Question 1

Funds raised from financing activities should be invested in assets that can be used to carry on business operations.

Accepted Answer

A) True 
 B)False

Question 2

The Financial Accounting Standards Board created the objectives of financial reporting.

Accepted Answer

A) True 
 B)False

Question 3

Excursion Corp.increased its dollar amount of working capital over the past several years.To further evaluate the company's short-run liquidity,which one of the following measures should be used?

Accepted Answer

A) The current ratio 
B) An analysis of the company's long-term debt 
C) An analysis of the return on stockholders' equity 
D) An analysis of retained earnings

Question 4

How is income from operations determined?

Accepted Answer

A) By subtracting the cost of goods sold from sales. 
B) By subtracting the total operating expenses from sales 
C) By subtracting the total operating expenses from gross profit. 
D) By subtracting selling expenses from operating revenues.

Question 5

Which of the following events will cause a company's current ratio to increase?

Accepted Answer

A) The collection of an account receivable. 
B) Selling land for cash at a loss. 
C) The discharge of an account payable by signing a short-term note payable. 
D) Paying off a long-term loan.

Question 6

In preparing the financial statements for December 31,2014,an accountant improperly classified the payment of prepaid rent as rent expense.Which of the following amounts would not be affected by this improper classification?

Accepted Answer

A) Retained earnings,January 1,2014 
B) Retained earnings,December 31,2014 
C) Net income 
D) Total assets

Question 7

In the stockholders' equity section of a classified balance sheet,a distinction is made between amounts invested by owners and amounts accumulated from business earnings.

Accepted Answer

A) True 
 B)False

Question 8

Dividends paid appears on both the income statement and the statement of retained earnings.

Accepted Answer

A) True 
 B)False

Question 9

Which one of the following is an operating 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.

Question 10

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 11

Cory Harper,a newly hired accountant,wanted to impress his boss,so he stayed late one night to analyze the office supplies expense account.He determined the cost by month,for the past 12 months,of each of the following: computer paper,copy paper,fax paper,pencils and pens,note pads,postage,corrections supplies,stationery,and miscellaneous items.Why do companies not include information of this nature in published financial statements?

Accepted Answer

The answer of Cory Harper,a newly hired accountant,wanted to impress...

Question 12

How is a classified balance sheet useful to decision makers?

Accepted Answer

The answer of How is a classified balance sheet useful...

Question 13

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

Accepted Answer

A) Notes to the Financial Statements 
B) Forecasts of Cash Flows and Earnings 
C) Report of the Independent Accountants 
D) Management's Discussion and Analysis

Question 14

Ficus Company calculated the following amounts concerning its financial information for the years ending December 31,2014 and 2013:
  REQUIRED:
Suppose Ficus Company had a decrease in its cash account from 2013 to 2014.Would the other current asset amounts have increased or decreased? Explain.

Accepted Answer

The answer of Ficus Company calculated the following amounts concerning...

Question 15

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 net income?

Accepted Answer

A) $80,000 
B) $92,190 
C) $130,800 
D) $46,470

Question 16

Which of the following represents one of the purposes of the notes to financial statements?

Accepted Answer

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 17

Potential stockholders and lenders are interested in a company's financial statements.Several financial statement items appear below.Answer the questions that follow.

Accepted Answer

The answer of Potential stockholders and lenders are interested in...

Question 18

An independent auditor's (CPA's)report is a guarantee that the financial statements are free from fraud or material error

Accepted Answer

A) True 
 B)False

Question 19

The statement of cash flows,like the income statement,reports only operating activities of a company.

Accepted Answer

A) True 
 B)False

Question 20

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 ______________________________...

Exam 2: Financial Statements and the Annual Report

Funds raised from financing activities should be invested in assets that can be used to carry on business operations.

The Financial Accounting Standards Board created the objectives of financial reporting.

Excursion Corp.increased its dollar amount of working capital over the past several years.To further evaluate the company's short-run liquidity,which one of the following measures should be used?

How is income from operations determined?

Which of the following events will cause a company's current ratio to increase?

In preparing the financial statements for December 31,2014,an accountant improperly classified the payment of prepaid rent as rent expense.Which of the following amounts would not be affected by this improper classification?

In the stockholders' equity section of a classified balance sheet,a distinction is made between amounts invested by owners and amounts accumulated from business earnings.

Dividends paid appears on both the income statement and the statement of retained earnings.

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

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

How is a classified balance sheet useful to decision makers?

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

Ficus Company calculated the following amounts concerning its financial information for the years ending December 31,2014 and 2013: REQUIRED: Suppose Ficus Company had a decrease in its cash account from 2013 to 2014.Would the other current asset amounts have increased or decreased? Explain.

Which of the following represents one of the purposes of the notes to financial statements?

Potential stockholders and lenders are interested in a company's financial statements.Several financial statement items appear below.Answer the questions that follow.

An independent auditor's (CPA's)report is a guarantee that the financial statements are free from fraud or material error

The statement of cash flows,like the income statement,reports only operating activities of a company.

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