Question 1

The quality of accounting information that allows a user to analyze two or more companies and look for similarities and differences is known as understandability.

Accepted Answer

A) True 
 B)False

Question 2

____________________ is the magnitude of an omission or misstatement in accounting information that will affect the judgment of someone relying on the information.

Accepted Answer

The answer of ____________________ is the magnitude of an omission...

Question 3

The 2016 income statement of Nasir Inc.shows operating revenues of $135,800, selling expenses of $40,310, general and administrative expenses of $33,990, interest expense of $880, and income tax expense of $13,090.Nasir's stockholders' equity was $250,000 at the beginning of the year and $345,000 at the end of the year.The company has 10,000 shares of stock outstanding at December 31, 2016.
​
Required: Compute Nasir's profit margin.What other information would you need in order to comment on whether this ratio is favorable?

Accepted Answer

The answer of The 2016 income statement of Nasir Inc.shows...

Question 4

.____________________ is the impact of information to change decision-making.

Accepted Answer

The answer of .____________________ is the impact of information to...

Question 5

____________________ is the process of writing off the cost of tangible assets and ____________________ is the process of writing off the cost of intangible assets.

Accepted Answer

The answer of ____________________ is the process of writing off...

Question 6

Which of the following statements is true concerning intangible assets?

Accepted Answer

A)  Intangible assets have no economic substance. 
B)  Intangible assets lack physical existence. 
C)  Intangible assets are listed in the stockholders' equity section of the balance sheet. 
D)  Intangible assets appear in the current assets section of the balance sheet.

Question 7

Supplementary disclosures required by GAAP that help explain detail behind the accounting treatment of certain items in the financial statements is most likely found in which of the following sections of a corporate annual report?

Accepted Answer

A)  Report of the Independent Accountants 
B)  Notes to the Financial Statements 
C)  Management's Discussion and Analysis 
D)  Balance Sheet

Question 8

Marvel Shoes reported the following items on its statement of cash flows for the current year: $\begin{array}{lc}
\text { Net cash inflows from operating activities } & \$ 70,000 \
\text { Net cash outflows from investing activities } & (20,000) \
\text { Net cash outflows from financing activities } & (40,000) \
\text { Cash balance at the beginning of the year } & 30,000
\end{array}$
-Read the information about Marvel Shoes.What was the amount of net increase or decrease in the cash balance for Marvel Shoes for the current year?

Accepted Answer

A)  $ 10,000 increase 
B)  $ 30,000 increase 
C)  $ 40,000 increase 
D)  $ 70,000 increase

Question 9

Match the selected items from a classified balance sheet and multiple-step income statement to the section in which they would appear on the classified balance sheet or the income statement.
-Capital stock

Accepted Answer

A) Current Assets (balance sheet) 
B) Property, Plant, & Equipment (balance sheet) 
C) Current Liabilities (balance sheet) 
D) Long-term Liabilities (balance sheet) 
E) Stockholders' Equity (balance sheet)
F)Operating Revenue (income statement)
G)Operating Expenses (income statement)
H)Other Revenue & Expenses (income statement)
I)Income Taxes (income statement)

Question 10

Which one of the following statements is true?

Accepted Answer

A)  The two primary sources of financing available to corporations are borrowed funds and funds invested by owners. 
B)  Financing activities involve the acquisition of property, plant and equipment. 
C)  Borrowed funds are a more permanent source of financing than funds invested by owners. 
D)  Investing activities involve the selling of products or services and the incurring of expenses related to selling these products and services.

Question 11

Which one of the following items is reported as a current asset on a classified balance sheet?

Accepted Answer

A)  Trucks 
B)  Accounts receivable 
C)  Land 
D)  Common stock

Question 12

Which of the following is not an objective of financial reporting?

Accepted Answer

A)  To reflect prospective cash receipts to investors and creditors. 
B)  To reflect prospective cash flows to an enterprise. 
C)  To reflect resources and claim to resources. 
D)  To reflect current stock prices and information concerning stock markets.

Question 13

How are assets which are expected to be realized in cash, sold, or consumed within the normal operating cycle of a business or within one year (if the operating cycle is shorter than one year) reported on a classified balance sheet?

Accepted Answer

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

Question 14

Selected data from the accounting records of Cobb Company are listed below: $$\begin{array} { l r l r } 
\text { General \& administrative expenses } & \$ 2,200 & \text { Operating revenues } & \$ 6,000 \
\text { Selling expenses } & 1,800 & \text { Incometaxes } & 600 \
\text { Other revenues (expenses) } & 800 & \text { Dividends paid } & 1,200
\end{array}$$
-Read the information about Cobb Company.What is Cobb's income from operations?

Accepted Answer

A)  $ 1,600 
B)  $ 2,000 
C)  $ 2,200 
D)  $ 2,800

Question 15

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 16

Matching
Identify whether the following investor questions are associated with (a) primary or (b) secondary financial reporting objectives.
-Based on the financial information, should I buy shares of Apple?

Accepted Answer

A) primary financial reporting objective 
B) secondary financial reporting objective

Question 17

The amount of a transaction may be immaterial by company standards but still be considered significant by financial statement users.

Accepted Answer

A) True 
 B)False

Question 18

The following income statement items are taken from the records of Burke Company for the year ended December 31, 2016: $$\begin{array} { l r } 
\text { Adverti sing expense } & \$ 2,600 \
\text { Commission expense } & 3,515 \
\text { Cost of goods sold } & 29,200 \
\text { Depreciation expense - Office Building } & 4,000 \
\text { Income tax expense } & 190 \
\text { Insurance expense - sales person's auto } & 3,350 \
\text { Interest expense } & 1,400 \
\text { Interest revenue } & 2,340 \
\text { Rent revenue } & 7,700 \
\text { Sal aries and wages expense - Office } & 13,660 \
\text { Sal es Revenue } & 50,300 \
\text { Supplies expense - Office } & 1,990
\end{array}$$ ​
-Read the information about Burke Company.
​
Required:
Prepare a multiple-step income statement for the year ended December 31, 2016.

Accepted Answer

The answer of The following income statement items are taken...

Question 19

Moore Industries began operations on January 2, 2016, with an investment of $50,000 by each of its two stockholders.Net income for its first year of business was $240,000.Moore Industries paid a total of $100,000 in dividends to its stockholders during the year.
​
-Read the information about Moore Industries.What is the company's retained earnings balance at December 31, 2016?

Accepted Answer

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

Question 20

Vance Corporation's partial income statement is as follows: $$\begin{array} { l r } 
\text { Sales } & \$ 1,300,000 \
\text { Cost of sales } & 300,000 \
\text { Selling expenses } & 210,000 \
\text { General and admin. expenses } & 150,000
\end{array}$$ Required:
Determine the profit margin.Would you invest in Vance Corporation? Explain your answer.

Accepted Answer

The answer of Vance Corporation's partial income statement is as...

Exam 2: Financial Statements and the Annual Report