Topic 2 C213

During the month, Meridian Company had the following cash transactions: Cash collected from customers $ 12,500 Cash received from a loan 8,000 Cash paid for wages payable (5,750) Cash paid for the purchase of a building (15,000) Cash received for the issuance of new shares of stock 2,600 Cash received from sale of land 6,400 Cash paid for rent (2,500) Cash paid for dividends (1,500) Given the above information, compute cash flow from operating activities.

4,250 $12,500 - $5,750 - $2,500 = $4,250

An independent audit report is usually issued by

A certified public accountant

Expenses generally cause

A decrease in net assets

Revenues cause

An increase in net assets

The idea that certain figures on an operating statement help to explain changes in figures on comparative balance sheets is referred to as

Articulation

Economic resources that are owned or controlled by an enterprise are called

Assets

Which of the following financial statements provides a picture of the enterprise at a particular point in time?

Balance sheet

Which of the following classifications does NOT appear on the Statement of Cash Flows?

Borrowing

Which of the following distinguishes between current and long-term assets?

Classified balance sheet

The idea that information becomes more useful when it can be related to a benchmark or a standard is referred to as

Comparability

The notion that when doubt exists concerning two or more reporting alternatives, users should select the alternative with the least favorable impact on reported income, assets, and liabilities is referred to as

Conservatism

Costs that are incurred during the normal operations of a business to generate revenues are called

Expenses

The financial statement that presents a summary of the revenues and expenses of a business for a specific period of time, such as a month or a year, is called a(n)

Income Statement

The accuracy of the information contained in the financial statements is the responsibility of the

Management

Whether an item is big enough that proper accounting will make a difference to users of accounting information is referred to as

Materiality

Which of the following would be considered a long-term liability?

Mortgage payable

Vital information that CANNOT be captured solely by dollar amounts is reported in a firm's

Notes to financial statements

Which of the following classifications refers to those activities that are part of the day-to-day business of a company?

Operating

Which of the following is a primary use of cash?

Operating expenses

In completing an audit of a company's financial statements, auditors

Provide some assurance that the financial statements are not misleading

A major source of cash from operating activities is

Receipts from sale of goods

The notion that information will be more useful if it will impact a decision is referred to as

Relevance

Which of the following are the two economic factors that enable us to trust an independent auditor despite the fact that the auditor was hired by the company being audited?

Reputation of auditor and risk of lawsuits

The idea that the activities of the entity are to be separated from those of the individual owner is the

Separate entity concept

Another name for the income statement is

Statement of earnings

Which of the following is NOT one of the four general types of financial statement notes?

Supplementary information required by the Internal Revenue Service

Which of the following is NOT one of the three primary financial statements?

The Statement of Retained Earnings

Which of the following is an example of additional information about summary totals that would be explained in the notes to the financial statements?

The description of all the individual items that comprise notes payable

Which of the following is an example of a disclosure of information NOT recognized that would be explained in the notes to the financial statements?

The disclosure of the uncertain, potential outcome of a lawsuit

Which of the following is an example of a significant accounting policy that would be explained in the notes to the financial statements?

The method used to estimate depreciation on a piece of equipment

A borrower benefits from providing financial information regarding income and expenses in the form of a lower interest rate on the loan because of reduced uncertainty for the lender with regard to repayment.

True

One reason for a company's preparing and providing financial statements is to reduce uncertainty for an investor regarding the firm's future financial performance.

True