90 test bank for fundamentals of financial accounting 3rd edition

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90 Test Bank for Fundamentals of Financial Accounting 3rd Edition

2 B are businesses whose stock is bought and sold on a stock exchange

3 C are businesses whose stock is bought and sold privately

4 D are businesses where stock is not used as evidence of ownership

Dividends are reported on the:

1 A Income statement

2 B Balance sheet

3 C Statement of retained earnings

4 D Income statement and balance sheet

Cash flow from investing activities includes

1 A money received from a company's stockholders for the sale of stock

2 B money received from the sale of the company's office building

3 C money paid for dividends to the company's stockholders

4 D money paid for salaries of employees

Which of the following would represent an operating activity?

1 A Purchasing equipment with money borrowed from creditors

2 B An investment of financial capital by the owners

3 C Buying the company's office supplies

4 D Repaying a loan the company had taken out

Which of the following would affect stockholders' equity?

1 A A company borrows $100 million and buys $100 million in equipment

2 B A company pays $100 million to stockholders as a dividend.

3 C A company sells $100 million in assets for $100 million cash

4 D A company receives payment for $100 million in accounts receivable

Expenses are shown

1 A on the income statement in the time period in which they are paid

2 B on the income statement in the time period in which they are incurred

3 C on the balance sheet in the time period in which they are paid

4 D on the balance sheet in the time period in which they are incurred

Creditors are:

1 A people or organizations who owe money to a business

2 B people or organizations to whom a business owes money

3 C stockholders of a business

4 D customers of a business

The three main types of business activities measured by financial statements are:

1 A selling goods, selling services, and obtaining financing

2 B operating activities, investing activities, and financing activities

3 C hiring, producing, and advertising

4 D generating revenues, paying expenses, and paying dividends

The Don't Bite Me Pest Control Company has 10,000 gallons of insecticide supplies on hand that cost $300,000; a bill from the vendor for $100,000 of these supplies has not yet been paid The company expects to earn $800,000 for its services when it uses the insecticide supplies The company would report a supplies asset in the amount of

1 A $10,000

2 B $200,000

3 C $300,000

4 D $800,000

Which of the following are the three basic elements of the balance sheet?

1 A assets, liabilities, and retained earnings

2 B assets, liabilities, and contributed capital

3 C assets, liabilities, and revenues

4 D assets, liabilities, and stockholders' equity

At the end of last year, the company's assets totaled $860,000 and its liabilities totaled $740,000 During the current year, the

company's total assets increased by $58,000 and its total liabilities increased by $24,000 At the end of the current year, stockholders' equity was

1 A $154,000

2 B $120,000

3 C $34,000

4 D $178,000

Accounting information systems:

1 A are summarized by reports that are published to the public

2 B capture and report the results of a business's operating, investing, and financing activities

3 C monitor business activities only in financial terms

4 D capture only the information that is needed by the owners of the company

Assets:

1 A represent the amounts earned by a company

2 B must equal the liabilities of a company

3 C must equal the stockholders' equity of the company

4 D represent the resources owned by a company

The Whackem-Smackem Software Company sold $11 million of computer games in its first year of operations The company

received payments of $7.5 million for these computer games The company's income statement would report:

1 A sales revenue of $7.5 million.

2 B accounts receivable of $3.5 million

3 C expenses of $3.5 million

4 D sales revenue of $11 million

The Publish or Perish Printing Company paid a dividend to

stockholders This will be reported on the:

1 A audit report

2 B income statement

3 C balance sheet

4 D statement of retained earnings

The separate entity assumption means:

1 A a company's financial statements reflect only the business activities of that company

2 B each separate owner's finances must be revealed in the financial

Which of the following would not represent a financing activity?

1 A Paying dividends to stockholders

2 B An investment of financial capital by the owners

3 C Borrowing money from a bank to finance the purchase of new equipment

4 D Collecting cash from customers

Net Income is

1 A the amount the company earned after expenses and dividends are

subtracted from revenue

2 B the amount by which assets exceed expenses

3 C the amount by which assets exceed liabilities

4 D the amount by which revenues exceed expenses

A company's balance sheet contained the following information: contributed capital: $12,000; accounts payable:$64,000; Total

assets:$176,000; Retained Earnings: $28,000 Assume Notes

Payable is the only other item on the balance sheet Notes Payable must equal

2 B monthly, quarterly and annually

3 C whenever management feels like it

4 D weekly

Which of the following is true?

1 A Companies can choose to end their fiscal year on any date they feel is most relevant

2 B Companies must end their fiscal year on March 31, June 30, September

30, or December 31

3 C Companies can select any date except a holiday to end their fiscal year

4 D Companies must end their fiscal year on December 31

Which of the following would represent an investing activity?

1 A Purchasing equipment

2 B An investment of financial capital by the owners

3 C Borrowing money from a bank

4 D Repaying a loan the company had taken out

Which of the following is not true?

1 A Assets = Liabilities + Stockholders' Equity

2 B Liabilities = Assets - Stockholders' Equity

3 C Stockholders' Equity + Liabilities - Assets = 0

4 D Liabilities - Stockholders' Equity = Assets

Operating activities:

1 A involve day to day events related to production and sales

2 B relate to the acquisition or sale of long-term assets

3 C only involve financial exchanges

4 D involve the payment of dividends to owners

Financing that individuals or institutions have provided to a

company is

1 A always classified as liabilities

2 B classified as liabilities when provided by creditors and stockholders' equity when provided by owners

3 C always classified as equity

4 D classified as stockholders' equity when provided by creditors and liabilities when provided by owners

If XYZ Company had $12 million in revenue and net income of $3 million then its:

1 A expenses must have been $15 million

2 B expenses must have been $9 million

3 C assets must have been $12 million

4 D assets must have been $3 million

During its first year of operations, Widgets Incorporated reported sales revenue of $386,000 but collected only $303,000 from

customers The amount to be reported as accounts receivable at the end of the year is

2 B involve the buying or selling of land, buildings, equipment, and other term investments.

long-3 C involve the receipt of interest from short-term investments such as

certificates of deposits (CD's)

4 D involve the payment of wages, rent and other costs of running a business

90 Free Test Bank for Fundamentals of Financial

Accounting 3rd Edition by Phillips Multiple Choice

2 B Notes payable can remain unpaid longer than accounts payable

3 C Notes payable are documented using formal written debt contracts while accounts payable are generally informal

4 D Notes payable are not reported as liabilities on the balance sheet while accounts payable are reported as liabilities on the balance sheet

The WC Company borrowed $26,500 from a bank during 2010

1 A This would be listed as ($26,500) under investing activities on the

statement of cash flows

2 B This would be listed as ($26,500) under operating activities on the

statement of cash flows

3 C This would be listed as $26,500 under investing activities on the statement

Which of the following is not an expense?

1 A Wages of employees

2 B Interest incurred on a loan the company had taken out

3 C Dividends

4 D Corporate income tax

During 2010, a company's assets rise $56,000 and its liabilities rise

$38,000 If no dividend is paid and no further capital is contributed, net income for 2010 was:

1 A directly by the 1933 Securities Act

2 B by the Public Company Accounting Oversight Board(PCAOB)

3 C by the Financial Accounting Standards Board(FASB)

4 D by the American Institute of Certified Public Accountants (AICPA)

A creditor might look at a company's financial statements to

determine if the:

1 A company is likely to have the resources to repay its debts

2 B company's stock is likely to fall, signaling a good time to sell

3 C company's stock is likely to rise, signaling a good time to buy

4 D company's stock is likely to vary up and down

What would a financial statement user learn from reading the

auditors' report?

1 A Whether the financial statements present a fair picture of the company's financial results and are prepared in accordance with GAAP

2 B Whether or not it is a good time to purchase the stock

3 C What the company plans to distribute as dividends

4 D Whether or not the company has plans for future expansion

Which of the following business organizations has only one owner?

1 A Supplies that were purchased and used in 2009 but paid for in 2010

2 B Dividends that were paid in 2010

3 C Supplies that were purchased, used, and paid for in 2010

4 D Supplies that were purchased in 2009 and paid for in 2010 but have not been used

Investors are often interested in the amount of net income

distributed as dividends In which section of the financial statements would investors look to find this amount?

1 A Statement of retained earnings

2 B Balance sheet

3 C Notes to the financial statements

4 D Income statement

If a company uses $50,000 of its cash to buy an asset then:

1 A assets and liabilities will be unchanged

2 B assets will rise $50,000 as will liabilities

3 C assets will rise $50,000 as will stockholders' equity

4 D assets will fall $50,000 and liabilities will rise $50,000

Which of the following is true about the format of financial

1 A Creditors are likely to conclude that the risk of lending to the company is falling and might be willing to accept a lower interest rate on loans.

2 B Investors are likely to conclude that the stock price is likely to rise, making the company more attractive as a potential investment

3 C Investors are likely to conclude that the company is more attractive as a potential investment

4 D Owners may conclude that the company will be less likely to distribute dividends

Investors and creditors look at the balance sheet to see whether the company

1 A is profitable

2 B owns enough assets to pay what it owes to creditors

3 C has had a positive cash flow from operations

4 D is paying sufficient dividends to stockholders

The purpose of a statement of retained earnings is to:

1 A estimate the current value of a company's assets

2 B report how the profits of a company have been distributed to stockholders

or retained in the business

3 C show where the money is flowing into and out of a company

4 D explain the specific revenues and expenses arising during the period

In the U.S., public companies have to be audited by independent auditors using rules approved by the:

1 A 1933 Securities Act

2 B Public Company Accounting Oversight Board (PCAOB)

3 C Financial Accounting Standards Board (FASB)

4 D American Institute of Certified Public Accountants (AICPA)

Which of the following would not affect a company's net income?

1 A A change in the company's income taxes

2 B Changing the selling price of a company's product

3 C Paying a dividend to stockholders

4 D Advertising a new product

To determine whether generally accepted accounting principles (GAAP) were followed in the preparation of financial statements, an examination of:

1 A tax documents would be performed by the IRS

2 B the annual report would be performed by the SEC

3 C the financial statements and related documents would be performed by an independent auditor

4 D the financial statements and related documents would be performed by theFASB

Which of the following statements is not true concerning the notes

to the financial statements?

1 A Notes to the financial statements explain what policies were used to

prepare the financial statements

2 B Notes to the financial statements provide additional information about what

is included in the financial statements

3 C Notes to the financial statements provide additional information about financial matters that are not included in the financial statements

4 D Notes to the financial statements provide financial information about the owners of the business

An investor might look at a company's financial statements to

determine:

1 A if competitors' earnings are rising or falling

2 B if the company's stock is likely to fall, signaling a good time to sell

3 C if the company's creditors are having a good year

4 D if the company's owners are financially sound

90 Free Test Bank for Fundamentals of Financial

Accounting 3rd Edition by Phillips Multiple Choice

Questions - Page 3

For the current year, the first year of operations, a company sold

$100,000 of goods to customers and received $90,000 in cash from

customers The remainder is owed to the company at the end of the year The company incurred $70,000 in expenses for the year and paid $65,000 of these in cash The remainder is owed by the

company at the end of the year Based on this information, what is the amount of net income for the year?

The first year of operations for a company was 2010 The net

income for the year 2010 was $20,000 and dividends of $12,000 were paid In 2011, the company reported net income of $34,000 and paid dividends of $5,000 At the end of 2010, the company had total assets of $150,000, and at the end of 2011, total assets were

$240,000.What is the amount of total assets at the end of 2011?

1 A $16,800

2 B $16,500

3 C $21,600

4 D $23,500

Which of the following statements is FALSE?

1 A Cash flows from financing activities would appear on the Statement of Cash Flows

2 B Dividends would appear on the Statement of Retained Earnings

3 C Assets would appear on the Income Statement

4 D Revenues would appear on the Income Statement

The statement of cash flows shows the following information: Cash flows from operating activities: $16,500; Cash flows investing

activities: $8,400; Cash flows from financing activities: $2,900 The beginning cash was $14,000 What is the amount of cash at the end

1 A $2,000 should be reported on the income statement as Utilities Expense

2 B Nothing should be reported about this in the current year's financial

Investing activities on the Statement of Cash Flows are

1 A transactions with lenders, borrowing and repaying cash

2 B transactions with stockholders, selling company stock and paying

dividends

3 C activities directly related to running the business to earn profit

4 D buying and selling productive resources with long lives

Choose the TRUE statement

1 A A company with Net Income will also have a cash increase from operating activities

2 B A company with Liabilities of $80,000 and Stockholders' equity of $50,000 will have Assets of $30,000

3 C If a company has total revenues of $80,000, total expenses of $50,000 anddividends of $10,000, they will have net income of $20,000