Accounting Test

An advantage of the corporate form of business is that

It's ownership is easily transferable via the sale of shares of stock

working capital

current assets - current liabilities

current ratio

current assets divided by current liabilities

order of liabilities on balance sheet

current liabilities and long-term liabilities

current assets divided by current liabilities

current ratio

information that accurately depicts what really happened

faithful representation

Issuance of common stock for cash

financing activities

Borrowing money is an example of an

financing activity

payment of cash dividends

financing activity

The concept that a business has a reasonable expectation of remaining in business for the foreseeable future is called the

going concern assumption

Valuing assets at their fair value rather than at their cost is inconsistent with the

historical cost principal

an item important enough to influence the decision of an investor or creditor

materiality

earnings per share

net income - preferred dividends / weighted average common shares outstanding

Cash receipts from customers

operating activity

cash payments to suppliers

operating activity

Sole Proprietorship

1 owner, simple, tax advantages, unlimited liability

On a classified balance sheet, short-term investments are classified as

Current assets

order of assets on classified balance sheet

Current assets; long-term investments; property, plant, and equipment; and intangible assets

debt to assets ratio

total liabilities/total assets

Sunland Corporation began the year with retained earnings of $310000. During the year, the company issued $410000 of common stock, recorded expenses of $1218000, and paid dividends of $81100. If Sunland's ending retained earnings was $330000, what was the company's revenue for the year?

$1319100

Suppose that Forever 21 Corporation has total assets of $3600000, common stock of $941000, and retained earnings of $590000 at December 31,2025. What are the stockholders claims on their assets at that date?

$1531000

For 2025, Whispering Winds Corp. reported net income of $38500, net sales $370500, and weighted-average shares of common stock outstanding of 16000. No preferred dividends were paid. Earnings per share is

$2.41

The total liabilities of Crane Construction Co. decreased by $81000 during the month of August 2025. Stockholders equity increased by $41000 during this period. By what amount and in what direction must total assets have changed during August?

$40000 decrease

solvency ratio

debt to assets ratio - total liabilities divided by total assets

Blossom Company began the year 2025 with retained earnings of $651000. During the year, the company sold additional shares of stock for $1022000, recorded revenues of $575000, expenses of $382000, paid dividends of $142500. What was Blossom's retained earnings balance at the end of 2025?

$701500

Vaughn Company began the year with retained earnings of $114000. During 2025, the company issued $84500 of common stock for cash. The company recorded revenues of $735000, expenses of $647000, paid dividends of $36000. What was Vaughns net income for the year 2025?

$88000

Financing Activities

(external sources of cash), raising money through outside resources - borrowing money, issue new shares of their own stock, paying dividends, buy back or repurchase

Partnership

2 or more owner, simple, shared control, broader skills, tax advantages, unlimited liabilities

An annual report includes all of the following except

A list of all customers

Which of the following is generally not classified as a current liability?

Bonds Payable

The management discussion and analysis (MD&A) section of the annual report covers all of the following aspects except the

Certification criteria of the company's auditors

Financial information is comparable if

Companies use the same accounting principles to prepare it

Acme Corporation hired a new accountant. Over the next four years, the accountant used four different accounting methods to record depreciation for Acme's equipment. Which of the following qualities of useful information has Acme most likely violated?

Consistency

Which of the following is NOT considered a measure of liquidity?

Debt to assets ratio

Which of the following is NOT an advantage of the corporate form of business organization?

Favorable Tax Treatment

Which entity is/are responsible for establishing accounting standards in the United States?

Financial Accounting Standards Board

The ability of a business to pay obligations that are expected to become due within the next year or operating cycle is

Liquidity

Corporation

Many owners in the form of stockholders equity, separate legal entity, easier to transfer ownership, easier to raise funds, no personal liability, income taxes are higher, limited liability, income taxes are a disadvantage

Operating Activities

Performing the day to day actions to produce and sell a product

Which of the following would NOT be considered an internal user of accounting data for Amazon?

President of the employees' labor union

Notes to the financial statements include al of the following except

Projected accounting information

Investing Activities

Purchasing resources a company needs in order to operate- purchase of long term assets (equipment, buildings, land, etc), purchase of investments (stock and bonds of other companies)

The best definition of assets is the

Resources belonging to a company that have future benefit to the company

Net income will result during a time period when

Revenues exceed expenses

the order of stockholders equity on the balance sheet

common stock , retained earnings (ending balance)

different companies using the same accounting principles

comparability

same accounting principles and methods used from year to year within a company

consistency

A useful measure of solvency is the

debt to assets ratio

(net income- preferred stock dividends) divided by weighted- average common shares outstanding

earnings per share

economic events can be identified with a particular unit of accountability

economic entity assumption

noncurrent resources that do not have physical substance

intangible assets

Cash purchase of equipment

investing activity

sale of old machine for cash

investing activity

measures of the short term ability of the enterprise to pay its maturing obligations

liquidity ratios

information that has a bearing on a decision

relevance

Measures of the ability of the company to survive over a long period of time

solvency ratios

The excess of current assets over current liabilities

working capital