Bus 1-20 Ch 1 Financial statements and business decisions

$100 (in thousands) is Blank______.

$100,000

Quartz Instruments had retained earnings of $145,000 at January 1. Net income for the year was $90,000, and dividends paid were $30,000. What amount of retained earnings should be reported at December 31?

$205,000 Reason: $145,000 + $90,000 - $30,000 = $205,000

Ace Electronics had the following increases in Cash during the month: $20,000 from owner contributions; $5,000 from sales to customers; and $15,000 borrowed from River Bank. Ace's revenue for the month was _____

$5,000

The ending cash balance on the balance sheet equals the sum of which of the following items

- The change in cash on the statement of cash flows for the year ended - Beginning of the year cash balance

Axis Company just bought a piece of land for $25,000. The land next door was sold last month for $27,000. Axis immediately put the land back on the market for $29,000, but so far hasn't had any offers. This land would appear on Axis Company's balance sheet at a value of Blank______. Multiple choice question. - $25,000 - $29,000 - $27,000 - nothing, because the land would be reported on the income statement, not the balance sheet

-25,000 Reason: Assets are initially reported based on their original cost to the company.

Keepers, Inc.'s balance sheet reported Retained earnings as $10,000 at January 1 and $12,000 at December 31. The income statement reported Net income of $3,000 for the year ended December 31. Dividends declared for the year ended December 31 must equal $

1000 Reason: (10,000+3,000)- 12,000 (retained earnings + current net income)- current earnings

Which of these would be reported as an investing activity? (Check all that apply.) Multiple select question.

Cash paid to build a new corporate headquarters Cash paid to buy equipment

Which of the following would be included in the operating section of the statement of cash flows? (Check all that apply.) Multiple select question.

Cash paid to employees Cash received from customers Cash paid to suppliers

Accountants may be licensed and certified as Blank______.

Certified Management Accountant (CMA) Certified Public Accountants (CPA) Certified Internal Auditor (CIA)

What information appears on the statement of stockholders' equity? (Select all that apply.)

Dividends Beginning balance of retained earnings Ending balance of retained earnings Net income

An income statement includes which of the following items.

Expenses Revenues Net income

Which of the following line items appear on an income statement?

Sales revenue Cost of goods sold Income tax expense

True or false: The accounting equation is Assets = Liabilities + Stockholders' Equity.

True

When a company sells goods to customers on credit, Blank______. Multiple choice question. - accounts receivable will be reported on the seller's balance sheet - accounts payable will be reported on the seller's balance sheet - accounts payable will be reported on the seller's income statement - accounts receivable will be reported on the seller's income statement

accounts receivable will be reported on the seller's balance sheet

On the balance sheet, accounts receivable represents Blank______.

amounts not yet collected from customers

The ending retained earnings' amount appears on the Blank______. (Select all that apply.)

balance sheet statement of stockholders' equity

The statement of cash flows shows Blank______, _______, ______

cash flows from investing activities cash flows from operating activities cash flows from financing activities

The sum of which two elements equals stockholders' equity?

common stock retained earnings

________ activities involve the buying and selling of land, buildings, and equipment used in the business. (Enter one word per blank)

investing

Revenues and expenses relate to the cash inflows and outflows found in the Cash flows from activities section of the statement of cash flows.

operating

The SEC Blank______, _______

- determines the financial statements that public companies must provide to stockholders - oversees financial reporting by US public companies

The purpose of a balance sheet is to report the Blank______. - financial position of a business at a particular point in time - results of the business's operation over a period of time - change in retained earnings for the period - change in cash for period

- financial position of a business at a particular point in time

During the current year, Revitup, Inc., an exercise video retailer, sold $24,000 of videos to its customers. Revitup collected $22,000 and expects to receive the remaining $2,000 in January of the following year. Revitup's income statement for the year ended December 31, of the current year, will report revenue of $

24,000

At December 31, Aloe, Inc.'s assets equal $8,000 and stockholders' equity equals $5,000. Liabilities must equal $.

3000

Which of the following is true? Multiple choice questions. - Land purchased 20 years ago is reported on the balance sheet at its higher current value. - Land purchased 20 years ago is reported on the balance sheet at the original price paid for it. - Land purchased 20 years ago is not reported on the balance sheet because it was paid for too many years ago.

Land purchased 20 years ago is reported on the balance sheet at the original price paid for it.

How is cash paid to employees classified on the statement of cash flows? Multiple choice question.

Operating activity

Match each cash transaction on the statement of cash flows with the proper type of activity by moving the descriptions using the arrows

Purchase of equipment - a negative cash flow - investing activity Sale of equipment - a positive cash flow - investing activity Borrow from a bank - a positive cash flow - financing activity Purchase inventory - a negative cash flow - operating activity Paid dividends - a negative cash flow - financing activity Cash collected from customers - a positive cash flow - operating activity

Which of the following are operating activities? (Check all that apply.) Multiple select question. Purchasing materials to produce products Purchasing plant and equipment Selling products to customers Borrowing from creditors

Purchasing materials to produce products Selling products to customers

Identify which of the various terms may be used to describe revenue on the income statement. _______, _______, _______,& ________

Service revenue Sale of goods Sales revenue Provision of services

Which of the following are alternative titles for the income statement?

Statement of operations Statement of income Statement of earnings

Which of the following are users of financial statements? (Check all that apply.) - Multiple select questions. - Supply chain managers - GAAP - Investors - Stockholders - Creditors

Supply chain managers Investors Stockholders Creditors

The heading of an income statement should include which of the following?

The name of the entity The accounting period covered by the statement The title of the financial statement

Which of the following is a characteristic of a sole proprietorship?

The owner is personally responsible for the debts of the business, even if the debts are more than the owner has invested in the business.

The heading of a balance sheet for a company that has been in business for years and has a June 30 year end might include which of the following? (Check all that apply.) - The title "Balance Sheet" - At June 30, 2019 - The name of the business - For the Year Ended June 30, 2019

The title "Balance Sheet" At June 30, 2019 The name of the business

Why would a banker want a copy of a company's financial statements? Multiple choice questions. - For no reason (bankers don't use financial statements) - To determine if a company has paid all of the taxes that it owes - To decide if a company is doing well enough to repay the amounts it has borrowed

To decide if a company is doing well enough to repay the amounts it has borrowed

True or false: The corporation, and not the owners, are viewed as owning the resources and as owing the debts of the business. True false question.TrueFalse

True Reason: The owners are considered separate from the business entity. It is the business entity that owns the assets and owes the liabilities.

Liberty, Inc., a US company, sold merchandise to Belle, a French company, for 10,000 euros. In Liberty's US financial statements, this sale should be reported in ______. - either US dollars or euros - old French francs - euros - US dollars

US dollars

Select all that apply Identify the 4 significant items in the headings of balance sheets. Multiple select question. - The period the statement covers - Unit of measure - Name of the entity - Name of the owner - Specific date - Title of the statement

Unit of measure Name of the entity Specific date Title of the statement

Which of the following qualitative characteristics does the FASB use when deciding what financial information should be reported? _______, __________, ________, ___________

Verifiability Comparability Timeliness Understandability

What information do the assets provide creditors and stockholders.

Whether the company has sufficient resources to operate

What information do the liabilites provide creditors and stockholders.

Whether there are excessive creditors' claims to the company's resources

What information do the stockholders' equity provide creditors and stockholders.

Whether there is sufficient investment and cushion should the company close the doors of its business

When a company sells goods to customers on credit, Blank______. Multiple choice question. - accounts payable will be reported on the seller's income statement - accounts receivable will be reported on the seller's balance sheet - accounts payable will be reported on the seller's balance sheet - accounts receivable will be reported on the seller's income statement

accounts receivable will be reported on the seller's balance sheet Reason: Sales, not accounts receivable, is reported on the income statement. Accounts receivable, an asset, is reported on the balance sheet.

Financial statements can be prepared Blank______. (Select all that apply.) Multiple select question. annually only at the end of a calendar year monthly quarterly

annually monthly quarterly

A balance sheet shows Blank______.

assets, liabilities, and stockholders' equity at a single point in time

Balance sheets report amounts Blank______. Multiple choice question.

at a specific point in time

A(n) ________ is performed by CPAs to determine whether the financial statements have been prepared in accordance with GAAP.

audit

Cash is reported on the Blank______, ___________________

balance sheet statement of cash flows

Ending retained earnings appears on the Blank______

balance sheet statement of stockholders' equity

Notes payable appear on the Blank______. Multiple choice question. - income statement - balance sheet as an asset - Statement of stockholders' equity - balance sheet as a liability

balance sheet as a liability

A company may list more than one type of revenue if it ______. Multiple choice question. - has assets that are greater than its liabilities - has more than one type of expense - comes from different sources such as services versus sales of goods - sells goods in different countries

comes from different sources such as services versus sales of goods

Mauricio invested $30,000 in Pizza Aroma in exchange for its stock. Pizza Aroma now has Blank______ under shareholders' equity. Multiple choice question. - a liability - retained earnings - net income - common stock

common stock

Corporations have Blank______

continuity of life limited liability for its stockholders

A business's assets are financed by Blank______. (Check all that apply.) - Securities and Exchange Commission - creditors - stockholders - management

creditors stockholders

The statement of stockholders' equity provides information about Blank______., ______, _______

dividends amounts reinvested for future growth net income as a source of financing

External decision makers use Blank______ accounting reports.

financial

Notes payable are Blank______. (Select all that apply.) Multiple select question. - formal written debt contracts - the same as accounts payable - part of stockholders' equity - liabilities

formal written debt contracts liabilities

The income statement is used by many to indicate whether the company Blank______, ______.

has the ability to earn more in the future, so that the stock price will improve sold goods and services for more than the cost to produce and deliver

The income statement reports ______, ______, &______

how well the company performed during the accounting period the revenues minus the expenses for the accounting period the profitability of the company for the accounting period

When a company earns net income, its retained earnings Blank______.

increase

Expenses reported in one accounting period Blank______ accounting period. (Check all that apply.) Multiple select question.

may be paid for in a prior may be paid in the same may be paid in a later

Net income is ______. (Check all that apply.) Multiple select question. - equal to the company's cash balance - assets plus liabilities - expenses minus revenues - net earnings - assets minus liabilities - revenues minus expenses

net earnings revenues minus expenses

_______ activities involve purchasing goods from suppliers, designing and manufacturing products, and selling products to customers. (Enter one word per blank.)

operating

The two sources of stockholders' equity are amounts Blank______. Multiple select questions. - borrowed from related companies - paid in from shareholders - borrowed from banks - earned and retained by the corporation

paid in from shareholders earned and retained by the corporation

The requirements in most states to become a Certified Public Accountant include Blank______.

passing the CPA exam

Financing activities involve exchanges between a company and its creditors and stockholders, while investing activities involve ______

purchases of productive assets

Financial statements that are prepared for external uses every three months are referred to as Blank______ reports.

quarterly

Financial statements that are prepared for external uses every three months are referred to as Blank______ reports. Multiple choice questions. - quarterly - annual - fiscal year - bi-annual

quarterly

Net income is equal to ______.

revenues minus expenses

A business's assets are financed by Blank______ and ______

stockholders creditors

Which groups have claims to a business's assets? (Check all that apply.)

stockholders creditors

What is retained earnings?

the amount of earnings (profit) reinvested in the business and not distributed to stockholders in the form of dividends

The statement of cash flows is needed in addition to the income statement because the statement of cash flows reports Blank______.

the cash received and paid, which differs from the revenues earned and the expenses incurred on the income statement

what is common stock?

the investment of cash and other assets in the business by the stockholders

True or false: The Income Statement is sometimes called the Statement of Earnings or Statement of Operations.

true

Z Company bought land 20 years ago for $30,000. Over the last 20 years, the value of the land has doubled. The increase in the land's value Blank______. Multiple choice questions. - will be shown as a gain on the income statement - will not be reported in Z Company's financial statements - will be shown as an increase in the carrying value of the land on the balance sheet

will not be reported in Z Company's financial statements

Which of these line items appears on a balance sheet? (Check all that apply.) Multiple select question. - Accounts receivable - Cash - Net income - Retained earnings - Sales revenue - Common stock

Accounts receivable Cash Retained earnings Common stock

_____ represent the amount of resources used during the period and are found on the ______ _______

Blank 1: Expenses Blank 2: income Blank 3: statement

The asset, _____, ______ represents the amount customers owe for goods or services.

Blank 1: accounts, account, or trade Blank 2: receivable or receivables

Which of the following is a financing activity? Multiple choice question. Borrowing money from the bank. Paying suppliers for raw materials. Selling goods to customers. Buying equipment with cash.

Borrowing money from the bank.

Multiple Select Question Select all that apply Which of the following statements are true? (Check all that apply.) Multiple select question. - Common stock increases when the company gets cash in exchange for stock. - Common stock increases when a company earns a profit. - Retained earnings increases when owners give a company money in exchange for stock. - Retained earnings increases when a company earns and keeps its profit.

Common stock increases when the company gets cash in exchange for stock. Retained earnings increases when a company earns and keeps its profit.

Which of the following line items appear on an income statement?

Cost of goods sold Sales revenue Income tax expense

If a company were to go out of business, ________ , would have first claims to a company's assets before the company's stockholders receive any money.

Creditors

If a company were to go out of business, who has first claim to the company's assets? Multiple choice question. - Creditors - Management - Stockholders - Customers

Creditors

Which of the following increase the common stock balance? (Select all that apply.) Multiple select question. - Net income - Financing provided by creditors - Dividends - Investments by owners - Financing provided by owners

Investments by owners Financing provided by owners

True or false: The common stock section of stockholders' equity is increased when the company has net income.

False Reason: Common stock is increased when the company receives investments by owners. Retained earnings increases when the company has net income.

True or false: Revenues earned are equal to the total cash collected during the accounting period.

False Reason: Revenues are earned when goods or services are delivered to customers. Cash can increase from other activities, such as borrowing or owner contributions.

True or false: If net income during the year increased by $10,000, then cash must also have increased by $10,000 during the year. True false question.

False Reason: Revenues are not the same as cash collected, and expenses are not the same as cash paid. Often revenues are earned and expenses incurred in a different accounting period than the period in which the cash is received or paid.

True or false: The income statement is useful for determining the amount of economic resources held by the company.

False Reason: The balance sheet, not the income statement, reports the economic resources, assets. The income statement reports the revenues minus the expenses for the accounting period.

Cash flows from _________on the statement of cash flows reports the cash activity with stockholders and creditors such as bank

Financing

How do financing activities differ from investing activities? (Check all that apply.) Multiple select question.

Financing activities may involve an exchange of cash for the company's own stock; investing activities do not. Financing activities may involve an exchange of cash with creditors; investing activities do not.

The measurement rules applied in computing numbers on the financial statements are referred to as Blank______. Multiple choice question.

GAAP

Which of the following are financial statements? (Check all that apply.) Multiple select question. - Liabilities - Income statement - Statement of cash flows - Statement of corporate responsibility - Assets - Balance sheet - Bank statement - Statement of stockholders' equity

Income statement Statement of cash flows Balance sheet Statement of stockholders' equity

A financial statement heading states that it was prepared: "For the Year Ended December 31" What types of financial statements could this be?

Income statement Statement of stockholders' equity Statement of cash flows