Question 1

Which of the following must be added to beginning Retained Earnings to compute ending Retained Earnings?

Accepted Answer

A)  Expenses
B)  Dividends
C)  Net income
D)  All of these answers are correct.

Question 2

Able Co. has $500,000 in assets and $400,000 in liabilities; therefore the equity is $900,000.

Accepted Answer

A) True 
 B)False

Question 3

Cost of goods sold appears on the:

Accepted Answer

A)  balance sheet as a deduction from sales.
B)  statement of retained earnings as an addition to beginning retained earnings.
C)  income statement as a deduction from gross profit.
D)  income statement as a deduction from sales.

Question 4

A proprietorship is a distinct and separate entity from the proprietor, from both an accounting and a legal viewpoint.

Accepted Answer

A) True 
 B)False

Question 5

Income taxes owed to the federal government would be classified as an) :

Accepted Answer

A)  expense on the income statement.
B)  current asset on the balance sheet.
C)  current liability on the balance sheet.
D)  financing activity on the statement of cash flows.

Question 6

Who ultimately controls a corporation?

Accepted Answer

A)  Board of Directors
B)  The stockholders
C)  The Chief Executive Officer CEO) 
D)  The President

Question 7

Net income is computed as:

Accepted Answer

A)  revenues - expenses.
B)  revenues - expenses - dividends.
C)  revenues - expenses + dividends.
D)  revenues + expenses.

Question 8

The going- concern concept of accounting:

Accepted Answer

A)  holds that the entity will remain in operation for the foreseeable future.
B)  enables accountants to ignore the effect of inflation in the accounting records.
C)  ensures that accounting records and statements are based on the most reliable data available.
D)  maintains that each organization or section of an organization stands apart from other organizations and individuals.

Question 9

For which form of business ownership are the owners of a business legally distinct from the business?

Accepted Answer

A)  Partnership
B)  Proprietorship
C)  Corporation
D)  All of the above

Question 10

At the beginning of the period, assets were $490,000 and stockholders' equity was $240,000. During the year, assets increased by $60,000, liabilities increased by $40,000, and stockholders' equity increased by $20,000. Beginning liabilities must have been:

Accepted Answer

A)  $300,000.
B)  $280,000.
C)  $230,000.
D)  $250,000.

Question 11

Which of the following financial statements shows the net increase or decrease in cash during the period?

Accepted Answer

A)  Statement of retained earnings and balance sheet
B)  Statement of cash flows
C)  Statement of operations
D)  Balance sheet only

Question 12

An investor who wished to answer the question, "Can the company sell its products?" should investigate the:

Accepted Answer

A)  sales revenue trend.
B)  net income for the current period and projected net income for the next period.
C)  operating activities section of the cash flow statement.
D)  current and projected inventory levels.

Question 13

Expenses are:

Accepted Answer

A)  increases in retained earnings resulting from operations.
B)  increases in assets resulting from operations.
C)  decreases in retained earnings resulting from operations.
D)  increases in liabilities resulting from purchasing assets.

Question 14

All of the following are characteristics of useful accounting information EXCEPT:

Accepted Answer

A)  relevant.
B)  reliable.
C)  consistent.
D)  informative.

Question 15

What is the proper order for the categories of the statement of cash flows?

Accepted Answer

A)  Operating activities, investing activities, and financing activities
B)  Investing activities, financing activities, and operating activities
C)  Financing activities, investing activities, and operating activities
D)  Operating activities, financing activities, and investing activities

Question 16

Financial statements are:

Accepted Answer

A)  standard documents that tell us how well a business is performing and where it stands in financial terms.
B)  reports issued by outside consultants who are hired to analyze key operations of the business.
C)  standard documents issued by outside consultants who are hired to analyze key operations of the business in financial terms.
D)  reports created by management that states it is responsible for the acts of the corporation.

Question 17

Retained earnings do not represent cash that is available to a company for future operations and expansion.

Accepted Answer

A) True 
 B)False

Question 18

Which financial statement must be prepared before the others?

Accepted Answer

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

Question 19

The ending balance in Retained Earnings appears on the:

Accepted Answer

A)  statement of retained earnings only.
B)  balance sheet only.
C)  income statement and statement of cash flows.
D)  balance sheet and statement of retained earnings.

Question 20

The two types of accounting are:

Accepted Answer

A)  bookkeeping and decision- oriented.
B)  profit and nonprofit.
C)  internal and external.
D)  financial and managerial.

Exam 1: The Financial Statements

Retained earnings do not represent cash that is available to a company for future operations and expansion.

Correct AnswerverifiedShow Answer

Which of the following must be added to beginning Retained Earnings to compute ending Retained Earnings?

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What is the proper order for the categories of the statement of cash flows?

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For which form of business ownership are the owners of a business legally distinct from the business?

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Cost of goods sold appears on the:

Correct AnswerverifiedShow Answer

At the beginning of the period, assets were $490,000 and stockholders' equity was $240,000. During the year, assets increased by $60,000, liabilities increased by $40,000, and stockholders' equity increased by $20,000. Beginning liabilities must have been:

Correct AnswerverifiedShow Answer

The going- concern concept of accounting:

Correct AnswerverifiedShow Answer

Which of the following financial statements shows the net increase or decrease in cash during the period?

Correct AnswerverifiedShow Answer

Income taxes owed to the federal government would be classified as an) :

Correct AnswerverifiedShow Answer

Who ultimately controls a corporation?

Correct AnswerverifiedShow Answer

Financial statements are:

Correct AnswerverifiedShow Answer

Which financial statement must be prepared before the others?

Correct AnswerverifiedShow Answer

An investor who wished to answer the question, "Can the company sell its products?" should investigate the:

Correct AnswerverifiedShow Answer

Able Co. has $500,000 in assets and $400,000 in liabilities; therefore the equity is $900,000.

Correct AnswerverifiedShow Answer

The two types of accounting are:

Correct AnswerverifiedShow Answer

Net income is computed as:

Correct AnswerverifiedShow Answer

The ending balance in Retained Earnings appears on the:

Correct AnswerverifiedShow Answer

A proprietorship is a distinct and separate entity from the proprietor, from both an accounting and a legal viewpoint.

Correct AnswerverifiedShow Answer

Expenses are:

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All of the following are characteristics of useful accounting information EXCEPT:

Correct AnswerverifiedShow Answer

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