Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

Which of the following clarifies information presented in the financial statements, as well as expanding upon it where additional detail is needed?

Accepted Answer

A) Auditor's report 
B) Management discussion and analysis section 
C) Notes to the financial statements 
D) President's state of the company report 
A) Auditor's report 
B) Management discussion and analysis section 
C) Notes to the financial statements 
D) President's state of the company report

Question 3

A corporation has which of the following set of characteristics?

Accepted Answer

A) Shared control, tax advantages, increased skills and resources 
B) Simple to set up and maintains control with founder 
C) Easier to transfer ownership and raise funds, no personal liability 
D) Harder to raise funds and gives owner control 
A) Shared control, tax advantages, increased skills and resources 
B) Simple to set up and maintains control with founder 
C) Easier to transfer ownership and raise funds, no personal liability 
D) Harder to raise funds and gives owner control

Question 4

The statement of cash flows would disclose the payment of a dividend

Accepted Answer

A) nowhere on the statement. 
B) in the operating activities section. 
C) in the investing activities section. 
D) in the financing activities section. 
A) nowhere on the statement. 
B) in the operating activities section. 
C) in the investing activities section. 
D) in the financing activities section.

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

Marvin Services Corporation had the following accounts and balances: $$\begin{array} { l r l r } 
\text { Accounts payable } & \$ 30,000 & \text { Equipment } & \$ 35,000 \
\text { Accounts receivable } & 5,000 & \text { Land } & 35,000 \
\text { Buildings } & ? & \text { Unearned service revenue } & 10,000 \
\text { Cash } & 15,000 & \text { Total stockholders' equity } & ?
\end{array}$$ If the balance of the Buildings account was $40,000 and $10,000 of Accounts Payable were paid in cash, what would be the total liabilities and stockholders' equity?

Accepted Answer

A) $90,000 
B) $78,000 
C) $80,000 
D) $120,000 
A) $90,000 
B) $78,000 
C) $80,000 
D) $120,000

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

Benedict Company compiled the following financial information as of December 31, 2017: $$\begin{array} { l r } 
\text { Service revenue } & \$ 1,120,000 \
\text { Common stock } & 240,000 \
\text { Equipment } & 320,000 \
\text { Operating expenses } & 1,000.000 \
\text { Cash } & 280,000 \
\text { Dividends } & 80,000 \
\text { Supplies } & 40,000 \
\text { Accounts payable } & 160,000 \
\text { Accounts receivable } & 120,000 \
\text { Retained earnings, } 1 / 1 / 17 & 600,000
\end{array}$$ Benedict's assets on December 31, 2017 are

Accepted Answer

A) $1,880,000. 
B) $1,360,000. 
C) $640,000. 
D) $760,000. 
A) $1,880,000. 
B) $1,360,000. 
C) $640,000. 
D) $760,000.

Question 11

Pinson Company began the year with retained earnings of $670,000. During the year, the company recorded revenues of $600,000, expenses of $380,000, and paid dividends of $140,000. What was Pinson's retained earnings at the end of the year?

Accepted Answer

A) $1,030,000 
B) $750,000 
C) $1,130,000 
D) $600,000 
A) $1,030,000 
B) $750,000 
C) $1,130,000 
D) $600,000

Question 12

The conceptual framework that underlines IFRS

Accepted Answer

A) is very similar to that used to develop GAAP. 
B) does not define assets or liabilities. 
C) does not define equity. 
D) does not define income or expenses. 
A) is very similar to that used to develop GAAP. 
B) does not define assets or liabilities. 
C) does not define equity. 
D) does not define income or expenses.

Question 13

Henson Company began the year with retained earnings of $380,000. During the year, the company recorded revenues of $500,000, expenses of $380,000, and paid dividends of $40,000. What was Henson's retained earnings at the end of the year?

Accepted Answer

A) $540,000 
B) $460,000 
C) $840,000 
D) $500,000 
A) $540,000 
B) $460,000 
C) $840,000 
D) $500,000

Question 14

Which financial statement would best indicate whether the company relies on debt or stockholders' equity to finance its assets?

Accepted Answer

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

Question 15

Borrowing money 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 16

Which of the following groups uses accounting information primarily to insure the entity is operating within prescribed rules?

Accepted Answer

A) Taxing authorities 
B) Regulatory agencies 
C) Labor Unions 
D) Management 
A) Taxing authorities 
B) Regulatory agencies 
C) Labor Unions 
D) Management

Question 17

Which activities involve putting the resources of the business into action to generate a profit?

Accepted Answer

A) Delivering 
B) Financing 
C) Investing 
D) Operating 
A) Delivering 
B) Financing 
C) Investing 
D) Operating

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

Two primary external users of accounting information are investors and creditors.

Accepted Answer

A) True 
 B)False

Question 20

U.S. standards are developed by the

Accepted Answer

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

Exam 1: Introduction to Financial Statements

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

Which of the following clarifies information presented in the financial statements, as well as expanding upon it where additional detail is needed?

A corporation has which of the following set of characteristics?

The statement of cash flows would disclose the payment of a dividend

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

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

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

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

Pinson Company began the year with retained earnings of $670,000. During the year, the company recorded revenues of $600,000, expenses of $380,000, and paid dividends of $140,000. What was Pinson's retained earnings at the end of the year?

The conceptual framework that underlines IFRS

Henson Company began the year with retained earnings of $380,000. During the year, the company recorded revenues of $500,000, expenses of $380,000, and paid dividends of $40,000. What was Henson's retained earnings at the end of the year?

Which financial statement would best indicate whether the company relies on debt or stockholders' equity to finance its assets?

Borrowing money is an example of a(n)

Which of the following groups uses accounting information primarily to insure the entity is operating within prescribed rules?

Which activities involve putting the resources of the business into action to generate a profit?

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

Two primary external users of accounting information are investors and creditors.

U.S. standards are developed by the

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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