Accounting Study Guide
All of the following are the types of activities that businesses engage in except:
organizational activities
Which of the following best describes a company's operating activities?
. Operating activities focus on the sale of products and services.
Marcos Inc. had net income for 2014 of $40,000. It declared and paid a $3,500 cash dividend in 2014. If the company's retained earnings for the end of the year was $38,200, what was the company's retained earnings balance at the beginning of 2014?
1,700
Read the information about Skyline Inc. What is Skyline's current ratio?
1.2 to 1
What amount should Sun City report on its balance sheet for total assets?
200,000
Sawaddee Enterprises began the year with total assets of $450,000 and total liabilities of $230,000. If Sawaddee's total assets increased by $80,000 and its total liabilities increased by $57,000 during the year, what is the amount of Sawaddee's owners' equity at the end of the year?
243,000
Read the information for Moss Company. What are Moss' current liabilities?
50,000
Sawaddee Enterprises began the year with total assets of $450,000 and total liabilities of $230,000. If Sawaddee's total assets doubled to $900,000 and its owners' equity remained the same during the year, what was the amount of its total liabilities at the end of the year?
680,000
Which of the following accounts are normally reported as current liabilities on a classified balance sheet?
Income taxes payable and salaries payable
On January 1, 2015, Flaggler Company's balance in retained earnings was $70,000. During 2015, the company earned net income of $43,000 and paid $15,000 in dividends. Calculate the retained earnings balance at December 31, 2015.
98,000
To determine the source of a company's assets, on which financial statement will you look?
A balance sheet only
Which one of the following statements is true concerning assets?
Accountants use the term historical cost to refer to the original cost of an asset
Which of the following include only current assets?
Accounts receivable, cash, inventory, office supplies
Which one of the following is an economic obligation for a business entity?
Amounts owed to creditors
Which financial statement would you refer in order to determine whether a company owed funds to creditors?
Balance Sheet
Which one of the following correctly represents one of the basic financial statement models?
Beginning Retained Earnings + Net Income - Dividends = Ending Retained Earnings
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:
Comparability
. Grand Stores, Inc. is concerned about its profitability for the current year, since its profit margin has dropped 10% since last year. Which of the following is the least useful comparison in evaluating the drop in Grand Stores' profit margin?
Comparison with it's current ratio for the current year
An accountant is uncertain about the best estimate of an amount for a business transaction. If two amounts are about equally likely, the amount least likely to overstate assets and income is selected. Which of the following qualities is characterized by this action?
Conservatism
One significant difference between a classified and non-classified balance sheet is the distinction between which of the following items?
Current and non-current assets
Under current accounting principles, how is net income on the income statement measured?
Excess of revenues over expenses during the period
Why is the time period assumption required?
External users of financial statements want statements that accurately reflect net income or earnings for a specific time period.
Which of the following statements is true concerning external users of financial information?
External users rely on the financial statements to help make informed decisions.
Which on of the following groups is considered an internal user of financial statements?
Factory managers that supervise production line workers
Which of the following best describes a company's financing activities?
Financing activities enable a company to acquire assets needed to run a business
Which one of the following sections is least likely to be found in a corporate annual report?
Forecasts of Cash flows and Earnings
Read the information about Hopper Inc. Which statement best represents Hopper's performance?
Hopper's profit margin ratio decreased
For which of the following is the current ratio most useful?
In evaluating a company's liquidity
Assume that you want to determine the profit margin for a company. Which one of the following financial statements is the best source of this information?
Income Statement
Which one of the following subtotals or totals would appear in a multiple-step, but not a single-step income statement?
Income from operations
Which one of the following items is reported as a current asset on classified balance sheet?
Inventory
Which one of the following is a financing activity of a business?
Issuing stock for cash
Although businesses engage in a wide variety of activities, all of these activities can be categorized into three types. Which of the following choices best reflects these three types of business activities?
Operating, financing, investing
Which of the following events will cause a company's current ratio to decrease?
Paying off long-term debt with cash
Which of the following is a current asset?
Prepaid Insurance
Read the information about Hopper, Inc. Which ratio are you able to calculate given only the information provided by Hopper?
Profit margin
Which one of the following is not a major category for long-term assets?
Receivables
Cook, Inc., a manufacturer of tires, has given you its most recent annual report in an effort to obtain a sizable loan. The company is very profitable and appears to have a sound financial position. Based on a report presented on prime-time TV last night =, you are aware that Cook is a defendant in several lawsuits related to its defective tires that cause vehicles to overturn. The information presented on television is an example of financial information that is:
Relevant
The qualitative characteristics of accounting data include:
Reliability
An investor found the following in an annual report: "The financial statements, in our opinion, present fairly the financial position, operating results, and cash flows, in conformity with accounting principles generally accepted in the United States." In which section of the annual report did the investor find this?
Report of the Independent Accountants
In preparing the financial statements for December 31, 2015, an accountant improperly classified the payment of prepaid rent as rent expense. Which of the following amounts would not be affected by this improper classification?
Retained earnings, January 1, 2015
To which of the following entities must a company report if it sells its stock on the organized stock market?
Securities and Exchange Commission (SEC)
Which of the following events will cause a company's current ratio to increase?
Selling land for cash at a loss
A company is not required to prepare both a(n):
Statement of stockholder's equity and statement of retained earnings
Liquidity relates to a company's ability to do which of the following?
The ability to pay its financial obligations as they become due
What was the economic effect of the payment of Lewis' dividends?
The dividends reduce total retained earnings for the year
Which statement is true concerning an income statement?
The income statement summarizes the results of operations for a period of time
Relevant information can be quantitative or qualitative. In deciding whether to go to college part-time of full-time, which of the following is a qualitative factor for a student?
The opportunity to make friends
Which one of the following is considered a financing activity?
The payment of a cash dividend
As used in accounting, the "Notes to the Financial Statements" should be:
include as an integral part of the financial statements