Deck 2: Corporate Financial Statements

Question 1

Which of the following accounts are normally reported as current liabilities on a classified balance sheet?

A) Accounts payable and Prepaid insurance
B) Interest payable and Interest receivable
C) Income taxes payable and Salaries payable
D) Capital stock and Accounts payable

Answer 1

C

Question 2

Which one of the following is not categorized as a long-term assets?

A) Intangibles
B) Property, plant, and equipment
C) Inventory
D) Patents

Answer 2

C

Question 3

Paradise Company reports the following information at December 31, 2012: What is Natural Company's Gross Profit?

A) $ 6,100,000
B) $ 6,500,000
C) $ 5,500,000
D) $12,000,000

Answer 3

C

Question 4

Wing Company

- Refer to the information provided for Wing Company. Calculate current assets.

A) $498,000
B) $401,000
C) $854,000
D) $709,000

Question 5

Which set of items below are classified as current assets?

A) Accounts receivable, Net income, Inventory, and Dividends
B) Cash, Accounts receivable, Capital stock, and Sales
C) Net income, Cash, Office supplies, and Inventory
D) Cash, Accounts receivable, Inventory, and Office supplies

Question 6

Short-term investments are:

A) fixed assets.
B) accounts receivables.
C) intangible assets.
D) current assets.

Question 7

Which one of the following is a source of equity?

A) Notes payable
B) Accounts payable
C) Land
D) Contributed capital

Question 8

Which of the following are noncurrent assets?

A) Machinery and equipment
B) Accounts receivable
C) Inventories
D) Unearned revenues

Question 9

Wing Company

- Refer to the information provided for Wing Company. Calculate current liabilities.

A) $ 97,000
B) $211,000
C) $354,000
D) $143,000

Question 10

Peck Company
The Peck Company reported the following items on its financial statements for the year ending December 31, 2012.


- Refer to the information provided for Peck Company. How much will be reported as retained earnings on its balance sheet at December 31, 2012, if this is the first year of operations?

A) $45,000
B) $55,000
C) $85,000
D) $65,000

Question 11

Peck Company
The Peck Company reported the following items on its financial statements for the year ending December 31, 2012.


-Refer to the information provided for Peck Company. The income statement for Peck will report net income for the current year in the amount of:

A) $545,000.
B) $ 65,000.
C) $ 85,000.
D) $120,000.

Question 12

Which of the following best describes the term "current assets"?

A) The amount of total profits earned by a business since it began operations plus all other resources.
B) The amount of claim that the owners have in the business in the current year.
C) Assets expected to be converted into cash within one year or one.
D) The cumulative profits earned by a business less any dividends distributed in the current period.

Question 13

Jarret Company

-Refer to the information provided for Jarret Company. Calculate current assets.

A) $457,000
B) $615,000
C) $125,000
D) $340,000

Question 14

Which one of the following items is a classification on the classified balance sheet?

A) Operating accounts
B) Stockholders' equity
C) Revenues and expenses
D) Net income and dividends

Question 15

IPOD CORPORATION
IPOD Corporation's end-of-year balance sheet consisted of the following amounts.


- Refer to the information provided for IPOD Corporation. What is IPOD's retained earnings balance at the end of the current year?

A) $ 500,000
B) $1,100,000
C) $ 400,000
D) $1,200,000

Question 16

Which of the following would not be considered an intangible asset?

A) Franchise rights
B) Copyrights
C) Investments
D) Trademarks

Question 17

Which of the following is not a form of a business entity?

A) Sole proprietorship
B) Partnership
C) Entrepreneurship
D) Corporation

Question 18

In which of the following organization forms are the owners' legal responsibility for the debt of the business limited to the amount they invested in the business?

A) Sole proprietorship
B) Corporation
C) Partnership
D) Cooperative

Question 19

IPOD CORPORATION
IPOD Corporation's end-of-year balance sheet consisted of the following amounts.


-Refer to the information provided for IPOD Corporation. What amount should IPOD report on its balance sheet for total assets?

A) $2,000,000
B) $2,550,000
C) $2,100,000
D) $1,900,000

Question 20

If assets are expected to be realized in cash, sold, or consumed within one year, how are they reported on a classified balance sheet?

A) Property, plant, and equipment
B) Current assets
C) Intangible assets
D) Current liabilities

Question 21

Pacific Corporation Calculate the total amount of current assets for Pacific Corporation.

A) $ 842,000
B) $1,022,000
C) $ 732,000
D) $ 842,000

Question 22

Which of the following organizations is primarily responsible for establishing GAAP in the United States?

A) Securities and Exchange Commission (SEC)
B) Financial Accounting Standards Board (FASB)
C) International Accounting Standards Board (IASB)
D) Internal Revenue Service (IRS)

Question 23

On a multi-step income statement, subtracting total operating expenses from gross profit will equal:

A) gross margin.
B) operating income.
C) income before taxes.
D) net income.

Question 24

Which one of the following items is least likely to be found in a corporate annual report?

A) Notes to the financial statements
B) Internal budget reports
C) Auditor's report
D) Management's discussion and analysis

Question 25

Gain and losses are reported on the multi-step income statement under which of the following classifications?

A) Cost of sales
B) Other revenues and expenses
C) Operating revenues and expenses
D) Gross margin

Question 26

Trump Company

- Refer to the information provided for Trump Company. What is Trump Company's net income?

A) $390,000
B) $200,000
C) $273,000
D) $280,000

Question 27

Most businesses in the United States are:

A) sole proprietorships.
B) partnerships.
C) corporations.
D) separate entities.

Question 28

Trump Company

- Refer to the information provided for Trump Company. What is Trump Company's income from operations?

A) $160,000
B) $280,000
C) $220,000
D) $120,000

Question 29

Trump Company

-Refer to the information provided for Trump Company. By what amount will net income on a single-step income statement differ from net income on a multi-step income statement if Trump Company prepares both formats?

A) $12,000
B) $8,000
C) $0
D) $6,000

Question 30

Which of the following would appear on an income statement?

A) Unearned revenue
B) Cost of sales
C) Retained earnings
D) Dividends

Question 31

Which of the following items will be found in a corporate annual report?

A) Industry standards
B) Notes to the financial statements
C) Selected financial data from non-competitor companies
D) Management's statement on auditors responsibility for the financial statements.

Question 32

Which of the items below is a business entity?

A) Sole proprietorship
B) Labor union
C) Entreprenuersip
D) Political union

Question 33

In which section of the annual report would you find: "The financial statements, in our opinion, present fairly the financial position, operating results, and cash flows, in conformity with U.S. generally accepted accounting principles"?

A) Management report
B) Notes to the financial statements
C) Management's discussion and analysis
D) Independent auditor's report

Question 34

Which organization has the power to set accounting rules for companies whose stock is publicly-traded in the U.S. stock markets, but has delegated its power to another organization?

A) International Accounting Standards Board (IASB)
B) Financial Accounting Standards Board (FASB)
C) General Association of Accounting Practitioners (GAAP)
D) Securities and Exchange Commission (SEC)

Question 35

Management's discussion and analysis:

A) is a report of the independent accountants.
B) can be a substituted for the notes to the financial statements.
C) provides a discussion and analysis of the financial activities of the company by the company's management.
D) provides assurances that the auditors are responsible for the financial statements.

Question 36

The Securities Exchange Commission (SEC) is concerned with:

A) developing a new conceptual framework in order to reduce differences in financial reports for global companies.
B) setting accounting rules for all companies that are incorporated in the United States.
C) setting accounting rules for publicly-traded companies in the United States.
D) working to reduce differences in accounting reports issued by governmental units.

Question 37

Which of the following represents one of the purposes of the auditor's report?

A) To provide a place for management to justify questionable items in the statements
B) To provide comparative ratios for the company's financial data
C) To provide the CPA's opinion of the fairness of the financial statements
D) To satisfy the need for full disclosure of all the facts relevant to a company's results and financial position

Question 38

As used in accounting, the "Notes to the Financial Statements" should be:

A) shown at the bottom of the income statement.
B) shown in the notes section of the balance sheet.
C) included as an integral part of the financial statements.
D) considered an optional part of the financial statements.

Question 39

A question asked by stockholders is, "How much gross profit did the company make?" What financial statement would have the "gross profit" indicated as a separate line item?

A) The balance sheet because retained earnings represents gross profits
B) The statement of cash flows as cash inflows and outflows represents gross profits
C) The multi-step income statement
D) The single-step income statement

Question 40

The list below contains several items that appear on a multi-step income statement. Select the choice that lists the items in the order they would appear on a multi-step income statement.

A) 6, 5, 4, 7, 1, 2, 3
B) 7, 6, 1, 4, 2, 3, 5
C) 6, 5, 4, 1, 7, 2, 3
D) 6, 7, 4, 1, 2, 3, 5

Question 41

Presently, the dominant body in the development of accounting principles in the United States is the:

A) American Institute of Certified Public Accountants (AICPA).
B) American Accounting Association (AAA).
C) Financial Accounting Standards Board (FASB).
D) Institute of Management Accountants (IMA).

Question 42

The percent of fixed assets to total assets is an example of:

A) vertical analysis.
B) solvency analysis.
C) profitability analysis.
D) horizontal analysis.

Question 43

The analysis that calculates both the absolute and percentage change in each account balance on a financial statement is called:

A) vertical analysis.
B) solvency analysis.
C) profitability analysis.
D) horizontal analysis.

Question 44

What type of analysis is indicated by the following?

A) Vertical analysis
B) Horizontal analysis
C) Liquidity analysis
D) Common-size analysis

Question 45

In performing a vertical analysis, the base for cost of goods sold is:

A) total selling expenses.
B) net sales.
C) total expenses.
D) total revenues.

Question 46

Select the type of business that is most likely to obtain large amounts of resources by issuing stock.

A) Partnership
B) Corporation
C) Proprietorship
D) None are correct

Question 47

Bloom's Garden Center Company
Selected data from the financial statements of Bloom's Garden Center are provided below.


-Refer to the selected data provided for Bloom's Garden Center. Which of the following would result from a vertical analysis of Bloom's income statement?

A) The accounts receivable turnover ratio is 6.35 in 2012.
B) Gross profit is 50% of net sales for 2012.
C) Cost of goods sold increased $20,000 or 11.11% during 2012.
D) Net sales is 88.9% of total assets for 2012.

Question 48

Countries outside the U.S. use financial accounting standards issued by the:

A) LLC.
B) SEC.
C) IASB.
D) GAAP.

Question 49

In a common-size financial statement, which of the following is given a percentage of 100 percent?

A) Total liabilities
B) Net income
C) Costs of goods sold
D) Total assets

Question 50

Bloom's Garden Center Company
Selected data from the financial statements of Bloom's Garden Center are provided below.


-Refer to the selected data provided for Bloom's Garden Center. Which of the following would result from a horizontal analysis of Bloom's income statement?

A) Net sales increased $100,000 during 2012, or 33.33% of the 2011 amount.
B) Gross profit is 50% of net sales for 2012.
C) Accounts receivable is 15.6% of total assets in 2012.
D) The accounts receivable turnover ratio is 6.35 times in 2012.

Question 51

An entity that is organized according to state or federal statutes and in which ownership is divided into shares of stock is a:

A) proprietorship.
B) corporation.
C) partnership.
D) governmental unit.

Question 52

The independent auditor's report does which of the following?

A) Describes which financial statements are covered by the audit
B) Gives the auditor's opinion regarding the fairness of the financial statements
C) Summarizes what the auditor did
D) States that the financial statements are truthful

Question 53

Which of the following is not a characteristic of a corporation?

A) Corporations are organized as a separate legal taxable entity.
B) Ownership is divided into shares of stock.
C) Corporations experience an ease in obtaining large amounts of resources by issuing stock.
D) For tax purposes, a corporation's business is not separated from the stockholder.

Question 54

Bloom's Garden Center Company
Selected data from the financial statements of Bloom's Garden Center are provided below.


- Refer to the selected data provided for Bloom's Garden Center. Which of the following would result from a horizontal analysis of Bloom's balance sheet?

A) Accounts receivable increased $14,000 or 25% during 2012.
B) Accounts receivable is around five times larger than inventory in 2012.
C) Accounts receivable is 15.6% of total assets in 2012.
D) The accounts receivable turnover ratio is 6.35 times in 2012.

Question 55

An analysis in which all the components of an income statement are expressed as a percentage of net sales is called:

A) vertical analysis.
B) horizontal analysis.
C) liquidity analysis.
D) common-size analysis.

Question 56

Which of the following below generally is the most useful in analyzing companies of different sizes?

A) Comparative statements
B) Common-size financial statements
C) Price-level accounting
D) Audit report

Question 57

Bloom's Garden Center Company
Selected data from the financial statements of Bloom's Garden Center are provided below.


-Refer to the selected data provided for Bloom's Garden Center. Which of the following would result from a horizontal analysis of Bloom's income statement?

A) Cost of goods sold is 50% of net sales for 2012.
B) Gross profit is 50% of net sales for 2012.
C) Cost of goods sold increased $20,000 or 11.1% during 2012.
D) Inventory decreased $5,000 or 25% during 2011.

Question 58

Vertical analysis is also known as:

A) perpendicular analysis.
B) trend analysis.
C) common-size analysis.
D) straight-line analysis.

Question 59

The initials GAAP stand for:

A) General Acceptance of Accounting Procedures.
B) Generally Accepted Accounting Plans.
C) Generally Accepted Accounting Principles.
D) Generally Accepted Accounting Practices.

Question 60

Which one of the following is the authoritative body having the primary responsibility for developing accounting principles in the United States?

A) FASB
B) IRS
C) SEC
D) AICPA

Question 61

The following information is taken from Jackson Company's balance sheet as December 31, 2012:
Using the information provided for Jackson Company, answer the following questions:

Question 62

Barron Corporation
The accountant for Barron Corporation prepared the following list of account balances from the company's records for the year ended December 31, 2012.
Determine the following amounts for Barron Corporation.

Question 63

Which of the following statements is true regarding a corporation's purchase of treasury stock?

A) The cost of treasury stock is a reduction in stockholders' equity.
B) Dividends must still be paid on treasury stock because it is still issued.
C) Treasury stock is reported as an asset because it is considered an investment in the corporation's own stock.
D) Treasury stock is no longer considered issued once it is back in the hands of the issuer.

Question 64

Stimulus Corporation
All of the items from Stimulus Corporation's income statement for the year ending December 31, 2012, are presented below.
Refer to the informaion of Stimulus Corporation. How much is net income for the year ended December 31, 2012? If Stimulus Corporation had used a single-step statement what would be their net income and by how much would net income be different than if the multi-step approach had been used? Explain.

Question 65

How is a classified balance sheet useful to decision makers?

Question 66

Significant changes in stockholders' equity are reported in:

A) income statement.
B) retained earnings statement.
C) statement of stockholders' equity.
D) statement of cash flows.

Question 67

Revenue and expense data for Martinez Company are as follows:

Question 68

All of the following are normally found in a corporation's stockholders' equity section except:

A) common stock.
B) additional paid-in capital.
C) dividends in arrears.
D) retained earnings.

Question 69

Which of the following is one of the elements of stockholders' equity?

A) Income tax payable
B) Dividends payable
C) Retained earnings
D) Accounts payable

Question 70

Classify the following items according to the financial statement on which each belongs, either the income statement (IS), statement of retained earnings (RE), or the balance sheet (BS). Also indicate whether each is a revenue (R), expense (E), asset (A), liability (L), or stockholders' equity (SE) item.

Question 71

Which one of the following financial statements shows how and why each equity account in the company's balance sheet changed from one year to the next?

A) Balance sheet
B) Statement of retained earnings
C) Income statement
D) Statement of stockholders' equity

Question 72

The comparative balance sheet of Ramos Company appears below:
RAMOS COMPANY
Comparative Balance Sheet
December 31, 2012
Instructions

Question 73

Presented below are selected data from the balance sheet of Stuff Company for 2012. The figures are expressed in millions.

Question 74

Stockholders' equity:

A) is usually equal to cash on hand.
B) includes paid-in capital and liabilities.
C) includes retained earnings and paid-in capital.
D) is shown on the income statement.

Question 75

How does the definition of a current liability relate to that of a current asset?

Question 76

The balance in the retained earnings account represents:

A) cash in the bank.
B) the amount of cash available for dividends.
C) accumulated revenues from all prior years of operations.
D) accumulated earnings that have not been distributed to stockholders.

Question 77

Most financial reports contain the following list of basic elements. For each element identify the person(s) who prepared the element and describe the information a user would expect to find in each element. Some information is verifiable, while other information is subjectively chosen by management. Indicate whether the information is each element is verifiable.

Question 78

Presented below are selected data from the accounting records for Hot Rod Hanks Co. for 2012.

Question 79

Which of the following statements is true regarding vertical analysis?

A) Cross-sectional analysis compares financial data for a single entity over time.
B) Common-size financial statements are used to compare companies of different sizes.
C) Trend analysis compares a company's financial data to industry averages.
D) Time series analysis is effective for comparison of different companies over time.

Question 80

Comparative information taken from the Carson Company financial statements is shown below:
Instructions
Using horizontal analysis, show the percentage change from 2011 to 2012 with 2011 as the base year.