Chapter 1-3 Flashcards
Which of the following would not appear on the retained earnings statement?
Service revenue
Resources owned by a business are referred to as
Assets
Which section of a cash flow statement shows the amount of cash spent on new equipment during the most recent accounting period?
The investing section
The segment of the annual report that presents an opinion regarding the fairness of the presentation of the financial position and results of operations is/are the
Auditor’s opinion
When the auditor is satisfied that the financial statements provide a fair representation of the company financial position and results of operation in accordance with generally accepted accounting principles, the auditor will express
An unqualified opinion
Which of the following is required as a result of the Sarbanes-Oxley Act (SOX)?
Top management must certify the financial statement for their company
Which financial statement presents information as of a specific point in time?
Balance sheet
The balance sheet
Reports the assets, liabilities, and stockholders equity at a specific date
Which of the following is an expense?
Cost of goods sold
Which of the following is the most appropriate definition of accounting information?
The information system that identifies, records, and communications the economic events of an organization to interested users
Easy transfer of ownership is a characteristic of which form of business organization?
Corporation
In which forms of business organization are the owners personally liable for all the debts of the business?
Sole proprietorship and partnerships
At the end of the year, Stoneland corporation has liabilities of $3,500 and equity of $2,000. How much are the company’s assets at the end of the year?
$5,500
Which of the following is an example of a financing activity?
Issuing shares of common stock
Which of the following is not one of the three primary business activities?
Advertising
In term of the principle types of business activities, paying salaries expenses is an example of
Operating activities
Which of the following best describes stockholders’ equity?
Stockholders’ equity are the claims of owners
Chris’s Maid Service began the year with total assets of $100,000 and stockholders’ equity of $40,000. During the year the company earned $110,000 in net income and paid $5,000 in dividends. Total assets at the end of the year were $240,000. How much are total liabilities at the end of the year?
$95,000
To which of the following questions will internal users want answers?
All of these
Which of the following is not an external user of accounting data?
Chief Financial Officer
The financial statements for Joanna Corporation contained the following account information:
Accounts receivable , $15,000
Sales revenue, $90,000
Cash, $25,000
Salaries and wages expense, $30,000
Supplies expense,$10,000
How much was Joanna Corporation’s net income?
$50,000
Jeremiah company recorded the following cash transactions for the year:
Collected $80,000 from lenders
Collected $260,000 from costumers
Paid $130,000 for salaries
Paid $10,000 in dividends
Paid $90,000 for good and services
Paid $20,000 to purchase office equipment
What was the company’s net cash provided by operating activities for the year?
$40,000
If total liabilities deceased by $10,000 and total assets decreased by $5,000 during a period of time, then total stockholders’ equity must have changed by what amount and direction during that same period?
$5,000 increase
In which of the following sequences are the financial statements usually prepared?
Income statement, balance sheet, retained earnings statement, and statement of cash flows
The cost of assets consumed or services used is also known as
An expense
The financial statements for Allen Corporation contained the following account information:
Accounts receivable, $15,000
Sales revenue, $90,000
Cash, $15,000
Salaries and wages expense, $25,000
Insurance expense,$10,000
How much was Allen Corporation net income?
$55,000
The segment of a corporation’s annual report that describes the corporation’s accounting methods is the
Notes to the financial statements
The payment of dividends is an example of a(n)
Financial activity
Paying interest expense and receiving interest revenue are both example of
Operating activities
Chris’s Maid Service began the year with total assets of $125,000 and stockholders’ equity of $40,000. During the year the company earned $90,000 in net income and paid $20,000 in dividends. Total assets at the end of the year were $215,000. How much are total liabilities at the end of the year?
$105,000
Jose Inc. reports the following balances and amounts. The following information is presented in random order. Accounts payable, $ 125,000 Accounts receivable, 140,000 Accumulated depreciation—Equipment, $60,000 Cash, $100,000 Equipment, $400,000 Intangible assets, $20,000 Inventory, $200,000 Long-term investments, $80,000 Long-term liabilities, $200,000 Notes payable (short-term), $56,000 Prepaid insurance, $2,000 Salaries and wages payable, 8,000 Short-term investments, $80,000 Stockholders' equity, 493,000
How much is working capital?
$333,000
Jose Inc. reports the following balances and amounts. The following information is presented in random order.
Accounts payable, $35,000 Cash provided by operations, 90,000 Accounts receivable, 37,500 Net income, 36,000 Average common shares, 20,000 Salaries and wages payable, 8,000 Average current liabilities, 110,000 Stockholders' equity, 240,000 Average and total assets, 600,000 Total current assets, 300,000 Average total liabilities, 320,000 Total current liabilities, 120,000 Cash, 100,000
How much is Ortiz’s current ratio?
2.50
Which one of the following is not an alternate means of expressing a ratio?
Dollar amount
The accounting concept that indicates that assets and liabilities should be reported at the price received to sell the asset or settle the liability is the
Fair value principle
Which accounting assumption requires that only those things that can be expressed in dollar values are included in the accounting records?
Monetary unit assumption
The economic entity assumption states that economic events
Of each entity can be separately identified and accounted for
If a company has the ability to pay obligations that are expected to become due within the next year or operating cycle whichever is longer, what is the term that describes this measure?
Liquidity
The following ratios are available for Leer Inc. and Stable Inc.
Leer Inc. stable Inc.
Current Ratio 2.0, 1.5
Compared to Stable Inc., Leer Inc. has
Higher liquidity
Net income is 200,000, preferred dividends are $20,000, and average common shares outstanding are 50,000. How much is earnings per share?
$3.60
Which of the following is not classified as a current asset?
Patents
Which of the following is an example of an intangible assets?
Trademarks
At the end of the year, Red company had retained earnings of $2,184,000. During the year, the company issued stock for $98,000 and paid dividends of $34,000. Net income for the year was $402,000. How much was the retained earnings balance at the beginning of the same year?
$1,816,000
Issuing new shares of common stock will
Increase common stock
Bombay Corporation had $48,000 at the beginning of the year and it had cash disbursements of $21,000 during the year. At the end of the year, Bombay Company had $51,000. What was Bombay Corporation’s cash receipts for the year?
$24,000
Total assets are $150,000, current liabilities are $10,000, long-term liabilities are $20,000, common stock is $50,000, and retained earnings totals $70,000. How much is total stockholders’ equity?
$120,000
For what purpose might a company use free cash flow?
All of the answer choices are correct
Which of the following is the correct order for listing current assets on the balance sheet?
Cash, short-term investments, accounts receivable, inventories, prepaid expenses
What are generally accepted accounting principles?
A set of accounting rules and practices that have authoritative support
What is the primary accounting standard-setting body in the United States?
Financial accounting standards board
Burton Corporation has current assets of $3,750,000 and current liabilities of 2,050,000. If Burton Corporation pays $500,000 of its accounts payable what will the new current ratio be?
2.10
The net cash inflow from operating activities is $140,000; cash received from issuing stock is $75,000; cash paid for capital expenditures is $60,000; cash paid for bonds held as an investment is $20,000; and dividends paid are $20,000. How much is free cash flow?
$60,000
What is the primary criterion by which accounting information can be judged?
Usefulness for decision making
The primary objective of financial reporting is to provide financial information that is useful to investors and creditors for making decisions about providing capital. According to the FASB, useful information should possess certain fundamental qualities. All of the following are qualities of useful information except
Universality
Which of the following statements is false?
Comparability means using the same accounting principles form year to year within a company
If a company receives cash from a customer before performing services for the customers, then
Assets increase and liabilities increase
What type of account is unearned revenue?
Liability
What does a general ledger of a company?
All the assets, liability, stockholders’ equity, revenue, expense, and dividends accounts
Genesis Company declares and pays a $900 dividend to shareholders. This transaction will immediately affect the
Retained earnings statement and balance sheet only
If an previously unrecorded expense is paid with cash then
Assets will decrease
The effects on the basic accounting equation of performing services for cash are to
Increase assets and increase stockholders’ equity
At the start of the month, Hawaii Inc. reported retained earnings of $136,000. During the month, Hawaii generated revenues of $20,000, incurred expenses of $12,000, purchased equipment for $5,000 and paid dividends of $2,000. What is the balance in retained earnings at the end of the month?
$142,000 credit
If an account is debited in the journal entry then
That account will be debited in the ledger
During its first year of operations, Acme Tires had revenues of $135,000 and expenses of $87,000. The business also paid cash dividends of $10,000 and purchased $25,000 of equipment in exchange for cash during the first year. What is the company’s retained earnings at the end of its first year?
A credit balance of $38,000
Which of the following events is not recorded in a company’s accounting records?
Discussing with a customer the services a company offers
Accounts with normal credit balances include
Liabilities and stockholders’ equity
Transaction are initially recorded in chronological order in a _____ before they are transferred to the accounts
Journal
What journal entry is recorded as result of issuing stock to investors for cash?
A debit to cash and credit to common stock
Which of the following is the correct sequence of events?
Analyze a transaction; record it in the journal; post it to the ledger
On Jan 10, Novis Company purchased manufacturing equipment for $80,000 cash. What kind of activity is this?
Investing activity
Wilson Company showed the following balances at the end of its first year:
Accounts receivable, $11,000 Accounts payable, $4,000 Cash, $9,000 Common stock, ? Dividends, $1,000 Expenses, $17,000 Notes payable, $6,000 Prepaid insurance, $2,000 Revenues, $22,000
What did Wilson Company show as the balance of its common stock account?
$8,000
A revenue account
Is increased by credits
A trail balance
Is a list of accounts with their balances at a given time
A trail balance will not balance if
A $100 cash dividends is debited to dividends for $1,000 and credited to cash for $100
Jamal Company began the year with $109,000 in its Common Stock account and a debit balance in Retained Earnings of $14,000. During the year, the company earned net income of $33,000 and declared and paid $5,000 of dividends. In addition, the company sold additional common stock amounting to $37,000. Based on this information, what should the transaction analysis show for the ending stockholders’ equity?
$160,000
