Accounting Test
An advantage of the corporate form of business is that
It's ownership is easily transferable via the sale of shares of stock
working capital
current assets - current liabilities
current ratio
current assets divided by current liabilities
order of liabilities on balance sheet
current liabilities and long-term liabilities
current assets divided by current liabilities
current ratio
information that accurately depicts what really happened
faithful representation
Issuance of common stock for cash
financing activities
Borrowing money is an example of an
financing activity
payment of cash dividends
financing activity
The concept that a business has a reasonable expectation of remaining in business for the foreseeable future is called the
going concern assumption
Valuing assets at their fair value rather than at their cost is inconsistent with the
historical cost principal
an item important enough to influence the decision of an investor or creditor
materiality
earnings per share
net income - preferred dividends / weighted average common shares outstanding
Cash receipts from customers
operating activity
cash payments to suppliers
operating activity
Sole Proprietorship
1 owner, simple, tax advantages, unlimited liability
On a classified balance sheet, short-term investments are classified as
Current assets
order of assets on classified balance sheet
Current assets; long-term investments; property, plant, and equipment; and intangible assets
debt to assets ratio
total liabilities/total assets
Sunland Corporation began the year with retained earnings of $310000. During the year, the company issued $410000 of common stock, recorded expenses of $1218000, and paid dividends of $81100. If Sunland's ending retained earnings was $330000, what was the company's revenue for the year?
$1319100
Suppose that Forever 21 Corporation has total assets of $3600000, common stock of $941000, and retained earnings of $590000 at December 31,2025. What are the stockholders claims on their assets at that date?
$1531000
For 2025, Whispering Winds Corp. reported net income of $38500, net sales $370500, and weighted-average shares of common stock outstanding of 16000. No preferred dividends were paid. Earnings per share is
$2.41
The total liabilities of Crane Construction Co. decreased by $81000 during the month of August 2025. Stockholders equity increased by $41000 during this period. By what amount and in what direction must total assets have changed during August?
$40000 decrease
solvency ratio
debt to assets ratio - total liabilities divided by total assets
Blossom Company began the year 2025 with retained earnings of $651000. During the year, the company sold additional shares of stock for $1022000, recorded revenues of $575000, expenses of $382000, paid dividends of $142500. What was Blossom's retained earnings balance at the end of 2025?
$701500
Vaughn Company began the year with retained earnings of $114000. During 2025, the company issued $84500 of common stock for cash. The company recorded revenues of $735000, expenses of $647000, paid dividends of $36000. What was Vaughns net income for the year 2025?
$88000
Financing Activities
(external sources of cash), raising money through outside resources - borrowing money, issue new shares of their own stock, paying dividends, buy back or repurchase
Partnership
2 or more owner, simple, shared control, broader skills, tax advantages, unlimited liabilities
An annual report includes all of the following except
A list of all customers
Which of the following is generally not classified as a current liability?
Bonds Payable
The management discussion and analysis (MD&A) section of the annual report covers all of the following aspects except the
Certification criteria of the company's auditors
Financial information is comparable if
Companies use the same accounting principles to prepare it
Acme Corporation hired a new accountant. Over the next four years, the accountant used four different accounting methods to record depreciation for Acme's equipment. Which of the following qualities of useful information has Acme most likely violated?
Consistency
Which of the following is NOT considered a measure of liquidity?
Debt to assets ratio
Which of the following is NOT an advantage of the corporate form of business organization?
Favorable Tax Treatment
Which entity is/are responsible for establishing accounting standards in the United States?
Financial Accounting Standards Board
The ability of a business to pay obligations that are expected to become due within the next year or operating cycle is
Liquidity
Corporation
Many owners in the form of stockholders equity, separate legal entity, easier to transfer ownership, easier to raise funds, no personal liability, income taxes are higher, limited liability, income taxes are a disadvantage
Operating Activities
Performing the day to day actions to produce and sell a product
Which of the following would NOT be considered an internal user of accounting data for Amazon?
President of the employees' labor union
Notes to the financial statements include al of the following except
Projected accounting information
Investing Activities
Purchasing resources a company needs in order to operate- purchase of long term assets (equipment, buildings, land, etc), purchase of investments (stock and bonds of other companies)
The best definition of assets is the
Resources belonging to a company that have future benefit to the company
Net income will result during a time period when
Revenues exceed expenses
the order of stockholders equity on the balance sheet
common stock , retained earnings (ending balance)
different companies using the same accounting principles
comparability
same accounting principles and methods used from year to year within a company
consistency
A useful measure of solvency is the
debt to assets ratio
(net income- preferred stock dividends) divided by weighted- average common shares outstanding
earnings per share
economic events can be identified with a particular unit of accountability
economic entity assumption
noncurrent resources that do not have physical substance
intangible assets
Cash purchase of equipment
investing activity
sale of old machine for cash
investing activity
measures of the short term ability of the enterprise to pay its maturing obligations
liquidity ratios
information that has a bearing on a decision
relevance
Measures of the ability of the company to survive over a long period of time
solvency ratios
The excess of current assets over current liabilities
working capital
