TEST BANK 51 51
Financial Accounting Tools For Business Decision
51 51 51 51 51
51 Making, 10th Edition, Paul D. Kimmel,
51 51 51 51 51 51
51 Chapters 1 – 13, Complete
51 51 51 51
Copyright © 2022 John Wiley & Sons, Inc. (For Instructor Use Only)
,TABLE OF CONTENTS 51 51
1 Introduction to Financial Statements
51 51 51 51 51
2 A Further Look at Financial Statements
51 51 51 51 51 51 51
3 The Accounting Information System
51 51 51 51 51
4 Accrual Accounting Concepts
51 51 51 51
5 Merchandising Operations and the Multiple-Step Income Statement
51 51 51 51 51 51 51 51
6 Reporting and Analyzing Inventory
51 51 51 51 51
7 Fraud, Internal Control, and Cash
51 51 51 51 51 51
8 Reporting and Analyzing Receivables
51 51 51 51 51
9 Reporting and Analyzing Long-Lived Assets
51 51 51 51 51 51
10 Reporting and Analyzing Liabilities
51 51 51 51 51
11 Reporting and Analyzing Stockholders’ Equity
51 51 51 51 51 51
12 Statement of Cash Flows
51 51 51 51 51
13 Financial Analysis: The Big Picture
51 51 51 51 51 51
Copyright © 2022 John Wiley & Sons, Inc. (For Instructor Use Only)
,CHAPTER 1 51
INTRODUCTION TO FINANCIAL STATEMENTS 51 51 51
CHAPTER LEARNING OBJECTIVES 51 51
1. Identify the forms of business organization and the uses of accounting information. A sole
51 51 51 51 51 51 51 51 51 51 51 51 51
proprietorship is a business owned by one person. A partnership is a business owned by two
51 51 51 51 51 51 51 51 51 51 51 51 51 51 51 51
or more people associated as partners. A corporation is a separate legal entity for which
51 51 51 51 51 51 51 51 51 51 51 51 51 51 51
evidence of ownership is provided by shares of stock. Internal users are managers who need
51 51 51 51 51 51 51 51 51 51 51 51 51 51 51
accounting information to plan, organize, and run business operations. The primary external
51 51 51 51 51 51 51 51 51 51 51 51
users are investors and creditors. Investors (stockholders) use accounting information to
51 51 51 51 51 51 51 51 51 51 51
decide whether to buy, hold, or sell shares of a company‘s stock. Creditors (suppliers and
51 51 51 51 51 51 51 51 51 51 51 51 51 51 51
bankers) use accounting information to assess the risk of granting credit or loaning money
51 51 51 51 51 51 51 51 51 51 51 51 51 51
toa business. Other groups who have an indirect interest in a business are taxing authorities,
51 1
5 51 51 51 51 51 51 51 51 51 51 51 51 51 51
customers, labor unions, and regulatory agencies.
51 51 51 51 51 51
2. Explain the three principal types of business activity. Financing activities involve collecting
51 51 51 51 51 51 51 51 51 5 1 51
the necessary funds to support the business. Investing activities involve acquiring the
51 51 51 51 51 51 51 51 51 51 51 51
resources necessary to run the business. Operating activities involve putting the resources
51 51 51 51 51 51 51 51 51 51 5 1 51
of the business into action to generate a profit.
51 51 51 51 51 51 51 51 51
3. Describe the four financial statements and how they are prepared. An income statement
51 51 51 51 51 51 51 51 51 51 51 51
presents the revenues and expenses of a company for a specific period of time. A retained
51 51 51 51 51 51 51 51 51 51 51 51 51 51 51 51
earnings statement summarizes the changes in retained earnings that have occurred for a
51 51 51 51 51 51 51 51 51 51 51 51 51
specific period of time. A balance sheet reports the assets, liabilities, and stockholders‘ equity
51 51 51 51 51 51 51 51 51 51 51 51 51 51
of a business at a specific date. A statement of cash flows summarizes information
51 51 51 51 51 51 51 51 51 51 51 51 5 1 5 1
concerning the cash inflows (receipts) and outflows (payments) for a specific period of time.
51 51 51 51 51 51 51 51 51 51 51 51 51 51
Assets are resources owned by a business. Liabilities are the debts and obligations of the
51 51 51 51 51 51 51 51 51 51 51 51 51 51 51
business. Liabilities represent claims of creditors on the assets of the business. Stockholders‘
51 51 51 51 51 51 51 51 51 51 51 51 51
equity represents the claims of owners on the assets of the business. Stockholders‘ equity is
51 51 51 51 51 51 51 51 51 51 51 51 51 51 51
subdivided into two parts: common stock and retained earnings. The basic accounting
51 51 51 51 51 51 51 51 51 51 51 51
equation is Assets = Liabilities + Stockholders‘ Equity. Within the annual report, the
51 51 51 51 51 51 51 51 51 51 51 51 51
management discussion and analysis provides management‘s interpretation of the
51 51 51 51 51 51 51 51 51
company‘s results and financial position as well as a discussion of plans for the future. Notes
51 1
5 51 51 51 51 51 51 51 51 51 51 51 51 51 51
to the financial statements provide additional explanation or detail to make the financial
51 51 51 51 51 51 51 51 51 51 51 51 51
statements more informative. The auditor‘s report expresses an opinion as to whether the
51 51 51 51 51 51 51 51 51 51 51 51 51
financialstatements present fairly the company‘s results of operations and financial position.
51 1
5 51 51 51 51 51 51 51 51 51 51
*4. Explain the career opportunities in accounting. Accounting offers many different jobs in fields
51 51 51 51 51 51 51 51 51 51 51 51 51
such as public and private accounting, governmental, and forensic accounting. Accounting is a
51 51 51 51 51 51 51 51 51 51 51 51 51
popular major because there are many different types of jobs, with unlimited potential for
51 51 51 51 51 51 51 51 51 51 51 51 51 51
career advancement
51 51
Copyright © 2022 John Wiley & Sons, Inc. (For Instructor Use Only)
, 2-2 Test Bank for Kimmel, Financial Accounting: Tools for Business Decision Making, 10e
Difficulties:
Easy: 143 51
Medium: 101 51
Hard: 12 51
Question List by Section 51 51 51
Business Organization and Accounting Information
51 51 51 51
Uses:Forms of Business Organization; 47, 48, 202, 246
51 1
5 51 51 51 51 51 51 51
Sole Proprietorship: 5, 44, 49, 58, 59
51 51 51 51 51 51
Partnership: 1, 4, 46, 56 51 51 51 51
Corporation: 2, 3, 45, 50, 51, 52, 53, 55, 57, 233, 245 51 51 51 51 51 51 51 51 51 51 51
Hybrid Forms of Organization: 60, 61 51 51 51 51 51
Users and Uses of Financial Information: 6, 7, 11, 74, 87
51 51 51 51 51 51 51 51 51 51
Internal Users: 62, 63, 64, 75, 77, 82, 234
51 51 51 51 51 51 51 51
External Users: 8, 9, 10, 12, 65, 76, 78, 79, 80, 81, 83, 84, 85, 86, 88, 89
51 51 51 51 51 51 51 51 51 51 51 51 51 51 51 51 51
Data Analytics: 66, 67, 68, 69, 70, 235, 236
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Ethics in Financial Reporting: 71, 72, 73, 237,
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255The Three Types of Business Activity: 97
51 1
5 51 51 51 51 51 51
Financing Activities: 13, 15, 18, 90, 91, 93, 94, 95, 96, 97, 102, 109, 117, 118, 119, 238
51 51 51 51 51 51 51 51 51 51 51 51 51 51 51 51 51
Investing Activities: 14, 16, 98, 99, 115, 116
51 51 51 51 51 51 51
Operating Activities: 17, 19, 20, 100, 101, 103, 104, 105, 106, 107, 108, 110, 111, 112, 113,
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114
The Four Financial Statements:
51 51 51
Income Statement: 21, 22, 23, 24,127, 128, 132, 133, 134, 138, 142, 143
51 51 51 51 51 51 51 51 51 51 51 51
Retained Earnings Statement: 120, 122, 123, 124, 125, 126, 129, 130, 131, 135, 137, 139, 140,
51 51 51 51 51 51 51 51 51 51 51 51 51 51 51
141, 144, 145, 146, 147, 148, 149, 150, 154, 164, 169, 178, 181, 252
51 51 51 51 51 51 51 51 51 51 51 51 51
Balance Sheet: 25, 27, 28, 29, 30, 31, 32, 33, 34, 35, 136, 151, 152, 153, 163, 165, 166, 168,
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170, 173, 177, 179, 180, 182, 185, 186, 187, 188, 199, 200, 201, 207, 208, 213, 214, 215, 216,
51 51 51 51 51 51 51 51 51 51 51 51 51 51 51 51 51 51
217, 218, 219, 220, 221, 222, 225, 229, 239, 240, 241, 253
51 51 51 51 51 51 51 51 51 51 51
Statement of Cash Flows: 26, 121, 171, 174, 183, 242, 249
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Interrelationships of Statements: 155, 156, 157, 158, 159, 160, 161, 162, 167, 175, 176, 184,
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250, 251, 256
51 51
Elements of an Annual Report: 36, 41, 192, 196, 197
51 51 51 51 51 51 51 51 51
Management Discussion and Analysis: 40, 191 51 51 51 51 51
Notes to the Financial Statements: 37, 42, 190, 193, 194, 198, 254
51 51 51 51 51 51 51 51 51 51 51
Auditor‘s Report: 38, 39, 195 51 51 51 51
Copyright © 2022 John Wiley & Sons, Inc. (For Instructor Use Only)
Financial Accounting Tools For Business Decision
51 51 51 51 51
51 Making, 10th Edition, Paul D. Kimmel,
51 51 51 51 51 51
51 Chapters 1 – 13, Complete
51 51 51 51
Copyright © 2022 John Wiley & Sons, Inc. (For Instructor Use Only)
,TABLE OF CONTENTS 51 51
1 Introduction to Financial Statements
51 51 51 51 51
2 A Further Look at Financial Statements
51 51 51 51 51 51 51
3 The Accounting Information System
51 51 51 51 51
4 Accrual Accounting Concepts
51 51 51 51
5 Merchandising Operations and the Multiple-Step Income Statement
51 51 51 51 51 51 51 51
6 Reporting and Analyzing Inventory
51 51 51 51 51
7 Fraud, Internal Control, and Cash
51 51 51 51 51 51
8 Reporting and Analyzing Receivables
51 51 51 51 51
9 Reporting and Analyzing Long-Lived Assets
51 51 51 51 51 51
10 Reporting and Analyzing Liabilities
51 51 51 51 51
11 Reporting and Analyzing Stockholders’ Equity
51 51 51 51 51 51
12 Statement of Cash Flows
51 51 51 51 51
13 Financial Analysis: The Big Picture
51 51 51 51 51 51
Copyright © 2022 John Wiley & Sons, Inc. (For Instructor Use Only)
,CHAPTER 1 51
INTRODUCTION TO FINANCIAL STATEMENTS 51 51 51
CHAPTER LEARNING OBJECTIVES 51 51
1. Identify the forms of business organization and the uses of accounting information. A sole
51 51 51 51 51 51 51 51 51 51 51 51 51
proprietorship is a business owned by one person. A partnership is a business owned by two
51 51 51 51 51 51 51 51 51 51 51 51 51 51 51 51
or more people associated as partners. A corporation is a separate legal entity for which
51 51 51 51 51 51 51 51 51 51 51 51 51 51 51
evidence of ownership is provided by shares of stock. Internal users are managers who need
51 51 51 51 51 51 51 51 51 51 51 51 51 51 51
accounting information to plan, organize, and run business operations. The primary external
51 51 51 51 51 51 51 51 51 51 51 51
users are investors and creditors. Investors (stockholders) use accounting information to
51 51 51 51 51 51 51 51 51 51 51
decide whether to buy, hold, or sell shares of a company‘s stock. Creditors (suppliers and
51 51 51 51 51 51 51 51 51 51 51 51 51 51 51
bankers) use accounting information to assess the risk of granting credit or loaning money
51 51 51 51 51 51 51 51 51 51 51 51 51 51
toa business. Other groups who have an indirect interest in a business are taxing authorities,
51 1
5 51 51 51 51 51 51 51 51 51 51 51 51 51 51
customers, labor unions, and regulatory agencies.
51 51 51 51 51 51
2. Explain the three principal types of business activity. Financing activities involve collecting
51 51 51 51 51 51 51 51 51 5 1 51
the necessary funds to support the business. Investing activities involve acquiring the
51 51 51 51 51 51 51 51 51 51 51 51
resources necessary to run the business. Operating activities involve putting the resources
51 51 51 51 51 51 51 51 51 51 5 1 51
of the business into action to generate a profit.
51 51 51 51 51 51 51 51 51
3. Describe the four financial statements and how they are prepared. An income statement
51 51 51 51 51 51 51 51 51 51 51 51
presents the revenues and expenses of a company for a specific period of time. A retained
51 51 51 51 51 51 51 51 51 51 51 51 51 51 51 51
earnings statement summarizes the changes in retained earnings that have occurred for a
51 51 51 51 51 51 51 51 51 51 51 51 51
specific period of time. A balance sheet reports the assets, liabilities, and stockholders‘ equity
51 51 51 51 51 51 51 51 51 51 51 51 51 51
of a business at a specific date. A statement of cash flows summarizes information
51 51 51 51 51 51 51 51 51 51 51 51 5 1 5 1
concerning the cash inflows (receipts) and outflows (payments) for a specific period of time.
51 51 51 51 51 51 51 51 51 51 51 51 51 51
Assets are resources owned by a business. Liabilities are the debts and obligations of the
51 51 51 51 51 51 51 51 51 51 51 51 51 51 51
business. Liabilities represent claims of creditors on the assets of the business. Stockholders‘
51 51 51 51 51 51 51 51 51 51 51 51 51
equity represents the claims of owners on the assets of the business. Stockholders‘ equity is
51 51 51 51 51 51 51 51 51 51 51 51 51 51 51
subdivided into two parts: common stock and retained earnings. The basic accounting
51 51 51 51 51 51 51 51 51 51 51 51
equation is Assets = Liabilities + Stockholders‘ Equity. Within the annual report, the
51 51 51 51 51 51 51 51 51 51 51 51 51
management discussion and analysis provides management‘s interpretation of the
51 51 51 51 51 51 51 51 51
company‘s results and financial position as well as a discussion of plans for the future. Notes
51 1
5 51 51 51 51 51 51 51 51 51 51 51 51 51 51
to the financial statements provide additional explanation or detail to make the financial
51 51 51 51 51 51 51 51 51 51 51 51 51
statements more informative. The auditor‘s report expresses an opinion as to whether the
51 51 51 51 51 51 51 51 51 51 51 51 51
financialstatements present fairly the company‘s results of operations and financial position.
51 1
5 51 51 51 51 51 51 51 51 51 51
*4. Explain the career opportunities in accounting. Accounting offers many different jobs in fields
51 51 51 51 51 51 51 51 51 51 51 51 51
such as public and private accounting, governmental, and forensic accounting. Accounting is a
51 51 51 51 51 51 51 51 51 51 51 51 51
popular major because there are many different types of jobs, with unlimited potential for
51 51 51 51 51 51 51 51 51 51 51 51 51 51
career advancement
51 51
Copyright © 2022 John Wiley & Sons, Inc. (For Instructor Use Only)
, 2-2 Test Bank for Kimmel, Financial Accounting: Tools for Business Decision Making, 10e
Difficulties:
Easy: 143 51
Medium: 101 51
Hard: 12 51
Question List by Section 51 51 51
Business Organization and Accounting Information
51 51 51 51
Uses:Forms of Business Organization; 47, 48, 202, 246
51 1
5 51 51 51 51 51 51 51
Sole Proprietorship: 5, 44, 49, 58, 59
51 51 51 51 51 51
Partnership: 1, 4, 46, 56 51 51 51 51
Corporation: 2, 3, 45, 50, 51, 52, 53, 55, 57, 233, 245 51 51 51 51 51 51 51 51 51 51 51
Hybrid Forms of Organization: 60, 61 51 51 51 51 51
Users and Uses of Financial Information: 6, 7, 11, 74, 87
51 51 51 51 51 51 51 51 51 51
Internal Users: 62, 63, 64, 75, 77, 82, 234
51 51 51 51 51 51 51 51
External Users: 8, 9, 10, 12, 65, 76, 78, 79, 80, 81, 83, 84, 85, 86, 88, 89
51 51 51 51 51 51 51 51 51 51 51 51 51 51 51 51 51
Data Analytics: 66, 67, 68, 69, 70, 235, 236
51 51 51 51 51 51 51 51
Ethics in Financial Reporting: 71, 72, 73, 237,
51 51 51 51 51 51 51
255The Three Types of Business Activity: 97
51 1
5 51 51 51 51 51 51
Financing Activities: 13, 15, 18, 90, 91, 93, 94, 95, 96, 97, 102, 109, 117, 118, 119, 238
51 51 51 51 51 51 51 51 51 51 51 51 51 51 51 51 51
Investing Activities: 14, 16, 98, 99, 115, 116
51 51 51 51 51 51 51
Operating Activities: 17, 19, 20, 100, 101, 103, 104, 105, 106, 107, 108, 110, 111, 112, 113,
51 51 51 51 51 51 51 51 51 51 51 51 51 51 51 51
114
The Four Financial Statements:
51 51 51
Income Statement: 21, 22, 23, 24,127, 128, 132, 133, 134, 138, 142, 143
51 51 51 51 51 51 51 51 51 51 51 51
Retained Earnings Statement: 120, 122, 123, 124, 125, 126, 129, 130, 131, 135, 137, 139, 140,
51 51 51 51 51 51 51 51 51 51 51 51 51 51 51
141, 144, 145, 146, 147, 148, 149, 150, 154, 164, 169, 178, 181, 252
51 51 51 51 51 51 51 51 51 51 51 51 51
Balance Sheet: 25, 27, 28, 29, 30, 31, 32, 33, 34, 35, 136, 151, 152, 153, 163, 165, 166, 168,
51 51 51 51 51 51 51 51 51 51 51 51 51 51 51 51 51 51 51
170, 173, 177, 179, 180, 182, 185, 186, 187, 188, 199, 200, 201, 207, 208, 213, 214, 215, 216,
51 51 51 51 51 51 51 51 51 51 51 51 51 51 51 51 51 51
217, 218, 219, 220, 221, 222, 225, 229, 239, 240, 241, 253
51 51 51 51 51 51 51 51 51 51 51
Statement of Cash Flows: 26, 121, 171, 174, 183, 242, 249
51 51 51 51 51 51 51 51 51 51
Interrelationships of Statements: 155, 156, 157, 158, 159, 160, 161, 162, 167, 175, 176, 184,
51 51 51 51 51 51 51 51 51 51 51 51 51 51
250, 251, 256
51 51
Elements of an Annual Report: 36, 41, 192, 196, 197
51 51 51 51 51 51 51 51 51
Management Discussion and Analysis: 40, 191 51 51 51 51 51
Notes to the Financial Statements: 37, 42, 190, 193, 194, 198, 254
51 51 51 51 51 51 51 51 51 51 51
Auditor‘s Report: 38, 39, 195 51 51 51 51
Copyright © 2022 John Wiley & Sons, Inc. (For Instructor Use Only)
