Question 1

Which of the following would not be considered an internal user of accounting data for a company?

Accepted Answer

A) The president of a company 
B) The controller of a company 
C) Creditor of a company 
D) Salesperson of a company

Question 2

The primary purpose of the statement of cash flows is to report

Accepted Answer

A) a company's investing transactions. 
B) a company's financing transactions. 
C) information about cash receipts and cash payments of a company. 
D) the net increase or decrease in cash.

Question 3

Net income is another term for revenue.

Accepted Answer

A) True 
 B)False

Question 4

The basic accounting equation states that Assets = Liabilities.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is an advantage of corporations relative to partnerships and sole proprietorships?

Accepted Answer

A) Reduced legal liability for investors 
B) Harder to transfer ownership 
C) Lower taxes 
D) Most common form of organization

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 $70,000 and $5,000 of Accounts Payable were paid in cash, what would be the balance of the total stockholders' equity?

Accepted Answer

A) $135,000 
B) $120,000 
C) $170,000 
D) $130,000

Question 7

Information in the notes to the financial statements has to be quantifiable (numeric).

Accepted Answer

A) True 
 B)False

Question 8

Which of the following is the best definition of an internal user of accounting information?

Accepted Answer

A) Investors who use accounting information to decide whether to buy or sell stock. 
B) Creditors like banks that use accounting information to evaluate the risk of lending money. 
C) Labor unions who use accounting information to examine the ability of the company to pay increased wages and benefits. 
D) Managers who use accounting information to plan, organize, and run a business.

Question 9

Which of the following is the most appropriate and modern definition of accounting?

Accepted Answer

A) The information system that identifies, records, and communicates the economic events of an organization to interested users. 
B) A means of collecting information. 
C) The interconnected network of subsystems necessary to operate a business. 
D) Electronic collection, organization, and communication of vast amounts of information.

Question 10

Which type of corporate information is not available to investors?

Accepted Answer

A) Dividend history 
B) Forecast of cash needs for the upcoming year 
C) Cash provided by investing activities 
D) Beginning cash balance

Question 11

International standards are developed by the

Accepted Answer

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

Question 12

Cash is another term for stockholders' equity.

Accepted Answer

A) True 
 B)False

Question 13

The accounting equation may be expressed as

Accepted Answer

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

Question 14

Stockholders' equity can be described as claims of

Accepted Answer

A) creditors on total assets. 
B) owners on total assets. 
C) customers on total assets. 
D) debtors on total assets.

Question 15

Which of the following are internal reports that accounting provides to internal users?

Accepted Answer

A) Forecasts of cash needs for next year. 
B) Financial comparisons of operating activity alternatives. 
C) Both forecasts of cash needs and financial comparisons are internal reports. 
D) Neither forecasts of cash needs or financial comparisons is an internal report.

Question 16

Finney Company began the year by issuing $80,000 of common stock for cash. The company recorded revenues of $740,000, expenses of $640,000, and paid dividends of $40,000. What was Finney's net income for the year?

Accepted Answer

A) $60,000 
B) $140,000 
C) $100,000 
D) $180,000

Question 17

An advantage of the corporate form of business is that

Accepted Answer

A) it has limited life. 
B) its owner's personal resources are at stake. 
C) its ownership is easily transferable via the sale of shares of stock. 
D) it is simple to establish.

Question 18

Kilmer Corporation began the year with retained earnings of $930,000. During the year, the company issued $1,260,000 of common stock, recorded expenses of $3,600,000, and paid dividends of $240,000. If Kilmer's ending retained earnings was $990,000, what was the company's revenue for the year?

Accepted Answer

A) $3,660,000 
B) $3,900,000 
C) $4,920,000 
D) $50,160,000

Question 19

Jimmy's Repair Shop started the year with total assets of $300,000 and total liabilities of $240,000. During the year the business recorded $630,000 in revenues, $330,000 in expenses, and dividends of $60,000. The net income reported by Jimmy's Repair Shop for the year was

Accepted Answer

A) $240,000. 
B) $300,000. 
C) $180,000. 
D) $570,000.

Question 20

If total liabilities decreased by $105,000 and stockholders' equity decreased by $35,000 during a period of time, then total assets must change by what amount and direction during that same period?

Accepted Answer

A) $140,000 increase 
B) $70,000 decrease. 
C) $140,000 decrease. 
D) $70,000 decrease

Exam 1: Introduction to Financial Statements

Which of the following would not be considered an internal user of accounting data for a company?

The primary purpose of the statement of cash flows is to report

Net income is another term for revenue.

The basic accounting equation states that Assets = Liabilities.

Which of the following is an advantage of corporations relative to partnerships and sole proprietorships?

Information in the notes to the financial statements has to be quantifiable (numeric).

Which of the following is the best definition of an internal user of accounting information?

Which of the following is the most appropriate and modern definition of accounting?

Which type of corporate information is not available to investors?

International standards are developed by the

Cash is another term for stockholders' equity.

The accounting equation may be expressed as

Stockholders' equity can be described as claims of

Which of the following are internal reports that accounting provides to internal users?

Finney Company began the year by issuing $80,000 of common stock for cash. The company recorded revenues of $740,000, expenses of $640,000, and paid dividends of $40,000. What was Finney's net income for the year?

An advantage of the corporate form of business is that

Kilmer Corporation began the year with retained earnings of $930,000. During the year, the company issued $1,260,000 of common stock, recorded expenses of $3,600,000, and paid dividends of $240,000. If Kilmer's ending retained earnings was $990,000, what was the company's revenue for the year?

Jimmy's Repair Shop started the year with total assets of $300,000 and total liabilities of $240,000. During the year the business recorded $630,000 in revenues, $330,000 in expenses, and dividends of $60,000. The net income reported by Jimmy's Repair Shop for the year was

If total liabilities decreased by $105,000 and stockholders' equity decreased by $35,000 during a period of time, then total assets must change by what amount and direction during that same period?