Accounting Quiz Chapter 2

Which of the following best describes a company's operating activities?

Operating activities focus on the sale of products and services.

Which of the following include only current assets

Accounts receivable, cash, inventory, office supplies

If an investor can use accounting information for two different companies to evaluate the types and amounts of expenses, the information is said to have the quality of

Comparability

An accountant is uncertain about the best estimate of an amount for a business transaction. If two amounts are about equally likely, the amount least likely to overstate assets and income is selected. Which of the following qualities is characterized by this action?

Conservatism

What is the correct method for calculating working capital?

Current Assets minus Current Liabilities

How are assets which are expected to be realized in cash, sold, or consumed within the normal operating cycle of a business or within one year (if the operating cycle is shorter than one year) reported on a classified balance sheet?

Current assets

A bank loaned $62 million to Apex Corporation to finance the construction of a new distribution warehouse. In which section of Apex's statement of cash flows would you be able to determine whether the company repaid any portion of the debt during the year?

Financing Activities

As used in accounting, the "Notes to the Financial Statement" should be:

Included as an integral part of the financial statements

Which of the following would appear on a multiple-step income statement but not on a single-step income statement?

Income before income taxes

What are the two subtotals that distinguish the multi-step income statement from the single-step income statement?

Income from operations and income before taxes

Which of the following statements is true concerning intangible assets?

Intangible assets lack physical existence.

Carnival Bakery borrowed $500,000 from Front Street Bank. Carnival then hired a contractor to build a new Jonesie distribution outlet. In which section of Carnival's statement of cash flows would you find information that indicated that Carnival acquired the new Jonesie distribution outlet

Investing Activities

"Claims to economic resources" are known as

Liabilities and stockholders' equity

Which of the following accounts are normally reported as noncurrent liabilities on a classified balance sheet?

Notes payable due in 5 years and bonds payable

Which of the following are generally supplementary information required by GAAP concerning the accounting treatments used by a company?

Notes to the Consolidated Financial Statements

Which of the following represents the correct sequence of the three business activities on the Statements of Cash Flows?

Operating - Investing - Financing

An investor found the following in an annual report: "The financial statements, in our opinion, present fairly the financial position, operating results, and cash flows, in conformity with accounting principles generally accepted in the United States." In which section of the annual report did the investor find this?

Report of the Independent Accountants

Which financial statement reports the sources and uses of an entity's cash resources?

Statement of cash flows

Liquidity relates to a company's ability to do which of the following?

The ability to pay its financial obligations as they become due

Excursion Corp. increased its dollar amount of working capital over the past several years. To further evaluate the company's short-run liquidity, which one of the following measures should be used?

The current ratio

A question asked by stockholders is, "How much profit did the company make?" What should the stockholder examine to get the most information that will help evaluate the answer to this question?

The income statement, since it shows the revenues and expenses for the period

What is the primary objective of financial reporting?

To provide useful information for decision making.

Information that is material means that an error or alternative method of handling a transaction

Would possibly affect the judgment of someone relying on the financial statements

Forman, Inc. earned $600,000 profit during 2016. On which financial statement(s) will you find the dollar amount of the profit earned by the company?

income statement and statement of retained earnings