ACG2021- Chapter 1 Smartbook Assignment

________ statements represent a company's primary means of communicating information to external users. (Enter one word)

Financial

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? - $140,000 - $175,000 - $205,000 - $235,000

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

Which of the following represents the net income earned by a corporation and not yet paid to shareholders? - Other comprehensive income - Retained earnings - Paid-in capital - Additional paid-in capital

- Retained earnings

Resources owned by a company are called - assets. - revenues. - liabilities. - stockholders' equity.

- assets.

In addition to the financial statements, which of the following must be included in the annual reports? (Select all that apply) - management discussion and analysis. - notes disclosures. - press releases. - corporate income tax returns.

- management discussion and analysis. - notes disclosures.

________ is the common abbreviation for the Board that currently establishes financial accounting and reporting standards in the U.S. (Enter the acronym.)

FASB

The accounting equation is: Assets = Liabilities + __________

Stockholders' equity

The system that maintains records of a company's operations and then communicates that information to decision makers is referred to as ________. (Enter one word per blank)

accounting

Management discussion and analysis and note disclosures to the financial statements are included in the __________ __________. (Enter one word per blank.)

annual report or 10 K

A(n) _________ is a resource, such as cash, land, or buildings, that is owned by a company.

asset

The qualitative characteristic of using the same accounting method each period over time refers to the concept of __________

consistentcy

The financial statement that summarizes revenues and expenses for a period of time is the ___________ ____________. (Enter one word per blank)

income statement

Information that best explains companies' stock price performance is reported on the _________ __________.

income statement No other single piece of company information better explains companies' stock price performance than does financial accounting net income, the bottom line in the income statement.

Any amount owed to a creditor is classified in the balance sheet as a/an _________. (Enter one word per blank)

liability or debt

Financial information that may impact investors' and creditors' decisions is referred to as ___________ and must be reported under GAAP.

materiality

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

operating

__________ refers to information being available to users early enough to allow them to use it in the decision process.

timelieness

Which of these would be found on a company's balance sheet? (Select all that apply.) - Depreciation expense - Sales revenue - Notes payable - Equipment - Accounts receivable

- Notes payable - Equipment - Accounts receivable

A consensus among different individuals appraising the value of land describes which qualitative accounting characteristic? - Verifiability - Comparability - Consistency - Timeliness

- Verifiability

An income statement includes which of the following items? (Select all that apply.) - amounts contributed by stockholders - revenues - net income - cash - expenses

- revenues - net income - expenses

Which of the following aspects relate to the information provided in an income statement? - Assurance that the company will pay its obligations when they become due - Assurance that the company will pay dividends to stockholders - Ability to earn a profit from its operations during the current period

- Ability to earn a profit from its operations during the current period

Which of the following appear(s) on the balance sheet? - common stock - salaries expense - utilities payable - accounts receivable - net income

- common stock - utilities payable - accounts receivable

The form of business organization where an entity is legally separate from its owners and issues shares of stock is a - proprietorship - partnership - corporation

- corporation

Dividends paid to shareholders is on which financial statement? - statement of shareholders' equity - income statement - balance sheet

- statement of shareholders' equity

The purpose of an income statement is to: - report the cash inflows and cash outflows for the period - summarize the profit-generating activities that occurred during a particular reporting period - report the risk involved in operating the business for the reporting period - report assets, liabilities, and stockholders' equity for the period

- summarize the profit-generating activities that occurred during a particular reporting period

The three most common forms of business organization are sole proprietorship, ___________, and ____________. (Enter one word per blank)

partnership and corporation

When revenues are greater than expenses, a company has net __________, whereas when revenues are less than expenses, a company has a net ____________.

profit, loss

The financial statement that provides information about cash receipts and cash disbursements for the period is the _______________

statement of cash flows

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? - $27,000 - $43,000 - $38,000 - $33,000

- $33,000 Reason: Beginning retained earnings + Common stock + Net income - Dividends = Ending retained earnings. 0 + $30,000 + $8,000 - $5,000 = $33,000.

Which of the following appear on the statement of stockholders' equity? (Select all that apply.) - Beginning balance of retained earnings - Net income - Property, plant, and equipment - Cash received during the accounting period - Dividends

- Beginning balance of retained earnings - Net income - Dividends

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 - $11,000 - $19,000 - $39,000

- $31,000 Reason: $11,000 is the ending balance in retained earnings. For total stockholders' equity, you must add the amount in the common stock account. $20,000 + $5,000 + $10,000 - $4,000 = $31,000.

Which of the following accounts is on the statement of stockholders' equity? - Accounts payable - Equipment - Cash - Common stock

- Common stock

According to the conceptual framework, for accounting information to be relevant, what two qualities must it possess? - Consistency - Confirmatory value - Predictive value - Freedom from material error

- Confirmatory value - Predictive value

Who has the responsibility for preparing financial statements in accordance with generally accepted accounting principles? - Audit committee - SEC staff auditors - CPA firms who audit the company - Corporate management

- Corporate management

The private sector organization that is currently responsible for setting accounting standards in the United States is the - Committee on Accounting Procedure. - Financial Accounting Standards Board. - Securities and Exchange Commission. - Accounting Principles Board.

- Financial Accounting Standards Board.

Which of the following are attributes of FASB? (Select all that apply.) - Independence - Public sector organization - Full-time board members - Part-time board members - Private sector organization

- Independence - Full-time board members - Private sector organization

Which of the following knowledge and skills should an accounting professional possess? - Leadership skills - Fluency in several languages - Ability to work in teams - Technical accounting knowledge - Presentation skills

- Leadership skills - Ability to work in teams - Technical accounting knowledge - Presentation skills

Who has the responsibility to apply accounting standards when communicating with investors and creditors? - Management - The SEC - Auditors - The FASB

- Management Reason: The SEC has the legal right to set accounting standards, but it has largely delegated this duty to FASB; the SEC regulates financial markets Reason: Auditors express an opinion on the financial statements, which are the responsibility of a company's management Reason: The FASB sets financial accounting standards

The heading of an income statement should include which of the following? (Select all that apply.) - The accounting period covered by the statement - The name of the business - The name of the person who prepared the statement - The single date on which the statement was prepared - The title of the financial statement

- The accounting period covered by the statement - The name of the business - The title of the financial statement

The purpose of a statement of cash flows is to provide information about the - assets used during the period. - income and related expenses during the period. - cash receipts and cash disbursements during a period. - assets, liabilities, and stockholders' equity used during the period.

- cash receipts and cash disbursements during a period.

The primary functions of accounting are to: - provide information to taxing authorities - communicate information to decison makers - measure a company's activities - increase a company's profitability - increase a company's stock market valuation

- communicate information to decison makers - measure a company's activities

Faithful representation requires information to have which of the following three characteristics? - Confirmatory value - Predictive value - Neutrality - Completeness - Free from material error

- Neutrality - Completeness - Free from material error

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 - conservatism. - neutrality. - comparability. - timeliness

- comparability.

Identify the three most common forms of business organization. - coporation - enterprise entity - partnership - unlimited stock entity - sole proprietorship

- coporation - partnership - sole proprietorship

The two sources of stockholders' equity are amounts - earned by the corporation - borrowed from banks - paid in from shareholders - borrowed from related companies

- earned by the corporation - paid in from shareholders

A code or moral system that provides criteria for evaluating right and wrong is referred to as - ethics. - a values model. - standards. - a dilemma system.

- ethics.

Companies communicate information about their business activities primarily through - pubic relations announcements - financial statements - their tax return

- financial statements

In financial accounting which of the following are the three types of business activities of a company? - selling activities - building activities - financing activities - investing activities - operating activities

- financing activities - investing activities - operating activities

If the SEC does not agree with a standard issued by the private sector, it can - force a change in the standard. - create another accounting standard setting body. - issue a new FASB statement. - remove FASB board members from their position.

- force a change in the standard.

Faithful representation requires that information is complete, neutral, and - confirmatory. - free from material error. - relevant. - within cost-benefit constraints.

- free from material error.

The income statement is considered most useful for predicting - future asset base - future profitability - future borrowing potential - future dividends

- future profitability

Where is the time period covered by the income statement found? - in the footnotes - in the income section - in the revenue section - in the heading

- in the heading

The financial statement that summarizes the profit-generating activities of a company during a particular period of time is the - balance sheet - statement of cash flows - income statement - statement of stockholders' equity

- income statement

The statement used to predict future profitability and a company's future cash-generating ability is the - statement of stockholders' equity - income statement - balance sheet - statement of financial position

- income statement

Amounts owed to creditors are - expenses - stockholders' equity - liabilities - assets - revenues

- liabilities

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. - relevance. - confirmatory value. - understandability.

- neutrality.

Which of the following are operating activities? - paying advertising expenses - borrowing from creditors - providing services to customers - purchasing plant and equipment - paying salaries to employees

- paying advertising expenses - providing services to customers - paying salaries to employees

An advantage of the corporate form of organization is that a corporation. - does not have to pay its creditors - provides limited liability to swtockholders - is not taxed - is not regulated

- provides limited liability to swtockholders

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 - materiality and consistency. - cost and benefit. - neutrality and materiality. - relevance and faithful representation.

- relevance and faithful representation.

The four financial statements published to provide information to external users include which of the following? - statement of stockholders equity - income statement - statement of assets - statement of cash flows - balance sheet - statement of business activities

- statement of stockholders equity - income statement - statement of cash flows - balance sheet

Which of the following item(s) is (are) assets? - accounts payable - common stock - supplies - inventory

- supplies - inventory

Which of the following line items appear on an income statement? (Select all that apply.) - Supplies expense - Supplies - Accounts receivable - Salaries payable - Cash - Revenues

- supplies expense - revenues

Keepers, Inc.'s balance sheet reported retained earnings as $10,000 at December 31, 2017 and $12,000 at the December 31, 2018. The income statement reported net income of $3,000 for the year ended December 31, 2018. Dividends declared for the year ended December 31, 2018 must equal $___________

1,000 Reason: Beginning retained earnings + Common stock + Net income - Ending retained earnings = Dividends. $10,000 + $0 + $3,000 - $12,000 = $1,000.

The financial statement that displays a firm's financial position on a particular date is the _________ ____________ . (Enter one word per blank)

Balance sheet

True or false: The fundamental activities of a business are selling activities and marketing activities.

False The fundamental activities are financing, investing, and operating activities.