Question 1

International standards are referred to as

Accepted Answer

A) IFRS. 
B) GAAP. 
C) IASB. 
D) FASB. 
A) IFRS. 
B) GAAP. 
C) IASB. 
D) FASB.

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

A local retail shop has been operating as a sole proprietorship. The business is growing and now the owner wants to incorporate. Which of the following is not a reason for this owner to incorporate?

Accepted Answer

A) Ability to raise capital for expansion 
B) Desire to limit the owner's personal liability 
C) The prestige of operating as a corporation 
D) The ease in transferring shares of the corporation's stock 
A) Ability to raise capital for expansion 
B) Desire to limit the owner's personal liability 
C) The prestige of operating as a corporation 
D) The ease in transferring shares of the corporation's stock

Question 4

Which financial statement is prepared first?

Accepted Answer

A) Balance sheet 
B) Income statement 
C) Retained earnings statement 
D) Statement of cash flows 
A) Balance sheet 
B) Income statement 
C) Retained earnings statement 
D) Statement of cash flows

Question 5

Elston Company compiled the following financial information as of December 31, 2017: $$\begin{array} { l r } 
\text { Service revenue } & \$ 840,000 \
\text { Common stock } & 180,000 \
\text { Equipment } & 240,000 \
\text { Operating expenses } & 750,000 \
\text { Cash } & 210,000 \
\text { Dividends } & 60,000 \
\text { Supplies } & 30,000 \
\text { Accounts payable } & 120,000 \
\text { Accounts receivable } & 90,000 \
\text { Retained earnings, } 1 / 1 / 17 & 450,000
\end{array}$$ Elston's assets on December 31, 2017 are

Accepted Answer

A) $1,410,000. 
B) $1,020,000. 
C) $480,000. 
D) $570,000. 
A) $1,410,000. 
B) $1,020,000. 
C) $480,000. 
D) $570,000.

Question 6

The common characteristic possessed by all assets is

Accepted Answer

A) long life. 
B) great monetary value. 
C) tangible nature. 
D) future economic benefit. 
A) long life. 
B) great monetary value. 
C) tangible nature. 
D) future economic benefit.

Question 7

External users of accounting information, like the Internal Revenue Service, are most commonly known as

Accepted Answer

A) taxing authorities. 
B) labor unions. 
C) customers. 
D) regulatory agencies. 
A) taxing authorities. 
B) labor unions. 
C) customers. 
D) regulatory agencies.

Question 8

Net income results when

Accepted Answer

A) Assets > Liabilities. B) Revenues = Expenses. C) Revenues > Expenses. D) Revenues < Expenses. A) Assets > Liabilities. B) Revenues = Expenses. C) Revenues > Expenses. D) Revenues < Expenses.

Question 9

Net income will result during a time period when

Accepted Answer

A) assets exceed liabilities. 
B) assets exceed revenues. 
C) expenses exceed revenues. 
D) revenues exceed expenses. 
A) assets exceed liabilities. 
B) assets exceed revenues. 
C) expenses exceed revenues. 
D) revenues exceed expenses.

Question 10

If total liabilities increased by $90,000 and stockholders' equity increased by $30,000 during a period of time, then total assets must change by what amount and direction during that same period?

Accepted Answer

A) $120,000 decrease 
B) $120,000 increase 
C) $150,000 increase 
D) $180,000 increase 
A) $120,000 decrease 
B) $120,000 increase 
C) $150,000 increase 
D) $180,000 increase

Question 11

Which type of corporate information is readily available to investors?

Accepted Answer

A) Financial comparison of operating alternatives 
B) Marketing strategies for a product that will be introduced in eighteen months 
C) Forecasts of cash needs for the upcoming year 
D) Amount of net income retained in the business 
A) Financial comparison of operating alternatives 
B) Marketing strategies for a product that will be introduced in eighteen months 
C) Forecasts of cash needs for the upcoming year 
D) Amount of net income retained in the business

Question 12

Buying assets needed to operate a business is an example of a(n)

Accepted Answer

A) delivering activity. 
B) financing activity. 
C) investing activity. 
D) operating activity. 
A) delivering activity. 
B) financing activity. 
C) investing activity. 
D) operating activity.

Question 13

Which of the following is an asset?

Accepted Answer

A) Mortgage payable 
B) Investments 
C) Common stock 
D) Retained earnings 
A) Mortgage payable 
B) Investments 
C) Common stock 
D) Retained earnings

Question 14

Which of the following is not a common way that managers use the balance sheet?

Accepted Answer

A) To analyze the balances of assets, liabilities, and stockholders' equity throughout the accounting period 
B) To determine if the cash balance is sufficient for future needs 
C) To analyze the balance between debt and common stock financing 
D) To analyze the balance of accounts receivable on the last day of the accounting period 
A) To analyze the balances of assets, liabilities, and stockholders' equity throughout the accounting period 
B) To determine if the cash balance is sufficient for future needs 
C) To analyze the balance between debt and common stock financing 
D) To analyze the balance of accounts receivable on the last day of the accounting period

Question 15

Which of the following is a user of accounting information with an indirect financial interest in a business?

Accepted Answer

A) A financial adviser 
B) Management 
C) Investor 
D) Creditor 
A) A financial adviser 
B) Management 
C) Investor 
D) Creditor

Question 16

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.

Accepted Answer

A) True 
 B)False

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

Which of the following groups uses accounting information to determine whether the company's net income will result in a stock price increase?

Accepted Answer

A) Investors in common stock 
B) Marketing managers 
C) Creditors 
D) Chief Financial Officer 
A) Investors in common stock 
B) Marketing managers 
C) Creditors 
D) Chief Financial Officer

Question 19

Lankston Company began the year by issuing $120,000 of common stock for cash. The company recorded revenues of $1,100,000, expenses of $960,000, and paid dividends of $60,000. What was Lankston's net income for the year?

Accepted Answer

A) $80,000 
B) $200,000 
C) $140,000 
D) $260,000 
A) $80,000 
B) $200,000 
C) $140,000 
D) $260,000

Question 20

The United States and the international standard-setting environment are primarily driven by meeting the needs of

Accepted Answer

A) investors and creditors. 
B) tax authorities. 
C) central government planners. 
D) academic researchers. 
A) investors and creditors. 
B) tax authorities. 
C) central government planners. 
D) academic researchers.

Exam 1: Introduction to Financial Statements

International standards are referred to as

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

A local retail shop has been operating as a sole proprietorship. The business is growing and now the owner wants to incorporate. Which of the following is not a reason for this owner to incorporate?

Which financial statement is prepared first?

The common characteristic possessed by all assets is

External users of accounting information, like the Internal Revenue Service, are most commonly known as

Net income results when

Net income will result during a time period when

If total liabilities increased by $90,000 and stockholders' equity increased by $30,000 during a period of time, then total assets must change by what amount and direction during that same period?

Which type of corporate information is readily available to investors?

Buying assets needed to operate a business is an example of a(n)

Which of the following is an asset?

Which of the following is not a common way that managers use the balance sheet?

Which of the following is a user of accounting information with an indirect financial interest in a business?

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.

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

Which of the following groups uses accounting information to determine whether the company's net income will result in a stock price increase?

Lankston Company began the year by issuing $120,000 of common stock for cash. The company recorded revenues of $1,100,000, expenses of $960,000, and paid dividends of $60,000. What was Lankston's net income for the year?

The United States and the international standard-setting environment are primarily driven by meeting the needs of

A Further Look at Financial Statements

The Accounting Information System

Merchandising Operations and the Multiple-Step Income Statement

Reporting and Analyzing Inventory

Fraud, Internal Control, and Cash

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Liabilities

Reporting and Analyzing Stockholders Equity

Statement of Cash Flows

Financial Analysis: The Big Picture

Managerial Accounting

Job Order Costing

Process Costing

Activity-Based Costing

Cost-Volume-Profit

Cost-Volume-Profit Analysis: Additional Issues

Incremental Analysis

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Planning for Capital Investments

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