TEST BANK FOR FINANCIAL ACCOUNTING FOR MBAS
g g g g g g
8TH EDITION BY EASTON
g g g g
, Module 1 g
FinancialAccountingforMBAs g g g
Learning Objs – Coverage byquestion g g g g g
True/False Multiple Choice
g
LO1 – Explain and assess the four main business
g g g g g g g g
activities.
g
LO2 – Identify and discuss the users and suppliers of
1- 4 1, 2
g g g g g g g g g
financial statement information.
g g
g g g
LO3 – Describe and examine the four financial
5-10 3-19
g g g g g g g
statements, and define the accounting equation.
g g g g g g
LO4 – Explain and apply the basics of profitability
11-13 20-25
g g g g g g g g
analysis.
g
LO5 – Assess business operations within the context
14 26, 27
g g g g g g g
of a competitive environment.
g
g g g g
LO6 – Access reports filed with the SEC (Appendix 1A).
g g g g g g g g g
LO7 – Describe the accounting principles and
g g g g g g
regulations that frame financial statements (Appendix
g g g g g g 15 28-30
1B).
g
These questions are available to assign in myBusinessCourse.
g g g g g g g
© Cambridge Business Publishers, 2021
g g g g
1-1 Financial Accounting for MBAs, 8th Edition
g g g g g
,Module 1: Financial Accounting for MBAs
g g g g g
True/False
TOPIC:Users of Financial Statement Information LO: g g g g g
2
1. Shareholders demand financial information primarily to assess profitability and risk whereas bankers
g g g g g g g g g g g
demand information primarily to assess cash flows to repay loan interest and principal.
g g g g g g g g g g g g g
ACCURATE ANSWER:-True g
Reasoning:->>->>>While both shareholders and bankers are interested in all the information g g g g g g g g g g
companies provide, shareholders care about more about a firm‘s profitability and bankers care more
g g g g g g g g g g g g g g
about solvency and creditworthiness.
g g g g
TOPIC:Publicly Available Financial g g
Reports LO: 2
g g g
2. Publicly traded companies are required to provide quarterly financial reports directly to the public.
g g g g g g g g g g g g g
ACCURATE ANSWER:-False g
Reasoning:->>->>>Companies provide electronic versions of quarterly financial statements to the g g g g g g g g g
SEC, which posts them to the Internet for the public to access them.
g g g g g g g g g g g g g
TOPIC:Users of Financial Statement Information LO: g g g g g
2
3. Publicly traded companies provide financial information primarily to satisfy the SEC and
g g g g g g g g g g g
the tax authorities (that is, the Internal Revenue Service).
g g g g g g g g g
ACCURATE ANSWER:-False g
Reasoning :->>->>>Demand for information extends to many users; the regulators such as the SEC
g g g g g g g g g g g g g
and the IRS are only one class of users.
g g g g g g g g g
TOPIC:SEC Filings LO: g g
2
4. Publicly traded companies must provide to the Securities Exchange Commission annual
g g g g g g g g g g
audited financial statements (10-K reports) and quarterly audited financial statements (10-Q reports).
g g g g g g g g g g g g
ACCURATE ANSWER:-False g
Reasoning:->>->>>Quarterly reports do not need to be audited. g g g g g g g
TOPIC:Balance
Sheet LO: 3
g g g
5. If a firm reports retained earnings of $175.3 million on its balance sheet, it must also report
g g g g g g g g g g g g g g g g
$175.3 million in cash. g g g
ACCURATE ANSWER:-False g
Reasoning:->>->>>The accounting equation requires total assets to equal total liabilities plus g g g g g g g g g g
stockholders‘ equity. That does not imply, however, that liability and equity accounts relate directly to
g g g g g g g g g g g g g g g
specific assets.
g g
© Cambridge Business Publishers, 2021
g g g g
Test Bank (T/F & MC), Module 1
g g g g g g 1-2
, TOPIC:Balance
Sheet LO: 3
g g g
6. A balance sheet shows a firm‘s position over a period of time, whereas an income statement,
g g g g g g g g g g g g g g g
statement of stockholders‘ equity, and statement of cash flows show its position at a point in time.
g g g g g g g g g g g g g g g g g
ACCURATE ANSWER:-False g
Reasoning:->>->>>The statement is reversed: A balance sheet shows a firm‘s position at a point in g g g g g g g g g g g g g g
time, whereas an income statement, statement of equity, and statement of cash flows show its
g g g g g g g g g g g g g g g
gposition over a period of time. g g g g g
TOPIC:Accounting
Equation LO: 3
g g g
7. Assets must always equal liabilities plus equity.
g g g g g g
ACCURATE ANSWER:-True g
Reasoning:->>->>>The accounting equation is Assets = Liabilities + Equity. This relation must always hold. g g g g g g g g g g g g g
TOPIC:Income Statement LO: g g
3
8. The income statement reports net income which is defined as the firm‘s profit after all expenses and
g g g g g g g g g g g g g g g g
dividends have been paid.
g g g g
ACCURATE ANSWER:-False g
Reasoning:->>->>>The statement contains two errors. First, net income does not include any g g g g g g g g g g g
dividends during the period; these are a distribution of profits and not part of its calculation. Second,
g g g g g g g g g g g g g g g g g
the income statement is prepared on an accrual basis and thus includes expenses incurred (as
g g g g g g g g g g g g g g g
opposed to paid).
g g g
TOPIC:Statement of Cash g g
Flows LO: 3
g g g
9. A statement of cash flows reports on cash flows for operating, investing and financing activities at a
g g g g g g g g g g g g g g g g
point in time.
g g g
ACCURATE ANSWER:-False g
Reasoning:->>->>>A statement of cash flows reports on cash flows for operating, investing, and g g g g g g g g g g g g
financing activities over a period of time.
g g g g g g g
TOPIC:Statement of Stockholders’ Equity g g g
LO: 3
g g
10. An increase in common stock would be reflected in the statement of stockholders‘ equity.
g g g g g g g g g g g g g
ACCURATE ANSWER:-True g
Reasoning:->>->>>The statement of stockholders‘ equity reports on changes in the accounts that g g g g g g g g g g g
make up stockholders‘ equity. This includes contributed capital, retained earnings, and other equity.
g g g g g g g g g g g g g
1-3 Financial Accounting for MBAs, 8th Edition g g g g g
g g g g g g
8TH EDITION BY EASTON
g g g g
, Module 1 g
FinancialAccountingforMBAs g g g
Learning Objs – Coverage byquestion g g g g g
True/False Multiple Choice
g
LO1 – Explain and assess the four main business
g g g g g g g g
activities.
g
LO2 – Identify and discuss the users and suppliers of
1- 4 1, 2
g g g g g g g g g
financial statement information.
g g
g g g
LO3 – Describe and examine the four financial
5-10 3-19
g g g g g g g
statements, and define the accounting equation.
g g g g g g
LO4 – Explain and apply the basics of profitability
11-13 20-25
g g g g g g g g
analysis.
g
LO5 – Assess business operations within the context
14 26, 27
g g g g g g g
of a competitive environment.
g
g g g g
LO6 – Access reports filed with the SEC (Appendix 1A).
g g g g g g g g g
LO7 – Describe the accounting principles and
g g g g g g
regulations that frame financial statements (Appendix
g g g g g g 15 28-30
1B).
g
These questions are available to assign in myBusinessCourse.
g g g g g g g
© Cambridge Business Publishers, 2021
g g g g
1-1 Financial Accounting for MBAs, 8th Edition
g g g g g
,Module 1: Financial Accounting for MBAs
g g g g g
True/False
TOPIC:Users of Financial Statement Information LO: g g g g g
2
1. Shareholders demand financial information primarily to assess profitability and risk whereas bankers
g g g g g g g g g g g
demand information primarily to assess cash flows to repay loan interest and principal.
g g g g g g g g g g g g g
ACCURATE ANSWER:-True g
Reasoning:->>->>>While both shareholders and bankers are interested in all the information g g g g g g g g g g
companies provide, shareholders care about more about a firm‘s profitability and bankers care more
g g g g g g g g g g g g g g
about solvency and creditworthiness.
g g g g
TOPIC:Publicly Available Financial g g
Reports LO: 2
g g g
2. Publicly traded companies are required to provide quarterly financial reports directly to the public.
g g g g g g g g g g g g g
ACCURATE ANSWER:-False g
Reasoning:->>->>>Companies provide electronic versions of quarterly financial statements to the g g g g g g g g g
SEC, which posts them to the Internet for the public to access them.
g g g g g g g g g g g g g
TOPIC:Users of Financial Statement Information LO: g g g g g
2
3. Publicly traded companies provide financial information primarily to satisfy the SEC and
g g g g g g g g g g g
the tax authorities (that is, the Internal Revenue Service).
g g g g g g g g g
ACCURATE ANSWER:-False g
Reasoning :->>->>>Demand for information extends to many users; the regulators such as the SEC
g g g g g g g g g g g g g
and the IRS are only one class of users.
g g g g g g g g g
TOPIC:SEC Filings LO: g g
2
4. Publicly traded companies must provide to the Securities Exchange Commission annual
g g g g g g g g g g
audited financial statements (10-K reports) and quarterly audited financial statements (10-Q reports).
g g g g g g g g g g g g
ACCURATE ANSWER:-False g
Reasoning:->>->>>Quarterly reports do not need to be audited. g g g g g g g
TOPIC:Balance
Sheet LO: 3
g g g
5. If a firm reports retained earnings of $175.3 million on its balance sheet, it must also report
g g g g g g g g g g g g g g g g
$175.3 million in cash. g g g
ACCURATE ANSWER:-False g
Reasoning:->>->>>The accounting equation requires total assets to equal total liabilities plus g g g g g g g g g g
stockholders‘ equity. That does not imply, however, that liability and equity accounts relate directly to
g g g g g g g g g g g g g g g
specific assets.
g g
© Cambridge Business Publishers, 2021
g g g g
Test Bank (T/F & MC), Module 1
g g g g g g 1-2
, TOPIC:Balance
Sheet LO: 3
g g g
6. A balance sheet shows a firm‘s position over a period of time, whereas an income statement,
g g g g g g g g g g g g g g g
statement of stockholders‘ equity, and statement of cash flows show its position at a point in time.
g g g g g g g g g g g g g g g g g
ACCURATE ANSWER:-False g
Reasoning:->>->>>The statement is reversed: A balance sheet shows a firm‘s position at a point in g g g g g g g g g g g g g g
time, whereas an income statement, statement of equity, and statement of cash flows show its
g g g g g g g g g g g g g g g
gposition over a period of time. g g g g g
TOPIC:Accounting
Equation LO: 3
g g g
7. Assets must always equal liabilities plus equity.
g g g g g g
ACCURATE ANSWER:-True g
Reasoning:->>->>>The accounting equation is Assets = Liabilities + Equity. This relation must always hold. g g g g g g g g g g g g g
TOPIC:Income Statement LO: g g
3
8. The income statement reports net income which is defined as the firm‘s profit after all expenses and
g g g g g g g g g g g g g g g g
dividends have been paid.
g g g g
ACCURATE ANSWER:-False g
Reasoning:->>->>>The statement contains two errors. First, net income does not include any g g g g g g g g g g g
dividends during the period; these are a distribution of profits and not part of its calculation. Second,
g g g g g g g g g g g g g g g g g
the income statement is prepared on an accrual basis and thus includes expenses incurred (as
g g g g g g g g g g g g g g g
opposed to paid).
g g g
TOPIC:Statement of Cash g g
Flows LO: 3
g g g
9. A statement of cash flows reports on cash flows for operating, investing and financing activities at a
g g g g g g g g g g g g g g g g
point in time.
g g g
ACCURATE ANSWER:-False g
Reasoning:->>->>>A statement of cash flows reports on cash flows for operating, investing, and g g g g g g g g g g g g
financing activities over a period of time.
g g g g g g g
TOPIC:Statement of Stockholders’ Equity g g g
LO: 3
g g
10. An increase in common stock would be reflected in the statement of stockholders‘ equity.
g g g g g g g g g g g g g
ACCURATE ANSWER:-True g
Reasoning:->>->>>The statement of stockholders‘ equity reports on changes in the accounts that g g g g g g g g g g g
make up stockholders‘ equity. This includes contributed capital, retained earnings, and other equity.
g g g g g g g g g g g g g
1-3 Financial Accounting for MBAs, 8th Edition g g g g g
