Exam 1: Introduction to Business Activities and Overview of Financial Statements and the Reporting Process

The same asset can have different measurements for tax purposes, for financial reporting purposes, and for internal managerial decision-making purposes.

The balance sheet of Allhear, a communications firm, for the year ended December 31, 20x1, showed current assets of $20 million, current liabilities of $16 million, shareholders' equity of $17 million, and noncurrent assets of $29 million. Compute the amount of noncurrent liabilities on Allhear's balance sheet at the end of 20x1.

The income statement of Ride-on Motors, an automotive manufacturer, for the year ended December 31, 20x1, reported revenues $7,400 million and cost of sales of $6,000 million.In addition, it reported other operating expenses of $900 million, a loss of $2 million on the sale of a business, and net financing income of $200 million.Tax expense for the year was $100 million.Compute the amount of net income or loss that Ride-on Motors reported for 20x1.

Expenses are:

Most firms report the amounts in their financial statements using _____.

Current assets, typically held and used for several years, include land, buildings, equipment, patents; and long-term investments in securities.

FASB board members make standard-setting decisions guided by a conceptual framework that addresses the objectives of financial reporting and qualitative characteristics of accounting information.. Briefly describe the objectives of financial reporting and qualitative characteristics of accounting information

To increase cash flow, a manufacturer might:

FASB board members make standard-setting decisions guided by a conceptual framework that addresses the qualitative characteristics of accounting information. Which of the qualitative characteristics of accounting information holds that the information should represent what it is supposed to represent, in the sense that the information should correspond to the phenomenon being reported, and it should be verifiable and free from bias?

Regulatory bodies generally require firms whose securities trade publicly (for example, common shares) to obtain an audit of their financial reports by _____.

The purpose of the conceptual framework developed by the Financial Accounting Standards Board (FASB) is to guide?

A _____ year ends on a date that is determined by the firm, perhaps based on its business model (for example, many retailers choose the end of January).

Management operates the productive capacity of the firm to generate earnings.Operating activities include the following except for:

_____ are creditors' claims for funds, usually because they have provided funds, or goods and services, to the firm.

The accrual basis does not match the cost of the efforts required to generate inflows with the inflows themselves.

FASB board members make standard-setting decisions guided by a conceptual framework that addresses the qualitative characteristics of accounting information. Which of the qualitative characteristics of accounting information holds that the information should facilitate comparisons across firms and over time?

An income statement connects two successive _____ through its effect on retained earnings.

_____ measure the inflows of assets (or reductions in liabilities) from selling goods and providing services to customers.

Compute the missing balance sheet amounts in each of the three independent cases that follow: CASE A CASE B CASE C Noncurrent assets \ 460,000 \ 90,000 \ 280,000 Shareholders' equity 870,000 340,000 Total assets B E 500,000 Current liabilities 270,000 20,000 I Current assets 250,000 F J Noncurrent liabilities 100,000 G K Total liabilities and shareholders' equity C 990,000 L Current assets minus current liabilities D H 200,000

Each firm makes financing decisions about the proportion of funds to obtain from owners, long-term creditors, and short-term creditors.