Week One smart book questions

True or false: The corporation, and not the owners, are viewed as owning the resources and as owing the debts of the business. True false question.

True

A balance sheet shows ______.

assets, liabilities, and stockholders' equity at a single point in time

Mauricio invested $30,000 in Pizza Aroma in exchange for its stock. Pizza Aroma now has ______ under shareholders' equity.

common stock

Common forms of business organization include ______. (Check all that apply.)

corporation sole proprietorship partnership

Shareholders' equity arises primarily from amounts invested by shareholders and amounts ______.

earned and retained by the corporation

The main goal of US GAAP is to ______.

ensure that companies produce useful information for users of financial statements

The purpose of a balance sheet is to report the ______.

financial position of a business at a particular point in time

Which of the following are not found in the heading of a balance sheet? (Select all that apply.)

period covered name of the owner

Companies typically prepare ______ financial statements each accounting period.

4, The four financial statements are the balance sheet, income statement, statement of of stockholders' equity, and the statement of cash flows.

Which financial statement is a company's primary measure of profit?

Income statement

Which financial statement is a company's primary measure of profit? Multiple choice question.

Income statement

Pizza Aroma generated $11,000 in revenues and had expenses of $6,000. Pizza Aroma's net income or loss is ______. Multiple choice question.

$5,000

Identify the uses of generally accepted accounting principles (GAAP). (Check all that apply.)

Auditors need to be sure the financial statements are prepared in accordance with GAAP. Companies use GAAP when preparing financial statements.

Identify the ways in which a business may be organized. (Check all that apply.)

Corporation Partnership Sole proprietorship

True or false: Creditors hope to gain in two ways—they hope (1) to receive dividends and (2) to sell their shares at a higher price.

False, Investors, not creditors, hope to receive dividends and to sell their shares at a higher price. Borrowers are legally obligated to pay creditors interest, not dividends, and repay the principal.

True or false: The income statement is useful for determining the amount of economic resources held by the company.

False, The balance sheet, not the income statement, reports the economic resources, assets. The income statement reports the revenues minus the expenses for the accounting period.

Which of the following increase the common stock balance? (Select all that apply.)

Financing provided by owners Investments by owners

The measurement rules applied in computing numbers on the financial statements are referred to as ______.

GAAP

Identify the steps in the process to follow when faced with an ethical dilemma. (Select all that apply.)

Identify alternative courses of action. Identify the benefits of a decision and who will be harmed. Choose the course of action that is most ethical.

Which of these line items appears on both the income statement and the statement of stockholders' equity?

Net income

True or false: The accounting equation is Assets = Liabilities + Stockholders' Equity.

True

The classifications used to categorize cash inflows and outflows on the statement of cash flows includes cash flows from which activities?

Operating, Investing, Financing

______ are earned by selling goods or services to customers.

Revenues

A financial statement heading states that it was prepared: "For the Year Ended December 31, 2019." What types of financial statements could this be? (Check all that apply.)

Statement of stockholders' equity Income statement Statement of cash flows

Which of these line items appear on a balance sheet? (Check all that apply.)

Stockholders' Equity Liabilities Assets

The heading of an income statement should include which of the following? (Check all that apply.)

The accounting period covered by the statement The title of the financial statement The name of the entity

The notes to financial statements ______. (Check all that apply.)

along with the financial statements provide a more complete picture of a company's financial health are an integral part because the financial statements do not contain all the necessary details provide supplemental information about the financial condition of a company

Careful consideration is taken when making changes in GAAP ______. (Select all that apply.)

because they may affect selling prices of public companies' stock and is actively debated before the changes are required

The statement of stockholders' equity reports the ______.

changes in earnings and dividends for a specified period of time

A financial statement heading notes that it was prepared: "For the Year Ended December 31, 2019." This could be the ______. (Check all that apply.)

income statement statement of stockholders' equity statement of cash flows

Mauricio, the owner of Pizza Aroma, spent $2,500 of his own money to take his family to Disney World. Pizza Aroma's financial statements will report ______.

nothing about this trip

Net income ______. Multiple choice question.

on the income statement causes retained earnings to increase on the statement of stockholders' equity

The balance sheet of a corporation reports ______.

only the results of the business' activities

Expenses report the ______ during the accounting period. Multiple choice question.

resources used to earn revenue

The sum of which two elements equals stockholders' equity?

retained earnings common stock

Net income is equal to ______.

revenues minus expenses

Net income is ______. (Check all that apply.)

revenues minus expenses net earnings

Which of the following classifications is not used to categorize cash inflows and cash outflows on the statement of cash flows?

spending

Expenses are ______.

the amount of resources used to earn revenue

The income statement reports ______. (Select all that apply.)

the profitability of the company for the accounting period how well the company performed during the accounting period the revenues minus the expenses for the accounting period

An owner gives $5,000 cash to his company in exchange for stock. This will increase the company's ______. (Check all that apply.)

total stockholders' equity cash common stock

Z Company bought land 20 years ago for $30,000. Over the last 20 years, the value of the land has doubled. The increase in the land's value ______. Multiple choice question.

will not be reported in Z Company's financial statements