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164 Test Bank for Cornerstones of Financial Accounting 2nd

True False Questions Free Text Questions

Multiple Choice Questions-Page 1

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

1 Balance Sheet

2 Statement of Retained Earnings

3 Income Statement

4 Statement of Cash Flows

Which of the following are Noncurrent assets?

1 Machinery and equipment

4 Cash flow from operations

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 The cost of assets used in the operations of a business.

Barr Attorneys reported the following information for the year ended

December 31, 2013 Revenue $14,000,000; Expenses 11,500,000; Dividends 1,000,000; Retained Earnings at December 31, 2013 1,750,000; What was the retained earnings balance at December 31, 2012?

1 $50,000

2 $550,000

3 $800,000

4 $850,000

Which one of the following correctly represents one of the basic financial statement models?

1 Assets - Liabilities = Net Income

2 Assets + Liabilities = Total Assets

3 Revenues + Expenses = Net Income

4 Beginning Retained Earnings + Net Income - Dividends = Ending 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, 2013

2 Income Statement at December 31, 2013

3 Income Statement for the Year Ended December 31, 2013

4 Statement of Retained Earnings at December 31, 2013

External users of financial information

1 Need detailed records of the business to make informed decisions.

2 Are primarily responsible for the preparation of financial statements.

3 Rely on the financial statements to help make informed decisions.

4 Rely on management to tell them whether the company is a good investment

What is the name of the branch of accounting concerned with providing

outside decision makers with information to assess the amounts, timing and uncertainties of the company's future cash flows?

Which of the following is not a form of a business entity?

1 $750,000

2 $650,000

3 $500,000

4 $550,000

"Revenues" are best described as:

1 decreases in assets resulting from the sale of goods or services.

2 increases in assets resulting from the sale of products or services.

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

4 an increase in the financing activities.

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

1 Net Income

2 Expenses

3 Revenues

4 Dividends

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 of the following terms best describes a distribution of the net income

of a corporation to its owners?

3 Statement of Retained Earnings

4 Statement of Public Accounting

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

1 Financing

2 Operating

3 Investing

4 Measuring

"Economic resources" are known as

1 Assets

2 Liabilities and stockholders' equity

3 Owners' equity and stockholders' equity

4 Retained earnings and revenues

What is unearned revenue?

1 A supplier considering selling to the company on credit.

2 The labor union representing employees of a company that is involved in labor

Suppose a company reports the following information at December 31, 2013: Sales $15,000,000; Cash $3,000,000; Unearned Revenue $ 400,000; Dividends

$1,000,000; Cost of Sales $8,500,000; What is the company's Gross Profit?

1 $ 6,100,000

2 $ 5,500,000

3 $ 6,500,000

4 $12,000,000

In which form of organization are the owners' legal responsibility for the debt

of the business limited to the amount they invested in the business?

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

B&B Painting reported the following information for the year ended December

31, 2013 Revenues $2,500,000; Expenses 2,000,000; Retained Earnings at December 31, 2012 100,000; Retained Earnings at December 31, 2013 450,000; How much was paid out in dividends in 2013?

3 Revenues and Expenses

4 Net Income and Dividends

Which one of the following is not an external user of financial statements?

1 Internal Revenue Service

2 Creditors

3 Stockholders

4 The Company's President

What is the name for a person who lends funds to a business entity and

expects repayment with interest?

1 Creditor

3 Proprietor

4 Stockholder

Bay Camera: The company reported the following items on its financial

statements for the year ended December 31, 2013: Sales $780,; of Sales

$700,000; Selling, general & administrative expense 20,000; Other Expense 15,000; Dividends 5,000; Income Tax Expense 12,500 Refer to Bay Camera What amount will be reported as Retained Earnings on the Balance Sheet at December 31, 2013, assuming this is the first year of operations?

1 $22,500

2 $27,500

3 $42,500

4 Not enough information is provided.

Beard Marine: The company reported the following information for the year ended December 31, 2013: Net income $100,000; Dividends 6,000; Retained earnings at December 31, 2013 $120,000; Refer to Beard Marine What was the balance of Retained Earnings at January 1, 2013?

1 $ 21,000

2 $ 26,000

3 $106,000

4 $214,000

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 invests funds into a business and is considered an owner?

Which of the following best describes the term "current assets"?

1 The amount of total profits earned by a business since it began operations plus all other resources.

2 The amount of claim that the owners have in the business in the current year.

3 Assets expected to be converted into cash within one year or one operating cycle, whichever is longer.

4 The cumulative profits earned by a business less any dividends distributed in the current period.

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 A local bank is reviewing the company’s loan application.

2 The company is attempting to sell its stock to the public.

3 The labor union representing the company's employees is negotiating a pay raise as part of a new labor agreement.

4 The company's management is deciding whether to detail its vehicles today or tomorrow.

Which statement summarizes the results of the company's operations?

1 Statement of Cash Flows

2 Statement of Retained Earnings

3 Balance Sheet

4 Income Statement

Beaver Tree Service: Beginning Retained Earnings $550,000; Ending Retained Earnings 700,000; Dividends Paid 100,000; Revenue 525,000; Refer to Beaver Tree Service What is the company’s net income?

1 $150,000

2 $250,000

3 $300,000

4 $350,000

Net Income appears on which financial statement(s)?

1 Balance Sheet only

2 Income Statement only

3 Both the Balance Sheet and the Income Statement

4 The Income Statement, Statement of Cash Flows using the indirect method and the Statement of Retained Earnings

Another term for Short Term Investments is:

1 Inventories

2 Accounts Receivable

3 Contributed Capital

4 Marketable Securities

What is the primary objective of financial reporting?

1 To help investors make credit decisions.

2 To help management assess cash flows.

3 To protect users from fraudulent financial information.

4 To provide useful information for decision making

On January 1, 2012, a company reported assets of $1,000,000 and liabilities of

$600,000 During 2012, assets decreased by $100,000 and Stockholders'

Equity decreased $200,000 What is the amount of liabilities at December 31, 2012?

On January 1, 2013, a company's balance in retained earnings was $275,000 During 2013, the company earned net income of $23,500 and paid $11,200 in dividends Calculate the retained earnings balance at December 31, 2013

1 $263,800

2 $298,500

3 $262,700

4 $287,300

On January 1, 2013, a company's balance in retained earnings was

$10,000,000 At December 31, 2013, the balance in retained earnings was

$9,400,000 If the company earned net income of $440,000 during the year, how much were dividends?

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.

Bay Camera: The company reported the following items on its financial

statements for the year ended December 31, 2013: Sales $780,000; Cost of Sales $700,000; Selling, general & administrative expense 20,000; Other

Expense 15,000; Dividends 5,000; Income Tax Expense 12,500 Refer to Bay Camera What is the company’s Net Income for the current year?

1 The dividend reduced net income for 2013.

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 the company reports net income.

Which one of the following is a correct fundamental accounting equation?

1 Assets + Liabilities = Stockholders' Equity

2 Assets + Retained Earnings = Stockholders' Equity

3 Assets + Stockholders' Equity = Liabilities

4 Assets = Liabilities + Stockholders' Equity

Beaver Tree Service: Beginning Retained Earnings $550,000; Ending Retained Earnings 700,000; Dividends Paid 100,000; Revenue 525,000; Refer to Beaver Tree Service The company's expenses are:

1 $100,000

2 $150,000

3 $450,000

4 $275,000

96 Free Test Bank for Cornerstones of Financial

Accounting 2nd Edition by Rich Multiple Choice

On a multiple-step income statement, operating income results from

subtracting total operating expenses from which of the following amounts?

1 Gross margin

2 Cost of goods sold

3 Income before taxes

4 Net sales

As used in accounting, the "Notes to the Financial Statements" should be:

1 Shown at the bottom of the Income Statement.

2 Excluded, as they are not an integral part of the financial statements.

3 Included as an integral part of the financial statements.

4 Considered an optional part of the financial statements.

Working capital is calculated by which of the following?

1 Current assets divided by current liabilities

2 Total assets minus total liabilities

3 Current assets minus current liabilities

4 Current assets plus current liabilities

Been There Used Furniture: Been There Used Furniture began operation on January 1, 2013, with an initial investment of $100,000 from each of its five stockholders During the year, the company had net income of $200,000 and paid dividends of $50,000 Refer to Been There Used Furniture Calculate the retained earnings balance at December 31, 2013

1 $150,000

2 $200,000

3 $500,000

4 $650,000

Benchmark Surveyors: The following balances are provided: Cash $234,000; Accounts Payable $ 97,000; Inventories 121,000; Notes Payable (due 2018) 211,000; Land 453,000; Accounts Receivable 46,000 Refer to Benchmark Surveyors Calculate Current Assets

Been There Used Furniture: Been There Used Furniture began operation on January 1, 2013, with an initial investment of $100,000 from each of its five stockholders During the year, the company had net income of $200,000 and paid dividends of $50,000 Refer to Been There Used Furniture The dividends for the year

1 Increase the amount of capital stock reported by the company

2 Are part of the company's operating expense

3 Are reported on the Statement of Retained Earnings

4 Are reported on the Income Statement.

Bellweather Times: The company reports the following balances: Other

Revenue $180,000; General and Administrative Expense $320,000; Dividends paid $220,000; Operating Revenues $700,000; Selling Expenses

$280,000;Income Tax Expense $60,000; Refer to Bellweather Times What is the company's income from operations?

1 3.00 to 1

1 Statement of Cash Flows

2 Retained Earnings Statement

3 Income Statement

4 Balance Sheet

A non-classified balance sheet typically does not have a distinction between which of the following items?

1 Assets and Liabilities

2 Current and Noncurrent items

3 Liabilities and Stockholders' Equity

4 Resources invested by the owners and amounts borrowed from creditors

For which of the following is the working capital and current ratio is most useful?

1 In evaluating a company's liquidity

2 In evaluating a company's solvency

3 In evaluating a company's profitability

4 In evaluating a company's revenues

Which of the following represents one of the purposes of the Auditor's

Report?

1 To provide a place for management to justify questionable items in the statements.

2 To provide comparative ratios for the company's financial data

3 To provide the CPA's opinion of the fairness of the financial statements.

4 To satisfy the need for full disclosure of all the facts relevant to a company's results and financial position

Which of the following items will be found in a corporate annual report?

1 Industry standards

2 Notes to the financial statements

3 Selected financial data from non-competitor companies

4 Management’s statement that the auditors are responsible for the financial statements.

A company increased its dollar amount of working capital over the past

several years Which one of the following measures should be used to further evaluate the company’s short-run liquidity?

1 The Asset Ratio

2 An analysis of the company's long-term debt

3 An analysis of the return on stockholders' equity

4 The Current Ratio

Barnes Restaurant reports the following amounts: Cash $125,000Inventory

$215,000; Land 275,000Unearned Revenue 117,000; Equipment

350,000Common Stock 300,000; Calculate Current Assets

1 6, 5, 4, 7, 1, 2, 3

2 7, 6, 1, 4, 2, 3, 5

3 6, 5, 4, 1, 7, 2, 3

4 6, 7, 4, 1, 2, 3, 5

Management's Discussion and Analysis:

1 Is a report of the independent accountants

2 Can be a substituted for the notes to the financial statements.

3 Provides a discussion and explanation of various items reported in the financial statements.

4 Provides assurances that the auditors are responsible for the financial statements.