Chapter 1 SmartBook
In addition to the financial statements, which of the following must be included in the annual reports?
management discussion and analysis. notes disclosures.
Milton Corp. has beginning retained earnings of $800. During the year Milton had $2,000 of revenues and $900 in expenses. Milton paid a dividend of $100. What is retained earnings at year-end?
$1,800
Quartz Instruments had retained earnings of $145,000 at December 31, 2017. Net income for 2018 was $90,000, and dividends for 2018 were $30,000. What amount of retained earnings should be reported at December 31, 2018?
$205,000
Which of the following aspects relate to the information provided in an income statement?
Ability to earn a profit from its operations during the current period
the four financial statements published to provide informational to external users include which of the following
Balance Sheet Statement of Stockholders' Equity Income Statement Statement of Cash Flows
Which of the following appear(s) on the balance sheet?
Common stock Accounts receivable Utilities payable
Which of the following accounts are stockholders' equity accounts?
Common stock Retained earnings
Faithful representation requires information to have which of the following three characteristics?
Completeness Free from material error Neutrality
According to the conceptual framework, for accounting information to be relevant, what two qualities must it possess?
Confirmatory value Predictive value
The private sector organization that is currently responsible for setting accounting standards in the United States is the
Financial Accounting Standards Board.
Which of the following appear on the statement of stockholders' equity? (Select all that apply.)
Net income Dividends Beginning balance of retained earnings
Which of the following accounts are stockholders' equity accounts?
Retained earnings Common stock
Dividends paid to shareholders is on which financial statement?
Statement of Shareholders' Equity
identify which of the following are included in the heading of the statement of stockholders' equity for Xoff, Inc.
Statement of Stockholders' Equity Xoff, Inc. The period of time covered by the statement
Which of the following are financial statements?
Statement of stockholders' equity Income statement Balance sheet
The accounting equation is: Assets = Liabilities +
Stockholders' Equity
Which of the following items are found on a balance sheet?
Stockholders' equity Assets Liabilities
Which of the following line items appear on an income statement? (Select all that apply.)
Supplies expense Revenues
The heading of an income statement should include which of the following? (Select all that apply.)
The title of the financial statement The name of the business The accounting period covered by the statement
Which of the following appear(s) on the balance sheet?
Utilities payable Accounts receivable Common stock
A consensus among different individuals appraising the value of land describes which qualitative accounting characteristic?
Verifiability
The concept of understandability assumes that the users of financial statements should have
a reasonable understanding of business and economic activities.
The system that maintains records of a company's operations and then communicates that information to decision makers is referred to as
accounting
The two main functions of _________ are to (1) measure business activities and (2) to communicate those measurements to investors and creditors. (Enter only one word.)
accounting
resources owned by a company are called
assets
An enhancing qualitative characteristic of accounting information that refers to the financial statement users' ability to utilize accounting information to differentiate between companies that are reporting similar events is
comparability
If the same accounting principles and methods are used for similar events by two different firms, this enhances what accounting qualitative characteristic?
comparability
Using the same accounting methods in each period refers to the qualitative characteristic of
consistency
predictive value
consistently increasing income helps forecast the company's ability to generate future cash
Dividends paid to shareholders are recorded on the income statement as an expense.
false
the fundamental activities of a business are selling activities and marketing activities
false, they are financing, investing, and operating activities
The financial statement that summarizes revenues and expenses for a period of time is the
income statement
The financial statement that summarizes the profit-generating activities of a company during a particular period of time is the
income statement
The statement used to predict future profitability and a company's future cash-generating ability is the
income statement
when a company earns net income, its retained earnings
increase
the primary functions of accounting are to
measure a company's activities communicate information to decision makers
Pizza Aroma generated $11,000 in revenues and had expenses of $6,000. Pizza Aroma's net income or loss is:
net income of $5,000
The characteristic that a new accounting standard should not favor one group of companies over others or achieve a particular social outcome is an example of
neutrality
an advantage of the corporate form of organization its hat a corporation
provides limited liability to stockholders
The hierarchy of qualitative characteristics of financial information require that, in order to be useful for decision making, information should possess the fundamental characteristics of
relevance and faithful representation.
Undistributed profits that have accumulated in the company over time are called _________ earnings
retained
an income statement reports
revenues expenses net income or loss
the purpose of an income statement is to
summarize the profit-generating activities that occurred during a particular reporting period
A code or moral system that provides criteria for evaluating right and wrong is referred to as
ethics
Salaries already paid to employees for the month is a(n) ______ account that appears on the ______.
expense; income statement
Confirmatory value
positive income is consistent with effectiveness of management
retained earnings represents
the total net income earned over the life of the company that has not been distributed as dividends.
The qualitative characteristic wherein information is available early enough allowing it to be useful for a decision describes the concept of
timeliness
Financial information that is immaterial in amount or nature need not be reported under GAAP.
true
Gem Corporation is a new company and obtains financing by issuing common stock to investors for $30,000. During the year, Gem earns $8,000 in net income and pays stockholders a dividend of $5,000. What is the total stockholders' equity at the end of the year?
$33,000
Which of the following are attributes of FASB? (Select all that apply.)
Independence Full-time board members Private sector organization
which of the following line items appear on an income statement
Supplies expense Salaries expense Service revenue
The heading on the Statement of Stockholders' Equity includes which one of the following
The period of time covered
The heading on the Statement of Stockholders' Equity includes which one of the following?
The period of time covered
Which of the following accounts is on the statement of stockholders' equity?
common stock
In our society, the two main functions of accounting are to
communicate information to investors and creditors. measure business activities.
Who has the responsibility for preparing financial statements in accordance with generally accepted accounting principles?
corporate management
The form of business organization where an entity is legally separate from its owners and issues shares of stock is a
corporation
Stockholders' equity arises primarily from amounts invested by shareholders and amounts
earned by the corporation
which of the following items are assets
equipment supplies
in financial accounting which of the following are the 3 types of business activities of a company
financing activities operating activities investing activities
Faithful representation requires that information is complete, neutral, and
free from material error
The income statement is considered most useful for predicting
future profitability
Where is the time period covered by the income statement found?
in the heading
When revenues are greater than expenses, a company has net ________, whereas when revenues are less than expenses, a company has a net _______.
income loss
Information that best explains companies' stock price performance is reported on
income statement
The financial statement that is most useful in explaining a company's stock price performance is the
income statement
Financial information that may impact investors' and creditors' decisions is referred to as _______ and must be reported under GAAP
material
Financial information that may impact investors' and creditors' decisions is referred to as ____________ and must be reported under GAAP
material
which of the following are operating activities
paying salaries to employees providing services to customers paying advertising expenses
identify the most common forms of business organization
sole proprietorship partnership corporation
The financial statement that provides information about cash receipts and cash disbursements for the period is the
statement of cash flows
Rahls issues stock to investors for $20,000, and has $5,000 of net income in its first year of operations. During Year 2, Rahls earns $10,000 in net income and pays a dividend to stockholders of $4,000. What is the balance in stockholders' equity at the end of year 2?
$31,000
Which of these would be found on a company's balance sheet?
Equipment Notes payable Accounts receivable
According to the conceptual framework, for accounting information to be relevant, what two qualities must it possess?
Predictive value Confirmatory value
Which of the following knowledge and skills should an accounting professional possess?
Presentation skills Leadership skills Technical accounting knowledge Ability to work in teams
Management discussion and analysis and note disclosures to the financial statements are included in the __________________
annual reports
The financial statement that displays a firm's financial position on a particular date is the
balance sheet
which of the following financial statements shows a firm's financial position on a particular date
balance sheet
ending retained earnings is calculated as
beginning retained earnings + net income - dividends
The purpose of a statement of cash flows is to provide information about the
cash receipts and cash disbursements during a period
________Statements represent a company's primary means of communicating information to external users.
financial
Companies communicate information about their business activities primarily through
financial statements
Amounts owed to creditors are
liabilities
The accounting equation is: Assets = ______ + Stockholders' Equity.
liabilities
Any amount owed to a creditor is classified in the balance sheet as a/an
liability
Who has the responsibility to apply accounting standards when communicating with investors and creditors?
management
Which qualitative characteristic requires that financial information should not influence decision making to achieve a predetermined result?
neutrality
_________ activites involve purchasing goods from suppliers, designing and manufacturing products and selling products to customers
operational
the three most common forms of business organization are sole proprietorship, __________ and _______
partnership corporation
Which of the following represents the net income earned by a corporation and not yet paid to shareholders?
retained earnings
______ refers to information being available to users early enough to allow them to use it in the decision process.
timeliness
When the cost of an item can be traced to objective evidence of a transaction, such as a sales receipt, canceled check, and bank statement, the information has the quality of
verifiability
