Question 1

Net income will result during a time period when

Accepted Answer

A)  assets exceed liabilities.
B)  assets exceed revenues.
C)  expenses exceed revenues.
D)  revenues exceed expenses.

Question 2

All of the following are interrelationships that are important to understand when preparing financial statements except

Accepted Answer

A)  the net income from the income statement is used in the retained earnings statement.
B)  the ending retained earnings from the retained earnings statement is used in the stockholder's equity section of the balance sheet.
C)  the cash on the balance sheet should be equal to the cash at the end of the period on the statement of cash flows.
D)  all of the payments on the balance sheet should be equal to the cash payments for operating activities on the statement of cash flows.

Question 3

An income statement shows

Accepted Answer

A)  revenues, liabilities, and stockholders' equity.
B)  expenses, dividends, and stockholders' equity.
C)  revenues, expenses, and net income.
D)  assets, liabilities, and stockholders' equity.

Question 4

Retained earnings at the end of the period is equal to

Accepted Answer

A)  retained earnings at the beginning of the period plus net income minus liabilities.
B)  retained earnings at the beginning of the period plus net income minus dividends.
C)  net income.
D)  assets plus liabilities.

Question 5

Which of the following would not be considered an external user of accounting data for the Julian Company?

Accepted Answer

A)  Internal Revenue Service agent
B)  Management
C)  Creditors
D)  Customers

Question 6

An income statement

Accepted Answer

A)  summarizes the changes in retained earnings for a specific period of time.
B)  reports the changes in assets, liabilities, and stockholders' equity over a period of time.
C)  reports the assets, liabilities, and stockholders' equity at a specific date.
D)  presents the revenues and expenses for a specific period of time.

Question 7

Explanatory notes and supporting schedules are an optional part of an annual report.

Accepted Answer

A) True 
 B)False

Question 8

A business organized as a separate legal entity owned by stockholders is a partnership.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following is an asset?

Accepted Answer

A)  Mortgage payable
B)  Investments
C)  Common stock
D)  Retained earnings

Question 10

A business is usually involved in two types of activities-financing and investing.

Accepted Answer

A) True 
 B)False

Question 11

The accounting equation can be expressed as Assets - Liabilities = Stockholders' Equity.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following is an advantage of corporations relative to partnerships and sole proprietorships?

Accepted Answer

A)  Reduced legal liability for investors
B)  Harder to transfer ownership
C)  Lower taxes
D)  Most common form of organization

Question 13

The heading on the statement of cash flows identifies all of the following except

Accepted Answer

A)  the preparer of the statement.
B)  the company
C)  the time period covered by the statement.
D)  the type of statement.

Question 14

Ending retained earnings for a period is equal to beginning

Accepted Answer

A)  Retained earnings + Net income + Dividends.
B)  Retained earnings - Net income - Dividends.
C)  Retained earnings + Net income - Dividends.
D)  Retained earnings - Net income + Dividends.

Question 15

Which of the following groups uses accounting information to determine whether the company's operating performance might result in a stock price increase?

Accepted Answer

A)  Investors in common stock
B)  Marketing managers
C)  Creditors
D)  Chief Financial Officer

Question 16

The heading for the income statement might include the line "As of December 31, 20xx."

Accepted Answer

A) True 
 B)False

Question 17

The liability created by a business when it purchases coffee beans and coffee cups on credit from suppliers is termed a(n)

Accepted Answer

A)  account payable.
B)  account receivable.
C)  revenue.
D)  expense.

Question 18

Which financial statement is prepared first?

Accepted Answer

A)  Balance sheet
B)  Income statement
C)  Retained earnings statement
D)  Statement of cash flows

Question 19

Borrowing money is an example of a(n)

Accepted Answer

A)  delivering activity.
B)  financing activity.
C)  investing activity.
D)  operating activity.

Question 20

The partnership form of business organization

Accepted Answer

A)  is a separate legal entity.
B)  is a common form of organization for service-type businesses.
C)  enjoys an unlimited life.
D)  has limited liability.

Exam 1: Introduction to Financial Statements

The heading on the statement of cash flows identifies all of the following except

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A business organized as a separate legal entity owned by stockholders is a partnership.

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The partnership form of business organization

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An income statement shows

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The heading for the income statement might include the line "As of December 31, 20xx."

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The liability created by a business when it purchases coffee beans and coffee cups on credit from suppliers is termed a(n)

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Which of the following would not be considered an external user of accounting data for the Julian Company?

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Retained earnings at the end of the period is equal to

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Which financial statement is prepared first?

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Which of the following groups uses accounting information to determine whether the company's operating performance might result in a stock price increase?

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Which of the following is an asset?

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Net income will result during a time period when

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Explanatory notes and supporting schedules are an optional part of an annual report.

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Which of the following is an advantage of corporations relative to partnerships and sole proprietorships?

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All of the following are interrelationships that are important to understand when preparing financial statements except

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An income statement

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The accounting equation can be expressed as Assets - Liabilities = Stockholders' Equity.

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Ending retained earnings for a period is equal to beginning

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Borrowing money is an example of a(n)

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A business is usually involved in two types of activities-financing and investing.

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