Chapter 1 Video Lecture Assignment

Use the following amounts to calculate net income: Assets, $165,000; Dividends, $9,000; Expenses, $61,000; Liabilities, $74,000; Revenues, $82,000.

$21,000

Match the term and the definition. 1. Provides justification for measuring many assets based on their original costs instead of current liquidation values. 2. A unit or scale of measurement can be used to measure financial statement elements. 3. The economic life of an enterprise can be divided into artificial time periods for financial reporting. 4. All economic events with a particular economic entity can be identified.

1. Going concern assumption 2. Monetary unit assumption 3. Periodicity assumption 4. Economic entity assumption

Select the components of relevance that matches with its definition. 1. Information is useful in helping to forecast future outcomes. 2. Information provides feedback on past activities. 3. The nature or amount of an item has the ability to affect decisions.

1. Predictive value 2. Confirmatory value 3. Materiality

Accounting can be defined as:

1. The language of business. (True) 2. A measurement/communication process. (True) 3. A mathematics course. (False)

Match the term and the definition. 1. A consensus among different measurers. 2. Users must understand the information within the context of the decision they are making 3. The ability of users to see similarities and differences between two different business activities 4. Information being available to users early enough to allow them to use it in the decision process.

1. Verifiability 2. Understandability 3. Comparability 4. Timeliness

Ethics is best described as:

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

Which of the following is an alternate form of the accounting equation?

Assets − Liabilities = Stockholders' Equity

What are the primary components of stockholders' equity?

Common Stock and Retained Earnings

Part of the inventory of memory chips of a semiconductor company is obsolete because of the launch of more advanced products.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?

Completeness

Expenses are best defined as:

Costs of providing products and services.

Which of the following is a feature of the corporate form of business ownership?

Double taxation

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

False

Investors and creditors rely heavily on managerial accounting information in making investment and lending decisions.

False

Net income appears in which two financial statements?

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?

It is useful to company management in making decisions.

What was the objective of the 1933 Securities Act?

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

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?

Management's discussion and analysis

Which of the following best explains a company's stock price performance?

Net income

The balance sheet:

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

The statement of cash flows:

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

Which of the following is an important indicator of management's ability to respond to business situations and the possibility of bankruptcy?

Total liabilities

Which of the following is not one of the four primary financial statements?

Trial Balance

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

True

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

True

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

True

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

True

Which of the following questions is most likely to be asked by a creditor?

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

Which of the following questions is most likely to be asked by an investor?

Will the company's stock increase in value?

Select the account classification that matches with the description. a. Sales of products or services. b. Owners' claims to resources. c. Distributions to stockholders. d. Costs of selling products or services. e. Resources of a company. f. Amounts owed.

a. Revenues b. Stockholders' equity c. Dividends d. Expenses e. Assets f. Liabilities

Each of these parties plays a role in the quality of financial reporting. Select the group that matches with its function. a. Group that has been given power by Congress to enforce the proper application of financial reporting rules for companies whose securities are publicly traded. b. Independent, private-sector group that is primarily responsible for setting financial reporting standards in the United States. c. Independent intermediaries that help to ensure that management appropriately applies financial reporting rules in preparing the company's financial statements. d. Body that is attempting to develop a single set of high-quality, understandable global accounting standards.

a. Securities and Exchange Commission b. Financial Accounting Standards Board c. Auditors d. International Accounting Standards Board

Select the financial statement that matches with the description (Related transactions). a. Change in owners' claims to resources. b. Profitability of the company. c. Change in cash as a result of operating, investing, and financing activities. d. Resources equal creditors' and owners' claims to those resources.

a. Statement of stockholders' equity b. Income statement c. Statement of cash flows d. Balance sheet

Based on the concept of _____, big companies probably do not record all their assets as assets.

materiality