Accounting Chapter 1 Smartbook questions

____ are measurable amounts that the company owes to creditors

liabilities

Mauricio invested 30,000 in pizza aroma in exchange for its stock. pizza aroma now has a balance in its ____ account

retained earnings

What is the reason for this?

Revenues are recorded when the goods or services are provided even if the cash is not collected until a later accounting period.

Accounts _____is an asset on the balance sheet that reports the amounts owed by customers for sales or services provided on credit. (Enter one word per blank.)

receivable

Select all that apply Which of the following characteristics are needed in order for financial information to be useful? A. Faithful representation B. Relevance C. Internally reported D. Competitiveness

A and B

Which of the following represents the owners' claims on profits the company earned for them through its business operations (select all that apply) A. retained earnings B. earned capital C. common stock D. paid-in capital

A and B

Which of the following represents the amount of owners' claim that the owners contributed directly to the company? Multiple select question. A. Paid-in Capital B. Earned Capital C. Retained Earnings D. Common Stock

A and D

US GAAP are ______. A. the accounting rules developed by the FASB for use in the United States B. the oversight board that supervises auditors C. the accounting rules developed by the IASB for use in the United States D. another term for IFRS

A

Which of the following represents the written promise to repay a bank? A. Notes Payable B. Accounts Payable C. Accounts Receivable D. Promissory Receivable

A

Which of the following statements are true? A. Retained Earnings increases when a company earns and keeps its profit. B. Common Stock increases when a company earns a profit. C. Retained Earnings increases when owners give a company money in exchange for stock.

A

An owner gives 5,000 dollars cash to his company in exchange for stock. This will increase the company's (select all that apply) A. total liabilities B. cash C. retained earnings D. common stock E. net income F. total stockholders' equity

B, D, and F

The Blank______ activities section on the statement of cash flows reports the activities directly related to running the business to earn profit. A. financial B. investment C. financing D. operating E. investing

D

Cash Flows from (used in) _________Activities on the statement of cash flows reports the cash activity from the buying and selling of productive resources such as land, buildings and equipment. (Add only one word per blank.)

investing

_____ have primary responsibility for following GAAP

managers

The main reson companies exist is to maximize their____

owner's wealth

When a company obtains financing by issuing shares that are traded on a stock exchange it is called a(n) _____ _____ offering, or IPO

Initial public

Which of the following are assets? Land Supplies Wages expense Equipment wages payable cash

Land, supplies, equipment, and cash

True/False: Revenues always equals cash collections during the accounting period

False

What are some of the most liquid assets?

1. cash 2. short term investment 3. accounts receivable 4. inventory 5. supply 6. prepaid expenses

Put the balance sheet line items in the proper order form top to bottom Retained earnings Accounts payable common stock equipment supplies cash

1. cash 2. supplies 3. equipment 4. accounts payable 5. common stock 6. retained earnings

At December 31, Aloe, Inc.'s assets equal $8,000 and stockholders' equity equals $5,000. Liabilities must equal____

3,000 dollars

The following are the assets, liabilities and stockholders' equity balances in millions at December 31 in alphabetical order: Accounts Payable $500 Cash 700 Common Stock 600 Equipment 900 Retained Earnings ? retained earnings equals _____. total assets equal _____. total liabilities plus common stock equals ______

500 1,600 1,100

Ace Electronics bought equipment for $4,000. Normally the equipment would have cost $4,500, but the supplier gave Ace a special discount. Ace's balance sheet should report equipment of ______. A. $4,000 B. $4,500 C. nothing, because the equipment would be reported on the income statement, not the balance sheet D. 500

A

Ace Electronics paid $4,000 of the $5,000 its employees had earned during the period. Ace Electronics should report Wages Expense of $5,000 on the income statement and Wages Payable of ______ on the balance sheet prepared in accordance with generally accepted accounting principles. A. 1,000 B. 0 C. 5,000 D. 4,000

A

Cash Flows from (used in) Investing Activities on the statement of cash flows reports the cash activity from the ______. A. buying and selling of equipment B. collections from customers C. borrowing and repaying of loans D. payment of dividends

A

Select all that apply Financial information is enhanced when it is ______. (Check all that apply.) Multiple select question. A. comparable B. timely C. future-oriented D. verifiable E. understandable F. on a cash-basis

A, B, D, E

Financial statements can be prepared ______. (Check all that apply.) Multiple select question. A. on a fiscal year basis B. on a quarterly basis C. on a monthly basis D. only when the government allows E. only at the end of a calendar year

A, B, and C

A financial statement heading states that it was prepared: "For the Year Ended December 31, 2020." What types of financial statements could this be? Multiple select question. A. statement of retained earnings B. balance sheet C. statement of cash flows D. income statement

A, C, D

Accounting rules in the United States are _______ accounting rules used in other countries. A. exactly the same as B. similar to C. nothing like

B

Axis Company just bought a piece of land for $25,000. What a deal! The land next door was sold last month for $27,000. Axis immediately put the land back on the market for $29,000, but so far hasn't had any offers. This land would appear on Axis Company's balance sheet at a value of: A. $27,000. B. $25,000. C. $29,000. D. nothing, because the land would be reported on the income statement, not the balance sheet.

B

The order in which assets are reported on the balance sheet is based on when the asset is ______. Multiple choice question. A. expected to be sold and collected B. expected to be used or turned into cash C. paid for and consumed D. purchased

B

_____ are used to accumulate and report the effects of each different business activity separately rather than combining the various types of activities together A. dividends B. accounts C. Costs D. income statements

B

Select all that apply The US Financial Accounting Standards Board is working with the International Accounting Standards Board to ______. (Check all that apply.) A. make sure that next year's meeting is hosted by an IFRS country B. make financial statements more comparable C. eliminate differences in financial reporting among countries D. preserve the unique identity of each country's financial reporting rules

B and C

Retained earnings are ______. (Select all that apply.) Multiple select question. A. equal to the company's cash balance B. increased by net income C. increased by dividends D. decreased by dividends E. cash available to be paid to stockholders

B and D

The heading of an income statement ______. (Select all that apply.) Multiple select question. A. indicates if the reported numbers are rounded to the nearest thousand or million B. includes the time period covered C. states that it is for external users only D. includes the name of the company E. states that it was prepared in accordance with generally accepted accounting principles

B and D

Which of the following statements are true regarding the income statement? Income statements ____ (Select all that apply) A. report the increase in cash B. report revenues minus expenses C. report assets, liabilities, and stockholders' equity D. are sometimes called the statement of operations

B and D

Select all that apply Which of the following would be included in the operating activity section of the statement of cash flows? (Select all that apply.) A. Cash paid to purchase land B. Cash received from customers C. Cash paid to suppliers D. Cash paid to employees E. Cash paid to purchase a new office building

B, C, D

Select all that apply How is accounting knowledge beneficial to different business majors? Accounting knowledge helps ______. (Check all that apply.) Multiple select question. A. accounting majors but not other business majors B. to determine supply chain options C. in setting prices by brand managers D. to forecast revenue by financial analysts E. to assess the value of investing options by investment analysts

B, C, D, E

Select all that apply Which of the following accounts are liabilities? (Check all that apply.) Multiple select question. A. Common Stock B. Note Payable C. Accounts Payable D. Cash E. Wages Payable F. Accounts Receivable G. Taxes Payable

B, C, E, G

Which of the following are the correct terms for the 3 activities found on the statement of cash flows? (Select all that apply.) A. Operational B. Operating C. Financial D. Financing E. Investing

B, D, E

Select all that apply Select all of the line-items found on a statement of retained earnings for the month ended September 30. A. Add: Dividends B. Subtract: Dividends C. Add: Revenues D. Add: Net Income E. Retained Earnings, September 30 F. Subtract: Expenses G. Retained Earnings, September 1

B, D, E, G

Accounts Receivable is ______. A. the amount the company expects to pay for previous credit sales B. reported on the income statement C. the amount the company expects to collect for previous credit sales D. reported in the liabilities section of the balance sheet D. always less than the company's cash

C

Accounts are: A. used only by the largest corporations. B. listed only on the income statement, but not on any other financial statement. C. used to accumulate and report the effects of each different business activity.

C

Liabilities are _____ A. economic resources expected to benefit the company in the future B. expenses incurred to help generate revenues C. measurable amounts that the company owes to creditors D. measurable amounts that the company owes to stockholders

C

The balance sheet balances when ______. A. assets equal stockholders' equity less liabilities B. assets plus liabilities equals stockholders' equity C. assets equal liabilities plus stockholders' equity D. revenues less expenses equals net income E. revenues plus expenses equals net income

C

The primary goal of most companies is to ____ A. raise capital by issuing stock B. reduce liabilities C. make a profit D. pay taxes

C

The unit of measure concept is the idea that a company should report its financial results on its financial statements using ______. A. various currencies depending on where each transaction originated B. a relevant unit of measure for each account such as dollars for Cash but number of units for Inventory C. a single monetary unit, such as the US dollar D. a consistent time period

C

A corporation earns profits for its stockholders by:(check all that apply) A. issuing stock to them for cash B. ensuring revenues are less than expenses C. selling goods at more than their cost D. providing services at more than their cost

C and D

Businesses earn profits by ____. (check all that apply) A. borrowing from creditors B. issuing new stock shares to their owners C. providing service or selling goods at more than the cost to provide the service or deliver the goods D. having revenues greater than expenses

C and D

Which of the following statements are true? (Select all that apply) A. supplies are assets, but equipment is a liabilitiy B. supplies are purchased from suppliers, while equipment is donated by stockholders C. supplies are assets that can be used in the process of earning revenue in the near future D. equipment is furniture or machinery that can be used for years

C and D

Select all that apply Select all of the following that represent creditors' claims to Noodlecake's resources reported on its balance sheet. A. Accounts Receivable B. Expenses C. Notes Payable D. Notes Receivable E. Accounts Payable

C and E

The heading of a balance sheet should include which of the following? (Check all that apply.) A. For the Year Ended December 31, 2020 B. For the Year Ended June 30, 2020 C. The name of the business D. The title "Balance Sheet" E. At December 31, 2020

C, D, E

The heading of an income statement should include (Select all that apply) A. the date on which the statement was prepared B. the name of the person who prepared the statement C. the title "Income Statement" D. a heading formatted in any manner E. the name of the business F. the accounting period covered by the statement

C, E, F

An initial public offering, IPO, is when a company: A. borrows from the general public by issuing promissory notes. B. issues a prospectus to the general public. C. offers shares to preferred individuals before making an offering to the general public. D. issues shares that are traded on a stock exchange.

D

Creditors want to see that a company that owes them money has ______. A. borrowed money from many other people B. liabilities that are greater than its assets C. assets that are greater than its stockholders' equity D. assets that are greater than its liabilities

D

The main goal of both US GAAP and IFRS is to _____ A. reduce the number of required financial statements B. ensure that companies become more profitable C. prevent all fraud and ensure the amounts reported are precise to the penny D. ensure that companies produce useful information for capital providers

D

The order in which liabilities are reported on the balance sheet is based on when the liability is: A. incurred. B. expected to be used in helping to generate revenues. C. acquired and expected to be expensed. D. expected to be paid or settled.

D

The unit-of-measure assumption states that ______. A. assets equal liabilities plus stockholders' equity B. assets should be recorded at cost C. a business's financial reports include only the activities of the business D. results of business activities should be reported in an appropriate monetary unit

D

Who has primary responsibility for preparing and making sure that a company's financial statements follow GAAP? A. The Public Company Accounting Oversight Board (PCAOB) B. The Securities and Exchange Commission (SEC) C. Independent auditors (CPAs) D. Management E. The stockholders

D

A single-step income statement includes which of the following? (Select all that apply) A. assets B. expenses C. dividends D. revenues E. Net income F. retained earnings

D and E

Which of these would be reported as cash flows from (used in) Investing Activities? (Check all that apply) A. Cash paid for rent B. Cash paid for advertising C. Cash paid for employee wages D. Cash paid to buy equipment E. cash paid to build a new corporate headquarters F. cash received from owners in exchange for stock

D and E

When a company is owed for sales made to customers on credit, the asset called: A. Accounts Receivable will be reported on the income statement. B. Sales Revenue will be reported on the balance sheet. C. Accounts Payable will be reported on the balance sheet. D. Accounts Payable will be reported on the income statement E. Accounts Receivable will be reported on the balance sheet.

E

True/False: The order of the heading of an income statement indicates the name of the statement first, the period of time covered, and the name of the company third.

False The name of the company is first, followed by the statement name, and then the period of time covered by the income statement

What is the reason for this?

Financial statements must be reported using a single monetary unit, the US dollar. International companies are required to translate their foreign currency transactions into US dollars.

True or false: Understanding accounting is useful for all business majors given many business decisions rely on accounting information.

True

True or false: Creditors would like a company that owes them money to have a large positive cash flow from operating activities.

True, cash flow from operating activities can be used to repay loans.

Liberty, INC., a US company, sold merchandise to Belle, a french company for 10,000 euros. in liberty's US financial statements, this sale should be reported in US dollars.

US dollars this is because the unit of measure assumption assumes the transactions of Liberty, a US company, were in US dollars. Thus, sales in euros are translated into US dollars for reporting purposes in the US

Acme enterprises, a consulting firm, bought 4 boxes of copy paper from an office supply store for 15 dollars each. the copy paper would be reported as______

an asset, supplies