Deck 1: Accounting As a Form of Communication

Question 1

What is the name of the branch of accounting concerned with providing managers and administrators with information to facilitate the planning and control of business operations?

A)Management accounting
B)Auditing
C)Financial accounting
D)Bookkeeping

Answer 1

A

Question 2

The inflow of assets resulting from the sale of products and services is called a(n)

A)asset
B)liability
C)revenue
D)expense

Answer 2

C

Question 3

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

A)The amount of total profits earned by a business since it began operations.
B)The amount of interest or claim that the owners have in the business.
C)The economic resources of a business entity.
D)The cumulative profits earned by a business less any dividends distributed.

Answer 3

C

Question 4

Which one of the following business decisions will least likely require financial information?

A)The National Bank is reviewing the loan application from Petra's Restaurant.
B)Petra's Restaurant is attempting to sell its stock to the public.
C)The labor union representing Winn's Fitness Spa employees is negotiating a pay raise as part of a new labor agreement.
D)Petra's Restaurant management is deciding whether to wash its catering vans today or tomorrow.

Question 5

Which of the following would be internal users of accounting information?

A)Customers and vendors
B)Employees and managers
C)Government and banks
D)Employees and customers

Question 6

Which of the following best describes the term "expenses"?

A)The amount of total profits earned by a business since it began operations.
B)The amount of interest or claim that the owners have in the business.
C)The future economic resources of a business entity.
D)The outflow of assets resulting from the sale of goods and services.

Question 7

Which one of the following is least likely to be a user of financial information of a grocery store?

A)The manager of the grocery store.
B)The supplier of milk to the grocery store.
C)A stockbroker looking for a possible investment.
D)A customer at the grocery store.

Question 8

Which of the following statements best describes the term "revenues"?

A)Revenues represent an outflow of assets resulting from the sale of goods or services.
B)Revenues represent assets received from the sale of products or services.
C)Revenues represent assets used or consumed in the sale of products or services.
D)Revenues represent the dollar amount of bonds sold to the public.

Question 9

The costs of doing business through the sale of goods and services are called

A)Net income
B)Expenses
C)Revenues
D)Dividends

Question 10

Which of the following would be classified as external users of financial statements?

A)Stockholders and management of the company
B)The controller of the company and a company's stockholders
C)The company's marketing managers
D)The creditors and stockholders of the company

Question 11

The three forms of business entities are:

A)Government,cooperatives,and philanthropic organizations
B)Financing,investing,and operating
C)Sole proprietorships,partnerships,and corporations
D)Wholesaler,manufacturer,and retailer

Question 12

Trailways Busline is an example of a

A)producer
B)supplier
C)retailer
D)service provider

Question 13

Which one of the following is not one of the three activities included in the definition of accounting?

A)Communicating
B)Identifying
C)Measuring
D)Operating

Question 14

Which one of the following is not an external user of financial statements?

A)Suppliers
B)Creditors
C)Investors
D)The company's controller

Question 15

Which of the following statements would be true if you own stock in a company?

A)You are an owner of the retained earnings and capital stock of the company.
B)You have a claim to the assets of the business
C)You have the right to receive interest on an annual basis.
D)You have the right to a portion of the company's revenues each accounting period.

Question 16

All of the following are examples of manufacturers except:

A)Whirlpool
B)Boeing
C)Amazon.com
D)Ford

Question 17

Which one of the following is not an external user of financial information?

A)Company management
B)Internal Revenue Service
C)Creditors
D)Stockholders

Question 18

Which of the following invests funds into a business and is considered an owner?

A)Stockholders
B)Creditors
C)Bankers
D)Lenders

Question 19

Clip Joint Company is ready to sell its bonds.Which one of the following financial questions is most relevant to the issue of the bonds and that investors will most likely want answered before they purchase the bonds?

A)How many product lines did Clip Joint Company have last year?
B)What will be Clip Joint Company's cost to start operations in another city?
C)How much debt does Clip Joint Company already have?
D)Will Clip Joint Company pay dividends?

Question 20

Which one of the following events involves a liability for a business?

A)Loans to be repaid to banks
B)Inventories purchased for cash
C)Amounts invested by the owners
D)Stock sold to the general public

Question 21

Leary Corporation's end-of-year balance sheet consisted of the following amounts: What amount should Leary report on its balance sheet for total assets?

A)$175,000
B)$141,000
C)$195,000
D)$194,000

Question 22

Which of the following is an organization that lends funds to a business entity and expects repayment of the funds?

A)A partner
B)A stockholder
C)An owner
D)A creditor

Question 23

Which one of the following items is correct concerning the time element of financial statements?

A)The balance sheet covers a period of time.
B)The statement of retained earnings explains changes during a particular period.
C)An income statement lists amounts at a specific point in time.
D)Both the income statement and the balance sheet cover a period of time.

Question 24

Which one of the following is an economic obligation for a business entity?

A)Salaries paid to employees for services rendered
B)Amounts owed to creditors
C)Materials used in manufacturing products
D)Payment of rent for the next year

Question 25

Harbor City Corporation's end-of-year balance sheet consisted of the following amounts: What is Harbor City's retained earnings balance at the end of the current year?

A)$10,000
B)$110,000
C)$160,000
D)$170,000

Question 26

Which of the following statements is true?

A)Profits distributed to the creditors are called dividends.
B)The balance sheet shows the assets,liabilities,and profits of a company.
C)Dividends are an expense,and are reported on the income statement as a deduction from net income.
D)The income statement reports the revenues and expenses of a company.

Question 27

Which one of the following correctly represents one of the basic financial statement models?

A)Assets - Liabilities = Net Income
B)Assets + Liabilities = Owners' Equity
C)Revenues + Expenses = Net Income
D)Beginning Retained Earnings + Net Income - Dividends = Ending Retained Earnings

Question 28

Which financial statement would you analyze to determine if a company distributed any of its profits to its shareholders?

A)Balance Sheet
B)Statement of Retained Earnings
C)Income Statement
D)Statement of Public Accounting

Question 29

Which financial statement would you refer to in order to determine whether a company owed funds to creditors?

A)Balance Sheet
B)Statement of Retained Earnings
C)Income Statement
D)Statement of Public Accounting

Question 30

Harbor City Corporation's end-of-year balance sheet consisted of the following amounts: What amount should Harbor City report on its balance sheet for total assets?

A)$110,000
B)$155,000
C)$170,000
D)$190,000

Question 31

Which statement summarizes the income earned and the dividends paid?

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

Question 32

Which one of the following groups is considered an internal user of financial statements?

A)A bank reviewing a loan application from a corporation.
B)The labor union representing employees of a company that is involved in labor negotiations
C)The financial analysts for a brokerage firm who are preparing recommendations for the firm's brokers on companies in a certain industry,
D)Factory managers that supervise production line workers.

Question 33

You are a potential stockholder and are concerned that a particular company you are ready to invest in might have too much debt.Which financial statement would provide you information needed in order to evaluate your concern?

A)Balance sheet
B)Income statement
C)Statement of retained earnings
D)Statement of public accounting

Question 34

Which one of the following financial statements reports an entity's financial position at a specific date?

A)Balance sheet
B)Statement of retained earnings
C)Income statement
D)Both the income statement and the balance sheet

Question 35

Which of the following terms best describes a distribution of the net income of a business to its owners?

A)Revenue
B)Dividends
C)Earnings
D)Monetary unit

Question 36

Which of the following is the correct date format for the financial statement heading?

A)Balance sheet for the year ended June 30,2014
B)Income statement at December 31,2014
C)Balance sheet at December 31,2014
D)Statement of retained earnings at December 31,2014

Question 37

Which of the following best describes the term "retained earnings"?

A)The amount of total profits earned by a business since it began operations.
B)The amount of interest or claim that the owners have on the assets of the business.
C)The future economic resources of a business entity.
D)The cumulative profits earned by the business less any dividends distributed.

Question 38

How is the balance sheet linked to the other financial statements?

A)The amount of retained earnings reported on the balance sheet is equal to net income.
B)Retained earnings is added to total assets and reported on the balance sheet.
C)Net income increases retained earnings on the statement of retained earnings,which ultimately increases retained earnings on the balance sheet.
D)There is no link between the balance sheet and other statements,as each contains different accounts and provides different information.

Question 39

Which one of the following is a correct expression of the accounting equation?

A)Assets + Liabilities = Owners' Equity
B)Assets = Liabilities - Owners' Equity
C)Assets + Owners' Equity = Liabilities
D)Assets = Liabilities + Owners' Equity

Question 40

Which one of the following items appears on a balance sheet?

A)Accounts payable
B)Sales revenue
C)Utilities expense
D)Cost of goods sold

Question 41

The following information is provided by the Ferrara Corporation: Calculate Ferrara Corporation's expenses.

A)$20,000
B)$30,000
C)$40,000
D)Cannot tell from the information provided.

Question 42

Lewis Corporation reported the following information for the year ended December 31,2014: What was the balance of Lewis' retained earnings at January 1,2014?

A)$21,000
B)$29,000
C)$31,000
D)$35,000

Question 43

The following information is provided by the Ferrara Corporation: What is the net income for Ferrara Corp.?

A)$10,000
B)$20,000
C)$30,000
D)Unable to tell from the information provided.

Question 44

Mobile Power Corp.reported the following information for the year ended December 31,2014. What was the retained earnings balance for Mobile Power at December 31,2013?

A)$ 165,000
B)$ 168,000
C)$ 182,000
D)$ 192,000

Question 45

Aloha Company reports the following information at December 31,2014: What is Aloha Company's net income?

A)$ 15,000
B)$ 45,000
C)$ 55,000
D)$ 65,000

Question 46

Native Dave's Consultants had the following balance sheet amounts at the beginning of the year: During the year,total assets increased by $100,000 and total liabilities increased by $40,000.The company also paid $30,000 in dividends.No other transactions occurred except revenues and expenses.How much is net income for the year?

A)$30,000
B)$60,000
C)$70,000
D)$90,000

Question 47

Dimension Inc.had net income for 2014 of $24,000.It declared and paid a $13,000 cash dividend in 2014.If the company's retained earnings for the end of the year was $39,600,what was the company's retained earnings balance at the beginning of 2014?

A)$28,600
B)$50,600
C)$76,600
D)$2,600

Question 48

Leary Corporation's end-of-year balance sheet consisted of the following amounts: What is Leary's total liabilities balance at the end of the current year?

A)$3,000
B)$110,000
C)$63,000
D)$173,000

Question 49

Marcos Inc.had net income for 2014 of $40,000.It declared and paid a $3,500 cash dividend in 2014.If the company's retained earnings for the end of the year was $38,200,what was the company's retained earnings balance at the beginning of 2014?

A)$81,700
B)$74,700
C)$5,300
D)$1,700

Question 50

Las Palmas Company reported the following items on its financial statements for the year ending December 31,2014: How much will be reported as retained earnings on Las Palmas' balance sheet at December 31,2014,if this is the first year of operations?

A)$ 45,000
B)$ 65,000
C)$ 85,000
D)Not enough information is provided.

Question 51

Leary Corporation's end-of-year balance sheet consisted of the following amounts: What is Leary's retained earnings balance at the end of the current year?

A)$10,000
B)$3,000
C)$66,000
D)$110,000

Question 52

Las Palmas Company reported the following items on its financial statements for the year ending December 31,2014: The income statement for Las Palmas will report net income for the current year in the amount of

A)$ 45,000
B)$ 65,000
C)$ 85,000
D)$ 465,000

Question 53

If a company has $152,000 of revenues,declares and pays $55,000 in dividends,and has net income of $89,000,how much were expenses for the year?

A)$ 8,000
B)$ 63,000
C)$144,000
D)Unable to determine the amount due to incomplete information.

Question 54

Cerrato Company has assets of $350,000,liabilities of $130,000,and retained earnings of $180,000.How much is total owners' equity?

A)$ 40,000
B)$ 170,000
C)$ 220,000
D)$ 350,000

Question 55

Gyro's Shop reported a net loss of $15,000 and total expenses of $80,000.How much are total revenues?

A)$ 15,000
B)$ 65,000
C)$ 95,000
D)The answer cannot be determined from the information given.

Question 56

Lewis Corporation reported the following information for the year ended December 31,2014: What was the economic effect of the payment of Lewis' dividends?

A)The dividend reduced net income for 2014.
B)The dividend should be equal to net income if the company's accounting equation is in balance.
C)The dividends reduce total retained earnings for the year.
D)The dividends must be paid whenever Raymond Corp.reports net income.

Question 57

Leary Corporation's end-of-year balance sheet consisted of the following amounts: What is Leary's owners' equity balance at the end of the current year?

A)$3,000
B)$110,000
C)$63,000
D)$173,000

Question 58

Volt Corp.reported the following information for the year ended December 31,2014: How much was paid out in dividends by Volt in 2014?

A)$ 20,000
B)$ 25,000
C)$ 30,000
D)$ 50,000

Question 59

On January 1,2014,A-Best Company's balance in retained earnings was $70,000.At the end of the year,December 31,2014,the balance in retained earnings was $94,000.During 2014,the company earned net income of $40,000.How much were dividends?

A)$16,000
B)$24,000
C)$40,000
D)$64,000

Question 60

On January 1,2014,Francisco Company's balance in retained earnings was $70,000.During 2014,the company earned net income of $43,000 and paid $15,000 in dividends.Calculate the retained earnings balance at December 31,2014.

A)$42,000
B)$90,000
C)$98,000
D)$113,000

Question 61

To which of the following entities must a company report if it sells its stock on the organized stock market?

A)American Institute of Certified Public Accountants (AICPA)
B)American Accounting Association (AAA)
C)International Accounting Standards Board (IASB)
D)Securities and Exchange Commission (SEC)

Question 62

Which organization,in addition to the Financial Accounting Standards Board (FASB),occasionally issues authoritative rules for financial statements?

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

Question 63

Which of the following organizations is responsible for setting auditing standards followed by public accounting firms in conducting independent audits of financial statements?

A)Financial Accounting Standards Board (FASB)
B)Securities and Exchange Commission (SEC)
C)Public Company Accounting Oversight Board (PCAOB)
D)International Accounting Standards Board (IASB)

Question 64

The natural progression in items from one statement to another and preparation of financial statements is best represented by the following order:

A)Balance sheet and statement of cash flows > statement of retained earnings > income statement
B)Balance sheet and statement of cash flows > income statement > statement of retained earnings.
C)Statement of retained earnings > income statement > balance sheet and statement of cash flows
D)Income statement > statement of retained earnings > balance sheet and statement of cash flows

Question 65

Which of the following is a five-member body that has the authority from Congress to set standards for conducting audits?

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

Question 66

Sawaddee Enterprises began the year with total assets of $450,000 and total liabilities of $230,000.If Sawaddee's total assets increased by $80,000 and its total liabilities increased by $57,000 during the year,what is the amount of Sawaddee's owners' equity at the end of the year?

A)$197,000
B)$543,000
C)$243,000
D)$220,000

Question 67

Sawaddee Enterprises began the year with total assets of $450,000 and total liabilities of $230,000.If Sawaddee's total assets doubled to $900,000 and its owners' equity remained the same during the year,what was the amount of its total liabilities at the end of the year?

A)$670,000
B)$680,000
C)$440,000
D)$900,000

Question 68

The statement of retained earnings accomplishes which of the following?

A)It summarizes income earned and dividends paid over a single period of the business.
B)It accumulates all revenues for the year.
C)It summarizes the balance sheet accounts.
D)It summarizes the capital stock accounts over the life of the business.

Question 69

Which one of the following is an assumption made in the preparation of financial statements?

A)Financial statements are prepared for a specific entity that is distinct from the entity owners.
B)Financial statements are prepared assuming that inflation has a distinct effect on the monetary unit
C)Preparation of financial statements for a specific time period assumes that the balance sheet covers a period of time.
D)Market values are always assumed to be irrelevant when preparing financial statements.

Question 70

Why is the time period assumption required?

A)Inflation exists
B)External users of financial statements want statements that accurately reflect net income or earnings for a specific time period.
C)The dollar is the monetary unit in the United States.
D)The federal government requires it.

Question 71

At December 31,2014,the accounting records of Whole Foods Corporation contain the following: If Cash is $26,000,what is the December 31,2014 capital stock balance?

A)$272,000
B)$240,000
C)$220,000
D)$400,000

Question 72

At December 31,2014,the accounting records of Whole Foods Corporation contain the following: If capital stock is $260,000,what is the December 31,2014 cash balance?

A)$46,000
B)$506,000
C)$94,000
D)$86,000

Question 73

The reliability of the information in a company's financial statements is the responsibility of which of the following?

A)The Securities and Exchange Commission (SEC)
B)The Certified Public Accountant in charge of the audit of the company's financial statements
C)The company's management
D)The stockholders of the company.

Question 74

Which concept is the reason the dollar is used in the preparation of financial statements?

A)Going concern
B)Legal entity
C)Monetary unit
D)Time Period

Question 75

Sawaddee Enterprises began the year with total assets of $450,000 and total liabilities of $230,000.If Sawaddee total liabilities increased by $31,000 and its owners' equity decreased by $53,000 during the year,what was the amount of its total assets at the end of the year?

A)$472,000
B)$242,000
C)$198,000
D)$428,000

Question 76

Which one of the following statements is true concerning assets?

A)They are recorded at market value and then adjusted for inflation.
B)They are recorded at market value for financial reporting purposes as historical cost may be arbitrary.
C)Accountants use the term historical cost to refer to the original cost of an asset.
D)Assets are measured using the time-period approach.

Question 77

All of the following are different expressions for net income except:

A)Profits
B)Excess of revenues over expenses
C)Capital
D)Earnings

Question 78

Cranston Enterprises purchased land for $2,000,000 in 1999.In 2014,an independent appraiser assessed the value at $4,400,000.What amount should appear on the financial statements in 2014 with respect to the land?

A)$2,000,000
B)$2,400,000
C)$4,400,000
D)Whatever amount the company believes is the best indicator of the true value of the land.

Question 79

The Securities and Exchange Commission (SEC)is concerned with

A)All companies in the United States regardless of size.
B)Companies that issue securities to the general public.
C)Accounting reports issued by government entities.
D)All domestic and international companies that issue accounting reports.

Question 80

Which the following organizations is primarily responsible for establishing GAAP today?

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