137 test bank for financial accounting making the connection spiceland 1st edition

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137 Test Bank for Financial Accounting Making the

Connection Spiceland 1st Edition

Multiple Choice Questions-Page 1

Which definition below best describes financial accounting?

1 A.Process of measuring income taxes owed to the government.

2 B System of maintaining communication with a company's customers and suppliers.

3 C Procedures designed to enhance the company's image to potential investors.

4 D Measuring business activities and communicating them to external parties.

Transactions of a company involving external sources of

funding are referred to as:

1 A.The change in retained earnings equals net income less dividends.

2 B Equality of revenue and expense transactions over time.

3 C Resources of the company equal creditors' and owners' claims to those resources.

4 D Financing activities equal investing and operating activities.

The primary purpose(s) of financial accounting is (are) to:

1 A.Measure and record business transactions.

2 B Prepare federal and state tax returns.

3 C Communicate financial results to investors and creditors.

4 D a and c.

Which of the following best describes a revenue?

1 A.Resources owned.

2 B Cash received from a customer.

3 C Amounts earned from providing goods and services to a customer.

4 D Dividends paid to stockholders.

Net income can best be described as:

1 A Net cash received by a company during the year.

2 B Revenues minus expenses.

3 C The amount of profits retained in a company for the year.

4 D Resources owned by a company.

Which business form has the advantage of limited liability?

1 A.Provides information primarily for external decision makers.

2 B Provides information primarily for a company's employees.

3 C Provides information primarily for the use of managers of the company.

4 D Is primarily used to compute a company's tax obligation.

Transactions related to the primary business activities of the company, such as selling goods and services to customers, are referred to as:

1 A.Investing activities.

2 B Management activities.

3 C Operating activities.

Limited liability means:

1 A.Stockholders of a corporation are not obligated to pay the corporation's debts out of their own pocket.

2 B Liabilities of a company cannot exceed its assets.

3 C Companies are not allowed to borrow unless they are profitable.

4 D Companies are less likely to be sued if they are formed as a corporation.

Creditors' claims to a corporation's resources are referred to as:

1 A.Dividends.

2 B Assets.

3 C Liabilities.

4 D Stockholders' equity.

What is the primary purpose of financial accounting?

1 A.Determine the amount of tax liability owed to the government.

2 B Communicate business transactions to internal management.

3 C Measure business transactions and communicate those measures to external users

to make decisions.

4 D Measure the profitability of the company in order to assist employees with making decisions.

An alternative form of the accounting equation is:

1 A Net Income = Revenues - Expenses.

2 B Stockholders' Equity = Assets + Liabilities.

3 C Assets = Liabilities - Stockholders' Equity.

4 D Assets - Liabilities = Stockholders' Equity.

The accounting equation is defined as:

1 A.Assets = Liabilities + Stockholders' Equity.

2 B Assets = Liabilities - Stockholders' Equity.

3 C Net Income = Revenues - Expenses.

4 D Liabilities + Revenues = Assets.

Liabilities are best defined as:

1 A.Amounts the company expects to collect in the future from customers.

2 B Debts or obligations the company owes resulting from past transactions.

3 C The amounts that owners have invested in the business.

1 A.The company's assets exceed liabilities by $60,000.

2 B The company has issued $60,000 of common stock.

3 C Net income for the year equals $60,000.

4 D Total revenues earned during the year equal $60,000.

The accounts which represent the resources of the company are called:

Transactions of a company that include the purchase and sale

of long-term productive assets are referred to as:

1 A.Investing activities.

2 B Financing activities.

3 C Expenditure activities.

4 D Operating activities.

Financial accounting does not deal with which of the following?

1 A.Measuring a company's economic activity.

2 B Preparing financial reports.

3 C Making business decisions.

4 D Communicating financial results to investors.

91 Free Test Bank for Financial Accounting Making the Connection 1st Edition by Spiceland Multiple Choice

Which of the following accounts appears in the statement of stockholders' equity?

correctly matches the activity with its type?

1 A.Investing - paying utilities for the month.

2 B Investing - purchasing land.

3 C Operating - paying dividends to stockholders.

4 D Financing - selling equipment for cash.

Which of the following is not a balance sheet item?

1 A.Assets.

2 B Common stock.

3 C Retained earnings.

4 D Revenues.

On January 1, 2012, Gucci Brothers Inc started the year with a

$492,000 balance in Retained Earnings and a $605,000 balance

in Common Stock During 2012, the company earned net

income of $92,000, paid a dividend of $15,200, and issued more common stock for $27,500 What is total stockholders' equity on December 31, 2012?

1 A $1,231,700.

2 B $1,097,000.

3 C $1,201,300.

4 D Statement of stockholders' equity.

The equation best describing the income statement is:

1 A.Revenues - Expenses = Net Income.

2 B Assets = Revenues - Expenses.

3 C Assets = Liabilities + Stockholders' Equity.

4 D Revenues + Expenses = Net Income.

Aikman Company has paid dividends of $2,410, $0, $1,570 and

$1,060 over the first four years of the company's existence If Retained Earnings after year four has an ending balance of

$9,700, what is the average annual amount of net income (loss) over the past four years for Aikman?

1 A.$3,685.

2 B $14,740.

3 C $840.

4 D $1,260.

In what order are the following financial statements prepared: (1) balance sheet, (2) income statement, and (3) statement of stockholders' equity?

4 D Statement of stockholders' equity.

The account type that represents payments to stockholders is called:

Retained earnings at the end of the year is calculated using:

1 A.Beginning retained earnings, net income, and dividends.

2 B Common stock and dividends.

3 C Stockholders' equity, net income, and dividends.

4 D Net income and dividends.

Which of the following is an operating activity?

1 A.Issuing common stock.

2 B Paying dividends.

3 C Borrowing cash from a bank to acquire a factory.

4 D Paying electricity bills for the month.

Which of the following is the correct order for preparing the financial statements?

1 A.Balance sheet, statement of stockholders' equity, and income statement.

2 B Balance sheet, income statement, and statement of stockholders' equity.

3 C Statement of stockholders' equity, income statement, and balance sheet.

4 D Income statement, statement of stockholders' equity, and balance sheet.

Nina Corp had the following net income (loss) the first three years of operation: $7,100, ($1,600), and $3,600 If the Retained Earnings balance at the end of year three is $1,100, what was the total amount of dividends paid over these three years?

1 A.$500.

2 B $0.

3 C $9,100.

4 D $8,000.

The equation best describing the balance sheet is:

1 A.Assets = Liabilities + Stockholders' Equity.

2 B Revenues - Expenses = Net Income.

3 C Ending Retained Earnings + Dividends = Net Income.

4 D Revenues + Expenses = Net Income.

The financial statement(s) that record activity over an interval of time is (are) the:

1 A.Income statement.

2 B Balance sheet.

3 C Balance sheet and income statement.

4 D Income statement and statement of cash flows.

Which of the following statements regarding financial reports is not correct?

1 A.A balance sheet contains assets, liabilities, and stockholders' equity information.

2 B An income statement shows revenues and expenses.

3 C A statement of stockholders' equity reports revenues, net income, and dividends information.

4 D A statement of cash flows shows cash inflows and outflows from operating,

investing, and financing activities.

The accounts that represent resources owed to creditors are called:

1 A.Assets.

2 B Liabilities.

3 C Dividends.

4 D Stockholders' equity.

Which financial statement is typically prepared first?

1 A.Balance sheet.

2 B Income statement.

3 C Statement of stockholders' equity.

4 D Statement of cash flows.

The ending Retained Earnings balance of Boomer Inc

decreased by $1.0 million from the beginning of the year The company declared a dividend of $5.4 million during the year What was the net income earned during the year?

1 A.Common stock and liabilities.

2 B Assets and liabilities.

3 C Common stock and retained earnings.

4 D Revenues and expenses.

How many of the following transactions are operating

activities? Borrowed $50,000 from the bank; Purchased $12,000

in supplies; Provide services to customers for $27,000; Paid the utility bill of $750; Purchased a delivery truck for $12,000;

Received $25,000 from issuing common stock

1 A.One.

2 B Two.

3 C Three.

4 D Four.

Sooner Company has had a net income of $8,000, $5,000,

$12,000, and $10,000 over the first four years of the company's existence If the average annual amount of dividends paid over the last four years is $3,000, what is the ending retained

If accounting information is considered to have faithful

representation, then which of the following is true?

1 A.The information represents to users what it claims to represent.

2 B The information follows conservatism principles and is also material.

3 C The information is considered pertinent to or affects decisions.

4 D The information will have predictive value, feedback value, and is timely.

Which of the following statements is NOT correct about the financial statements?

1 A.An income statement reports revenues, expenses, and net income information.

2 B The statement of stockholders' equity presents common stock, dividends, and retained earnings information.

3 C A balance sheet reports assets, liabilities, revenues, and expenses.

4 D The statement of cash flows shows cash inflows and outflows from operating, financing, and investing activities.

For accounting information to be relevant, it must have which of the following characteristics?

1 A.Predictive value or confirmatory value.

2 B Large in amount and timely.

3 C Comparability or consistency.

4 D Freedom from material error, neutrality, or completeness.

Which of the following items would not appear in an income statement?

2 B Monetary unit assumption.

3 C Going concern assumption.

4 D Economic entity assumption.

GAAP is an abbreviation for:

1 A.Generally authorized accounting procedures.

2 B Generally applied accounting procedures.

3 C Generally accepted auditing practices.

4 D Generally accepted accounting principles.

Financial reporting objectives do not include providing

information:

1 A.Useful to investors and creditors in making decisions.

2 B To determine market values, assess profit potential, and evaluate management.

3 C Helpful to investors in predicting cash flows.

4 D That tells about a company's economic resources and claims to those resources.

Which statement below best describes the objectives of

financial accounting?

1 A.Provide information that helps predict cash flows.

2 B Provide information about the economic resources, claims to resources and

changes in resources and claims.

3 C Provide information that is useful in making decisions.

4 D All of the above are correct.

The assumption that a business can continue to remain in

operation into the future is the:

1 A.Monetary unit assumption.

2 B Periodicity assumption.

3 C Economic entity assumption.

4 D Going concern assumption.

Enhancing qualitative characteristics of accounting information include:

1 A.Relevance and comparability.

2 B Comparability and consistency.

3 C Faithful representation and relevance.

4 D Cost effectiveness and materiality.

The independent, private-sector group that is primarily

responsible for setting financial reporting standards in the United States is the:

4 D Statement of stockholders' equity.

Net income appears in which two financial statements?

1 A.Balance sheet and income statement.

2 B Statement of stockholders' equity and balance sheet.

3 C Income statement and statement of stockholders' equity.

4 D Net income appears in only one financial statement.

Materiality is based upon which factor(s)?

1 A.Securities and Exchange Commission.

2 B International Accounting Standards Board.

3 C Financial Accounting Standards Board.

4 D U.S Congress.

Of the following, the most important objective for financial

reporting is to provide information useful for:

1 A.Predicting cash flows.

2 B Determining taxable income.

3 C Providing accountability.

4 D Increasing future profits.

The conceptual framework's qualitative characteristic of faithful representation includes:

1 A.Cash flows from operating activities.

2 B Cash flows from financing activities.

3 C Cash flows from customers.

4 D Cash flows from investing activities.

Which of the following items is reported in the statement of stockholders' equity?

1 A.Total assets.

2 B Total expenses.

3 C Net income.

4 D Operating cash flows.

Which accounting amount best represents value created for stockholders during the current period?

1 A.Standards of Professional Compliance (SPC).

2 B Generally Accepted Accounting Principles (GAAP).

3 C Generally Accepted Auditing Standards (GAAS).

4 D Rules of Financial Reporting (RFR).

The balance sheet depicts which of the following equations?

1 A.Net income = revenue - expenses.

2 B Ending retained earnings = beginning retained earnings + net income - dividends.

3 C Assets = liabilities + stockholders' equity.

4 D Net cash flows = total cash inflows - total cash outflows.

Which financial statement reports a company's retained

earnings?

1 A.Income statement.

2 B Balance sheet.

3 C Statement of cash flows.

4 D All of the above.

The International Accounting Standards Board:

1 A.Is governed by the U.S Securities and Exchange Commission.

2 B Can overrule the FASB when their policies disagree.

3 C Promotes the use of high-quality, understandable global accounting standards.

4 D Is the primary standard-setting body in the United States.

Primary qualitative characteristics of accounting information are:

1 A.Relevance and comparability.

2 B Comparability and consistency.

3 C Faithful representation and relevance.

4 D Faithful representation and consistency.

The conceptual framework's qualitative characteristic of

relevance includes:

1 A.Predictive value.

Independent auditors express an opinion on the:

1 A.Fairness of financial statements.

2 B Amount of income taxes a company owes to the government.

3 C Quality of the company's products.

4 D Quality of a company's workforce.

The assumption that the assets and liabilities of the business are accounted for on the books of the company but not

included in the records of the owner is the:

1 A.Monetary unit assumption.

2 B Going concern assumption.

3 C Economic entity assumption.