123 test bank for financial ACCT 1st edition

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123 Test Bank for Financial ACCT 1st Edition

Multiple Choice Questions-Page 1

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 Public Accounting

On January 1, 2010, Blackstone Company reported assets of $1,000,000 and liabilities of $600,000 During 2010 assets decreased by $200,000 and Equity decreased $250,000 What is the amount of Equity at December 31, 2010

1 $650,000

2 $150,000

3 $400,000

4 $800,000

Which of the following statements is true regarding economic events?

1 The signing of a service contract is an example of an external event that is recorded in the accounting records.

2 Every event which affects an entity can be identified from a source document.

3 All internal and external events must be measured with sufficient reliability.

4 External events involve exchanges between an entity and another entity outside the company.

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 Both the Income Statement and the Balance Sheet

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 one 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

Ponzi Corporation reported the following information for the year ended

December 31, 2010 Net income $100,000; Dividends 6,000; Retained earnings

at December 31, 2010 $120,000; What was the economic effect of the payment

of Ponzi's dividends?

1 The dividend reduced net income for 2010.

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 Corp reports net income.

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 Public Accounting

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 economic events throughout the entire time period.

4 it is required by the federal government.

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

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

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

1 Balance Sheet for the Year Ended June 30, 2010

2 Income Statement at December 31, 2010

3 Income Statement for the Year Ended December 31, 2010

4 Statement of Retained Earnings at December 31, 2010

Businesses engage in which of the following three main activity categories?

1 Financing, Investing, Operating

2 Cash, Credit, Noncash

3 Financing, Credit, Operating

4 Financing, Management, Operating

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

1 Balance Sheet

2 Statement of Retained Earnings

3 Income Statement

4 Statement of Public Accounting

Which statement demonstrates the financial success or failure of the

company over that specific period of time?

1 Statement of Cash Flows

2 Statement of Retained Earnings

3 Balance Sheet

4 Income Statement

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.

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 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.

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.

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 is an organization that lends funds to a business entity and expects repayment of the funds?

IPOD Corporations' end-of-year Balance Sheet consisted of the following amounts Cash $150,000;Accounts Receivable $500,000; Property, plant & equipment 700,000;Long-term debt 400,000; Capital stock 1,000,000;Accounts payable 200,000; Retained earnings ; Inventory 350,000; What is IPOD 's

Retained Earnings balance at the end of the current year?

$1,400,000; Selling, general and Other Expense 30,000; administrative

expense 40,000 ; Dividends 10,000Income Tax Expense 25,000; Refer to Peck Company How much will be reported as Retained Earnings on its Balance Sheet at December 31, 2010, if this is the first year of operations?

1 $45,000

2 $55,000

3 $85,000

4 Not enough information is provided.

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 Monetary Unit

IPOD Corporations' end-of-year Balance Sheet consisted of the following amounts Cash $ 150,000; Accounts Receivable $500,000; Property, plant & equipment 700,000; Long-term debt 400,000; Capital stock 1,000,000;

Accounts payable 200,000; Retained earnings; Inventory 350,000; Refer to IPOD Corp What amount should IPOD report on its Balance Sheet for Total Assets?

Which one of the following events involves 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 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.

Jetson Corp reported the following information for the year ended December

31, 2010 Revenue $14,000,000; Expenses 11,500,000; Dividends 1,000,000; Retained Earnings at December 31, 2010 1,750,000; What was the retained earnings balance at December 31, 2009?

1 $250,000

2 $2,500,000

3 $1,500,000

4 $ 350,000

Bailout Corp reported the following information for the year ended December

31, 2010 Revenues $2,500,000; Expenses 2,000,000; Retained Earnings at December 31, 2009 100,000; Retained Earnings at December 31, 2010 450,000; How much was paid out in dividends in 2010?

"Revenues" are best described as:

1 decreases in resources resulting from the sale of goods or 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.

The Peck Company reported the following items on its financial statements for the year ending December 31, 2010 Sales $1,560,000;Cost of Sales

$1,400,000; Selling, general and Other Expense 30,000; administrative

expense 40,000 ; Dividends 10,000Income Tax Expense 25,000; The Income Statement for Peck will report Net Income for the current year in the amount

Which of the following invests funds into a business and is considered an owner?

1 Stockholders

2 Creditors

3 Bankers

4 Lenders

73 Free Test Bank for Financial ACCT 2010 1st

Edition by Godwin Multiple Choice Questions-Page 2

"Economic resources" are known as

1 Assets

2 Liabilities and stockholders' equity

3 Owners' equity and stockholders' equity

4 Retained earnings and revenues

Monaco Lawn Service Co creates a revenue each time a lawn is:

1 scheduled for service.

2 paid in full.

3 mowed.

4 prepaid in advance.

Cash investments made by stockholders in exchange for capital stock in a business are reported on the statement of cash flows in the

1 financing activities section

2 investing activities section

3 operating activities section

4 supplemental statement

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 statement

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

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.

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?

1 Comparability

2 Consistency

3 Neutrality

4 Materiality

On January 1, 2010, Money Company's balance in retained earnings was

$10,000,000 At the end of the year, December 31, 2010, the balance in retained earnings was $9,400,000 During 2010, the company earned net income of

$440,000 How much were dividends?

1 likely affect the judgment of someone relying on the financial statements

2 not affect the decisions of financial statement users

3 not impact a business decision of a creditor

4 result in the overstatement of assets or income

Cash used to purchase a truck to transport lawn mowers and other tools to customer locations is reported on the statement of cash flows in the

1 financing activities section

2 investing activities section

3 operating activities section

4 supplemental statement

The qualitative characteristics of accounting information include

1 reliability

2 cash flow information

3 all accounting information

4 assets reported on the balance sheet

The principle of conservatism is concerned with

1 the avoidance of overstating assets or income in the preparation of financial

statements.

2 the minimization of costs associated with providing financial information.

3 the company's ability to carry out its existing commitments.

4 the company's procedures for recording activities at their initial exchange price.

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

Liabilities are reported on the

1 income statement

2 retained earnings statement

3 statement of cash flows

4 balance sheet

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

Which one of the following is not one of the activities on the Statement of Cash Flows?

1 Operating activities

2 Investing activities

3 Business activities

4 Financing activities

Monaco Lawn Service Co 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 May

4 None of the Above

Expenses can be matched against revenue

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.

Mullins, Inc manufactures furniture Mullins has given you its most recent annual report in an effort to obtain a sizeable loan The company is very

profitable and appears to have a strong financial position However, based on

a news report you saw on television last night, you are aware that Mullins is a defendant in a class action lawsuit related to defective products Serious injuries were allegedly caused by Mullins' infant high chairs overturning The television news report is an example of financial

1 Predictable

2 Conservative

3 Relevant

4 Comparable

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

Tarp Corporation: Beginning Retained Earnings $550,000; Ending Retained Earnings 700,000; Dividends Paid 100,000; Revenue 525,000 What is the net income for Tarp Corp.?

1 $150,000

2 $250,000

3 $300,000

4 $350,000

Davis Construction began operation on January 1, 2010, with an initial

investment of $100,000 from each of its three stockholders During the year ending 2010 Davis Construction had net income of $125,000 and paid

dividends of $50,000 Refer to Davis Construction The dividends for the year

1 Increase the amount of capital stock reported by the company

2 Are part of Davis Construction's operating expense

3 Are reported on the Statement of Retained Earnings

4 Are reported on the Income Statement.

Davis Construction began operation on January 1, 2010, with an initial

investment of $100,000 from each of its three stockholders During the year ending 2010 Davis Construction had net income of $125,000 and paid

dividends of $50,000 and calculate its Retained Earnings balance at

Doughtry's Pet Shop reported a net loss of $1,500,000 and total expenses of

$2,900,000 How much are total sales?

3 Balance Sheet

4 None are correct.

An accountant is uncertain about the best estimate of an amount for a

business transaction If there are two possible amounts that could be

recorded, the amount least likely to overstate assets and earnings is selected Which of the following qualities is characterized by this action?

1 Comparability

2 Conservatism

3 Materiality

4 Neutrality

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?

expensing these furniture items is based on cost vs benefit considerations as well as the accounting constraint of

1 Conservatism

"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 recorcded in the period resources are used to generate revenues.

4 An increase in the financing activities.

Tarp Corporation: Beginning Retained Earnings $550,000; Ending Retained Earnings 700,000; Dividends Paid 100,000; Revenue 525,000; The company's expenses are:

1 $100,000

2 $150,000

3 $450,000