Test bank for financial ACCT 2010 1st edition part 1

assets reported on the balance sheet If stockholders want to know how money flowed into and out of the company, what financial statement would they use?... The retained earnings stateme

Test Bank for Financial ACCT 2010 1st Edition Part 1

Tarp Corporation Beginning Retained Earnings $550,000 Ending Retained Earnings 700,000 Dividends Paid 100,000 Revenue 525,000 Refer to Tarp

Corporation The company's expenses are:

1 $100,000

2 $150,000

3 $450,000

4 $275,000

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 $9,950,000

2 $1,050,000

3 $2,150,000

4 $8,900,000

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 $ 800,000

2 $2,000,000

3 $3,800,000

4 $1,800,000

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

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

1 $4,400,000

2 $1,400,000

3 $2,400,000

4 $1,600,000

"Economic resources" are known as

1 Assets

2 Liabilities and stockholders' equity

3 Owners' equity and stockholders' equity

4 Retained earnings and revenues

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 equations represents the Statement of Retained

Davis Construction Inc 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, Inc and calculate its Retained Earnings balance at December 31, 2010

1 $175,000

2 $ 75,000

3 $250,000

4 $375,000

Davis Construction Inc 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 Inc 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 If Davis Construction's revenues were $500,000 for the year ended December

31, 2010, how much were total expenses?

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

In order for accounting information to be useful in making informed decisions,

it must be

1 Internal

2 Relevant

3 Reliable

4 Both relevant and reliable

Which of the following is a constraint to the qualitative characteristics of useful accounting information?

1 Conservatism

2 Materiality

3 Relevance

4 Comparability

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

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 information that is

1 Comparability

2 Consistency

3 Neutrality

4 Materiality

PTG Enterprises purchases many small pieces of office furniture, such as trash cans, that cost less than $100 each PTG accounts for these items as

expenses when acquired rather than reporting them as property, plant, and equipment on its balance sheet The company's accountant states that no accounting principle has been violated Justification for PTG's policy of

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

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

3 Scott applies the same accounting principles each period

4 Scott applies the same accounting principles as its competitors

Information that is material means that an error in recording the dollar

amount of a transaction would

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

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?

2 cash flow information

3 all accounting information

4 assets reported on the balance sheet

If stockholders want to know how money flowed into and out of the company,

what financial statement would they use?

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

Four financial statements are usually prepared for a business The statement

of cash flows is usually prepared last The retained earnings statement (RE), the balance sheet (B), and the income statement (I) are prepared in a certain order to obtain information needed for the next statement In what order are

these three statements prepared?

2 retained earnings statement

3 statement of cash flows

4 balance sheet

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

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

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

Which of the following is not an asset?

1 Investments

2 Cash

3 Inventory

4 Equity

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

"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

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

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

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 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

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

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 of the following underlying assumptions for the conceptual framework

is the reason the dollar is used in the preparation of financial

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

on the monetary unit

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.

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

"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

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 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

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

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

of a corporation to its owners?

1 Retained Earnings

1,000,000Accounts payable 200,000 Retained earnings ?Inventory 350,000 Refer to IPOD Corp What amount should IPOD report on its Balance Sheet for Total Assets?

1,000,000Accounts payable 200,000 Retained earnings ?Inventory 350,000 Refer to IPOD Corp What is IPOD 's Retained Earnings balance at the end of the current year?

1 $ 100,000

2 $1,100,000

3 $1,600,000

4 $1,700,000

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

current year in the amount of

Ponzi Corporation 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 Refer to Ponzi Corporation.

What was the balance of Retained Earnings at January 1, 2010?

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

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

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

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

1 Financing

2 Operating

3 Investing

4 Measuring