, FinancialmAccounting m5ce
Chapterm1 m–
mThemFinancialmStatements
Chapter m 1 m m The m Financialm State me nts
1.1 Explain mwhymaccountingmis mthemlanguagemofmbusiness
1 ) Which mofmthemfollowingmpersons mormgroups mhavemthemultimatemcontrolmofma mcorporation?
A ) themchiefmexecutivemofficer
B ) themboardmofmdirectors
C ) themauditmcommittee
D ) themshareholder
s mAnswer:m D
Diff:m2 m Type:mMC
mL.O.:m L.O.m1-1
2 ) Financialmstatements mare:
A ) reports missuedmbymoutsidemconsultants mwhomaremhiredmtomanalyzemkeymoperations mofmthembusiness
B ) reports mcreatedmbymmanagementmthatmstates mitmis mresponsiblemformthemacts mofmthemcorporation
C ) standardmdocuments mthatmtellmus mhowmwellma mbusiness mis mperformingmandmwheremitmstands min mfi
nancialmterms
D ) standardmdocuments missuedmbymoutsidemconsultants mwhomaremhiredmtomanalyzemkeymoperations m
ofmthembusiness min mfinancialmterms
Answer:m C
Diff:m1 m Type:mMC
mL.O.:m L.O.m1-1
3 ) Themaccountingmequation mcan mbemstatedmas:
A ) Assets m+ mLiabilities m= mShareholders' mequity
B ) Assets m= mLiabilities m+ mShareholders' mequity
C ) Assets m= mLiabilities m-mShareholders' mequity
D ) Assets m+ mShareholders' mequitym= mLiabiliti
es mAnswer:m B
Diff:m1 m Type:mMC
mL.O.:m L.O.m1-1
4 ) Themowners' minterestmin mthemassets mofma mcorporation mis mknown mas:
A ) assets
B ) shareholders' m equity
C ) expenses
D ) revenues
mAnswer:m
B
Diff:m1 m Type:mMC
mL.O.:m L.O.m1-1
©m2015 mPearsonmCanadamI 1-1
nc.
, FinancialmAccounting m5ce
Chapterm1 m–
mThemFinancialmStatements
5 ) On mJanuarym1,m2014,mtotalmassets mformLiftoffmTechnologies mwerem$125,000;mon mDecemberm31,m2014
,mtotalmassets mwerem$145,000.mOn mJanuarym1,m2014,mtotalmliabilities mwerem$110,000;mon mDecemberm31
,m2014,mtotalmliabilities mwerem$115,000.mWhatmaremthemamountmofmthemchangemandmthemdirection mofmt
hemchangemin mLiftoffmTechnologies mshareholders' mequitymform2014?
A ) decreasemofm$15,000
B ) increasemofm$15,000
C ) increasemofm$30,000
D ) decreasemofm$30,00
0 mAnswer:m B
Diff:m2 m Type:mMC
mL.O.:m L.O.m1-1
6 ) Claims mheldmbymthemshareholders m(owners)mofma mcorporation maremreferredmtomas:
A ) retainedmearnings
B ) sharemcapital
C ) sharemcapitalmminus mretainedmearnings
D ) sharemcapitalmplus mretainedmearnin
gs mAnswer:m D
Diff:m3 m Type:mMC
mL.O.:m L.O.m1-1
7 ) Payables maremclassifiedmas:
A ) increases min mearnings
B ) assets
C ) decreases min mearnings
D ) liabilities
mAnswer:m
D
Diff:m1 m Type:mMC
mL.O.:m L.O.m1-1
8 ) Receivables maremclassifiedmas:
A ) increases min mearnings
B ) assets
C ) decreases min mearnings
D ) liabilities
mAnswer:m
B
Diff:m1 m Type:mMC
mL.O.:m L.O.m1-1
9 ) Revenues mare:
A ) increases min mliabilities mresultingmfrom mdeliveringmgoods mormservices mtomcustomers
B ) increases min mretainedmearnings mresultingmfrom mdeliveringmgoods mormservices mtomcustomers
C ) decreases min massets mresultingmfrom mdeliveringmgoods mormservices mtomcustomers
D ) decreases min mretainedmearnings mresultingmfrom mdeliveringmgoods mormservices mtomcusto
mers mAnswer:m B
Diff:m2 m Type:mMC
mL.O.:m L.O.m1-1
©m2015 mPearsonmCanadamI 1-2
nc.
, FinancialmAccounting m5ce
Chapterm1 m–
mThemFinancialmStatements
10 ) Ifmassets mincreasem$120,000 mduringma mgiven mperiodmandmliabilities mdecreasem$25,000 mduringmthe
msamemperiod,mshareholders' mequitymmust:
A ) increasem$95,000
B ) decreasem$145,000
C ) decreasem$95,000
D ) increasem$145,00
0 mAnswer:m D
Diff:m3 m Type:mMC
mL.O.:m L.O.m1-1
11 ) Ifmliabilities mincreasem$120,000 mduringma mgiven mperiodmandmshareholders' mequitymdecreases m$25,000 md
uringmthemsamemperiod,massets mmust:
A ) decreasem$145,000
B ) increasem$145,000
C ) increasem$95,000
D ) decreasem$95,00
0 mAnswer:m C
Diff:m3 m Type:mMC
mL.O.:m L.O.m1-1
12 ) Expenses mare:
A ) increases min massets mresultingmfrom moperations
B ) increases min mretainedmearnings mresultingmfrom moperations
C ) increases min mliabilities mresultingmfrom mpurchasingmassets
D ) decreases min mretainedmearnings mresultingmfrom moperatio
ns mAnswer:m D
Diff:m2 m Type:mMC
mL.O.:m L.O.m1-1
13 ) Howmdomrevenues mforma mperiodmrelatemtomthembeginningmandmendingmbalances min mretainedmearnings?
A ) Revenues mwillmincreasemthembeginningmbalancemofmretainedmearnings mformthemperiod.
B ) Revenues mwillmdecreasemthembeginningmbalancemofmretainedmearnings mformthemperiod.
C ) Revenues mless mexpenses mwillmeithermincreasemormdecreasemthembeginningmbalancemofmretainedmearnin
gs mformthemperiod.
D ) Revenues mless mexpenses mwillmeithermincreasemormdecreasemthemendingmbalancemofmretainedmearnings mf
ormthemperiod.
Answer:m D
Diff:m2 m Type:mMC
mL.O.:m L.O.m1-1
14 ) Which mofmthemfollowingmbestmdescribes ma mliability?
A ) Liabilities marema mform mofmsharemcapital.
B ) Liabilities maremfuturemeconomicmbenefits mtomwhich ma mcompanymis mentitled.
C ) Liabilities maremaccounts mreceivablemofmthemcompany.
D ) Liabilities maremeconomicmobligations mtomcreditors mtombempaidmatmsomemfuturemdatembymthemco
mpany.mAnswer:m D
Diff:m1 m Type:mMC
mL.O.:m L.O.m1-1
15 ) Shareholders' mequitymformRaisin mCorporation mon mJanuarym1,m2014 mandmDecemberm31,m2014 mwerem$60
,000 mandm$75,000,mrespectively.mAssets mon mJanuarym1,m2014 mandmDecemberm31,m2014 mwerem$115,000 mand
m$105,000,mrespectively.mLiabilities mon mJanuarym1,m2014 mwerem$55,000.mWhatmismthemamountmofmliabilitiesm
on mDecemberm31,m2014?
A ) $40,000
©m2015 mPearsonmCanadamI 1-3
nc.
Chapterm1 m–
mThemFinancialmStatements
Chapter m 1 m m The m Financialm State me nts
1.1 Explain mwhymaccountingmis mthemlanguagemofmbusiness
1 ) Which mofmthemfollowingmpersons mormgroups mhavemthemultimatemcontrolmofma mcorporation?
A ) themchiefmexecutivemofficer
B ) themboardmofmdirectors
C ) themauditmcommittee
D ) themshareholder
s mAnswer:m D
Diff:m2 m Type:mMC
mL.O.:m L.O.m1-1
2 ) Financialmstatements mare:
A ) reports missuedmbymoutsidemconsultants mwhomaremhiredmtomanalyzemkeymoperations mofmthembusiness
B ) reports mcreatedmbymmanagementmthatmstates mitmis mresponsiblemformthemacts mofmthemcorporation
C ) standardmdocuments mthatmtellmus mhowmwellma mbusiness mis mperformingmandmwheremitmstands min mfi
nancialmterms
D ) standardmdocuments missuedmbymoutsidemconsultants mwhomaremhiredmtomanalyzemkeymoperations m
ofmthembusiness min mfinancialmterms
Answer:m C
Diff:m1 m Type:mMC
mL.O.:m L.O.m1-1
3 ) Themaccountingmequation mcan mbemstatedmas:
A ) Assets m+ mLiabilities m= mShareholders' mequity
B ) Assets m= mLiabilities m+ mShareholders' mequity
C ) Assets m= mLiabilities m-mShareholders' mequity
D ) Assets m+ mShareholders' mequitym= mLiabiliti
es mAnswer:m B
Diff:m1 m Type:mMC
mL.O.:m L.O.m1-1
4 ) Themowners' minterestmin mthemassets mofma mcorporation mis mknown mas:
A ) assets
B ) shareholders' m equity
C ) expenses
D ) revenues
mAnswer:m
B
Diff:m1 m Type:mMC
mL.O.:m L.O.m1-1
©m2015 mPearsonmCanadamI 1-1
nc.
, FinancialmAccounting m5ce
Chapterm1 m–
mThemFinancialmStatements
5 ) On mJanuarym1,m2014,mtotalmassets mformLiftoffmTechnologies mwerem$125,000;mon mDecemberm31,m2014
,mtotalmassets mwerem$145,000.mOn mJanuarym1,m2014,mtotalmliabilities mwerem$110,000;mon mDecemberm31
,m2014,mtotalmliabilities mwerem$115,000.mWhatmaremthemamountmofmthemchangemandmthemdirection mofmt
hemchangemin mLiftoffmTechnologies mshareholders' mequitymform2014?
A ) decreasemofm$15,000
B ) increasemofm$15,000
C ) increasemofm$30,000
D ) decreasemofm$30,00
0 mAnswer:m B
Diff:m2 m Type:mMC
mL.O.:m L.O.m1-1
6 ) Claims mheldmbymthemshareholders m(owners)mofma mcorporation maremreferredmtomas:
A ) retainedmearnings
B ) sharemcapital
C ) sharemcapitalmminus mretainedmearnings
D ) sharemcapitalmplus mretainedmearnin
gs mAnswer:m D
Diff:m3 m Type:mMC
mL.O.:m L.O.m1-1
7 ) Payables maremclassifiedmas:
A ) increases min mearnings
B ) assets
C ) decreases min mearnings
D ) liabilities
mAnswer:m
D
Diff:m1 m Type:mMC
mL.O.:m L.O.m1-1
8 ) Receivables maremclassifiedmas:
A ) increases min mearnings
B ) assets
C ) decreases min mearnings
D ) liabilities
mAnswer:m
B
Diff:m1 m Type:mMC
mL.O.:m L.O.m1-1
9 ) Revenues mare:
A ) increases min mliabilities mresultingmfrom mdeliveringmgoods mormservices mtomcustomers
B ) increases min mretainedmearnings mresultingmfrom mdeliveringmgoods mormservices mtomcustomers
C ) decreases min massets mresultingmfrom mdeliveringmgoods mormservices mtomcustomers
D ) decreases min mretainedmearnings mresultingmfrom mdeliveringmgoods mormservices mtomcusto
mers mAnswer:m B
Diff:m2 m Type:mMC
mL.O.:m L.O.m1-1
©m2015 mPearsonmCanadamI 1-2
nc.
, FinancialmAccounting m5ce
Chapterm1 m–
mThemFinancialmStatements
10 ) Ifmassets mincreasem$120,000 mduringma mgiven mperiodmandmliabilities mdecreasem$25,000 mduringmthe
msamemperiod,mshareholders' mequitymmust:
A ) increasem$95,000
B ) decreasem$145,000
C ) decreasem$95,000
D ) increasem$145,00
0 mAnswer:m D
Diff:m3 m Type:mMC
mL.O.:m L.O.m1-1
11 ) Ifmliabilities mincreasem$120,000 mduringma mgiven mperiodmandmshareholders' mequitymdecreases m$25,000 md
uringmthemsamemperiod,massets mmust:
A ) decreasem$145,000
B ) increasem$145,000
C ) increasem$95,000
D ) decreasem$95,00
0 mAnswer:m C
Diff:m3 m Type:mMC
mL.O.:m L.O.m1-1
12 ) Expenses mare:
A ) increases min massets mresultingmfrom moperations
B ) increases min mretainedmearnings mresultingmfrom moperations
C ) increases min mliabilities mresultingmfrom mpurchasingmassets
D ) decreases min mretainedmearnings mresultingmfrom moperatio
ns mAnswer:m D
Diff:m2 m Type:mMC
mL.O.:m L.O.m1-1
13 ) Howmdomrevenues mforma mperiodmrelatemtomthembeginningmandmendingmbalances min mretainedmearnings?
A ) Revenues mwillmincreasemthembeginningmbalancemofmretainedmearnings mformthemperiod.
B ) Revenues mwillmdecreasemthembeginningmbalancemofmretainedmearnings mformthemperiod.
C ) Revenues mless mexpenses mwillmeithermincreasemormdecreasemthembeginningmbalancemofmretainedmearnin
gs mformthemperiod.
D ) Revenues mless mexpenses mwillmeithermincreasemormdecreasemthemendingmbalancemofmretainedmearnings mf
ormthemperiod.
Answer:m D
Diff:m2 m Type:mMC
mL.O.:m L.O.m1-1
14 ) Which mofmthemfollowingmbestmdescribes ma mliability?
A ) Liabilities marema mform mofmsharemcapital.
B ) Liabilities maremfuturemeconomicmbenefits mtomwhich ma mcompanymis mentitled.
C ) Liabilities maremaccounts mreceivablemofmthemcompany.
D ) Liabilities maremeconomicmobligations mtomcreditors mtombempaidmatmsomemfuturemdatembymthemco
mpany.mAnswer:m D
Diff:m1 m Type:mMC
mL.O.:m L.O.m1-1
15 ) Shareholders' mequitymformRaisin mCorporation mon mJanuarym1,m2014 mandmDecemberm31,m2014 mwerem$60
,000 mandm$75,000,mrespectively.mAssets mon mJanuarym1,m2014 mandmDecemberm31,m2014 mwerem$115,000 mand
m$105,000,mrespectively.mLiabilities mon mJanuarym1,m2014 mwerem$55,000.mWhatmismthemamountmofmliabilitiesm
on mDecemberm31,m2014?
A ) $40,000
©m2015 mPearsonmCanadamI 1-3
nc.
