module 8

Question 1

1. The primary objective of financial accounting is __________________.
   A. to monitor and control company activities
   B. to provide the Board of Directors with information regarding the decisions of management
   C. to provide the IRS the tax returns of a company
   D. to issue a company’s annual report to the SEC
   E. to provide financial statements to help external users analyze an organization’s activities
   F. None of the above is the single best answer

Answer 1

E

Question 2

2. External users of accounting information include:
   A. the CEO
   B. part-time employees
   C. shareholders
   D. the director of human resources
   E. the general manager
   F. None of the above is the single best answer

Answer 2

C

Question 3

3. If liabilities total $350,000 and stockholders’ equity totals $500,000, then total assets must be:
   A. $150,000
   B. $850,000
   C. $350,000
   D. $500,000
   E. $650,000
   F. None of the above is the single best answer

Answer 3

B

Question 4

4. Lions Leather Company had retained earnings of $150,000 at the end of last year. For the current
   year, net income was $35,000 and dividends paid was $10,000. What is the balance in retained
   earnings at the end of the current year?
   A. $25,000
   B. $175,000
   C. $150,000
   D. $35,000
   E. $140,000
   F. None of the above is the single best answer

Answer 4

B

Question 5

5. Packers Parkas Inc. had retained earnings of $650,000 at the end of the current year. For the current
   year, revenues were $1,200,000 and expenses totaled $975,000. Kinder paid no dividends in the
   current year. What was the balance in retained earnings at the end of the prior year?
   A. $425,000
   B. $875,000
   C. $225,000
   D. $650,000
   E. $1,200,000
   F. None of the above is the single best answer

Answer 5

A

Question 6

6. Which of the following statements is incorrect?
   A. The responsibility for the preparation and integrity of financial statements rest with management.
   B. Assets on the balance sheet must equal liabilities and stockholders’ equity.
   C. Revenue and expense accounts belong on the balance sheet.
   D. Net income is the link between the income statement and the statement of retained earnings.
   E. The cash account is the link between the balance sheet and the statement of cash flows.
   F. None of the above is the single best answer

Answer 6

C

Question 7

7. Net Income results when_____________________.
   A. assets exceed liabilities
   B. cash flows from operating activities exceed cash flows from financing activities
   C. stockholders’ equity exceeds liabilities
   D. revenues exceed expenses
   E. revenues exceed liabilities
   F. None of the above is the single best answer.

Answer 7

D

Question 8

8. The primary business activities include:
   I. Investing III. Purchasing II.Marketing IV. Operating
   A. I only
   B. I, II, and III
   C. II and IV
   D . II and III
   E. I and IV
   F. None of the above is the single best answer

Answer 8

E

Question 9

9. In which section of the annual report will you find an unqualified opinion?
   A. MD&A
   B. Financial Statements
   C. Auditor’s Report
   D. Notes to the Financial Statements
   E. Letter from the Chairman of the Board
   F. None of the above is the single best answer

Answer 9

C

Question 10

10. The financial statements for Bears Boats LLC contained the following information:
    Accounts payable $10,000
    Sales revenue 80,000
    Rent expense 22,000
    Accounts receivable 17,000
    Salaries and wages expense 35,000
    What was Bears’ net income for the period?
    A. $80,000
    B. $23,000
    C. $70,000
    D. $48,000
    E. $7,000
    F. None of the above is the single best answer

Answer 10

B

Question 11

11. If assets increased $48,000 during a given period and stockholders’ equity increased $10,000
    during the same period, then liabilities must have _____________.
    A. increased $10,000
    B. decreased $10,000
    C. increased $38,000
    D. decreased $38,000
    E. decreased $48,000
    F. None of the above is the single best answer

Answer 11

C

Question 12

12. 49ers Gold Mining Inc. acquired office equipment with a five-year useful life for $5,000 by paying
    cash of $3,000 with the balance on account. What is the total effect of this transaction on Eli
    Corporation’s balance sheet?
    A. increase assets $2,000; increase liabilities $2,000
    B. increase assets $5,000, increase liabilities $5,000
    C. increase revenues $5,000; increase expenses $5,000
    D. increase expenses $5,000; increase assets $5,000
    E. increase liabilities $2,000; increase expenses $2,000
    F. None of the above is the single best answer

Answer 12

A

Question 13

13. The new accountant at Seahawk Salvage Corporation is asked to prepare financial statements for
    the first quarter of 2014. Which financial statement will she not prepare?
    A. balance sheet
    B. statement of cash flows
    C. statement of earnings and taxation
    D. retained earnings statement
    E. income statement
    F. None of the above is the single best answer.

Answer 13

C

Question 14

14. Dolphin Data had the following account balances at the end of the period for December 31:
    Notes payable $10,000
    Common stock 80,000
    Retained earnings, 12/31 this year 50,000
    Accounts payable 2,000
    Retained earnings, 12/31 last year 30,000
    Given this information, what must be the balance in the Assets account?
    A. $130,000
    B. $118,000
    C. $20,000
    D. $35,000
    E. $142,000
    F. None of the above is the single best answer

Answer 14

E

Question 15

15. Steelers Sanitation Company had the following balances at the end of the period:
    Revenues $100,000
    Expenses 82,000
    Dividends 3,000
    Cash flows from operating activities 12,000
    Cash flows from investing activities (6,000)
    Cash flows from financing activities 4,000
    9
    Given this information what must be the Cash balance on the balance sheet?
    A. $18,000
    B. $10,000
    C. $15,000
    D. $12,000
    E. $100,000
    F. None of the above is the single best answer

Answer 15

B

Question 16

16. During the year, Broncos Braising issued bonds for $35,000, issued stock for $20,000, generated
    revenues of $120,000, incurred expenses of $90,000, and paid $10,000 in dividends. What is the effect
    on the stockholders’ equity section of the balance sheet?
    A. increase $20,000
    B. increase $140,000
    C. decrease $35,000
    D. increase $40,000
    E. decrease $20,000
    F. None of the above is the single best answer

Answer 16

D

Question 17

17. Which section of the statements of cash flows represents the cash received from issuing bonds?
    A. Operating
    B. Investing
    C. Financing
    D. None of the above is the single best answer

Answer 17

C

Question 18

18. Which of the following will increase Liabilities on the balance sheet?
    A. issuing stock
    B. incurring a net loss
    C. purchasing equipment for cash
    D. paying dividends
    E. buying supplies on account
    F. None of the above is the single best answer

Answer 18

E

Question 19

19. Which of the following are expenses?
    A. payment of an outstanding notes payable
    B. purchasing land
    C. payment of an accounts payable
    D. payment of the current period’s rent
    E. retirement of long-term bonds payable
    F. None of the above is the single best answer.

Answer 19

D

Question 20

20. Which of the following accounts are on the balance sheet?
    A. Sales revenue
    B. Service revenue
    C. Rent expense
    D. Dividends
    E. Accounts payable
    F. None of the above is the single best answer.

Answer 20

E

Question 21

21. Within the statement of cash flows, which of the following would appear in the operating activities
    section?
    A. dividends paid to stockholders
    B. cash paid to purchase a new building
    C. cash received from issuing a note payable
    D. cash received from issuing common stock
    E. cash received from sales to customers
    F. None of the above is the single best answer

Answer 21

E

Question 22

22. Raiders Radar Inc. began the year with total liabilities of $40,000 and assets of $120,000. During
    the year the company earned $35,000 in net income and paid dividends of $15,000. What is the
    balance in stockholders’ equity at the end of the year?
    A. $35,000
    B. $100,000
    C. $120,000
    D. $140,000
    E. $160,000
    F. None of the above is the single best answer

Answer 22

B

Question 23

23. Vikings Valves Incorporated reported net income of $80,000 for the period. The company paid
    $10,000 in dividends, had $250,000 of revenue, issued stock for $30,000, and acquired equipment for
    $50,000. What are Vikings Inc.’s total expenses for the period?
    A. $120,000
    B. $140,000
    C. $160,000
    D. $170,000
    E. $220,000
    F. None of the above is the single best answer

Answer 23

D

Question 24

24. Which of the following items is a liability?
    A. common stock
    B. supplies
    C. salaries and wages payable
    D. rent expense
    E. prepaid rent
    F. None of the above is the single best answer.

Answer 24

C

Question 25

25. At the beginning of the period, Bengals Brewing LLC had assets $500,000, liabilities $225,000, and
    stockholders’ equity $275,000. During the period, the company purchased land for $70,000 cash,
    bought supplies for $10,000 on account, and issued a note payable for $5,000 cash. What is the total
    amount of assets reported at the end of the period?
    A. $515,000
    B. $530,000
    C. $570,000
    D. $575,000
    E. $585,000
    F. None of the above is the single best answer.

Answer 25

A

Question 26

26. Stockholders’ equity represents:
    A. claims of employees
    B. claims of creditors
    C. claims of owners
    D. the difference between revenues and expenses
    E. the difference between common stock and net income
    F. None of the above is the single best answer.

Answer 26

C

Question 27

27. Which of the following has the authority to set accounting standards in the U.S.?
    A. Generally Accepted Accounting Principles
    B. Federal Reserve System
    C. Federal Deposit Insurance Corporation
    D. Financial Accounting Standards Board
    E. Private Accounting System of Regulation
    F. None of the above is the single best answer

Answer 27

D

Question 28

28. If total assets for the period increased $10,000 and stockholders’ equity decreased $5,000, then
    liabilities must have_____________.
    A. increased $5,000
    B. decreased $5,000
    C. increased $15,000
    D. decreased $15,000
    E. increased $10,000
    F. None of the above is the single best answer

Answer 28

C

Question 29

29. Cardinals Canning Corporation issued a long-term bond for $350,000. It used the cash proceeds to
    purchase a building to use in operations. What is the impact on stockholders’ equity for these
    transactions?
    A. increase $350,000
    B. decrease $350,000
    C. increase $700,000
    D. decrease $700,000
    E. the transactions will not impact stockholders’ equity
    F. None of the above is the single best answer

Answer 29

E

Question 30

30. Which of the following are financing activities in the statement of cash flows?
    I. Payment of dividends
    II. Purchase of office building
    III. Payment of wages to employees
    IV. Issuance of a note payable
    A. I only
    B. I, II, and IV
    C. I and IV
    D. II and III
    E. III and IV
    F. None of the above is the single best answer.

Answer 30

C

Question 31

31. Firms want to obtain a(n) ____________________ opinion from their audits in order provide
    reasonable assurance to their investors that information is not materially misstated in their financial
    statements. Select one or more correct answers based on the chapter’s vocabulary.
    12
    A. affirmative
    B. unqualified
    C. substantive
    D. unbiased
    E. de jure
    F. None of the above correctly completes the sentence.

Answer 31

B

Question 32

32. Patriot Pete’s Pub has the following items on their balance sheet:
    Cash $ 80,000
    Company Car $ 15,000
    Building $300,000
    Loans ???
    If Pete initially used $250,000 of his own money to fund the pub’s assets and has made no loan
    payments, what is the total loan amount on the balance sheet?

Answer 32

$145,000