receivable $28,000 Accounts Payable $37,000 Building $55,000 Cash and Cash Equivalents $80,000 Salaries Expense $20,500 Common Stock $22,000 Interest Payable $1,500 Land $40,000 Short-term Investments $25,000 Income Taxes Payable $10,000 Equipment $59,500 Supplies $25,000 Service Revenue $99,000 Supplies Expense $38,000 Utilities Expense $28,500 Income Tax Expense $20,000 What is the total amount of liabilities at the end of the year? A) $48,500 B) $98,500 C) $198,500 D) $208,000 13) Kolander Company has the following accounts and balances at the end of the year: Long-term Note Payable $50,000 Accounts Receivable $28,000 Accounts Payable $37,000 Building $55,000 Cash and Cash Equivalents $80,000 Common Stock $122,000 Interest Payable $1,500 Land $40,000 Short-term Investments $5,000 Income Taxes Payable $10,000 Equipment $59,500 Supplies $5,000 What is the amount of Retained Earnings at the end of the year? A) $52,000 B) $98,500 C) $150,500 D) $174,000 1.6 Learning Objective 1-6 1) The three factors that influence business and accounting decisions are: A) judgment, cost/benefit analysis, and religious training. B) minimizing costs, maximizing profits and cost/benefit tradeoff. C) economic, legal, and ethical. D) legal implications, religious training, profit maximization. 2) The ________ factor recognizes that while certain actions might be both economically profitable and legal, they still may not be right. A) economic B) legal C) profitability D) ethical 3) In making global business decisions, complications include: A) what is legal in one country may not be legal in another country. B) what is ethical in one country may not be ethical in another country. C) a foreign government threatening to take over the company's plant in the Phillipines. D) all of the above. 4) The economic factor in decision making requires the decision maker to: A) maximize the economic benefit to the decision maker. B) maximize the economic benefit to the corporation or nonprofit entity. C) maximize the corporation's profits. D) minimize the corporation's costs.

Preview 4 out of 61  pages

Yongsam

The benefits of buying summaries with Stuvia:

Guaranteed quality through customer reviews

Guaranteed quality through customer reviews

Stuvia customers have reviewed more than 450,000 summaries. This how you know that you are buying the best documents.

Quick and easy check-out

Quick and easy check-out

You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.

Focus on what matters

Focus on what matters

Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!

$ 14.99
  • (0)
  Add to cart