Quizes Ch2-5

The objective of general-purpose financial reporting is?

to provide financial information about the reporting entity that is useful to present and potential equity investors, lenders, and other creditors in making decisions in their capacity as capital providers

the two fundamental qualities that make accounting information useful for decision making are

relevance and faithful representation

Revenue is recognized in the accounting period in which the performance obligation is satisfied. This statement describes the

revenue recognition principle.

For Carla Vista Co., the following information is available: Cost of goods sold $394000 Dividend revenue 14500 Income tax expense 36800 Operating expenses 137500 Sales revenue 583000 In Carla Vista's multiple-step income statement, gross profit

should be reported at $189000. $583000 - $394000 = $189000.

A trial balance may prove that debits and credits are equal, but

-an amount could be entered in the wrong account. -a transaction could have been entered twice. -a transaction could have been omitted. ******all of these answer choices are correct.******

Which of the following statements about materiality is correct?

-An item must make a difference or it need not be disclosed. -Materiality is a matter of relative size or importance. -An item is material if its inclusion or omission would influence or change the judgment of a reasonable person. ********All of these answers are correct.*****

In 2017, Cullumber Company reported net income of $618000. It declared and paid preferred stock dividends of $129000 and common stock dividends of $51000. During 2017, Cullumber had a weighted average of 300000 common shares outstanding. Compute Cullumber's 2017 earnings per share.

$1.63 ($618000 - $129000) ÷ 300000 sh. = $1.63.

Ivanhoe Company has the following items: common stock, $1617000; treasury stock, $214000; deferred income taxes, $247000 and retained earnings, $783000. What total amount should Ivanhoe Company report as stockholders' equity?

$2186000. $1617000 - $214000 + $783000 = $2186000.

Cullumber Company reports: Cash provided by operating activities $282000 Cash used by investing activities 115000 Cash provided by financing activities 130000 Beginning cash balance 94000 What is Cullumber's ending cash balance?

$391000. $94000 + $282000 - $115000 + $130000 = $391000.

Crane Company reported the following information for 2017: Sales revenue $2052000 Cost of goods sold 1380000 Operating expenses 213000 Unrealized holding gain on available-for-sale securities 120400 Cash dividends received on the securities 7500 For 2017, Crane would report other comprehensive income of

120400 (Unrealized holding gain)

Crane Company's trial balance reflected the following account balances at December 31, 2017: Accounts receivable (net) $36000 Trading securities 12000 Accumulated depreciation on equipment and furniture 31000 Cash 33500 Inventory 60000 Equipment 48000 Patent 8300 Prepaid expenses 4500 Land held for future business site 37000 In Crane's December 31, 2017 balance sheet, the current assets total is

146,000 $36000 + $12000 + $33500 + $60000 + $4500 = $146000.

Which of the following would not be a correct form for an adjusting entry?

A debit to an asset and a credit to a liability

The stockholders' equity section is usually divided into what three parts?

Capital stock, additional paid-in capital, retained earnings

Which of the following is true of accounting for changes in estimates?

Changes in estimates are not carried back to adjust prior years.

Concord Corporation loaned $530000 to another corporation on December 1, 2017 and received a 3-month, 6% interest-bearing note with a face value of $530000. What adjusting entry should Starr make on December 31, 2017?

Debit Interest Receivable and credit Interest Revenue, $2650. 1/12 x 6% x $530000 = $2650.

Which of the following is a required disclosure in the income statement when reporting the disposal of a component of the business?

Earnings per share from continuing operations, discontinued operations, and net income should be disclosed on the face of the income statement.

Which assumption or principle requires that all information significant enough to affect decisions of reasonably informed users should be reported in the financial statements?

Full disclosure

Where must earnings per share be disclosed in the financial statements to satisfy generally accepted accounting principles?

On the face of the income statement.

Which basic assumption is illustrated when a firm reports financial results on an annual basis?

Periodicity assumption

Which of the following is not a required component of financial statements prepared in accordance with generally accepted accounting principles?

President's letter to shareholders.

Which of the following statements is true about the accrual basis of accounting?

Revenues are recognized in the period the performance obligation is satisfied, regardless of the time period the cash is received.

The double-entry accounting system means

The dual effect of each transaction is recorded with a debit and a credit.

Which of the following statements best describes the purpose of closing entries?

To reduce the balances of revenue and expense accounts to zero so that they may be used to accumulate the revenues and expenses of the next period.

Which of the following is an example of managing earnings up?

Underestimating warranty claims.

Current assets are presented in the balance sheet in

order of their liquidity.

The balance sheet contributes to financial reporting by providing a basis for all of the following except a. determining the increase in cash due to operations. b. evaluating the capital structure of the enterprise. c. assessing the liquidity and financial flexibility of the enterprise. d. computing rates of return.

a. determining the increase in cash due to operations.

A soundly developed conceptual framework of concepts and objectives should

all of these answer choices are correct.

In preparing a statement of cash flows, cash flows from operating activities

can be calculated by appropriately adding to or deducting from net income those items in the income statement that do not affect cash.

Crane Company had revenues of $334000, expenses of $201000, and dividends of $47000. When Income Summary is closed to Retained Earnings, the amount of the debit or credit to Retained Earnings is a

credit of $133000. $334000 - $201000 = $133000.

Which of the following is not a required supplemental disclosure for the balance sheet? a. Contractual situations b.Accounting policies c. Contingencies d. Financial forecasts

d. Financial forecasts

Coronado Industries paid cash of $135000 on June 1, 2017 for one year's rent in advance and recorded the transaction with a debit to Prepaid Rent. The December 31, 2017 adjusting entry is

debit Rent Expense and credit Prepaid Rent, $78750.

the measurement principle includes the

historical cost principle and the fair value principle

The accounting principle of expense recognition is best demonstrated by

matching effort (expense) with accomplishment (revenue).

The income statement reveals

net earnings (net income) of a firm for a period of time.