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65 Test Bank for Financial ACCT2 2nd Edition

by Godwin Multiple Choice Questions - Part 1

On January 1, 2012, Blackstone Company reported assets of

$1,000,000 and liabilities of $600,000 During 2012 assets

decreased by $200,000 and Equity decreased $250,000 What is the amount of Equity on December 31, 2012

1 $650,000

2 $150,000

3 $400,000

4 $800,000

The income statement shows:

1 how much profit the company has earned since it began operations.

2 net income equal to the amount of cash on the balance sheet.

3 a summary of the results of operations for a period of time.

4 the liquidity of the company on an annual basis

"Matching principle" is best described as:

1 the principle that a revenue should be recorded when a resource has been earned.

2 an increase in resources resulting from the sale of goods or the provision of services.

3 the principle that expenses should be recorded in the period resources are used to generate revenues.

4 an increase in the financing activities.

The going concern assumption is concerned with:

1 the company's ability to continue operations long enough to carry out its existing obligations.

2 any information that is capable of influencing the decisions of anyone using the financial statements.

3 measuring ongoing business activities at their exchange price at the time of the initial external transaction.

4 offsetting management's natural optimism by providing a prudent approach to uncertainty in financial statement items.

Which statement demonstrates the financial success or failure of the company over that specific period of time?

1 Statement of changes in stockholders’ equity

2 Statement of retained earnings

3 Balance sheet

4 Income statement

Which financial statement would you refer to in order to determine how many resources (assets) the company owns?

1 Balance sheet

2 Statement of retained earnings

3 Income statement

4 Statement of cash flows

"Revenues" are best described as:

1 decreases in resources resulting from the purchase of goods for the provision

of services.

2 increases in resources resulting from the sale of goods or the provision of services.

3 assets used or consumed in the sale of products or services.

4 an increase in the financing activities section of the statement of cash flows. Which of the following is an assumption made in the preparation of the financial statements?

1 Financial statements are prepared for a specific entity that is distinct from the entity's owners.

2 The current market value is assumed to be less relevant than the original cost paid.

3 The preparation of financial statements for a specific time period assumes that the balance sheet covers a designated period of time.

4 Financial statements are prepared assuming that inflation has a distinct effect

on the monetary unit.

Which of the following concepts relates to separating the reporting

of business and personal economic transactions?

1 Cost principle

2 Monetary unit assumption

3 Economic entity assumption

4 Objectivity assumption

Who among the following invest funds into a business and are considered owners?

1 Stockholders

2 Creditors

3 Bankers

4 Lenders

Which of the following best describes the term "expenses"?

1 The cost of assets used in the investing activities of a business.

2 The amount of interest or claim that the owners have in the business.

3 The future economic resources of a business entity.

4 A decrease in resources resulting from the sale of goods or provision of services.

Which financial statement would you analyze to determine its

operating performance for the past year?

1 Balance sheet

2 Statement of retained earnings

3 Income statement

4 Statement of cash flows

You are a potential creditor and are concerned that a particular company you are ready to give a loan to might have too much debt Which financial statement would provide you information needed in order to evaluate your concern?

1 Balance sheet

2 Income statement

3 Statement of retained earnings

4 Statement of cash flows

Doughtry's Pet Shop reported a net loss of $1,500,000 and total expenses of $2,900,000 How much were the total sales?

1 $4,400,000

2 $1,400,000

3 $2,900,000

4 $1,500,000

Ponzi Corporation reported the following information for the year ended December 31, 2012 Net income $100,000; Dividends 6,000; Retained earnings at December 31, 2012 $120,000 Refer to the information provided above for Ponzi Corporation What was the economic effect of the payment of Ponzi's dividends?

1 The dividend reduced net income for 2012.

2 The dividend should be added to net income if the company's accounting equation is in balance.

3 The dividend reduced total retained earnings.

4 The dividends must be paid whenever Ponzi Corporation reports net income.

Ponzi Corporation reported the following information for the year ended December 31, 2012 Net income $100,000; Dividends 6,000; Retained earnings at December 31, 2012 $120,000 Refer to the information provided above for Ponzi Corporation What was the balance of retained earnings at January 1, 2012?

1 $ 21,000

2 $ 26,000

3 $106,000

4 $214,000

Which of the following is a correct fundamental accounting

equation?

1 Assets + Liabilities = Equity

2 Assets + Retained Earnings = Equity

3 Assets + Equity = Liabilities

4 Assets = Liabilities + Equity

"Economic resources" are known as:

1 assets.

2 liabilities.

3 owners' equity.

4 retained earnings.

Which one of the following items appears on a balance sheet?

1 Retained earnings

2 Sales revenue

3 Utilities expense

4 Dividends

Which one of the following financial statements reports an entity's financial position at a specific date?

1 Balance sheet

2 Statement of retained earnings

3 Income statement

4 Statement of cash flows

Monaco Lawn Service Company used $250 of fuel to mow

customer lawns in June The fuel was purchased on account and due in July Fuel Expense should be recorded in:

1 July.

2 June.

3 August.

4 April.

Ranger Company has assets of $5,000,000, liabilities of

$3,000,000, and retained earnings of $1,200,000 How much is total equity?

1 $8,000,000

2 $2,000,000

3 $3,800,000

4 $1,800,000

The assets and liabilities of the company are $175,000 and

$40,000, respectively Equity should equal:

1 $215,000.

2 $135,000.

3 $175,000.

4 $40,000.

Monaco Lawn Service Company creates revenue each time:

1 it is scheduled for service.

2 amount is paid in full.

3 a lawn is mowed.

4 money is received in advance.

What does the phrase, "Revenue is recognized when earned" mean?

1 Revenue is recorded in the accounting records when the goods are received from a supplier, and reported on the income statement when sold to the customer.

2 Revenue is recorded in the accounting records and reported on the income statement when the cash is received from the customer.

3 Revenue is recorded in the accounting records when the goods are sold to a customer, and reported on the income statement when the cash payment is received from the customer.

4 Revenue is recorded in the accounting records and reported on the income statement when goods are sold and delivered to a customer.

The resources used to generate revenues during a period are called:

1 net income.

2 expenses.

3 revenues.

4 dividends.

Expenses can be matched against revenues:

1 if the earnings process is not complete.

2 when cash is collected from the sale of products.

3 in the same period as the revenue that it helped to generate.

4 when payment is made for costs related to revenue.

Who among the following generally lends funds to a business entity and expects repayment of the funds?

1 A partner

2 A stockholder

3 An owner

4 A creditor

The time period assumption is necessary because:

1 inflation exists and causes confusing swings in financial statement amounts over time.

2 external users of financial statements want accurately-reported net income for

a specific period of time.

3 financial statements users expect full disclosure of all events throughout the entire time period translated in dollars.

4 it is required by the federal government.

Which one of the following events creates a liability for a business?

1 An obligation to pay for goods purchased on credit from a supplier

2 Inventories purchased for cash

3 Amounts invested by the owners

4 Stock sold to the general public

Which of the following is the correct date format for the financial statement heading?

1 Balance Sheet for the Year Ended June 30, 2012

2 Statement of Retained Earnings as of December 31, 2012

3 Income Statement for the Year Ending December 31, 2012

4 Statement of Retained Earnings at December 31, 2012

Which of the following underlying assumptions for the conceptual framework is the reason the dollar is used in the preparation of financial statements?

1 Economic entity

2 Continuity

3 Time period

4 Monetary unit

Which of the following terms best describes a distribution of the net income of a corporation to its owners?

1 Retained earnings

2 Dividends

3 Liquidation of assets

4 Revenue

65 Free Test Bank for Financial ACCT2 2nd Edition by Godwin Multiple Choice Questions - Part 2

If an investor can use accounting information for two different

companies to evaluate the types and amounts of expenses, the information is said to have the quality of:

1 comparability.

2 consistency.

3 neutrality.

4 materiality.

Beginning retained earnings $550,000; Ending retained earnings 700,000; Dividends paid 100,000; Revenue 525,000 Refer to the selected information provided for Tarp Corporation The company's expenses are:

1 $100,000.

2 $150,000.

3 $450,000.

4 $275,000.

Which one of the following financial statements shows the end of the year cash balance for a business entity?

1 Income statement and statement of retained earnings

2 Balance sheet and statement of cash flows

3 Statement of retained earnings and statement of cash flows

4 Balance sheet and statement of retained earnings

Scott Brothers, Inc follows the qualitative characteristic of

consistency This means that:

1 for expenses, Scott uses the same account titles as used by its competitors.

2 Scott has elected certain accounting principles that can never be changed.

3 Scott applies the same accounting methods each period.

4 Scott applies the same accounting principles as its competitors.

How is the balance sheet linked to the other financial statements?

1 The amount of retained earnings is reported on the balance sheet as a

liability.

2 Retained earnings is added to total assets and reported on the balance sheet.

3 Retained earnings from the statement of retained earnings is reported on the balance sheet.

4 There is no link between the balance sheet and other statements, as each contains different accounts and provides different information.

Beginning retained earnings $550,000; Ending retained earnings 700,000; Dividends paid 100,000; Revenue 525,000 Refer to the selected information provided for Tarp Corporation What is the net income for Tarp Corporation?

1 $150,000

2 $250,000

3 $525,000

4 $350,000

Which of the following qualitative characteristic of useful accounting information implies that only items that meet or exceed certain

thresholds will affect decisions?

1 Conservatism

2 Materiality

3 Relevance

4 Comparability

Which one of the following equations represents the statement of retained earnings activity?

1 Beginning retained earnings + net income + dividends = ending retained earnings

2 Beginning retained earnings + cash inflows 0 cash outflows = ending retained earnings

3 Beginning retained earnings + dividends 0 net income = ending retained earnings

4 Beginning retained earnings + net income 0 dividends = ending retained earnings

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

as shown in statement of cash flows?

1 Financing

2 Operating

3 Investing

4 Measuring

Which one of the following is a correct basic structure of the cash flow statement?

1 Cash flows provided (used) by operating activities + / - cash flows provided (used) by business activities + / - cash flows provided (used) by financing activities = net increase (decrease) in cash

2 Cash flows provided (used) by operating activities + / - cash flows provided (used) by investing activities + / - cash flows provided (used) by business activities = net increase (decrease) in cash

3 Cash flows provided (used) by operating activities + / - cash flows provided (used) by financing activities + / - net change in working capital = net increase (decrease) in cash

4 Cash flows provided (used) by operating activities + / - cash flows provided (used) by investing activities + / - cash flows provided (used) by financing activities = net increase (decrease) in cash

Jetson Corporation reported the following information for the year ended December 31, 2012 Revenue $14,000,000; Expenses

11,500,000; Dividends 1,000,000; Retained earnings at December

31, 2012 1,750,000 Refer to the selected information provided for Jetson Corporation What was the retained earnings balance on December 31, 2011?

1 $ 250,000

2 $2,500,000

3 $1,500,000

4 $ 350,000

If stockholders want to know how money flowed into and out of the company, what financial statement would they use?

1 Income statement

2 Statement of cash flows

3 Balance sheet

4 Statement of retained earnings

Liabilities are reported on the:

1 income statement.

2 statement of retained earnings.

3 statement of cash flows.

4 balance sheet.

One of the qualitative characteristics of accounting information include:

1 reliability.

2 cash flow information.

3 all accounting information.

4 assets reported on the balance sheet.

Which of the following best describes a company's operating

activities?

1 Operating activities are cash flows directly related to earning income.

2 Operating activities are necessary to provide the money to start a business.

3 Operating activities are needed to provide the valuable assets required to run

a business.

4 Operating activities represent the right to receive a benefit in the future.

Which of the following is not an asset?

1 Investments

2 Cash

3 Inventory

4 Equity

Cash received from customers for mowing their lawns is reported

on the statement of cash flows in the:

1 financing activities section.

2 investing activities section.

3 operating activities section.

4 supplemental section.

Which of the following best describes the term "retained earnings"

of a company?

1 The amount of total profits earned by a company since it began operations.

2 The amount of claim that the owners have on the assets of the company.

3 The future economic resources of a company.

4 The accumulated net income of a company that has not been distributed to owners in the form of dividends.

If a company has $10,500,000 of revenues, declares and pays

$550,000 in dividends, and has net income of $1,600,000, how much were expenses for the year?