TEST BANK FOR FINANCIAL ACCOUNTING FOR
pp pp pp pp pp
MBAS 8TH EDITION BY EASTON
pp pp pp pp pp
, Module 1 pp
Financial Accounting for MBAs pp pp pp
Learning Objs – Coverage by question
pp pp pp pp pp
True/False Multiple ppChoice
LO1 pp– ppExplain ppand ppassess ppthe ppfour ppmain
ppbusiness ppactivities.
LO2 pp– ppIdentify ppand ppdiscuss ppthe ppusers ppand
1- pp 4 1, pp 2
ppsuppliers ppof ppfinancial pp statement ppinformation.
LO3 pp– ppDescribe ppand ppexamine ppthe ppfour ppfinancial
5-10 3-19
ppstatements, ppand ppdefine ppthe ppaccounting ppequation.
LO4 pp– ppExplain ppand ppapply ppthe ppbasics ppof
11-13 20-25
ppprofitability ppanalysis.
LO5 pp– ppAssess ppbusiness ppoperations ppwithin ppthe
14 26, pp27
ppcontext ppof ppa pp competitive pp environment.
LO6 pp– ppAccess ppreports ppfiled ppwith ppthe ppSEC
pp(Appendix pp1A).
LO7 pp– ppDescribe ppthe ppaccounting ppprinciples
ppand ppregulations ppthat ppframe ppfinancial ppstatements 15 28-30
pp(Appendix pp1B).
These ppquestions ppare ppavailable ppto ppassign ppin ppmyBusinessCourse.
© ppCambridge ppBusiness pp Publishers, pp 2021
1-1 Financial ppAccounting ppfor pp MBAs, 8th ppEdition
pp
,Module 1: Financial Accounting for MBAs
pp pp pp pp pp
True/False
TOPIC:Users ppof ppFinancial ppStatement ppInformation p pLO:
2
1. Shareholders ppdemand ppfinancial ppinformation ppprimarily ppto ppassess ppprofitability ppand pprisk
ppwhereas ppbankers ppdemand ppinformation ppprimarily ppto ppassess ppcash ppflows ppto pprepay pploan
ppinterest ppand ppprincipal.
ACCURATE ppANSWER:-True
Reasoning:->>->>>While ppboth ppshareholders ppand ppbankers ppare ppinterested ppin ppall ppthe
ppinformation ppcompanies ppprovide, ppshareholders ppcare ppabout ppmore ppabout ppa ppfirm’s ppprofitability
ppand ppbankers ppcare ppmore ppabout ppsolvency ppand ppcreditworthiness.
TOPIC:Publicly ppAvailable ppFinancial
ppReports ppLO: pp2
2. Publicly pptraded ppcompanies ppare pprequired ppto ppprovide ppquarterly ppfinancial ppreports ppdirectly ppto ppthe pppublic.
ACCURATE ppANSWER:-False
Reasoning:->>->>>Companies ppprovide ppelectronic ppversions ppof ppquarterly ppfinancial ppstatements
ppto ppthe ppSEC, ppwhich ppposts ppthem ppto ppthe ppInternet ppfor ppthe pppublic ppto ppaccess ppthem.
TOPIC:Users ppof ppFinancial ppStatement ppInformation p pLO:
2
3. Publicly p p traded p p companies p p provide p p financial p p information p p primarily p p to p p satisfy
p p the p p SEC p p and p p the p p tax ppauthorities pp(that ppis, ppthe ppInternal ppRevenue ppService).
ACCURATE ppANSWER:-False
Reasoning pp:->>->>>Demand ppfor ppinformation ppextends ppto ppmany ppusers; ppthe ppregulators ppsuch
ppas ppthe ppSEC ppand ppthe ppIRS ppare pponly ppone ppclass ppof ppusers.
TOPIC:SEC ppFilings ppLO:
2
4. Publicly p p traded p p companies p p must p p provide p p to p p the p p Securities p p Exchange
p p Commission p p annual p p audited ppfinancial ppstatements pp(10-K ppreports) ppand ppquarterly
ppaudited ppfinancial ppstatements pp(10-Q ppreports).
ACCURATE ppANSWER:-False
Reasoning:->>->>>Quarterly ppreports ppdo ppnot ppneed ppto ppbe ppaudited.
TOPIC:Balance
ppSheet ppLO: pp3
5. If p p a p p firm p p reports p p retained pp earnings pp of pp $175.3 pp million pp on pp its pp balance pp sheet, pp it
p p must p p also p p report
$175.3 ppmillion ppin ppcash.
ACCURATE ppANSWER:-False
Reasoning:->>->>>The ppaccounting ppequation pprequires pptotal ppassets ppto ppequal pptotal ppliabilities
ppplus ppstockholders’ ppequity. ppThat ppdoes ppnot ppimply, pphowever, ppthat ppliability ppand ppequity
ppaccounts pprelate ppdirectly ppto ppspecific ppassets.
© ppCambridge ppBusiness pp Publishers, pp2021
Test ppBank pp(T/F pp& ppMC), ppModule pp1 1-2
, TOPIC:Balance
ppSheet ppLO: pp3
6. A ppbalance ppsheet ppshows ppa ppfirm’s ppposition ppover ppa ppperiod ppof pptime, ppwhereas ppan
ppincome ppstatement, ppstatement ppof ppstockholders’ ppequity, ppand ppstatement ppof ppcash ppflows
ppshow ppits ppposition ppat ppa pppoint ppin pptime.
ACCURATE ppANSWER:-False
Reasoning:->>->>>The ppstatement ppis ppreversed: ppA ppbalance ppsheet ppshows ppa ppfirm’s ppposition
ppat ppa pppoint ppin pptime, ppwhereas ppan ppincome ppstatement, ppstatement ppof ppequity, ppand ppstatement
ppof ppcash ppflows ppshow ppits p p position p p over ppa ppperiod ppof pptime.
TOPIC:Accounting
ppEquation ppLO: pp3
7. Assets ppmust ppalways ppequal ppliabilities ppplus ppequity.
ACCURATE ppANSWER:-True
Reasoning:->>->>>The ppaccounting ppequation ppis ppAssets pp= ppLiabilities pp+ ppEquity. ppThis pprelation ppmust
ppalways pphold.
TOPIC:Income ppStatement p pLO:
3
8. The ppincome ppstatement ppreports ppnet ppincome ppwhich ppis ppdefined ppas ppthe ppfirm’s ppprofit ppafter
ppall ppexpenses ppand ppdividends pphave ppbeen pppaid.
ACCURATE ppANSWER:-False
Reasoning:->>->>>The ppstatement ppcontains pptwo pperrors. ppFirst, ppnet ppincome ppdoes ppnot ppinclude
ppany ppdividends ppduring ppthe ppperiod; ppthese ppare ppa ppdistribution ppof ppprofits ppand ppnot pppart ppof
ppits ppcalculation. ppSecond, ppthe ppincome ppstatement ppis ppprepared ppon ppan ppaccrual ppbasis ppand
ppthus ppincludes ppexpenses ppincurred pp(as ppopposed ppto pppaid).
TOPIC:Statement ppof ppCash
ppFlows ppLO: pp3
9. A ppstatement ppof ppcash ppflows ppreports ppon ppcash ppflows ppfor ppoperating, ppinvesting ppand
ppfinancing ppactivities ppat ppa pppoint ppin pptime.
ACCURATE ppANSWER:-False
Reasoning:->>->>>A ppstatement ppof ppcash ppflows ppreports ppon pp cash flows
pp pp for pp operating,
ppinvesting, ppand ppfinancing ppactivities ppover ppa ppperiod ppof pptime.
TOPIC:Statement ppof ppStockholders’
ppEquity ppLO: pp3
10. An ppincrease ppin ppcommon ppstock ppwould ppbe ppreflected ppin ppthe ppstatement ppof ppstockholders’ ppequity.
ACCURATE ppANSWER:-True
Reasoning:->>->>>The ppstatement ppof ppstockholders’ ppequity ppreports ppon ppchanges ppin ppthe
ppaccounts ppthat ppmake ppup ppstockholders’ ppequity. ppThis ppincludes ppcontributed ppcapital, ppretained
ppearnings, ppand ppother ppequity.
1-3 Financial ppAccounting ppfor pp MBAs, 8th ppEdition
pp
pp pp pp pp pp
MBAS 8TH EDITION BY EASTON
pp pp pp pp pp
, Module 1 pp
Financial Accounting for MBAs pp pp pp
Learning Objs – Coverage by question
pp pp pp pp pp
True/False Multiple ppChoice
LO1 pp– ppExplain ppand ppassess ppthe ppfour ppmain
ppbusiness ppactivities.
LO2 pp– ppIdentify ppand ppdiscuss ppthe ppusers ppand
1- pp 4 1, pp 2
ppsuppliers ppof ppfinancial pp statement ppinformation.
LO3 pp– ppDescribe ppand ppexamine ppthe ppfour ppfinancial
5-10 3-19
ppstatements, ppand ppdefine ppthe ppaccounting ppequation.
LO4 pp– ppExplain ppand ppapply ppthe ppbasics ppof
11-13 20-25
ppprofitability ppanalysis.
LO5 pp– ppAssess ppbusiness ppoperations ppwithin ppthe
14 26, pp27
ppcontext ppof ppa pp competitive pp environment.
LO6 pp– ppAccess ppreports ppfiled ppwith ppthe ppSEC
pp(Appendix pp1A).
LO7 pp– ppDescribe ppthe ppaccounting ppprinciples
ppand ppregulations ppthat ppframe ppfinancial ppstatements 15 28-30
pp(Appendix pp1B).
These ppquestions ppare ppavailable ppto ppassign ppin ppmyBusinessCourse.
© ppCambridge ppBusiness pp Publishers, pp 2021
1-1 Financial ppAccounting ppfor pp MBAs, 8th ppEdition
pp
,Module 1: Financial Accounting for MBAs
pp pp pp pp pp
True/False
TOPIC:Users ppof ppFinancial ppStatement ppInformation p pLO:
2
1. Shareholders ppdemand ppfinancial ppinformation ppprimarily ppto ppassess ppprofitability ppand pprisk
ppwhereas ppbankers ppdemand ppinformation ppprimarily ppto ppassess ppcash ppflows ppto pprepay pploan
ppinterest ppand ppprincipal.
ACCURATE ppANSWER:-True
Reasoning:->>->>>While ppboth ppshareholders ppand ppbankers ppare ppinterested ppin ppall ppthe
ppinformation ppcompanies ppprovide, ppshareholders ppcare ppabout ppmore ppabout ppa ppfirm’s ppprofitability
ppand ppbankers ppcare ppmore ppabout ppsolvency ppand ppcreditworthiness.
TOPIC:Publicly ppAvailable ppFinancial
ppReports ppLO: pp2
2. Publicly pptraded ppcompanies ppare pprequired ppto ppprovide ppquarterly ppfinancial ppreports ppdirectly ppto ppthe pppublic.
ACCURATE ppANSWER:-False
Reasoning:->>->>>Companies ppprovide ppelectronic ppversions ppof ppquarterly ppfinancial ppstatements
ppto ppthe ppSEC, ppwhich ppposts ppthem ppto ppthe ppInternet ppfor ppthe pppublic ppto ppaccess ppthem.
TOPIC:Users ppof ppFinancial ppStatement ppInformation p pLO:
2
3. Publicly p p traded p p companies p p provide p p financial p p information p p primarily p p to p p satisfy
p p the p p SEC p p and p p the p p tax ppauthorities pp(that ppis, ppthe ppInternal ppRevenue ppService).
ACCURATE ppANSWER:-False
Reasoning pp:->>->>>Demand ppfor ppinformation ppextends ppto ppmany ppusers; ppthe ppregulators ppsuch
ppas ppthe ppSEC ppand ppthe ppIRS ppare pponly ppone ppclass ppof ppusers.
TOPIC:SEC ppFilings ppLO:
2
4. Publicly p p traded p p companies p p must p p provide p p to p p the p p Securities p p Exchange
p p Commission p p annual p p audited ppfinancial ppstatements pp(10-K ppreports) ppand ppquarterly
ppaudited ppfinancial ppstatements pp(10-Q ppreports).
ACCURATE ppANSWER:-False
Reasoning:->>->>>Quarterly ppreports ppdo ppnot ppneed ppto ppbe ppaudited.
TOPIC:Balance
ppSheet ppLO: pp3
5. If p p a p p firm p p reports p p retained pp earnings pp of pp $175.3 pp million pp on pp its pp balance pp sheet, pp it
p p must p p also p p report
$175.3 ppmillion ppin ppcash.
ACCURATE ppANSWER:-False
Reasoning:->>->>>The ppaccounting ppequation pprequires pptotal ppassets ppto ppequal pptotal ppliabilities
ppplus ppstockholders’ ppequity. ppThat ppdoes ppnot ppimply, pphowever, ppthat ppliability ppand ppequity
ppaccounts pprelate ppdirectly ppto ppspecific ppassets.
© ppCambridge ppBusiness pp Publishers, pp2021
Test ppBank pp(T/F pp& ppMC), ppModule pp1 1-2
, TOPIC:Balance
ppSheet ppLO: pp3
6. A ppbalance ppsheet ppshows ppa ppfirm’s ppposition ppover ppa ppperiod ppof pptime, ppwhereas ppan
ppincome ppstatement, ppstatement ppof ppstockholders’ ppequity, ppand ppstatement ppof ppcash ppflows
ppshow ppits ppposition ppat ppa pppoint ppin pptime.
ACCURATE ppANSWER:-False
Reasoning:->>->>>The ppstatement ppis ppreversed: ppA ppbalance ppsheet ppshows ppa ppfirm’s ppposition
ppat ppa pppoint ppin pptime, ppwhereas ppan ppincome ppstatement, ppstatement ppof ppequity, ppand ppstatement
ppof ppcash ppflows ppshow ppits p p position p p over ppa ppperiod ppof pptime.
TOPIC:Accounting
ppEquation ppLO: pp3
7. Assets ppmust ppalways ppequal ppliabilities ppplus ppequity.
ACCURATE ppANSWER:-True
Reasoning:->>->>>The ppaccounting ppequation ppis ppAssets pp= ppLiabilities pp+ ppEquity. ppThis pprelation ppmust
ppalways pphold.
TOPIC:Income ppStatement p pLO:
3
8. The ppincome ppstatement ppreports ppnet ppincome ppwhich ppis ppdefined ppas ppthe ppfirm’s ppprofit ppafter
ppall ppexpenses ppand ppdividends pphave ppbeen pppaid.
ACCURATE ppANSWER:-False
Reasoning:->>->>>The ppstatement ppcontains pptwo pperrors. ppFirst, ppnet ppincome ppdoes ppnot ppinclude
ppany ppdividends ppduring ppthe ppperiod; ppthese ppare ppa ppdistribution ppof ppprofits ppand ppnot pppart ppof
ppits ppcalculation. ppSecond, ppthe ppincome ppstatement ppis ppprepared ppon ppan ppaccrual ppbasis ppand
ppthus ppincludes ppexpenses ppincurred pp(as ppopposed ppto pppaid).
TOPIC:Statement ppof ppCash
ppFlows ppLO: pp3
9. A ppstatement ppof ppcash ppflows ppreports ppon ppcash ppflows ppfor ppoperating, ppinvesting ppand
ppfinancing ppactivities ppat ppa pppoint ppin pptime.
ACCURATE ppANSWER:-False
Reasoning:->>->>>A ppstatement ppof ppcash ppflows ppreports ppon pp cash flows
pp pp for pp operating,
ppinvesting, ppand ppfinancing ppactivities ppover ppa ppperiod ppof pptime.
TOPIC:Statement ppof ppStockholders’
ppEquity ppLO: pp3
10. An ppincrease ppin ppcommon ppstock ppwould ppbe ppreflected ppin ppthe ppstatement ppof ppstockholders’ ppequity.
ACCURATE ppANSWER:-True
Reasoning:->>->>>The ppstatement ppof ppstockholders’ ppequity ppreports ppon ppchanges ppin ppthe
ppaccounts ppthat ppmake ppup ppstockholders’ ppequity. ppThis ppincludes ppcontributed ppcapital, ppretained
ppearnings, ppand ppother ppequity.
1-3 Financial ppAccounting ppfor pp MBAs, 8th ppEdition
pp
