Financial Accounting Exam 1

Doughtry's Pet Shop reported a net loss of $1,500,000 and total expenses of $2,900,000. How much were the total sales? a. $4,400,000 b. $1,400,000 c. $2,900,00 d.$1,500,000

$1,400,000 Correct Feedback: $2,900,000 (total expenses) - $1,500,000 (net loss) = $1,400,000 (total sales)

Which one of the following is the authoritative body having the primary responsibility for developing accounting principles in the United States? a. FASB b. IRS c. SEC d. AICPA

FASB

Which of the following organizations is primarily responsible for establishing GAAP in the United States? a. securities and Exchange Commission (SEC) b. Financial Accounting Standards Board (FASB) c. International Accounting Standards Board (IASB) d. Internal Revenue Service (IRS)

Financial Accounting Standards Board (FASB)

Which of the following accounts are normally reported as current liabilities on a classified balance sheet? a. Accounts payable and Prepaid insurance b. Interest payable and Interest receivable c. Income taxes payable and Salaries payable d. Capital stock and Accounts payable

Income taxes payable and Salaries payable

Which of the following items will be found in a corporate annual report? a. Industry standards b. Notes to the financial statements c. Selected financial data from non-competitor companies d. Management's statement on auditors responsibility for the financial statements.

Notes to the financial statements

In order for accounting information to be useful in making informed decisions, it must be: a.internal. b. relevant. c. reliable. d. both relevant and reliable.

both relevant and reliable

Which of the following are noncurrent assets? a. Machinery and equipment b. Accounts receivable c. Inventories d. Unearned revenues

machinery and equipment

Which of the following is one of the elements of stockholders' equity? a. Income tax payable b Dividends payable c. Retained earnings d. Accounts payable

retained earnings

Which of the items below is a business entity? a. Sole proprietorship b. Labor union c. Entrepreneurship d. Political union

sole proprietorship

Most businesses in the United States are: a. sole proprietorships. b. partnerships. c. corporations. d. separate entities.

sole proprietorships

The Peck Company reported the following items on its financial statements for the year ending December 31, 2012. Sales ($1,560,000), Cost of sales ($1,400,000), Selling, general and Other expense ($30,000), administrative expense ($40,000), Dividends ($10,000), Income tax expense ($25,000) Refer to the information provided above for Peck Company. The Income Statement of Peck will report net income for the current year in the amount of: a. $ 55,000. b. $ 65,000. c. $ 85,000. d. $120,000.

$ 65,000 Correct Feedback: Net income = $1,560,000 (Sales) - 1,400,000 (Cost of sales) - 40,000 (Selling, general and administrative expenses) - 30,000 (Other expenses) - 25,000 (Income tax expense) = $65,000

Other revenues ($110,000), General and administrative expenses ($250,000), Dividends ($120,000), Gross profit ($750,000), Selling expenses ($220,000), Income tax expense ($117,000) Refer to the information provided for Trump Company. By what amount will net income on a single-step income statement differ from net income on a multi-step income statement if Trump Company prepares both formats? a. $12,000 b. $8,000 c. $0 d. $6,000

$0

Question IPOD CORPORATION IPOD Corporations' end-of-year Balance Sheet consisted of the following amounts. Cash ($180,000), Accounts receivable ($700,000), Property, plant & equipment ($950,000), Long-term debt ($600,000), Capital stock ($1,000,000), Accounts payable($350,000), Retained earnings (?) Inventory ($540,000) Refer to the information provided above for IPOD Corporation.What amount should IPOD report on its balance sheet for total assets? a. $1,420,000 b. $1,830,000 c. $2,370,000 d. $2,190,000

$2,370,000 Correct Feedback: $180,000 (Cash) + 700,000 (Accounts receivable) + 950,000 (Property, plant & equipment) + 540,000 (Inventory) = $2,370,000

Question Bloom's Garden Center Company Selected data from the financial statements of Bloom's Garden Center are provided below. 2012 2011 Accounts receivable $ 70,000 $ 56,000 Inventory 15,000 $ 20,000 Total assets 450,000 380,000 Net sales 400,000 300,000 Cost of goods sold 200,000 180,000 Refer to the selected data provided for Bloom's Garden Center. Which of the following would result from a horizontal analysis of Bloom's balance sheet? a. Accounts receivable increased $14,000 or 25% during 2012. b. Accounts receivable is around five times larger than inventory in 2012. c. Accounts receivable is 15.6% of total assets in 2012. d. The accounts receivable turnover ratio is 6.35 times in 2012.

Accounts receivable increased $14,000 or 25% during 2012. Correct Feedback: Change in accounts receivable: $70,000 - 56,000 = 14,000 increase % Change: $14,000 / 56,000 = 0.25 or 25%

Which one of the following equations represents the statement of retained earnings activity? a. Beginning retained earnings + net income + dividends = ending retained earnings b. Beginning retained earnings + cash inflows - cash outflows = ending retained earnings c. Beginning retained earnings + dividends - net income = ending retained earnings d. Beginning retained earnings + net income - dividends = ending retained earnings

Beginning retained earnings + net income - dividends = ending retained earnings

Which of the following below generally is the most useful in analyzing companies of different sizes? a. Comparative statements b. Common-size financial statements c. Price-level accounting d. Audit report

Common-size financial statements

Which of the following statements is true regarding vertical analysis? a. Cross-sectional analysis compares financial data for a single entity over time. b. Common-size financial statements are used to compare companies of different sizes. c. Trend analysis compares a company's financial data to industry averages. d. Time series analysis is effective for comparison of different companies over time.

Common-size financial statements are used to compare companies of different sizes.

2012 2011 Accounts receivable $ 70,000 $ 56,000 Inventory 15,000 $ 20,000 Total assets 450,000 380,000 Net sales 400,000 300,000 Cost of goods sold 200,000 180,000 Refer to the selected data provided for Bloom's Garden Center. Which of the following would result from a horizontal analysis of Bloom's income statement? a. Cost of goods sold is 50% of net sales for 2012. b. Gross profit is 50% of net sales for 2012. c. Cost of goods sold increased $20,000 or 11.1% during 2012. d. Inventory decreased $5,000 or 25% during 2011.

Cost of goods sold increased $20,000 or 11.1% during 2012. Correct Feedback: Change in cost of goods sold: $200,000 - 180,000 = 20,000 increase % Change: $20,000 / 180,000 = .1111 or 11.11%

Presently, the dominant body in the development of accounting principles in the United States is the: a. American Institute of Certified Public Accountants (AICPA). b. American Accounting Association (AAA). c. Financial Accounting Standards Board (FASB). d. Institute of Management Accountants (IMA).

Financial Accounting Standards Board (FASB).

The statement of cash flows has which of the following economic activity categories? a. Financing, investing, and operating b. Cash, credit, and noncash c. Financing, credit, and operating d. Financing, management, and operating

Financing, investing, and operating

Which of the following is not a characteristic of a corporation? a. Corporations are organized as a separate legal taxable entity. b. Ownership is divided into shares of stock. c. Corporations experience an ease in obtaining large amounts of resources by issuing stock. d. For tax purposes, a corporation's business is not separated from the stockholder.

For tax purposes, a corporation's business is not separated from the stockholder.

The initials GAAP stand for: a. General Acceptance of Accounting Procedures. b. Generally Accepted Accounting Plans. c. Generally Accepted Accounting Principles. d. Generally Accepted Accounting Practices.

Generally Accepted Accounting Principles.

The independent auditor's report does which of the following? a. Describes which financial statements are covered by the audit b. Gives the auditor's opinion regarding the fairness of the financial statements c. Summarizes what the auditor did d. States that the financial statements are truthful

Gives the auditor's opinion regarding the fairness of the financial statements

2012 2011 Accounts receivable $ 70,000 $ 56,000 Inventory 15,000 $ 20,000 Total assets 450,000 380,000 Net sales 400,000 300,000 Cost of goods sold 200,000 180,000 Refer to the selected data provided for Bloom's Garden Center. Which of the following would result from a vertical analysis of Bloom's income statement? a. The accounts receivable turnover ratio is 6.35 in 2012. b. Gross profit is 50% of net sales for 2012. c. Cost of goods sold increased $20,000 or 11.11% during 2012. d. Net sales is 88.9% of total assets for 2012.

Gross profit is 50% of net sales for 2012. Correct Feedback: Gross Profit: $400,000 (Net sales) -200,000 (Cost of goods sold) = $200,000 $200,000 (Gross profit) / $400,000 (Net sales) = 0.5 or 50%

Countries outside the U.S. use financial accounting standards issued by the: a. LLC. b. SEC. c. IASB. d. GAAP.

IASB

2012 2011 Accounts receivable $ 70,000 $ 56,000 Inventory 15,000 $ 20,000 Total assets 450,000 380,000 Net sales 400,000 300,000 Cost of goods sold 200,000 180,000 Refer to the selected data provided for Bloom's Garden Center. Which of the following would result from a horizontal analysis of Bloom's income statement? a. Net sales increased $100,000 during 2012, or 33.33% of the 2011 amount. b. Gross profit is 50% of net sales for 2012. c. Accounts receivable is 15.6% of total assets in 2012. d. The accounts receivable turnover ratio is 6.35 times in 2012.

Net sales increased $100,000 during 2012, or 33.33% of the 2011 amount. Correct Feedback: Change in net sales: $400,000 - 300,000 = $100,000 % Change: $100,000 / 300,000 = 0.3333 or 33.33%

Scott Brothers, Inc. follows the qualitative characteristic of consistency. This means that: a. for expenses, Scott uses the same account titles as used by its competitors. b. Scott has elected certain accounting principles that can never be changed. c. Scott applies the same accounting methods each period. d. Scott applies the same accounting principles as its competitors.

Scott applies the same accounting methods each period.

Which organization has the power to set accounting rules for companies whose stock is publicly-traded in the U.S. stock markets, but has delegated its power to another organization? a. International Accounting Standards Board (IASB) b. Financial Accounting Standards Board (FASB) c. General Association of Accounting Practitioners (GAAP) d. Securities and Exchange Commission (SEC)

Securities and Exchange Commission (SEC)

Which one of the following financial statements shows how and why each equity account in the company's balance sheet changed from one year to the next? a. Balance sheet b. Statement of retained earnings c. Income statement d. Statement of stockholders' equity

Statement of stockholders' equity

Which of the following statements is true regarding a corporation's purchase of treasury stock? a. The cost of treasury stock is a reduction in stockholders' equity. b. Dividends must still be paid on treasury stock because it is still issued. c. Treasury stock is reported as an asset because it is considered an investment in the corporation's own stock. d. Treasury stock is no longer considered issued once it is back in the hands of the issuer.

The cost of treasury stock is a reduction in stockholders' equity.

Which of the following represents one of the purposes of the auditor's report? a. To provide a place for management to justify questionable items in the statements b. To provide comparative ratios for the company's financial data c. To provide the CPA's opinion of the fairness of the financial statements d. To satisfy the need for full disclosure of all the facts relevant to a company's results and financial position

To provide the CPA's opinion of the fairness of the financial statements

The balance in the retained earnings account represents: a. cash in the bank. b. the amount of cash available for dividends. c. accumulated revenues from all prior years of operations. d. accumulated earnings that have not been distributed to stockholders.

accumulated earnings that have not been distributed to stockholders

Which one of the following events creates a liability for a business? a. an obligation to pay for goods purchased on credit from a supplier b. inventories purchased for cash c. amounts invested by the owners d. stock sold to the general public

an obligation to pay for goods purchased on credit from a supplier

Davis Construction began operation on January 1, 2012, with an initial investment of $100,000 from each of its three stockholders. During the year ending 2012 Davis Construction had net income of $125,000 and paid dividends of $50,000. Refer to the information provided for Davis Construction, Inc. The dividends for the year: a. increases the amount of capital stock reported by the company. b. are part of Davis Construction's operating expense. c. are reported on the statement of retained earnings. d. are reported on the income statement.

are reported on the statement of retained earnings.

Vertical analysis is also known as: a. perpendicular analysis. b. trend analysis. c. common-size analysis. d. straight-line analysis.

common-size analysis

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: a. comparability. b. consistency. c. neutrality. d. materiality.

comparability

An entity that is organized according to state or federal statutes and in which ownership is divided into shares of stock is a: a. proprietorship. b. corporation. c. partnership. d. governmental unit.

corporation

Select the type of business that is most likely to obtain large amounts of resources by issuing stock. a. Partnership b. Corporation c. Proprietorship d. None are correct

corporation

All of the following are normally found in a corporation's stockholders' equity section except: a. common stock. b. additional paid-in capital. c. dividends in arrears. d. retained earnings.

dividend in arrears

The analysis that calculates both the absolute and percentage change in each account balance on a financial statement is called: a. vertical analysis. b. solvency analysis. c. profitability analysis. d. horizontal analysis.

horizontal analysis

As used in accounting, the "Notes to the Financial Statements" should be: a. shown at the bottom of the income statement. b. shown in the notes section of the balance sheet. c. included as an integral part of the financial statements. d. considered an optional part of the financial statements.

included as an integral part of the financial statements.

Stockholders' equity: a. is usually equal to cash on hand. b. includes paid-in capital and liabilities. c. includes retained earnings and paid-in capital. d. is shown on the income statement.

includes retained earnings and paid-in capital.

Which financial statement would you analyze to determine its operating performance for the past year? a. balance sheet b. statement of retained earnings c. income statement d. statement of cash flows

income statement

"Revenues" are best described as: a. decreases in resources resulting from the purchase of goods for the provision of services b. increases in resources resulting from the sale of goods or the provision of services c. assets used or consumed in the sale of products or services d. an increase in the financing activities section of the statement of cash flows

increases in resources resulting from the sale of goods or the provision of services

In which section of the annual report would you find: "The financial statements, in our opinion, present fairly the financial position, operating results, and cash flows, in conformity with U.S. generally accepted accounting principles"? a. Management report b. Notes to the financial statements c. Management's discussion and analysis d. Independent auditor's report

independent auditor's report

Which one of the following items is least likely to be found in a corporate annual report? a. notes to the financial statements b. Internal budget reports c. Auditor's report d. Management's discussion and analysis

internal budget reports

PTG Enterprises purchases many small pieces of office furniture, such as trash cans, that cost less than $100 each. PTG accounts for these items as expenses when acquired rather than reporting them as property, plant, and equipment on its balance sheet. The company's accountant states that no accounting principle has been violated. Justification for PTG's policy of expensing these furniture items is based on cost vs. benefit considerations as well as qualitative characteristic of accounting information of: a. conservatism. b. materiality. c. reliability. d. verifiability.

materiality

Which of the following qualitative characteristic of useful accounting information implies that only items that meet or exceed certain thresholds will affect decisions? a. Conservatism b. Materiality c. Relevance d. Comparability

materiality

Which one of the following is not one of the three business activities as shown in statement of cash flows? a. Financing b. Operating c. Investing d. Measuring

measuring

In performing a vertical analysis, the base for cost of goods sold is: a. total selling expenses. b. net sales. c. total expenses. d. total revenues.

net sales

Management's discussion and analysis: a. is a report of the independent accountants. b. can be a substituted for the notes to the financial statements. c. provides a discussion and analysis of the financial activities of the company by the company's management. d. provides assurances that the auditors are responsible for the financial statements.

provides a discussion and analysis of the financial activities of the company by the company's management.

The Securities Exchange Commission (SEC) is concerned with: a. developing a new conceptual framework in order to reduce differences in financial reports for global companies. b. setting accounting rules for all companies that are incorporated in the United States. c. setting accounting rules for publicly-traded companies in the United States. d. working to reduce differences in accounting reports issued by governmental units.

setting accounting rules for publicly-traded companies in the United States.

Significant changes in stockholders' equity are reported in: a. income statement. b. retained earnings statement. c. statement of stockholders' equity. d. statement of cash flows.

statement of stockholder's equity

The going concern assumption is concerned with: a. the company's ability to continue operations long enough to carry out its existing obligations b. any information that is capable of influencing the decisions of anyone using the financial statements c. measuring ongoing business activities at their exchange price at the time of the initial external transaction d. offsetting management's natural optimism by providing a prudent approach to uncertainty in financial statement items

the company's ability to continue operations long enough to carry out its existing obligations

"Matching principle" is best described as: a. the principle that a revenue should be recorded when a resource has been earned b. an increase in resources resulting from the sale of goods of the provision of services c. the principle that expenses should be recorded in the period resources are used to generate revenue d. an increase in the financing activities

the principle that expenses should be recorded in the period resources are used to generate revenue

In a common-size financial statement, which of the following is given a percentage of 100 percent? a.Total liabilities b. Net income c. Costs of goods sold d. Total assets

total assets

An analysis in which all the components of an income statement are expressed as a percentage of net sales is called: a. vertical analysis. b. horizontal analysis. c. liquidity analysis. d. common-size analysis.

vertical analysis

The percent of fixed assets to total assets is an example of: a. vertical analysis. b. solvency analysis. c. profitability analysis. d. horizontal analysis.

vertical analysis

Monaco Lawn Service Company creates revenue each time: a. it is scheduled for service b. amount is paid in full c. a lawn is mowed d. money is received in advance

a lawn is mowed

The income statement shows: a. how much profit the company has earned since it began operations b. net income equal to the amount of cash on the balance sheet c. a summary of the results of operations for a period of time d. the liquidity of the company on an annual basis

a summary of the results of operations for a period of time

The principle of conservatism is concerned with: a. the avoidance of overstating assets or income in the preparation of financial statements. b. the minimization of costs associated with providing financial information. c. the company's ability to carry out its existing commitments. d. the company's procedures for recording activities at their initial exchange price.

the avoidance of overstating assets or income in the preparation of financial statements

Ponzi Corporation reported the following information for the year ended December 31, 2012. Net income ($100,000) Dividends ($6,000) Retained earnings at December 31, 2012 ($120,000) Refer to the information provided above for Ponzi Corporation. What was the economic effect of the payment of Ponzi's dividends? a. the dividend reduced net income for 2012. b. the dividend should be added to net income if the company's accounting equation is in balance. c. the dividend reduced total retained earnings. d. the dividends must be paid whenever Ponzi Corporation reports net income

the dividend reduced total retained earnings

A question asked by stockholders is, "How much gross profit did the company make?" What financial statement would have the "gross profit" indicated as a separate line item? a. The balance sheet because retained earnings represents gross profits b. The statement of cash flows as cash inflows and outflows represents gross profits c. The multi-step income statement d. The single-step income statement

the multi-step income statement

IPOD Corporation's end-of-year balance sheet consisted of the following amounts. Cash ($250,000), Accounts receivable ($500,000), Property, plant & equipment ($900,000), Long-term debt ($300,000), Capital stock ($1,200,000), Accounts payable ($100,000), Retained earnings (?), Inventory ($450,000) Refer to the information provided for IPOD Corporation. What amount should IPOD report on its balance sheet for total assets? a. $2,000,000 b. $2,550,000 c. $2,100,000 d. $1,900,000

$2,100,000 Correct Feedback: $250,000 (Cash) + 500,000 (Accounts receivable) + 900,000 (Property, plant & equipment) + 450,000 (Inventory) = $2,100,000 = Total assets

Ponzi Corporation reported the following information for the year ended December 31, 2012. Net income ($100,000) Dividends ($6,000) Retained earnings at December 31, 2012 ($120,000) Refer to the information provided above for Ponzi Corporation. What was the balance of retained earnings at January 1, 2012? a. $ 21,000 b. $ 26,000 c. $106,000 d. $214,000

$ 26,000 Correct Feedback: $120,000 (Retained earnings) + 6,000 (Dividends) - 1$00,000 (Net income) = $26,000

On January 1, 2012, Money Company's balance in retained earnings was $10,000,000. At the end of the year, December 31, 2012, the balance in retained earnings was $9,400,000. During 2012, the company earned net income of $440,000. How much were dividends? a. $1,040,000 b. $1,000,000 c. $ 600,000 d. $ 440,000

$1,040,000 Correct Feedback: $10,000,000 (Beginning retained earnings) + 440,000 (Net income) - 9,400,000 (Ending retained earnings) = $1,040,000 (Dividends)

Which of the following is not an asset? a. Investments b. Cash c. Inventory d. Equity

equity

Cash investments made by stockholders in exchange for capital stock in a business are reported on the statement of cash flows in the: a. financing activities section. b. investing activities section. c. operating activities section. d. supplemental section.

financing activities section

Which of the following would not be considered an intangible asset? a.Franchise rights b. Copyrights c. Investments d. Trademarks

investments

The assets and liabilities of the company are $175,000 and $40,000, respectively. Equity should equal: a. $215,000. b. $135,000. c. $175,000. d. $40,000.

$135,000 Correct Feedback: $175,000 (Assets) - 40,000 (Liabilities) = $135,000 (Equity)

Bailout Corporation reported the following information for the year ended December 31, 2012. Revenues ($2,500,000) Expenses ($2,000,000) Retained earnings at December 31, 2011 ($100,000) Retained earnings at December 31, 2012 ($450,000) Refer to the selected information provided for Bailout Corporation. How much was paid out in dividends in 2012? a. $500,000 b. $150,000 c. $350,000 d. $250,000

$150,000 Correct Feedback: $100,000 (2011 Retained earnings) + 2,500,000 (Revenues) - 2,000,000 (Expenses) - X (Dividends) = $450,000 (2012 Retained earnings) X = $150,000

Ranger Company has assets of $5,000,000, liabilities of $3,000,000, and retained earnings of $1,200,000. How much is total equity? a. $8,000,000 b. $2,000,000 c. $3,800,000 d. $1,800,000

$2,000,000 Correct Feedback: $5,000,000 (Assets) - 3,000,000 (Liabilities) = $2,000,000 (Equity)

Beginning retained earnings ($550,000) Ending retained earnings ($700,000) Dividends paid ($100,000) Revenue ($525,000) Refer to the selected information provided for Tarp Corporation. What is the net income for Tarp Corporation? a. $150,000 b. $250,000 c. $525,000 d. $350,000

$250,000 Correct Feedback: $550,000 (Beginning retained earnings ) + X (Net income) - 100,000 (Dividends) = $700,000 (Ending retained earnings) X = $250,000

Jetson Corporation reported the following information for the year ended December 31, 2012. Revenue ($14,000,000) Expenses ($11,500,000) Dividends ($1,000,000) Retained earnings at December 31, 2012 ($1,750,000) Refer to the selected information provided for Jetson Corporation. What was the retained earnings balance on December 31, 2011? a. $ 250,000 b. $2,500,000 c. $1,500,000 d. $ 350,000

$250,000 Correct Feedback: X (2011 Retained earnings) + 14,000,000 (Revenues) - 11,500,000 (Expenses) - $1,000,000 (Dividends) = $1,750,000 (2012 Retained earnings) X = $250,000

Refer to the information provided for Trump Company. Other revenues ($110,000), General and administrative expenses ($250,000), Dividends ($120,000), Gross profit ($750,000), Selling expenses ($220,000), Income tax expense ($117,000) What is Trump Company's net income? a. $390,000 b. $200,000 c. $273,000 d. $280,000

$273,000 Correct Feedback: Income from operations = $750,000 (Gross profit) - 250,000 (General and administrative expenses) - 220,000 (Selling expenses) = $280,000 Net income = $280,000 (Income from operations) + 110,000 (Other revenues) - 117,000 (Income taxes) = $273,000

Beginning retained earnings ($550,000) Ending retained earnings ($700,000) Dividends paid ($100,000) Revenue ($525,000) Refer to the selected information provided for Tarp Corporation. The company's expenses are: a. $100,000. b. $150,000. c. $450,000. d. $275,000.

$275,000 Correct Feedback: $550,000 (Beginning retained earnings ) + X (Net Income) - 100,000 (Dividends) = $700,000 (Ending retained earnings) X = $250,000 or Net Income $525,000 (Revenue) - 250,000 (Net income) = $275,000 (Expenses)

Refer to the information provided for Trump Company. Other revenues ($110,000), General and administrative expenses ($250,000), Dividends ($120,000), Gross profit ($750,000), Selling expenses ($220,000), Income tax expense ($117,000) What is Trump Company's income from operations? a. $160,000 b. $280,000 c. $220,000 d. $120,000

$280,000 Correct Feedback: $750,000 (Gross profit) - 250,000 (General and administrative expenses) - 220,000 (Selling expenses) = $280,000

Refer to the information provided for Jarret Company. Cash ($125,000), Inventory ($215,000), Land ($275,000), Unearned revenue ($117,000), Equipment ($350,000), Common stock ($300,000) Calculate current assets. a. $457,000 b. $615,000 c. $125,000 d. $340,000

$340,000 Correct Feedback: $125,000 (Cash) + 215,000 (Inventory) = $340,000

Davis Construction began operation on January 1, 2012, with an initial investment of $100,000 from each of its three stockholders. During the year ending 2012 Davis Construction had net income of $125,000 and paid dividends of $50,000. Refer to Davis Construction. If Davis Construction's revenues were $500,000 for the year ended December 31, 2012, how much were total expenses? a. $450,000 b. $375,000 c. $325,000 d. $625,000

$375,000 Correct Feedback: $500,000 (Revenues) - 125,000 (Net Income) = $375,000 (Expenses)

Cash ($234,000), Accounts payable ($97,000), Inventories ($121,000), Notes payable (due 2020) ($211,000), Land ($453,000), Accounts receivable ($46,000) Refer to the information provided for Wing Company. Calculate current assets. a. $498,000 b. $401,000 c. $854,000 d. $709,000

$401,000 Correct Feedback: $234,000 (Cash) + 46,000 (Accounts receivable) + 121,000 (Inventory) = $401,000

Paradise Company reports the following information at December 31, 2012: Sales $18,000,000) Cash ($3,000,000) Salaries payable ($400,000) Dividends ($1,000,000) Cost of sales ($12,500,000) What is Natural Company's Gross Profit? a. $6,100,000 b. $ 6,500,000 c. $ 5,500,000 d. $12,000,000

$5,550,000 Correct Feedback: $18,000,000 (Sales) - 12,500,000 (Cost of sales) = $5,500,000 (Gross profit)

IPOD Corporation's end-of-year balance sheet consisted of the following amounts. Cash ($250,000), Accounts receivable ($500,000), Property, plant & equipment ($900,000), Long-term debt ($300,000), Capital stock ($1,200,000), Accounts payable ($100,000), Retained earnings (?), Inventory ($450,000) Refer to the information provided for IPOD Corporation. What is IPOD's retained earnings balance at the end of the current year? a. $500,000 b. $1,100,000 c. $ 400,000 d. $1,200,000

$500,000 Correct Feedback: Total assets = $250,000 + 500,000 + 900,000 + 450,000= $2,100,000 Total liabilities = $300,000 + 100,000 = $400,000 Total stockholders' equity = $2,100,000 - 400,000 = $1,700,000 Retained earnings = $1,700,000 - 1,200,000 = $500,000

The Peck Company reported the following items on its financial statements for the year ending December 31, 2012. Sales ($1,560,000), Cost of sales ($1,400,000), Selling, general and Other expenses ($30,000), Administrative expenses ($40,000), Dividends ($10,000), Income taxes ($25,000) Refer to the information provided for Peck Company. How much will be reported as retained earnings on its balance sheet at December 31, 2012, if this is the first year of operations? a. $45,000 b. $55,000 c. $85,000 d. $65,000

$55,000 Correct Feedback: Net Income: $1,560,000 - 1,400,000 - 40,000 - 30,000 - 25,000 = $65,000 Retained Earnings: $65,000 - 10,000 = $55,000

The Peck Company reported the following items on its financial statements for the year ending December 31, 2012. Sales ($1,560,000), Cost of sales ($1,400,000), Selling, general and Other expense ($30,000), administrative expense ($40,000), Dividends ($10,000), Income tax expense ($25,000) Refer to Peck Company. How much will be reported as retained earnings on its balance sheet at December 31, 2012, if this is the first year of operations? a.$45,000 b. $55,000 c. $85,000 d. Not enough information is provided.

$55,000 Correct Feedback: Net Income: $1,560,000 (Sales) - 1,400,000 (Cost of sales) - 40,000 (Selling, general and administrative expenses) - $30,000 (Other expenses) - 25,000 (Income tax expense) = $65,000 Retained Earnings: $65,000 (Net income) - 10,000 (Dividends) = $55,000

The Peck Company reported the following items on its financial statements for the year ending December 31, 2012. Sales ($1,560,000), Cost of sales ($1,400,000), Selling, general and Other expenses ($30,000), Administrative expenses ($40,000), Dividends ($10,000), Income taxes ($25,000) Refer to the information provided for Peck Company. The income statement for Peck will report net income for the current year in the amount of: a. $545,000. b. $ 65,000. c. $ 85,000. d. $120,000.

$65,000 Correct Feedback: $1,560,000 (Sales) - 1,400,000 (Cost of sales) - 40,000 (Selling, general and administrative expenses) - 30,000 (Other expenses) - 25,000 (Income tax expense) = $65,000 = Net income

Davis Construction began operation on January 1, 2012, with an initial investment of $100,000 from each of its three stockholders. During the year ending 2012 Davis Construction had net income of $125,000 and paid dividends of $50,000. Refer to the information provided for Davis Construction, Inc. and calculate its retained earnings balance at December 31, 2012. a.$175,000 b. $ 75,000 c. $150,000 d. $275,000

$75,000 Correct Feedback: $ 0 (Beginning balance) + 125,000 (Net income) - 50,000 (Dividends) = $75,000

If a company has $10,500,000 of revenues, declares and pays $550,000 in dividends, and has net income of $1,600,000, how much were expenses for the year? a. $8,350,000 b. $1,050,000 c. $2,150,000 d. $8,900,000

$8,900,000 Correct Feedback: $10,500,000 (Revenues) - 1,600,000 (Net income) = $8,900,000 (Expenses)

Cash ($234,000), Accounts payable ($97,000), Inventories ($121,000), Notes payable (due 2020) ($211,000), Land ($453,000), Accounts receivable ($46,000) Refer to the information provided for Wing Company. Calculate current liabilities. a. $97,000 b. $211,000 c. $354,000 d. $143,000

$97,000 ($97,000 Accounts Payable)

1. Other incomes and expenses 2. Income before income taxes 3. Net income 4. Operating expenses 5. Gross margin 6. Net sales 7. Income from operations Select the choice that lists the items in the order they would appear on a multi-step income statement. a. 6, 5, 4, 7, 1, 2, 3 b. 7, 6, 1, 4, 2, 3, 5 c. 6, 5, 4, 1, 7, 2, 3 d. 6, 7, 4, 1, 2, 3, 5

6, 5, 4, 7, 1, 2, 3

Which one of the following financial statements shows the end of the year cash balance for a business entity? a. income statement and statement of retained earnings b. Balance sheet and statement of cash flows c. Statement of retained earnings and statement of cash flows d. Balance sheet and statement of retained earnings

Balance sheet and statement of cash flows

Which one of the following is a correct basic structure of the cash flow statement? a. Cash flows provided (used) by operating activities + / - cash flows provided (used) by business activities + / - cash flows provided (used) by financing activities = net increase (decrease) in cash b. Cash flows provided (used) by operating activities + / - cash flows provided (used) by investing activities + / - cash flows provided (used) by business activities = net increase (decrease) in cash c. Cash flows provided (used) by operating activities + / - cash flows provided (used) by financing activities + / - net change in working capital = net increase (decrease) in cash d. Cash flows provided (used) by operating activities + / - cash flows provided (used) by investing activities + / - cash flows provided (used) by financing activities = net increase (decrease) in cash

Cash flows provided (used) by operating activities + / - cash flows provided (used) by investing activities + / - cash flows provided (used) by financing activities = net increase (decrease) in cash

Which set of items below are classified as current assets? a. accounts receivable, Net income, Inventory, and Dividends b. Cash, Accounts receivable, Capital stock, and Sales c. Net income, Cash, Office supplies, and Inventory d. Cash, Accounts receivable, Inventory, and Office supplies

Cash, Accounts receivable, Inventory, and Office supplies

Four financial statements are usually prepared for a business. The statement of cash flows is usually prepared last. The retained earnings statement (RE), the balance sheet (B), and the income statement (I) are prepared in a certain order to obtain information needed for the next statement. In what order are these three statements prepared? a. I, RE, and B b. B, I, and RE c. RE, I, and B d. RE, B, and I

I, RE, and B

Which of the following is the correct date format for the financial statement heading? a. Balance Sheet for the Year Ended June 30, 2012 b. Statement of Retained Earnings as of December 31, 2012 c. Income Statement for the Year Ending December 31, 2012 d. Statement of Retained Earnings at December 31, 2012

Income Statement for the Year Ending December 31, 2012

Monaco Lawn Service Company used $250 of fuel to mow customer lawns in June. The fuel was purchased on account and due in July. Fuel expenses should be recorded in: a. July b. June c. August d. April

June

Which of the following best describes a company's operating activities? a. Operating activities are cash flows directly related to earning income. b. Operating activities are necessary to provide the money to start a business. c. Operating activities are needed to provide the valuable assets required to run a business. d. Operating activities represent the right to receive a benefit in the future.

Operating activities are cash flows directly related to earning income.

How is the balance sheet linked to the other financial statements? a. The amount of retained earnings is reported on the balance sheet as a liability. b. Retained earnings is added to total assets and reported on the balance sheet. c. Retained earnings from the statement of retained earnings is reported on the balance sheet. d. There is no link between the balance sheet and other statements, as each contains different accounts and provides different information.

Retained earnings from the statement of retained earnings is reported on the balance sheet.

Which of the following best describes the term "retained earnings" of a company? a. The amount of total profits earned by a company since it began operations. b. The amount of claim that the owners have on the assets of the company. c. The future economic resources of a company. d. The accumulated net income of a company that has not been distributed to owners in the form of dividends.

The accumulated net income of a company that has not been distributed to owners in the form of dividends.

Who among the following generally lends funds to a business entity and expects repayment of the funds? a. A partner b. A stockholder c. An owner d. A creditor

a creditor

Which of the following best describes the term "expenses"? a. the cost of assets used in the investing activities of a business b. the amount of interest or claim that the owners have in the business c. the future economic resources of a business entity d. a decrease in resources resulting from the sale of goods or provision of services

a decrease in resources resulting from the sale of goods or provision of services

"Economic resources" are known as: a. assets. b. liabilities. c. owners' equity. d. retained earnings.

assets

Liabilities are reported on the: a. income statement. b. statement of retained earnings. c. statement of cash flows. d. balance sheet.

balance sheet

Which financial statement would you refer to in order to determine how many resources (assets) the company owns? a. balance sheet b. statement of retained earnings c. income statement d. statement of cash flows

balance sheet

Which one of the following financial statements reports an entity's financial position at a specific date? a. Balance sheet b. Statement of retained earnings c. Income statement d. Statement of cash flows

balance sheet

You are a potential creditor and are concerned that a particular company you are ready to give a loan to might have too much debt. Which financial statement would provide you information needed in order to evaluate your concern? a. balance sheet b. income statement c. statement of retained earnings d. statement of cash flows

balance sheet

Which one of the following is not one of the activities on the statement of cash flows? a. Operating activities b. Investing activities c. Business activities d. Financing activities

business activities

An accountant is uncertain about the best estimate of an amount for a business transaction. If there are two possible amounts that could be recorded, the amount least likely to overstate assets and earnings is selected. Which of the following qualities is characterized by this action? a. Comparability b. Conservatism c. Materiality d. Neutrality

conservatism

Which one of the following is a source of equity? a. Notes payable b. Accounts payable c. Land d. Contributed capital

contributed capital

In which of the following organization forms are the owners' legal responsibility for the debt of the business limited to the amount they invested in the business? a. Sole proprietorship b. Corporation c. Partnership d. Cooperative

corporation

Which of the following would appear on an income statement? a. Unearned revenue b. Cost of sales c. Retained earnings d. Dividends

cost of sales

If assets are expected to be realized in cash, sold, or consumed within one year, how are they reported on a classified balance sheet? a. Property, plant, and equipment b. Current assets c. Intangible assets d. Current liabilities

current assets

Short-term investments are: a. fixed assets. b. accounts receivables. c. intangible assets. d. current assets

current assets

Which of the following terms best describes a distribution of the net income of a corporation to its owners? a. retained earnings b. dividends c. liquidation of assets d. revenue

dividends

Which of the following concepts relates to separating the reporting of business and personal economic transactions? a. cost principle b. monetary unit assumption c. economic entity assumption d. objectivity assumption

economic entity assumption

Which of the following is not a form of a business entity? a. Sole proprietorship b. Partnership c. Entrepreneurship d. Corporation

entrepreneurship

The resources used to generate revenues during a period are called: a. net income b. expenses c. revenues d. dividends

expenses

The time period assumption is necessary because: a. inflation exists and causes confusing swings in financial statement amounts over time b. external users of financial statements want accurately-reported net income for a specific period of time c. financial statements users expect full disclosure of all events throughout the entire time period translated in dollars d. it is required by the government

external users of financial statements want accurately-reported net income for a specific period of time

Expenses can be matched against revenues: a. if the earnings process is not complete b. when cash is collected from the sale of products c. in the same period as the revenue that it helped to generate d. when payment is made for costs related to revenue

in the same period as the revenue that it helped to generate

Information that is material means that an error in recording the dollar amount of a transaction would: a.likely affect the judgment of someone relying on the financial statements. b. not affect the decisions of financial statement users. c. not impact a business decision of a creditor. d. result in the overstatement of assets or income

likely affect the judgment of someone relying on the financial statements

Which of the following underlying assumptions for the conceptual framework is the reason the dollar is used in the preparation of financial statements? a. economic entity b. continuity c. time period d. monetary unit

monetary unit

Cash received from customers for mowing their lawns is reported on the statement of cash flows in the: a.financing activities section. b. investing activities section. c. operating activities section. d. supplemental section.

operating activities section

On a multi-step income statement, subtracting total operating expenses from gross profit will equal: a. gross margin. b. operating income. c. income before taxes. d. net income.

operating income

Gain and losses are reported on the multi-step income statement under which of the following classifications? a. Cost of sales b. Other revenues and expenses c. Operating revenues and expenses d. Gross margin

other revenues and expenses

What does the phrase, "revenue is recognized when earned" mean? a. revenue is recorded in the accounting records when the goods are received from a supplier, and reported in the income statement when sold to the consumer b. revenue is recognized in the accounting records and reported on the income statement when the cash is received from the customer c. revenue is recorded in the accounting records when the goods are sold to a customer, and reported on the income statement when the cash payment is received form the customer d. revenue is recorded in the accounting records and reported on the income statement when goods are sold and delivered to a customer

revenue is recorded in the accounting records and reported on the income statement when goods are sold and delivered to a customer

If stockholders want to know how money flowed into and out of the company, what financial statement would they use? a. Income statement b. Statement of cash flows c. Balance sheet d. Statement of retained earnings

statement of cash flows

Which one of the following items is a classification on the classified balance sheet? a. Operating accounts b. Stockholders' equity c. Revenues and expenses d. Net income and dividends

stockholder's equity

Who among the following invest funds into a business and are considered owners? a. Stockholders b. Creditors c. Bankers d. Lenders

stockholders

Mullins, Inc. manufactures furniture. Mullins has given you its most recent annual report in an effort to obtain a sizeable loan. The company is very profitable and appears to have a strong financial position. However, based on a news report you saw on television last night, you are aware that Mullins is a defendant in a class action lawsuit related to defective products. Serious injuries were allegedly caused by Mullins' infant high chairs overturning. The television news report is an example of financial information that is: a.predictable. b. conservative. c. relevant. d. comparable.

relevant

One of the qualitative characteristics of accounting information include: a.reliability. b. cash flow information. c. all accounting information. d. assets reported on the balance sheet.

reliability

Which one of the following items appears on a balance sheet? a.Retained earnings b.Sales revenue c. Utilities expense d. Dividends

retained earnings

Question On January 1, 2012, Blackstone Company reported assets of $1,000,000 and liabilities of $600,000. During 2012 assets decreased by $200,000 and Equity decreased $250,000. What is the amount of Equity on December 31, 2012? a. $650,000 b. $150,000 c. $400,000 d. $800,000

$150,000 Correct Feedback: Assets = Liabilities + Equity Jan. 01, 2012 $1,000,000 = $600,000 + $400,000 During 2012 -$200,000 = 50,000 + -250,000 Jan. 31, 2012 $ 800,000 = $ 650,000 + $ 150,000

Which of the following is an assumption made in the preparation of the financial statements? a. financial statements are prepared for a specific entity that is distinct from the entity's owners b. the current market value is assumed to be less relevant than the original cost paid c. the preparation of financial statements for a specific period of time assumes that the balance sheet covers a designated period of time d. financial statements are prepared assuming that inflation has a distinct effect on the monetary unit

financial statements are prepared for a specific entity that is distinct from the entity's owners

Which statement demonstrates the financial success or failure of the company over that specific period of time? a. statement of changes in stockholders' equity b. statement of retained earnings c. balance sheet d. income statement

income statement

Which one of the following is not categorized as a long-term assets? a. Intangibles b. Property, plant, and equipment c. Inventory d. Patents

inventory

Cash used to purchase a truck to transport lawn mowers and other tools to customer locations is reported on the statement of cash flows in the: a. financing activities section. b. investing activities section. c. operating activities section. d. supplemental section.

investing activities section

Which of the following is a correct fundamental accounting equation? a. Assets + Liabilities = Equity b. Assets + Retained Earnings = Equity c. Assets + Equity = Liabilities d. Assets = Liabilities + Equity

Assets = Liabilities + Equity

IPOD Corporations' end-of-year Balance Sheet consisted of the following amounts. Cash ($180,000), Accounts receivable ($700,000), Property, plant & equipment ($950,000), Long-term debt ($600,000), Capital stock ($1,000,000), Accounts payable ($350,000), Retained earnings (?), Inventory ($540,000) Refer to the information provided above for IPOD Corporation. What is IPOD's retained earnings balance at the end of the current year? a. $420,000 b. $1,420,000 c. $1,950,000 d. $2,370,000

$420,000 Correct Feedback: Assets = $180,000 (Cash) + 950,000 (Property, plant & equipment) + 700,000 (Accounts receivable) + 540,000 (Inventory) = $2,370,000 Liabilities = $600,000 (Long-term debt) + 350,000 (Accounts payable) = $950,000 Equity = $2,370,000 (Total assets) - 950,000 (Total liabilities) = $1,420,000 Retained Earnings = $1,420,000 (Stockholders' equity) - 1,000,000 (Capital stock) = $420,000

Inventory ($380,000), Accounts receivable ($190,000), Land ($290,000), Accounts payable ($180,000), Cash ($129,000), Unearned revenue ($110,000), Prepaid rent ($33,000), Common stock ($312,000), Retained earnings ($220,000), Long-term notes payable ($200,000) Calculate the total amount of current assets for Pacific Corporation. a. $ 842,000 b. $1,022,000 c. $ 732,000 d. $ 842,000

$732,000 Correct Feedback: $129,000 (Cash) + 190,000 (Accounts receivable) + 380,000 (Inventory) + 33,000 (Prepaid rent) = $732,000

Which of the following best describes the term "current assets"? a. The amount of total profits earned by a business since it began operations plus all other resources. b. The amount of claim that the owners have in the business in the current year. c. Assets expected to be converted into cash within one year or one. d. The cumulative profits earned by a business less any dividends distributed in the current period.

Assets expected to be converted into cash within one year or one