ACCY 200

the par value per share of common stock

- bears no relationship to the market value per share of common stock - is a relic from the past, that for all practical purposes, has lost its significance - is an arbitrary value assigned when the corporation is organized

Which is incorrect: - cash does not include amounts owed by customers who purchase merchandise on account - cash minus current liabilities is equal to net assets - cash represents cash on hand and in the company's bank accounts - cash is reported as a current asset on the balance sheet

- cash minus current liabilities is equal to net assets

Which are true? - Accounts receivable are not assets because the cash has not yet been received - the economic benefits associated with assets must be obtained or controlled by the firm - assets are probable future economic benefits to the firm - assets represent the amount of resources controlled by the firm - assets result from past transactions or events of the firm - assets must be tangible to be recorded on the balance sheet

- the economic benefits associated with assets must be obtained or controlled by the firm - assets are probable future economic benefits to the firm - assets represent the amount of resources controlled by the firm - assets result from past transactions or events of the firm

estimates are frequently made in accounting for which items

- warranty costs - depreciation of buildings and equipment - pension expense - cash receipts from customers

order the following: - income from operations - income taxes - cost of goods sold - gross profit

- cost of goods sold - gross profit - income form operations - income taxes

which financial statements are generally accepted accounting principles and auditing standards

- statement of cash flows - income statement - balance sheet - statement of changes in stockholders' equity

going concern concept

the concept refers to the presumption will continue to operate in the future

which account types are reported in an income statement?

- gains - expenses - losses - revenues

order the following in which they appear on tax statements: - income before taxes - net sales - income from operations - gross profits

- net sales - gross profits - income from operations - income before taxes

Stockholders' equity: - is another term for ____ - is equal to ____ minus ____ - is equal to ____ - is sometimes referred to as ____

- net worth - assets; liabilities - stockholders' equity - net assets

conservatism concept

when in doubt, a firm's assets and profits should be reported at

main activity categories in the statement of cash flows

- financing - operating - investing

what are reported on the income statement

- revenues - expenses - gains - losses

gross profit

- sometimes referred to as gross margin - represents the seller's maximum "cushion" available to cover all other operating expenses before it is possible to have net income

The investments by and distributions to owners during the period are reported on the ____

statement of stockholders' equity

the stated value per share of no-par-value stock operates in the same way as the ____ value per share

par

Assets are ____ future economic benefits obtained or controlled by a particular entity as a result of a ____ transaction or event

probable; past

full disclosure concept

the concept requires that the financial statements and notes include all necessary information to prevent a reasonably used of the financial statements from being mislead

concepts/principles relating to bookkeeping and the accounting process

- revenue recognition - accrual - accounting period - matching

Which is incorrect? - if retained earning has a negative balance, it is usually referred to as an accumulated deficit - retained earnings is increased each year by the entity's net income and dividends - retained earnings is the second principal category of stockholders' equity - retained earnings represent the cumulative net income of the entity that has been retained for use in the business

- retained earnings is increased each year by the entity's net income and dividends

____ are probable future economic benefits

assets

stockholders' equity is the ownership right of the stockholders in the ____ that remain after subtracting the ____ of the corporation

assets; liabilities

the two main components reported on the statement of changes in stockholders' equity

paid-in capital and retained earnings

which are true? - payment of cash dividends on common stock is a financing use (decrease) of cash - the decrease in accounts payable for the year is shown as an operating source (increase) of cash - if a current asset account increases for the yea, this will show up as an operating source (increase) of cash - if a current liability account increases for the year, this will show up as an operating source (increase) of cash - the net increase in cash for the year is equal to the sum of the net cash provided/used by operating, investing, and financing activities

- payment of cash dividends on common stock is a financing use (decrease) of cash - if a current liability account increases for the year, this will show up as an operating source (increase) of cash - the net increase in cash for the year is equal to the sum of the net cash provided/used by operating, investing, and financing activities

consolidated financial statements

when a parent-subsidiary relationship exists, the financial statements issued by the parent company reflect the results of the subsidiary company(ies)

If assets total $10,000 and stockholders' equity totals $3,000, then: liabilities total ____

$7,000

liabilities include:

- accounts payable - long-term debt other accrued liabilities

transactions

- are the starting point in the account process that end with the preparation of financial statements - can be seen as the bricks that build financial statements

what does the balance sheet list

- assets - liabilities - stockholders' equity

what concepts/principles relate to financial statements

- consistency - conservatism - materiality - full disclosure

proprietorships

a business that legally has no separate existence from its owner; a sole proprietorship is the simplest business form under which one can operate a business

current liabilities

are those liabilities that are likely to be paid with cash within one year of the balance sheet date

the entity's financial position at the end of the period is reported on the

balance sheet

the two main components of paid-in capital are

common stock and additional paid-in capital

most assets are not recorded at their current market values because of the limitations imposed by the ____ principle

cost

transactions

economic interchanges between entities that are accounted for and reflected in financial statements

the entity's earning for the period are ported on the ____

income statement

net worth

is a misleading term because assets and liabilities are not generally "worth" the amount reported on the balance sheet

income from operations

is a subtotal on the income statement that is not affected by the firm's tax rate or by amount of interest expense incurred

the balance sheet

is like a snapshot of the organization's financial position, frozen at a specific point in time

____ are probably future sacrifices of economic benefits

liabilities

materiality

means that absolute exactness is not necessary in the amounts shown in the financial statements

most assets are reported on the balanced sheet based on their ____

original (historical) cost

gross profit

results from subtracting cost of goods sold from net sales

In the horizontal model representation of the financial statements, the arrow going form net income to stockholders equity means that net income affects the ____ account within stockholders' equity

retained earnings

shareholders receive ____ of stock as evidence of their ownership interest in a corporation

shares

no-par-value stock can sometimes be assigned a ____ value per share

stated

matching concept

the concept does not mean that revenue and expense for the period are equal

unit of measurement

the concept supports the notion that for companies reporting their financial statements in United States dollars, no adjustments are made for the effects of inflation

revenue is recognized at the time of sale, which is when

title passes to the buyer, or when the services are performed

concepts/principles relating to transactions

unit of measurement, cost principle, and objectivity

disadvantages of proprietorships

- if the business fails, owners personal assets may be claimed by business creditors - owner has limited ability to raise capital owner has unlimited personal liability - difficulty of business formation

Which are true? - assets are amounts owed to other entities - liabilities are amounts owed to other entities - stockholders' equity is the amount owed to other entities - liabilities are claims against the firm by its creditors - liabilities are present obligations to transfer assets or provide services to other organizations

- liabilities are amounts owed to other entities - liabilities are claims against the firm by its creditors - liabilities are present obligations to transfer assets or provide services to other organizations