Ch.1 Wiley Plus MC

As of December 31, 2012, Stoneland Corporation has assets of $3,500 and stockholders' equity of $2,000. How much are the liabilities for Stoneland Corporation as of December 31, 2012?

$1,500 (Using the accounting equation, liabilities can be computed by subtracting stockholders' equity from assets, or $3,500 - $2,000 = $1,500.)

If total liabilities decreased by $15,000 and stockholders' equity increased by $5,000 during a period of time, then total assets must change by what amount and direction during that same period?

$10,000 decrease (Assets = Liabilities + Stockholders' Equity, can be used to determine the answer: ($15,000) + $5,000 = ($10,000))

Saira's Maid Service began the year with total assets of $120,000 and stockholders' equity of $40,000. During the year the company earned $90,000 in net income and paid $20,000 in dividends. Total assets at the end of the year were $215,000. How much are total liabilities at the end of the year?

$105,000 (First, determine the ending balance of stockholders' equity, which is the sum of the beginning balance of stockholders' equity plus net income less the dividends. $40,000 + $90,000 - $20,000 = $110,000 At the end of the period, total assets must equal the total of liabilities plus stockholders' equity. Assets = Liabilities + Stockholders' Equity $215,000 = Liabilities + $110,000 Liabilities = $105,000)

Saira's Maid Service began the year with total assets of $120,000 and stockholders' equity of $40,000. During the year the company earned $90,000 in net income and paid $20,000 in dividends. Total assets at the end of the year were $215,000. How much was stockholders' equity at the end of the year?

$110,000 (The sum of the beginning balance of stockholders' equity ($40,000) plus net income ($90,000) less the dividends paid ($20,000) during the period results in the ending balance of $110,000.)

The financial statements for Harold Corporation contained the following information. Accounts receivable $5,000 Sales revenue 75,000 Cash 15,000 Salaries expense 20,000 Rent expense 10,000 How much was Harold's net income?

$45,000 (Net income = Sales revenue - Salaries expense - Rent expense: $75,000 - $20,000 - $10,000 = $45,000.)

An annual report includes all of the following except

A listing of all of the stockholders.

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

Advertising.

To which of the following questions will internal users want answers?

All of the above -What selling price for our product will maximize the company's net income? -Which product line is most profitable? -Is cash sufficient to pay dividends to stockholders?

Resources owned by a business are referred to as

Assets.

The segment of the annual report that presents an opinion regarding the fairness of the presentation of the financial position and results of operations is/are the:

Auditor's opinion.

Which financial statement reports assets, liabilities, and stockholders' equity?

Balance sheet.

Which statement presents information as of a specific point in time?

Balance sheet.

The ending retained earnings balance appears on:

Both the retained earnings statement and the balance sheet.

Which of the following is not an external user of accounting data?

Chief Financial Officer. (CFO)

Stockholders' equity represents

Claims of owners.

Easy transfer of ownership is a characteristic of which form of business organization?

Corporation.

Which is not one of the three forms of business organization?

Creditorship.

Which of the following would not appear on the income statement?

Dividends paid.

What kind of classification is cost of goods sold?

Expense.

The payment of dividends is an example of a(n)

Financing activity.

The proprietorship form of business organization

Generally receives favorable tax treatment relative to a corporation.

In which of the following sequences are the financial statements usually prepared?

Income statement, retained earnings statement, balance sheet, and statement of cash flows.

Which of the following is an example of a financing activity?

Issuing shares of common stock

Which section of the annual report presents highlights of favorable or unfavorable trends and identifies significant events and uncertainties affecting a company's ability to pay near-term obligations, and a company's ability to fund operations and expansion?

Management discussion and analysis.

The segment of a corporation's annual report that describes the corporation's accounting methods is the:

Notes to the financial statements.

In terms of the principal types of business activities, paying salaries expense is an example of

Operating activities.

Paying interest expense and receiving interest revenue are examples of

Operating activities.

Which is an advantage of corporations relative to partnerships and sole proprietorships?

Reduced legal liability for investors.

Which statement about users of accounting information is incorrect?

Regulatory authorities are considered internal users.

The balance sheet

Reports the assets, liabilities, and stockholders' equity at a specific date.

Net income will result during a time period when

Revenues exceed expenses.

Which of the following would not appear on the retained earnings statement?

Service revenue. (Service revenue is reported on the income statement.)

In which forms of business organization are the owners personally liable for all the debts of the business?

Sole proprietorships and partnerships.

Which forms of business organization are considered to be separate accounting entities?

Sole proprietorships, corporations, and partnerships.

Which of the following did not result from the Sarbanes-Oxley Act?

Tax rates on corporations increased. (Created to stop unethical behavior)

Which of the following is the most appropriate and modern definition of accounting?

The information system that identifies, records, and communicates the economic events of an organization to interested users.

Which of the following became required as a result of SOX?

Top management must certify the financial statements for their company.

When the auditor is satisfied that the financial statements are provide a fair representation of the company's financial position and results of operation in accordance with generally accepted accounting principles, the auditor will express

Unqualified opinion.