FINANCIAL ACCOUNTING FINAL EXAM LATEST EDITION

FINANCIAL ACCOUNTING FINAL EXAM LATEST EDITION Which of the following sets of characteristics describes a corporation? a.) simple to set up and maintains control with founder. b.) easier to transfer ownership and raise funds, no personal liability. c.) shared control, tax advantages, increased skills and resources. d.) harder to raise funds and fives owner control. - CORRECT ANSWER-b.) easier to transfer ownership and raise funds, no personal liability. All of the following are advantages for organizing a business as a sole proprietorship EXCEPT a.) a sole proprietorship is a simple form of business to set up. b.) a sole proprietorship receives more favorable tax treatment. c.) a sole proprietorship gives the owner control of the business. d.) a sole proprietorship allows for an easy transfer of ownership through stock sales. - CORRECT ANSWER-d.) a sole proprietorship allows for an easy transfer of ownership through stock sales. The liability created by Old Navy when it purchases cleaning supplies on credit from a supplier is termed a(n) a.) revenue b.) account payable c.) account receivable d.) expense - CORRECT ANSWER-b.) account payable When can an investor find information about operating activities in a company's financial statements? a.) on the statement of cash flows and the income statement. b.) on the income statement only. c.) on all four financial statements. d.) on the statement of cash flows only. - CORRECT ANSWER-a.) on the statement of cash flows and the income statement. A balence sheets shows a.) assets, liabilities, and stockholders' equity. b.) revenues, liabilities, and stockholders' equity. c.) revenues, expenses, and dividends. d.) expenses, dividends, and stockholders' equity. - CORRECT ANSWER-a.) assets, liabilities, and stockholders' equity. Stockholders' equity a.) is shown on the income statement. b.) is usually equal to cash on hand. c.) is equal to liabilities and retained earnings. d.) includes retained earnings and common stock. - CORRECT ANSWER-d.) includes retained earnings and common stock. Notes to the financial statements a.) need not be read in detail if an unqualified opinion accompanies the financial statements. b.) are generally brief and few in number. c.) help clarify information presented in the financial statements. d.) are optional. - CORRECT ANSWER-c.) help clarify information presented in the financial statements. If it is not true that current assets are resources that are expected to be a.) consumed within one year. b.) realized in cash within one year. c.) acquired within one year. d.) sold within one year. - CORRECT ANSWER-c.) acquired within one year. TRUE OR FALSE The investment category on the balance sheet normally includes investments that are intended to be held for a short period of time (less than one year). - CORRECT ANSWER-FALSE TRUE OR FALSE Earnings per share measures the net income earned on each share of common stock. - CORRECT ANSWER-TRUE TRUE OR FALSE The excess of current assets over current liabilities is called working capital. - CORRECT ANSWER-TRUE In order for accounting information to be relevant, it must a.) help predict future events or confirm prior expectations. b.) be used by many different firms. c.) not be reported to the public. d.) have very little cost. - CORRECT ANSWER-a.) help predict future events or confirm prior expectations. The economic life of a business can be divided into artificial time periods. - CORRECT ANSWER-Periodicity assumption. The business will continue in operation long enough to carry out its existing objectives. - CORRECT ANSWER-Going concern assumption. Assets should be recorded at their cost. - CORRECT ANSWER-Historical cost principle. Economic events can identified with a particular unit of accountability. - CORRECT ANSWER-Economic entity assumption. Circumstances and events that make a difference to financial statement users should be disclosed. - CORRECT ANSWER-Full disclosure principal. Only transaction data that can be expressed in terms of money should be included in the accounting records. - CORRECT ANSWER-Monetary unit assumption. The periodicity assumption states that the economic life of a business can be divided into _____________ - CORRECT ANSWER-Artificial time periods. TRUE OR FALSE The monetary unit assumption has led to an increase in the notes to financial statements. - CORRECT ANSWER-FALSE. Which of the following accounts is increased with a credit? a.) sales revenue b.) dividends c.) supplies expense d,.) supplies - CORRECT ANSWER-a.) sales revenue The basic form if a journal entry has the a.) credit account enetered first and indented. b.) credit account entered first at the extreme left margin. c.) debit account entered first at the extreme left margin. d.) debit account entered first and indented. - CORRECT ANSWER-c.) debit account entered first at the extreme left margin. Which of the following accounts is an asset? a.) service revenue b.) supp