ACCT-280 EXAM-1

Which of the following statements is true?

By comparing earnings per share of a single corporation over time, a stockholder can evaluate the corporation's relative earnings performance.

The basic accounting equation states that Assets = Liabilities.`

False

The economic resources that are owned by a business are called stockholders' equity.

False

The heading for the income statement might include the line "As of December 31, 20xx."

False

The majority of U.S. business is transacted by proprietorships.

False

If the assets owned by a business total $150,000 and liabilities total $105,000, stockholders' equity totals $45,000.

True

Operating activities involve putting the resources of the business into action to generate a profit.

True

The accounting equation can be expressed as Assets - Liabilities = Stockholders' Equity.

True

The accounting equation can be expressed as Assets - Stockholders' Equity = Liabilities.

True

The balance sheet reports assets and claims to those assets at a specific point in time.

True

The information needs and questions of external users vary considerably.

True

The management discussion and analysis (MD & A) section of an annual report covers various financial aspects of a company.

True

The primary purpose of the statement of cash flows is to provide information about the cash receipts and cash payments of a company for a specific period of time.

True

A short-term creditor is primarily interested in the __________ of the borrower.

liquidity

The relationship between current assets and current liabilities is important in evaluating a company's

liquidity.

Intangible assets are

listed after property, plant, and equipment.

Equipment is classified on the balance sheet as

property, plant, and equipment.

Most business enterprises in the United States are

proprietorships and partnerships.

The most important information needed to determine if companies can pay their current obligations is the

relationship between current assets and current liabilities.

If the sum of the debit column equals the sum of the credit column in a trial balance, it indicates

the mathematical equality of the accounting equation.

Accounts are listed on the trial balance in

the order that they appear in the ledger.

A different set of financial statements usually is prepared for each user.

False `

Which of the following is not an advantage of the corporate form of business organization?

Favorable tax treatment

A business organized as a separate legal entity owned by stockholders is a partnership

False

Cash is another term for stockholders' equity.

False

Claims of creditors and owners on the assets of a business are called liabilities.

False

Explanatory notes and supporting schedules are an optional part of an annual report.

False

External users of accounting information are managers who plan, organize, and run a business.

False

If the assets owned by a business total $100,000 and liabilities total $65,000, stockholders' equity totals $25,000.`

False

Information in the notes to the financial statements has to be quantifiable (numeric).

False

Investing activities involve collecting the necessary funds to support the business.

False

Management of a business enterprise is the major external user of information.

False

Net income for the period is determined by subtracting total expenses and dividends from revenues.

False

Net income is another term for revenue.

False

One way of stating the accounting equation is: Assets + Liabilities = Stockholders' Equity.

False

Owners of business firms are the only people who need accounting information

False

Payments to owners are operating activities.

False

Proprietorships in the United States generate more revenue than the other two forms of business enterprise.

False

Accounting communicates financial information about a business to both internal and external users.

True

All publicly traded U.S. companies must provide their stockholders with an annual report each year.

True

An auditor is an accounting professional who conducts an independent examination of the accounting data presented by a company.

True

Assets are resources owned by a business and provide future services or benefits to the business.

True

Two primary external users of accounting information are investors and creditors

True

Current assets divided by current liabilities is known as the

current ratio.

Pharaoh Company has assets of $4429000, common stock of $1099000, and retained earnings of $620000. What are the creditors' claims on their assets?

$2710000

These are selected account balances on December 31, 2017. Land $145000 Land (held for future use) 244500 Buildings 1033000 Inventory 299000 Equipment 655000 Furniture 153000 Accumulated Depreciation 450000 What is the total amount of property, plant, and equipment that will appear on the balance sheet?

$1536000

For 2017 Sky song, Inc. reported net income of $32500; net sales $395500; and average share outstanding 15500. There were no preferred dividends. What was the 2017 earnings per share?

$2.10

For 2017 Pharaoh Company reported net income of $40000; net sales $380000; and average share outstanding 15500. There were no preferred dividends. What was the 2017 earnings per share?

$2.58

Whispering Winds Corp. has assets of $3593000, common stock of $936000, and retained earnings of $587000. What are the creditors' claims on their assets?

$2070000

Earnings per share are calculated by dividing

(net income less preferred dividends) by average common shares outstanding.

A business is usually involved in two types of activity—financing and investing.

False

Which of the following is not classified properly as a current asset?

A receivable from the sale of an asset to be collected in two years.

Which of the following is not a current liability?

Bonds Payable

A corporation has which of the following set of characteristics?

Easier to transfer ownership and raise funds, no personal liability.

Which of the following would not be classified as a long-term liability?

Current maturities of long-term debt

What is the order in which assets are generally listed on a classified balance sheet?

Current; long-term investments; property, plant and equipment, intangibles

Which of the following is not considered an asset?

Dividends

Trademarks would appear in which balance sheet section?

Intangible assets

In what section of the statement of cash flows would the purchase of office equipment for $10,000 cash appear?

Investing activities

On. Jan. 10, Nevis Company purchased manufacturing equipment for $80,000 cash. What kind of activity is this?

Investing activity

Which of the following is not one of the three forms of business organization?

Investors

The proper sequence of events to journalize a transaction is

Journalize; post; prepare a trial balance

Which of the following is an advantage of corporations relative to partnerships and sole proprietorships?

Reduced legal liability for investors

Which statement about long-term investments is not true?

They do not include long-term notes receivable.

Which of the following is a measure of liquidity?

Working capital

A trial balance will not balance if

a $100 cash dividend is debited to Dividends for $1,000 and credited to Cash for $100.

On a classified balance sheet, short-term investments are classified as

a current asset.

The operating cycle of a company is the average time that is required to go from cash to

cash in producing revenues.

A business organized as a separate legal entity is a

corporation

In a classified balance sheet, assets are usually classified as

current assets; long-term investments; property, plant, and equipment; and intangible assets.

Liabilities are generally classified on a balance sheet as

current liabilities and long-term liabilities

When a trial balance balances, it is an indication that

debits equal credits.

An intangible asset

derives its value from the rights and privileges it provides the owner.

A measure of profitability is the

earnings per share.

A current asset is

expected to be converted to cash or used in the business within a relatively short period of time.

The proprietorship form of business organization

generally receives favorable tax treatment relative to a corporation.

Earnings available to common stockholders is equal to

net income - preferred dividends. .

On a classified balance sheet, companies usually list current assets

in the order in which they are expected to be converted into cash.

The partnership form of business organization

is a common form of organization for service-type businesses.

A trial balance

is a list of accounts with their balances at a given time.

A business organized as a corporation

is owned by its stockholders.

An advantage of the corporate form of business is that

its ownership is easily transferable via the sale of shares of stock.

Earnings per share is a

profitability ratio.

Ratios that measure the income or operating success of a company for a given period of time are

profitability ratios.

Condition gt requires numbers instead of "null" and "0" - The liability of corporate stockholders is limited to the amount of their investment.

True

Corporate stockholders generally pay higher taxes but have no personal liability.

True

Creditors' rights to assets supersede owners' rights to the assets.

True

Examples of notes are descriptions of the significant accounting policies and methods used in preparing the statements, explanations of contingencies, and various statistics.

True

Financing activities for corporations include borrowing money and selling shares of their own stock.

True

It is not true that current assets are resources that are expected to be

acquired within one year.

The purchase or sale of long-lived assets used in operating the business is

an investing activity.