Fin Acct - CH 1

Connar Company reports the following accounts and balances at year end: Long-Term Notes Payable$150,000 Accounts Receivable$31,000 Accounts Payable$37,000 Building$55,000 Cash and Cash Equivalents$82,000 Salaries Expense$20,500 Common Stock$22,000 Interest Payable$1,500 Land$40,000 Short-term Investments$7000 Income Taxes Payable$14,000 Equipment$59,500 Supplies$7000 Service Revenue$99,000 Supplies Expense$18,000 Utilities Expense$8,500 Income Tax Expense$10,000 What is the total amount of current assets at the end of the year? A. $127,000 B. $82,000 C. $113,000 D. $141,000

A. $127,000 Cash and Cash Equivalents $82,000 + Short-term Investments $7000 + Accounts Receivable $31,000 + Supplies $7000 = $127,000

Wetzel Company has the following accounts and balances at the end of the fiscal year: Long-Term Notes Payable$152,000 Accounts Receivable$30,000 Accounts Payable$39,000 Building$55,000 Cash and Cash Equivalents$73,000 Salaries Expense$20,500 Common Stock$27,000 Interest Payable$5500 Land$42,000 Short-term Investments$29,000 Income Taxes Payable$15,000 Equipment$59,500 Supplies$30,000 Service Revenue$99,000 Supplies Expense$38,000 Utilities Expense$28,500 Income Tax Expense$21,000 What is the total amount of liabilities at the end of the year? A. $211,500 B. $59,500 C. $219,000 D. $110,500

A. $211,500 Accounts Payable $39,000 + Interest Payable $5500 + Income Taxes Payable $15,000 + Long-term Note Payable $152,000 = $211,500

The Statement of Retained Earnings is used to prepare the: A. Balance Sheet. B. Statement of Cash Flows. C. Statement of Assets. D. Income Statement.

A. Balance Sheet.

Which of the following statements is TRUE? A. Dividends reduce retained earnings. B. Dividends increase retained earnings. C. Dividends reduce net income. D. Dividends are expenses of a business.

A. Dividends reduce retained earnings.

All of the following are expenses EXCEPT for: A. Dividends. B. Depreciation Expense. C. Cost of Goods Sold. D. Salary Expense.

A. Dividends.

Which financial statement must be prepared before the others? A. Income statement B. Balance sheet C. Statement of retained earnings D. Statement of cash flows

A. Income statement

Which statement(s) reports the revenues, gains, expenses, and losses of an entity? A. Income statement B. Balance sheet C. Statement of retained earnings and statement of operations D. Statement of cash flows and income statement

A. Income statement

The ________ is elected by the stockholders and is responsible for setting policy and appointing officers. A. board of directors B. chief financial officer (CFO) C. advisory council D. chief executive officer (CEO)

A. board of directors

Cash dividends declared: A. decrease retained earnings on the statement of retained earnings. B. increase expenses on the income statement. C. decrease operating activities on the statement of cash flows. D. decrease revenue on the income statement.

A. decrease retained earnings on the statement of retained earnings.

The balance sheet shows the: A. ending balance in retained earnings. B. amount of cash dividends paid to stockholders. C. beginning balance in retained earnings. D. amount of net income or net loss.

A. ending balance in retained earnings.

The CORRECT data flow from one financial statement to the next is: A. income statement, statement of retained earnings, balance sheet, statement of cash flows. B. statement of retained earnings, income statement, statement of cash flows, balance sheet. C. balance sheet, statement of retained earnings, income statement, statement of cash flows. D. statement of retained earnings, income statement, balance sheet, statement of cash flows.

A. income statement, statement of retained earnings, balance sheet, statement of cash flows.

Revenues are: A. increases in retained earnings resulting from delivering goods or services to customers. B. decreases in retained earnings resulting from delivering goods or services to customers. C. increases in liabilities resulting from delivering goods or services to customers. D. decreases in assets resulting from delivering goods or services to customers.

A. increases in retained earnings resulting from delivering goods or services to customers.

Stockholders' equity is the stockholders' interest in the assets of the corporation. True False

True

Potter Company reports the following line items: Long-Term Notes Payable$50,000 Accounts Receivable$28,000 Accounts Payable$37,000 Building$55,000 Cash and Cash Equivalents$80,000 Salaries Expense$25,500 Common Stock$26,000 Interest Payable$1,500 Land$40,000 Short-term Investments$5,000 Income Taxes Payable$10,000 Equipment$59,500 Supplies$5,000 Service Revenue$104,000 Supplies Expense$20,000 Utilities Expense$11,500 Income Tax Expense$13,000 What is net income? A. $104,000 B. $34,000 C. $59,500 D. $26,000

B. $34,000 Service Revenue $104,000 - Supplies Expense $20,000 - Utilities Expense $11,500 - Income Tax Expense $13,000 - Salaries Expense $25,500 = $34,000

At the end of the current accounting period, account balances were as follows: Cash, $29,000; Accounts Receivable, $44,000; Common Stock, $18,000; Retained Earnings, $12,000. Liabilities for the period were: A. $55,000. B. $43,000. C. $61,000. D. $73,000.

B. $43,000. Cash $29,000 + Accounts Receivable $44,000 - Common Stock $18,000 - Retained Earnings $12,000 = $43,000

Dividends declared are reported on the: A. Statement of Assets. B. Statement of Retained Earnings. C. Income Statement. D. Balance Sheet.

B. Statement of Retained Earnings.

All of the following line items are found on the income statement EXCEPT for: A. interest expense. B. dividends declared. C. operating expense. D. cost of goods sold.

B. dividends declared.

Net income is computed as: Select one: A. revenues + expenses. B. revenues - expenses. C. revenues - expenses - dividends. D. revenues - expenses + dividends.

B. revenues - expenses.

The major types of transactions that affect retained earnings are: A. assets and liabilities. B. revenues, expenses, and dividends. C. revenues and liabilities. D. paid-in capital and common stock.

B. revenues, expenses, and dividends.

The balance sheet is also called the statement of financial position. True False

True

Kolander Company has the following accounts and balances at the end of the year: Long-Term Notes Payable$60,000 Accounts Receivable$30,000 Accounts Payable$39,000 Building$57,000 Cash and Cash Equivalents$84,000 Common Stock$123,000 Interest Payable$1500 Land$43,000 Short-term Investments$7000 Income Taxes Payable$13,000 Equipment$64,500 Supplies$5000 What is the amount of Retained Earnings at the end of the year? A. $177,000 B. $167,500 C. $54,000 D. $113,500

C. $54,000 Total Assets = $290,500Total Assets = Accounts Receivable $30,000 + Building $57,000 + Cash and Cash Equivalents $84,000 + Land $43,000 + Short-Term Investments $7000 + Equipment $64,500 + Supplies $5000 = $290,500Total Liabilities = Note Payable $60,000 + Accounts Payable $39,000 + Interest Payable $1500 + Income Taxes Payable $13,000 = $113,500Retained Earnings =Total Assets $290,500 - Total Liabilities $113,500 - Common Stock $123,000 = $54,000

The accounting equation can be stated as: A. Assets = Liabilities - Stockholders' Equity. B. Assets - Stockholders' Equity + Liabilities = Zero. C. Assets -Liabilities = Stockholders' Equity. D. Assets + Stockholders' Equity = Liabilities.

C. Assets -Liabilities = Stockholders' Equity.

Which financial statement must be prepared before the others? A. Balance sheet B. Statement of retained earnings C. Income statement D. Statement of cash flows

C. Income statement

Receivables are classified as: A. liabilities. B. decreases in earnings. C. assets. D. increases in earnings.

C. assets.

Which financial statement answers the following question: What is the company's financial position at fiscal year end? A. statement of retained earnings B. statement of cash flows C. balance sheet D. income statement

C. balance sheet

A company's interest expense for the period is reported on the: A. balance sheet. B. statement of cash flows. C. income statement. D. statement of retained earnings.

C. income statement.

Which of the following increases retained earnings? A. net loss B. expenses C. net income D. dividends

C. net income

The assets of a company: A. include property, plant, and equipment and accounts payable. B. must equal the liabilities of the company. C. represent economic resources that are expected to produce a future benefit. D. include short-term investments and notes payable.

C. represent economic resources that are expected to produce a future benefit.

Stockholders' equity as reported on the balance sheet does NOT include: A. common stock. B. additional paid-in capital. C. short-term investments. D. retained earnings.

C. short-term investments.

The balance sheet is also known as the: A. operating statement. B. statement of profit and loss. C. statement of financial position. D. assets statement.

C. statement of financial position.

Information must be sufficiently transparent so that it makes sense to reasonably informed users of the financial statements, such as creditors. This qualitative characteristic of information is called: A. verifiability. B. relevant. C. understandability. D. faithful representative.

C. understandability.

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The accounting equation can be stated as: A. Assets + Liabilities = Stockholders' Equity. B. Assets = Liabilities - Paid-in Capital - Dividends. C. Assets = Liabilities + Paid-in Capital - Common Stock. D. Assets = Liabilities + Paid-in Capital + Retained Earnings.

D. Assets = Liabilities + Paid-in Capital + Retained Earnings.

The CEO of Clarkson Company owns a vacation home in Hawaii. Clarkson Company owns a factory in Detroit where it is headquartered. Which of these properties is considered to be asset(s) of the business? A. Neither the vacation home in Hawaii nor the factory in Detroit. B. Only the vacation home in Hawaii. C. Both the vacation home in Hawaii and the factory in Detroit. D. Only the factory in Detroit.

D. Only the factory in Detroit.

When total expenses exceed total revenues, the result is: A. a dividend. B. an increase to retained earnings. C. a net profit. D. a net loss.

D. a net loss.

Decision makers who use accounting information include: A. the Securities and Exchange Commission. B. creditors. C. the Internal Revenue Service. D. all of the above.

D. all of the above.

The income statement: A. is not dated. B. reports the results of operations since the inception of the business. C. must cover only a month in time. D. covers a defined period of time.

D. covers a defined period of time.

The stable-monetary-unit assumption: A. maintains that each organization or section of an organization stands apart from other organizations and individuals. B. ensures that accounting records and statements are based on the most reliable data available. C. requires all entities to record transactions in U.S. dollars. D. enables accountants to ignore the effect of inflation on the accounting records.

D. enables accountants to ignore the effect of inflation on the accounting records.

The accounting assumption that states that the business, rather than its owners, is the reporting unit is the: A. going concern assumption. B. historical cost assumption. C. stable-monetary-unit assumption. D. entity assumption.

D. entity assumption.

The two types of accounting are: A. bookkeeping and decision-oriented. B. internal and external. C. profit and nonprofit. D. financial and management.

D. financial and management.

A company's balance sheet: A. lists liabilities before assets. B. has three main categories of assets. C. is dated for a period of time. D. has two main categories of liabilities.

D. has two main categories of liabilities.

Which financial statement answers the following question: How well did the company perform during the year? A. statement of retained earnings B. statement of cash flows C. balance sheet D. income statement

D. income statement

Historical cost: A. is used in the U.S. to value all business assets. B. is equal to the amount of cash paid minus the dollar value of all noncash considerations also given in the exchange. C. is the amount that the business could sell an asset for. D. is a verifiable measure that is relatively free from bias.

D. is a verifiable measure that is relatively free from bias.

Accounting: A. is often called the language of business. B. measures business activities. C. processes data into reports and communicates the data to decision makers. D. is all of the above.

D. is all of the above.

Verifiability means that the accounting information: A. is material and relevant. B. is understandable. C. is timely and understandable. D. must be capable of being checked for accuracy, completeness and reliability.

D. must be capable of being checked for accuracy, completeness and reliability.

To be useful, accounting information must have the fundamental qualitative characteristics of: A. materiality and understandability. B. comparability and relevance. C. faithful representation and timeliness. D. relevance and faithful representation.

D. relevance and faithful representation.

A balance sheet reports the company's financial position over a period of time. True False

False

Accounting information is used by investors and creditors, but not by regulatory bodies. True False

False

Following current U.S. GAAP, the carrying value of a building can be increased to its fair value. True False

False

Generally accepted accounting principles (GAAP) are the accounting guidelines formulated by the Securities and Exchange Commission. True False

False

Net income is the profit left over after subtracting expenses and dividends from revenues and gains. True False

False

Revenues and expenses are reported on both the income statement and the statement of retained earnings. True False

False

The accounting equation shows the relationship among assets, liabilities and net income. True False

False

The fundamental qualitative characteristics of accounting information are relevance and reliability. True False

False

The two main components of stockholders' equity are paid-in capital and dividends. True False

False

The Clarke Company had beginning retained earnings of $20,000 and net income of $5,000. Clarke declared and paid dividends of $1,000. Therefore, the ending retained earnings is $25,000. True False

False Beginning Retained Earnings $20,000 + Net Income $5,000 -Dividends $1,000 = Ending Retained Earnings $24,000

David Company has total assets of $500,000 and total liabilities of $180,000. David Company's stockholders' equity must therefore be $680,000. True False

False Stockholders' equity = $500,000 - $180,000 = $320,000

Accounting is an information system that measures business activities. True False

True

Accounting is often called the language of business. True False

True

Expenses are decreases in retained earnings that result from operations. True False

True

Owners' equity is called stockholders' equity for a corporation. True False

True

Stockholders have no personal obligation for the corporation's debts. True False

True