Chapter 1-3

Question 1

Which of the following would not appear on the retained earnings statement?

Answer 1

Service revenue

Question 2

Resources owned by a business are referred to as

Answer 2

Assets

Question 3

Which section of a cash flow statement shows the amount of cash spent on new equipment during the most recent accounting period?

Answer 3

The investing section

Question 4

The segment of the annual report that presents an opinion regarding the fairness of the presentation of the financial position and results of operations is/are the

Answer 4

Auditor’s opinion

Question 5

When the auditor is satisfied that the financial statements provide a fair representation of the company financial position and results of operation in accordance with generally accepted accounting principles, the auditor will express

Answer 5

An unqualified opinion

Question 6

Which of the following is required as a result of the Sarbanes-Oxley Act (SOX)?

Answer 6

Top management must certify the financial statement for their company

Question 7

Which financial statement presents information as of a specific point in time?

Answer 7

Balance sheet

Question 8

The balance sheet

Answer 8

Reports the assets, liabilities, and stockholders equity at a specific date

Question 9

Which of the following is an expense?

Answer 9

Cost of goods sold

Question 10

Which of the following is the most appropriate definition of accounting information?

Answer 10

The information system that identifies, records, and communications the economic events of an organization to interested users

Question 11

Easy transfer of ownership is a characteristic of which form of business organization?

Answer 11

Corporation

Question 12

In which forms of business organization are the owners personally liable for all the debts of the business?

Answer 12

Sole proprietorship and partnerships

Question 13

At the end of the year, Stoneland corporation has liabilities of $3,500 and equity of $2,000. How much are the company’s assets at the end of the year?

Answer 13

$5,500

Question 14

Which of the following is an example of a financing activity?

Answer 14

Issuing shares of common stock

Question 15

Which of the following is not one of the three primary business activities?

Answer 15

Advertising

Question 16

In term of the principle types of business activities, paying salaries expenses is an example of

Answer 16

Operating activities

Question 17

Which of the following best describes stockholders’ equity?

Answer 17

Stockholders’ equity are the claims of owners

Question 18

Chris’s Maid Service began the year with total assets of $100,000 and stockholders’ equity of $40,000. During the year the company earned $110,000 in net income and paid $5,000 in dividends. Total assets at the end of the year were $240,000. How much are total liabilities at the end of the year?

Answer 18

$95,000

Question 19

To which of the following questions will internal users want answers?

Answer 19

All of these

Question 20

Which of the following is not an external user of accounting data?

Answer 20

Chief Financial Officer

Question 21

The financial statements for Joanna Corporation contained the following account information:
Accounts receivable , $15,000
Sales revenue, $90,000
Cash, $25,000
Salaries and wages expense, $30,000
Supplies expense,$10,000
How much was Joanna Corporation’s net income?

Answer 21

$50,000

Question 22

Jeremiah company recorded the following cash transactions for the year:
Collected $80,000 from lenders
Collected $260,000 from costumers
Paid $130,000 for salaries
Paid $10,000 in dividends
Paid $90,000 for good and services
Paid $20,000 to purchase office equipment
What was the company’s net cash provided by operating activities for the year?

Answer 22

$40,000

Question 23

If total liabilities deceased by $10,000 and total assets decreased by $5,000 during a period of time, then total stockholders’ equity must have changed by what amount and direction during that same period?

Answer 23

$5,000 increase

Question 24

In which of the following sequences are the financial statements usually prepared?

Answer 24

Income statement, balance sheet, retained earnings statement, and statement of cash flows

Question 25

The cost of assets consumed or services used is also known as

Answer 25

An expense

Question 26

The financial statements for Allen Corporation contained the following account information: Accounts receivable, $15,000 Sales revenue, $90,000 Cash, $15,000 Salaries and wages expense, $25,000 Insurance expense,$10,000 How much was Allen Corporation net income?

Answer 26

$55,000

Question 27

The segment of a corporation’s annual report that describes the corporation’s accounting methods is the

Answer 27

Notes to the financial statements

Question 28

The payment of dividends is an example of a(n)

Answer 28

Financial activity

Question 29

Paying interest expense and receiving interest revenue are both example of

Answer 29

Operating activities

Question 30

Chris’s Maid Service began the year with total assets of $125,000 and stockholders’ equity of $40,000. During the year the company earned $90,000 in net income and paid $20,000 in dividends. Total assets at the end of the year were $215,000. How much are total liabilities at the end of the year?

Answer 30

$105,000

Question 31

``` Jose Inc. reports the following balances and amounts. The following information is presented in random order. Accounts payable, $ 125,000 Accounts receivable, 140,000 Accumulated depreciation—Equipment, $60,000 Cash, $100,000 Equipment, $400,000 Intangible assets, $20,000 Inventory, $200,000 Long-term investments, $80,000 Long-term liabilities, $200,000 Notes payable (short-term), $56,000 Prepaid insurance, $2,000 Salaries and wages payable, 8,000 Short-term investments, $80,000 Stockholders' equity, 493,000 ``` How much is working capital?

Answer 31

$333,000

Question 32

Jose Inc. reports the following balances and amounts. The following information is presented in random order. ``` Accounts payable, $35,000 Cash provided by operations, 90,000 Accounts receivable, 37,500 Net income, 36,000 Average common shares, 20,000 Salaries and wages payable, 8,000 Average current liabilities, 110,000 Stockholders' equity, 240,000 Average and total assets, 600,000 Total current assets, 300,000 Average total liabilities, 320,000 Total current liabilities, 120,000 Cash, 100,000 ``` How much is Ortiz's current ratio?

Answer 32

2.50

Question 33

Which one of the following is not an alternate means of expressing a ratio?

Answer 33

Dollar amount

Question 34

The accounting concept that indicates that assets and liabilities should be reported at the price received to sell the asset or settle the liability is the

Answer 34

Fair value principle

Question 35

Which accounting assumption requires that only those things that can be expressed in dollar values are included in the accounting records?

Answer 35

Monetary unit assumption

Question 36

The economic entity assumption states that economic events

Answer 36

Of each entity can be separately identified and accounted for

Question 37

If a company has the ability to pay obligations that are expected to become due within the next year or operating cycle whichever is longer, what is the term that describes this measure?

Answer 37

Liquidity

Question 38

The following ratios are available for Leer Inc. and Stable Inc. Leer Inc. stable Inc. Current Ratio 2.0, 1.5 Compared to Stable Inc., Leer Inc. has

Answer 38

Higher liquidity

Question 39

Net income is 200,000, preferred dividends are $20,000, and average common shares outstanding are 50,000. How much is earnings per share?

Answer 39

$3.60

Question 40

Which of the following is not classified as a current asset?

Answer 40

Patents

Question 41

Which of the following is an example of an intangible assets?

Answer 41

Trademarks

Question 42

At the end of the year, Red company had retained earnings of $2,184,000. During the year, the company issued stock for $98,000 and paid dividends of $34,000. Net income for the year was $402,000. How much was the retained earnings balance at the beginning of the same year?

Answer 42

$1,816,000

Question 43

Issuing new shares of common stock will

Answer 43

Increase common stock

Question 44

Bombay Corporation had $48,000 at the beginning of the year and it had cash disbursements of $21,000 during the year. At the end of the year, Bombay Company had $51,000. What was Bombay Corporation's cash receipts for the year?

Answer 44

$24,000

Question 45

Total assets are $150,000, current liabilities are $10,000, long-term liabilities are $20,000, common stock is $50,000, and retained earnings totals $70,000. How much is total stockholders' equity?

Answer 45

$120,000

Question 46

For what purpose might a company use free cash flow?

Answer 46

All of the answer choices are correct

Question 47

Which of the following is the correct order for listing current assets on the balance sheet?

Answer 47

Cash, short-term investments, accounts receivable, inventories, prepaid expenses

Question 48

What are generally accepted accounting principles?

Answer 48

A set of accounting rules and practices that have authoritative support

Question 49

What is the primary accounting standard-setting body in the United States?

Answer 49

Financial accounting standards board

Question 50

Burton Corporation has current assets of $3,750,000 and current liabilities of 2,050,000. If Burton Corporation pays $500,000 of its accounts payable what will the new current ratio be?

Answer 50

2.10

Question 51

The net cash inflow from operating activities is $140,000; cash received from issuing stock is $75,000; cash paid for capital expenditures is $60,000; cash paid for bonds held as an investment is $20,000; and dividends paid are $20,000. How much is free cash flow?

Answer 51

$60,000

Question 52

What is the primary criterion by which accounting information can be judged?

Answer 52

Usefulness for decision making

Question 53

The primary objective of financial reporting is to provide financial information that is useful to investors and creditors for making decisions about providing capital. According to the FASB, useful information should possess certain fundamental qualities. All of the following are qualities of useful information except

Answer 53

Universality

Question 54

Which of the following statements is false?

Answer 54

Comparability means using the same accounting principles form year to year within a company

Question 55

If a company receives cash from a customer before performing services for the customers, then

Answer 55

Assets increase and liabilities increase

Question 56

What type of account is unearned revenue?

Answer 56

Liability

Question 57

What does a general ledger of a company?

Answer 57

All the assets, liability, stockholders’ equity, revenue, expense, and dividends accounts

Question 58

Genesis Company declares and pays a $900 dividend to shareholders. This transaction will immediately affect the

Answer 58

Retained earnings statement and balance sheet only

Question 59

If an previously unrecorded expense is paid with cash then

Answer 59

Assets will decrease

Question 60

The effects on the basic accounting equation of performing services for cash are to

Answer 60

Increase assets and increase stockholders’ equity

Question 61

At the start of the month, Hawaii Inc. reported retained earnings of $136,000. During the month, Hawaii generated revenues of $20,000, incurred expenses of $12,000, purchased equipment for $5,000 and paid dividends of $2,000. What is the balance in retained earnings at the end of the month?

Answer 61

$142,000 credit

Question 62

If an account is debited in the journal entry then

Answer 62

That account will be debited in the ledger

Question 63

During its first year of operations, Acme Tires had revenues of $135,000 and expenses of $87,000. The business also paid cash dividends of $10,000 and purchased $25,000 of equipment in exchange for cash during the first year. What is the company's retained earnings at the end of its first year?

Answer 63

A credit balance of $38,000

Question 64

Which of the following events is not recorded in a company’s accounting records?

Answer 64

Discussing with a customer the services a company offers

Question 65

Accounts with normal credit balances include

Answer 65

Liabilities and stockholders’ equity

Question 66

Transaction are initially recorded in chronological order in a _____ before they are transferred to the accounts

Answer 66

Journal

Question 67

What journal entry is recorded as result of issuing stock to investors for cash?

Answer 67

A debit to cash and credit to common stock

Question 68

Which of the following is the correct sequence of events?

Answer 68

Analyze a transaction; record it in the journal; post it to the ledger

Question 69

On Jan 10, Novis Company purchased manufacturing equipment for $80,000 cash. What kind of activity is this?

Answer 69

Investing activity

Question 70

Wilson Company showed the following balances at the end of its first year: ``` Accounts receivable, $11,000 Accounts payable, $4,000 Cash, $9,000 Common stock, ? Dividends, $1,000 Expenses, $17,000 Notes payable, $6,000 Prepaid insurance, $2,000 Revenues, $22,000 ``` What did Wilson Company show as the balance of its common stock account?

Answer 70

$8,000

Question 71

A revenue account

Answer 71

Is increased by credits

Question 72

A trail balance

Answer 72

Is a list of accounts with their balances at a given time

Question 73

A trail balance will not balance if

Answer 73

A $100 cash dividends is debited to dividends for $1,000 and credited to cash for $100

Question 74

Jamal Company began the year with $109,000 in its Common Stock account and a debit balance in Retained Earnings of $14,000. During the year, the company earned net income of $33,000 and declared and paid $5,000 of dividends. In addition, the company sold additional common stock amounting to $37,000. Based on this information, what should the transaction analysis show for the ending stockholders' equity?

Answer 74

$160,000