Chapter 1

Which of the following is comprised of two parts: (1) common stock and (2) retained earnings? A. Expenses B. Liabilities C. Assets D. Revenues E. Stockholders' equity

E. Stockholders' equity

If total assets decreased by $10,000 and total stockholders' equity increased by $5,000 during a period of time, then total liabilities must have changed by what amount and direction during that same period? A. $15,000 decrease B. $5,000 increase C. $10,000 increase D. $15,000 increase E. $5,000 decrease

A. $15,000 decrease

Which of the following would not appear on an income statement? A. Unearned revenue B. Salaries and wages expense C. Service revenue D. Net income E. Cost of goods sold

A. Unearned revenue

A company paying cash to its suppliers for inventory to be sold to its customers is an example of A. an operating activity. B. an advertising activity. C. None of these D. a financing activity. E. an investing activity.

A. an operating activity.

Which of the following questions tends to be important to external users of a company's accounting information? A. None of these B. Is the company profitable? C. What selling price for our product will maximize the company's net income? D. All of these E. Which product line is most profitable?

B. Is the company profitable?

Which of the following best defines accounting? A. The processing system and regulatory rules for determining the fair market value of a business organization. B. The information system that identifies, measures, and communicates economic information to permit informed judgements and decisions by the users of the information. C. The management of large amounts of money, especially by governments or large companies. D. The organization and coordination of the activities of a business in order to achieve defined objectives. E. The action or business of promoting and selling products or services, including market research and advertising.

B. The information system that identifies, measures, and communicates economic information to permit informed judgements and decisions by the users of the information.

Which of the following did not result from the Sarbanes-Oxley Act (SOX)? A. SOX increased independent auditors' independence. B. Penalties for fraudulent activity increased. C. It decreased the oversight role of boards of directors. D. Top management must now certify the accuracy of financial information. E. The Sarbanes-Oxley Act caused all of these to occur.

C. It decreased the oversight role of boards of directors.

If the retained earnings account increases from the beginning of the year to the end of the year, then which of the following must be true? A. A net loss is less than dividends. B. Additional investments are less than net losses. C. Net income is greater than dividends. D. Dividends were not paid during the year. E. Net income is less than dividends.

C. Net income is greater than dividends.

Which of the following describes that sequence in which financial statements are prepared? A. All of these B. The balance sheet is prepared before the inncome statement. C. None of these D. The balance sheet is prepared before the retained earnings statement. E. The retained earnings statement is prepared before the income statement.

C. None of these

The segment of the annual report that presents an opinion regarding the fairness of the presentation of the financial position and results of operations is/are the A. management discussion and analysis. B. financial statements. C. auditor's opinion. D. income statement. E. balance sheet.

C. auditor's opinion.

A company began the year with total assets of $230,000 and total liabilities of $160,000. During the year, the company did the following: Recognized revenues, $400,000 Incurred expenses, $220,000 Declared and paid dividends, $40,000 Issued common stock, $10,000 What is the stockholders' equity at the end of the year? A. $210,000 B. $230,000 C. $200,000 D. $220,000 E. $190,000

D. $220,000

A corporation had the following accounts and balances: Accounts payable$18,000Accounts receivable 3,000Cash 9,000Common stock 10,000Equipment 52,000Prepaid insurance 4,000Retained earningsNot givenUnearned service revenue 6,000 What is the balance of the company's retained earnings account? A. $46,000 B. $26,000 C. $28,000 D. $34,000 E. $54,000

D. $34,000

The financial records for a corporation included the following information:Accounts receivable, $60,000Accounts payable, $25,000Cash, $15,000Common stock, $10,000Dividends, $5,000Rent expense, $10,000Sales revenue, $75,000Salaries and wages expense, $20,000Retained earnings is not given. Based on this information, how much is its net income? A. $55,000 B. $65,000 C. $50,000 D. $45,000 E. $40,000

D. $45,000

Which of the following is an expense? A. All of these B. Dividends C. Accounts receivable D. Cost of goods sold E. Wages payable

D. Cost of goods sold

Publicly traded U.S. companies must provide shareholders with an annual report. Which of the following is not part of the annual report provided to shareholders? A. Balance sheet B. Management discussion and analysis C. Notes to the financial statements D. General ledger E. Auditor's report

D. General ledger

Stockholders' equity can be described as claims of A. creditors on total assets. B. debtors on total assets. C. All of these D. owners on total assets. E. customers on total assets.

D. owners on total assets.

The balance sheet A. presents the revenues and expenses at a specific date. B. summarizes the changes in retained earnings for a specific period of time. C. reports the changes in assets, liabilities, and stockholders' equity over a period of time. D. reports the assets, liabilities, and stockholders' equity at a specific date. E. presents the revenues and expenses for a specific period of time.

D. reports the assets, liabilities, and stockholders' equity at a specific date.

A company recorded the following cash transactions for the year:Paid $140,000 for salaries.Paid $45,000 to purchase office equipment.Paid $25,000 of dividends.Collected $320,000 from customers.What is the company's net cash from operating activities for the year? A. $155,000 B. $125,000 C. $135,000 D. $320,000 E. $180,000

E. $180,000

Which of the following best describes stockholders' equity? A. Stockholders' equity are the economic resources of the firm. B. Stockholders' equity is the difference between revenues and expenses. C. Stockholders' equity is the cash collected from owners. D. Stockholders' equity are the claims of creditors. E. Stockholders' equity are the claims of owners.

E. Stockholders' equity are the claims of owners.

A business organized as a corporation A. is not considered to be a legal entity that is separate from its owners. B. is disadvantaged in terms of raising funds. C. is tax advantaged compared to sole proprietorships and partnerships. D. requires its stockholders be personally liable for the debts of the business. E. can be owned by one or more stockholders.

E. can be owned by one or more stockholders.