Question 1

Which statement is true concerning an income statement?

Accepted Answer

A) The income statement shows how much profit the company has earned since it began operations. 
B) Net income on the income statement should be equal to the amount of cash on the balance sheet. 
C) The income statement summarizes the results of operations for a period of time. 
D) The income statement indicates the liquidity of the company on an annual basis.

Question 2

On the statement of cash flows, the section involves the purchase and sale of products and services.

Accepted Answer

The answer of On the statement of cash flows, the...

Question 3

is the capacity of information to make a difference in a decision.

Accepted Answer

The answer of is the capacity of information to make...

Question 4

Dividends declared and paid reduce a company's retained earnings balance.

Accepted Answer

A) True 
 B)False

Question 5

For which of the following is the current ratio most useful?

Accepted Answer

A) In evaluating a company's liquidity 
B) In evaluating a company's solvency 
C) In evaluating a company's profitability 
D) In evaluating a company's probability

Question 6

Which one of the following is an investing activity of a business?

Accepted Answer

A) Paying for purchases of inventory 
B) Issuing stock for cash 
C) Borrowing money from a bank 
D) Purchasing a manufacturing plant for cash

Question 7

Which one of the following is not a major category for long-term assets?

Accepted Answer

A) Intangibles 
B) Property, plant, and equipment 
C) Receivables 
D) Goodwill

Question 8

Bartlett Industries
Bartlett Industries began operations on January 2, 2015, with an investment of $50,000 by each of its two stockholders.Net income for its first year of business was $240,000.Bartlett Industries paid a total of $100,000 in dividends to its stockholders during the year.
-Read the information about Bartlett Industries.What is the company's retained earnings balance at December 31, 2015?

Accepted Answer

A) $140,000 
B) $190,000 
C) $240,000 
D) $340,000

Question 9

In a -step income statement, all expenses and losses are added together, then deducted from the sum of all revenues and gains.

Accepted Answer

The answer of In a -step income statement, all expenses...

Question 10

The purpose of financial reporting is to provide economic information to external decision makers only.

Accepted Answer

A) True 
 B)False

Question 11

One primary purpose of a classified balance sheet is to help users evaluate the liquidity of a company.

Accepted Answer

A) True 
 B)False

Question 12

Read the information about Cargo Corporation.
Required:
Prepare the long-term asset section of Cargo Corp.'s balance sheet at December 31, 2015.You may omit the heading.Why are these amounts classified as "long-term"?

Accepted Answer

The answer of Read the information about Cargo Corporation.
Required:
Prepare the...

Question 13

The preparation of financial statements requires that the information be understandable

Accepted Answer

A) Only to CPAs. 
B) To those willing to spend the time to understand it. 
C) Only to those who take an accounting course. 
D) Only to financial analysts and brokers.

Question 14

An objective of financial reporting is to reflect economic information concerning a company's cash flows.

Accepted Answer

A) True 
 B)False

Question 15

Investing activities are needed to provide the funds to start a business.

Accepted Answer

A) True 
 B)False

Question 16

Deal Mart
The 2014 income statement of Deal Mart shows operating revenues of $130,800, selling expenses of $37,100, general and administrative expenses of $34,900, interest expense of $900, and income tax expense of $11,430.Deal Mart's stockholders' equity was $280,000 at the beginning of the year and $320,000 at the end of the year.The company has 20,000 shares of stock outstanding at December 31, 2014.
-Read the information about Deal Mart.What is Deal Mart's profit margin to the closest tenth of a percent)?

Accepted Answer

A) 2.8 
B) 35.5 
C) 61.2 
D) 14.5

Question 17

Lamar Company has total current assets of $122,000 and total current liabilities of $57,000.What is the amount of working capital for Lamar Company?

Accepted Answer

A) $ 57,000 
B) $ 65,000 
C) $ 122,000 
D) $ 179,000

Question 18

Guinther & Sons, Inc.
Guinther & Sons, Inc.a retailer of men's clothing, earned a net profit of $77,000 for 2014.The balance sheet for Guinther & Sons includes the following items: 
-Read the information for Guinther & Sons, Inc.The average current ratio for stores such as Guinther & Sons is 2.4 to 1.What does this comparison tell you about its liquidity?

Accepted Answer

A) It is more liquid than its competitors. 
B) It has more long-term assets than its competitors. 
C) Since a rule of thumb for current ratios is 2 to 1, neither Guinther & Sons, Inc.nor its competitors is liquid. 
D) Guinther & Sons, Inc.is more profitable than its competitors.

Question 19

Under current accounting principles, how is net income on the income statement measured?

Accepted Answer

A) Net change in owners' equity during the period 
B) Excess of revenues over expenses during the period 
C) Net change in the cash balance during the period 
D) Excess of revenues over expenses less any dividends paid during the period

Question 20

Read the information about Cargo Corporation.
Required:
Prepare the current assets section of the balance sheet for Cargo Corp.at December 31, 2015.You may omit the heading.How does the concept of liquidity apply?

Accepted Answer

The answer of Read the information about Cargo Corporation.
Required:
Prepare the...

Exam 2: Financial Statements and the Annual Report

Which statement is true concerning an income statement?

On the statement of cash flows, the section involves the purchase and sale of products and services.

is the capacity of information to make a difference in a decision.

Dividends declared and paid reduce a company's retained earnings balance.

For which of the following is the current ratio most useful?

Which one of the following is an investing activity of a business?

Which one of the following is not a major category for long-term assets?

In a -step income statement, all expenses and losses are added together, then deducted from the sum of all revenues and gains.

The purpose of financial reporting is to provide economic information to external decision makers only.

One primary purpose of a classified balance sheet is to help users evaluate the liquidity of a company.

Read the information about Cargo Corporation. Required: Prepare the long-term asset section of Cargo Corp.'s balance sheet at December 31, 2015.You may omit the heading.Why are these amounts classified as "long-term"?

The preparation of financial statements requires that the information be understandable

An objective of financial reporting is to reflect economic information concerning a company's cash flows.

Investing activities are needed to provide the funds to start a business.

Lamar Company has total current assets of $122,000 and total current liabilities of $57,000.What is the amount of working capital for Lamar Company?

Under current accounting principles, how is net income on the income statement measured?

Read the information about Cargo Corporation. Required: Prepare the current assets section of the balance sheet for Cargo Corp.at December 31, 2015.You may omit the heading.How does the concept of liquidity apply?