Chapter 2
True or False collecting an account receivable does not affect the balance sheet
False
How does declaring and paying a cash dividend affect the balance sheet?
Decreases cash and decreases retained earnings
How does issuing stock for cash affect the financial statement? -increases net income -increases cash flow from operating activities -increases cash flow from financing activities -increases assets -increases cash flow from investing activities -increases common stock -increases stockholders' equity -increases retained earnings
- Increases common stock - increases cash flow from financing activities - increases stockholders' equity - increases assets
Individuals holding which of the following positions must certify in writing that they have reviewed a company's financial reports and that the reports they reviewed present fairly the company's financial status? -Chief financial officer (CFO) -Chief Executive officer (CEO) -chairman of the board of directors -chairman of the securities and exchange commission
-Chief financial officer (CFO) -Chief Executive officer (CEO)
Which of the following accounts are reported on the balance sheet? -accounts receiveable -net income -salaries payable -salary expense -ending retained earnings -cash -dividends -common stock -Service Revenue -Cash flow from operating activities -Salary expense
-Ending retained earnings -cash -salaries payable -accounts receivable -common stock
Green Company incurred $5,000 of accrued expenses during Year 1, but paid the cash associated with the payables in Year 2. Based on this information alone, under accrual accounting, the company would report a - net loss of $5,000 and cash outfllow from operations of zero in Year 2. -Net loss of zero and cash outflow from operations of $5,000 in Year 1 -Net loss of $5,000 and cash outflow from operations of zero in Year 1. -Net loss of zero and cash outflow from operations of $5,000 in year 2.
-Net loss of $5,000 and cash outflow from operations of zero in Year 1. -Net loss of zero and cash outflow from operations of $5,000 in year 2.
An accrual occurs when an expense is recognized -before the associated cash is exchanged -and the cash is exchanged simultaneously -and the cash is exchanged in the future -after the associated cash has been exchanged
-before the associated cash is exchanged -and the cash is exchanged in the future
Which of the following shows how recognizing accrued salary expense affects financial statements? -cash flow decreases -liabilities decrease -cash flow is not affected -expenses are not affected -expenses increase -net income decreases -liabilities increase -assets are not affected -assets decrease -net income is not affected -cash flow increases -expenses decrease -net income increases -liabilities are not affected -assets increase
-cash flow is not affected -expenses increase -net income decreases -liabilities increase -assets are not affected
recognizing a cash expense will -cause a decrease in the net cash flow from operations shown on the statement of cash flow -case an increase in the amount of net income shown on the income statement -cause the amount of assets shown on the balance sheet to decrease -not affect the amount of retained earnings shown on the statement of changes in stockholders equity
-cause a decrease in the net cash flow from operations shown on the statement of cash flow -cause the amount of assets shown on the balance sheet to decrease
Recognizing and account payable is a(n) -asset use transaction -claims exchange transaction -asset source transaction -asset exchange transaction
-claims exchange transaction
Which of the following causes decreases in accounts receivable? -sales on account -expenses incurred on account -payment of payables -collections of receivables
-collections of receivables
Which of the following will cause a change in stockholders' equity? -earnings -purchase of building for cash -issue of stock -incurring a cash expense
-earnings -issue of stock -incurring a cash expense
The primary difference between notes payable and accounts payable is that notes - generally have longer terms and usually require interest changes -are the resources used to generate revenue -represent the obligation to distribute earnings to owners -are the company's obligation to a creditor
-generally have longer terms and usually require interest changes
Which of the following shows how recognizing revenue on account affects financial statements? -revenue increases -net income increases -cash flow increases -assets increase -liabilities increase
-revenue increases -net income increases -assets increase
Which of the following shows how recognizing revenue on account affects financial statements? -Revenue increase -accounts payable increases -cash flow increases -retained earnings increases -accounts receivable increases
-revenue increases -retained earnings increase -accounts receivable increase
Which of the following accounts is reported on the income statement? -salaries Expense -accounts receivable -service revenue -dividends -accrued salaries payable -net income
-salaries Expense -service revenue -net income
Dividends appears on which of the following statements? -statement of cash flows -statement of changes in stockholders' equity -balance sheet -income statement
-statement of changes in stockholders' equity
The Accounts Receivable account appears on which of the following statements?
Balance sheet
which of the following shows how issuing stock for cash affects the statement of cash flow?
Increases cash flow from financing activities
The concept that advocates pairing revenues with expenses is
Matching concept
_______ costs are costs that cannot be matched with revenue and are expensed in the period in which they are paid.
Period
The entery required to update an account balance prior to preparing financial statements is called
adjusting entry
What accounts appear on the statement of changes in stockholders' equity?
common stock and Net income
When a company collects cash from an account receivable, accounts receivable...
decrease and cash increases
If a company pays salaries accrued in year 1 during year 2, the cash account will ______ and the salaries payable account will _____ in year 2
decrease decrease
When a company incurs a cash expense, the balance in the retained earnings account....
decreases
When a company incurs a cash expense, the balance in the cash account...
decreases and the balance in the expense account increases
net income and cash flow from operating activities will
differ due to accrual accounting used on the income statement
what does the statement of cash flow do?
explains the change in cash from the beginning to the end of the accounting period
When providing services on account, the amount of revenue shown on the income statement will __________ (inc./dec.) and the assets on the balance will _______(inc./dec.).
increase and increase
When recognizing revenue on account, the amount of net income shown on the income statement will ___________ (increase/decrease) and the assets on the balance will ________(increase/decrease)
increase and increase
When a company collects cash from an account receivable, cash...
increases and accounts receivable decreases
issuing stock to obtain cash has the following effect on the statement of cash flows
increases cash flow from financing activities
Salaries Payable represents an
obligation to pay employees in the future
The account title that represents an obligation to pay employees cash in the future is salaries __________.
payable
the account title that represents an obligation to pay employees cash in the future is salaries ____________.
payable
costs that cannot be matched with revenue and are expensed in the period in which they are paid are called
period costs
accrued revenue is revenue that has been _____ but the associated cash has not been collected
recognized
Issuing a note to borrow money affects which of the following financial statements?
statement of cash flow balance sheet
What statement explains the change in cash
statement of cash flows