Question 1

One advantage of the corporate form of business is double taxation.Double taxation is a disadvantage of the corporate form of business.

Accepted Answer

A) True 
 B)False

Question 2

The assumption that the assets and liabilities of the business are accounted for on the books of the company but not included in the records of the owner is the:

Accepted Answer

A) Monetary unit assumption. 
B) Economic entity assumption. 
C) Going concern assumption.

Question 3

Cash received from bank borrowing would be reported in the statement of cash flows as what type of activity?

Accepted Answer

A) Investing. 
B) Organizing. 
C) Operating. 
D) Financing.

Question 4

If total liabilities of a company equal $16,000 and total stockholders' equity equals $9,000,then total assets equal $7,000.Total assets = Total liabilities ($16,000)+ Total stockholders' equity ($9,000)= $25,000.

Accepted Answer

A) True 
 B)False

Question 5

Amounts owed to suppliers,employees,the government in the form of taxes,and utility companies are examples of liabilities.

Accepted Answer

A) True 
 B)False

Question 6

Which statement below best describes the objectives of financial accounting?

Accepted Answer

A) Provide information that helps predict cash flows. 
B) Provide information about the economic resources,claims to resources and changes in resources and claims. 
C) Provide information that is useful in making decisions. 
D) All of the other answers are objectives of financial accounting.

Question 7

The primary objective of financial accounting is to provide useful information to managers in making decisions.Financial accounting is intended primarily to provide information to investors and creditors.

Accepted Answer

A) True 
 B)False

Question 8

The assumption that a business will continue to operate into the future is the:

Accepted Answer

A) Monetary unit assumption. 
B) Periodicity assumption. 
C) Economic entity assumption. 
D) Going concern assumption.

Question 9

The balance sheet depicts which of the following equations?

Accepted Answer

A) Net income = revenue - expenses. 
B) Ending retained earnings = beginning retained earnings + net income - dividends. 
C) Assets = liabilities + stockholders' equity.

Question 10

Liabilities can be best described as:

Accepted Answer

A) The amount of expenses over the past year. 
B) The amount expected to be distributed to stockholders. 
C) The amount owed to creditors.

Question 11

Which of the following has the single greatest impact on stock prices?

Accepted Answer

A) Total dividends. 
B) Total assets. 
C) Total revenues. 
D) Net income.

Question 12

One of the differences between a partnership and a corporation is that owners of a partnership have limited liability.Stockholders of a corporation have limited liability.

Accepted Answer

A) True 
 B)False

Question 13

Retained earnings at the end of the year is calculated using:

Accepted Answer

A) Beginning retained earnings,net income,and dividends. 
B) Common stock and dividends. 
C) Stockholders' equity,net income,and dividends.

Question 14

Which financial accounting number impacts stock prices more than any other single piece of information?

Accepted Answer

A) Retained earnings. 
B) Net income. 
C) Common stock.

Question 15

Net income (loss)appears in which two financial statements?

Accepted Answer

A) Balance sheet and income statement. 
B) Income statement and statement of stockholders' equity. 
C) Statement of stockholders' equity and balance sheet.

Question 16

Sooner Company had a net income of $8,000,$5,000,$12,000,and $10,000 over the first four years of the company's existence.If the average annual amount of dividends paid over the last four years is $3,000,what is the ending retained earnings balance?

Accepted Answer

A) $47,000. 
B) $35,000. 
C) $23,000.

Question 17

Financial accounting objectives do not include providing information:

Accepted Answer

A) Useful to investors and creditors in making decisions. 
B) To determine market values,assess profit potential,and evaluate management. 
C) Helpful to investors in predicting cash flows.

Question 18

Consider the following account balances of the Shattuck Law Firm at the end of the year: How many of these accounts would appear in Shattuck's year-end income statement?
$$\begin{array} { | l | r | } 
\hline \text { Accounts Payable } & \$ 4,400 \
\hline \text { Salaries Expense } & 12,800 \
\hline \text { Cash } & 1,700 \
\hline \text { Common Stock } & 2,400 \
\hline \text { Service Revenue } & 8,300 \
\hline \text { Supplies } & 4,300 \
\hline \text { Retained Earnings } & 1,100 \
\hline \text { Utilities Expense } & 5,000 \
\hline
\end{array}$$

Accepted Answer

A) Five. 
B) Four. 
C) Three.

Question 19

How many of the following transactions would affect operating cash flows reported in the statement of cash flows (all transaction involve cash)? 
Borrowed $50,000 from the bank
Purchased $12,000 in supplies
Provide services to customers for $27,000
Paid the utility bill of $750
Purchased a delivery truck for $12,000
Received $25,000 from issuing common stock

Accepted Answer

A) One. 
B) Two. 
C) Three.

Question 20

Which of the following accounts represents a resource of the company?

Accepted Answer

A) Common stock. 
B) Service revenue. 
C) Accounts receivable.

Exam 1: A Framework for Financial Accounting

One advantage of the corporate form of business is double taxation.Double taxation is a disadvantage of the corporate form of business.

The assumption that the assets and liabilities of the business are accounted for on the books of the company but not included in the records of the owner is the:

Cash received from bank borrowing would be reported in the statement of cash flows as what type of activity?

If total liabilities of a company equal $16,000 and total stockholders' equity equals $9,000,then total assets equal $7,000.Total assets = Total liabilities ($16,000)+ Total stockholders' equity ($9,000)= $25,000.

Amounts owed to suppliers,employees,the government in the form of taxes,and utility companies are examples of liabilities.

Which statement below best describes the objectives of financial accounting?

The primary objective of financial accounting is to provide useful information to managers in making decisions.Financial accounting is intended primarily to provide information to investors and creditors.

The assumption that a business will continue to operate into the future is the:

The balance sheet depicts which of the following equations?

Liabilities can be best described as:

Which of the following has the single greatest impact on stock prices?

One of the differences between a partnership and a corporation is that owners of a partnership have limited liability.Stockholders of a corporation have limited liability.

Retained earnings at the end of the year is calculated using:

Which financial accounting number impacts stock prices more than any other single piece of information?

Net income (loss) appears in which two financial statements?

Sooner Company had a net income of $8,000,$5,000,$12,000,and $10,000 over the first four years of the company's existence.If the average annual amount of dividends paid over the last four years is $3,000,what is the ending retained earnings balance?

Financial accounting objectives do not include providing information:

Which of the following accounts represents a resource of the company?