Accounting 1 Exam 1

Dividends represent expenses of operating the company. True or False?

False

Financial accounting primarily deals with the methods accountants use to provide information to an organization's internal users. True or False?

False

Investors and creditors rely heavily on managerial accounting information in making investment and lending decisions. True or False?

False

Ron owns five percent of a corporation's common stock. The concept of limited liability would imply that Ron is personally responsible for only five percent of the financial obligations of the corporation. True or False?

False

The two characteristics that ensure the relevance of accounting information are completeness and neutrality. True or False

False

The value of a company to its owners equals total resources of the company. True or False?

False

Which of the following questions is most likely to be asked by a creditor? 1) Will the company be capable of repaying its debt when it is due? 2) What are the company's terms of credit with its suppliers? 3) Will the company's stock increase in value? 4) What is the amount of taxes owed to the government

1) Will the company be capable of repaying its debt when it is due?

Which of the following is an alternate form of the accounting equation? 1)Assets − Liabilities = Stockholders' Equity 2)Revenues − Expenses = Net Income 3)Assets = Liabilities − Stockholders' Equity 4)Expenses − Dividends = Net Income

1)Assets − Liabilities = Stockholders' Equity

The balance in the cash account appears in which two financial statements? 1)Balance Sheet and Statement of Cash Flows 2)Balance Sheet and Statement of Stockholders' Equity 3)Income Statement and Statement of Cash Flows 4)Income Statement and Statement of Stockholders' Equity

1)Balance Sheet and Statement of Cash Flows

The organization responsible for creating a single set of global accounting standards is the: 1)International Accounting Standards Board 2)Internal Revenue Service 3)Financial Accounting Standards Board 4)Securities and Exchange Commission

1)International Accounting Standards Board

Information would be difficult to use if we listed assets as "100,000 dollars in cash, 200 computers, eight cars, and a building with all necessary fittings." Which assumption is used to overcome this difficulty? 1)Monetary unit assumption 2)Periodicity assumption 3)Going concern assumption 4)Economic entity assumption

1)Monetary unit assumption

Use the following amounts to calculate net income: Assets, $165,000; Dividends, $9,000; Expenses, $61,000; Liabilities, $74,000; Revenues, $82,000. 1)$12,000 2)$21,000 3)$30,000 4)$91,000

2)$21,000

Catalina Corporation begins the year with a $195,000 balance in Retained Earnings and a $320,000 balance in Common Stock. During the year, the company generated net income of $46,000, issued additional common stock for $28,000, and paid a dividend of $5,000. What is total stockholders' equity at the end of the year? 1)$515,000 2)$584,000 3)$589,000 4)$594,000

2)$584,000

Which of the following is true of public accounting? 1)A career in public accounting means providing accounting services to the company that employs you. 2)A public accountant usually gets to work with multiple clients. 3)Public accountants almost always earn higher starting salaries. 4)One who takes up a public accounting career will invariably work for the government.

2)A public accountant usually gets to work with multiple clients.

Total stockholders' equity appears in which two financial statements? 1)Balance Sheet and Statement of Cash Flows 2)Balance Sheet and Statement of Stockholders' Equity 3)Income Statement and Statement of Cash Flows 4)Income Statement and Statement of Stockholders' Equity

2)Balance Sheet and Statement of Stockholders' Equity

Part of the inventory of memory chips of a semiconductor company is obsolete because of the launch of more advanced products. However, the company's management still carries this inventory at historical prices in its balance sheet. Which primary qualitative characteristic is being violated here? 1)Neutrality 2)Completeness 3)Correctness 4)Freedom from error

2)Completeness

According to the cost constraint, financial accounting information is provided when the benefits of providing the information exceed the costs. True or False?

True

If mistakes or fraudulent reporting behavior are discovered, auditors require the company to correct all significant information before issuing financial statements. True or False

True

If you are able to predict the change in financial accounting's measure of profitability, you can predict the change in stock prices, too. True or False?

True

The income statement records activity over an interval of time. True or False?

True

The organization primarily responsible for establishing accounting and reporting standards in the United States is the Financial Accounting Standards Board (FASB). True or False?

True

Understandability is a user-specific quality. True or False

True

What was the objective of the 1933 Securities Act? 1)It set forth accounting and disclosure requirements for initial offerings of securities. 2)It provided for the regulation of auditors and the types of services they furnish to clients. 3)It paved the way for the creation of the Public Company Accounting Oversight Board. 4)It created a government agency, the Securities and Exchange Commission (SEC).

1)It set forth accounting and disclosure requirements for initial offerings of securities.

The balance sheet: 1)Presents the financial position of a company at a point in time. 2)Indicates if a company is profitable. 3)Shows the net change in cash over a period of time. 4)Reports the difference between revenues and expenses.

1)Presents the financial position of a company at a point in time.

From the list that follows, identify a company where a private accountant could possibly work. 1)Target 2)Ernst & Young 3)KPMG 4)Deloitte

1)Target

Different graders will arrive at the same exam score for multiple-choice tests, but they are more likely to differ in scoring essay exams. In this context, which characteristic does a multiple-choice test possess? 1)Verifiability 2)Comparability 3)Understandability 4)Timeliness

1)Verifiability

Which of the following best explains a company's stock price performance? 1)Dividends 2)Net income 3)Accounts receivable 4)Preferred stock

2)Net income

Which government agency has the authority to set accounting and reporting standards in the United States? 1)International Accounting Standards Board 2)Securities and Exchange Commission 3)Public Company Accounting Oversight Board 4)Financial Accounting Standards Board

2)Securities and Exchange Commission

Which of the following is not one of the four primary financial statements? 1)Balance Sheet 2)Trial Balance 3)Income Statement 4)Statement of Cash Flows

2)Trial Balance

Based on the concept of _____, big companies probably do not record all their assets as assets. 1)faithful representation 2)materiality 3)relevance 4)reliability

2)materiality

Ethics is best described as: 1)A consensus among different measures. 2)The rules of financial accounting. 3)A code or moral system that provides criteria for evaluating right and wrong behavior. 4)Accounting information that is complete, neutral, and free from error.

3)A code or moral system that provides criteria for evaluating right and wrong behavior.

What are the primary components of stockholders' equity? 1)Revenues and Expenses 2)Assets and Liabilities 3)Common Stock and Retained Earnings 4)Cash and Dividends

3)Common Stock and Retained Earnings

Expenses are best defined as: 1)Amounts owed to creditors. 2)Amounts the owners have invested in the business. 3)Costs of providing products and services. 4)Distributions to stockholders.

3)Costs of providing products and services.

You are reading a particular section of a bank's annual report. This section provides the bank's views about the impact of an upcoming regulation on the banking industry as a whole and the bank in particular. Which section of the annual report are you reading? 1)The income statement 2)The statement of stockholders' equity 3)Management's discussion and analysis 4)Note disclosures to the financial statements

3)Management's discussion and analysis

The statement of cash flows: 1)Presents the financial position of a company at a point in time. 2)Indicates if a company is profitable. 3)Shows the net change in cash over a period of time. 4)Reports the difference between revenues and expenses.

3)Shows the net change in cash over a period of time.

If stockholders' equity is $50,000 and liabilities are $78,000, then assets must equal: 1)$28,000 2)$50,000 3)$78,000 4)$128,000

4) $128,000

Which of the following is a feature of the corporate form of business ownership? 1)Unlimited liability 2)Lower tax rates 3)Limited resources 4)Double taxation

4) Double taxation

Which of the following questions is most likely to be asked by an investor? 1)What are the company's terms of credit with its suppliers? 2)What is the amount of taxes owed to the government? 3)Will the company be able to repay its debt when it is due? 4)Will the company's stock increase in value?

4) Will the company's stock increase in value?

Nike co-founder and chairman Phil Knight's personal residence is not treated as an asset of Nike, Inc. Which assumption is used in making this judgment? 1)Monetary unit assumption 2)Periodicity assumption 3)Going concern assumption 4)Economic entity assumption

4)Economic entity assumption

Net income appears in which two financial statements? 1)Balance Sheet and Statement of Cash Flows 2)Balance Sheet and Statement of Stockholders' Equity 3)Income Statement and Statement of Cash Flows 4)Income Statement and Statement of Stockholders' Equity

4)Income Statement and Statement of Stockholders' Equity

The FASB has explicitly stated the specific objectives of financial accounting. Which of the following is not one of those objectives? 1)Helps to predict cash flows. 2)Tells about economic resources, claims to resources, and changes in resources and claims. 3)It is useful to investors and creditors in making decisions. 4)It is useful to company management in making decisions.

4)It is useful to company management in making decisions.

Which of the following characteristics is highly related to the establishment of accounting standards? 1)Completeness 2)Appropriateness 3)Freedom from error 4)Neutrality

4)Neutrality

Which of the following is an important indicator of a company management's ability to respond to business situations and the possibility of bankruptcy? 1)Inventory 2)Accumulated depreciation 3)Total stockholders' equity 4)Total liabilities

4)Total liabilities

The balance of retained earnings represents the amount of earnings paid out in the form of dividends to stockholders. True or False

False

With a finance degree, you can apply for almost any position available to accounting majors. True or False

False

The act passed in 2002 that provides for the regulation of auditors and the types of services they furnish to clients is known as the Sarbanes-Oxley Act. True or False

True

The main functions of financial accounting are to measure business activities and to communicate those measurements to investors and creditors. True or False?

True