Question 1

The group of users of accounting information charged with achieving the goals of the business is its

Accepted Answer

A)   auditors.
B)   investors.
C)   managers.
D)   creditors.

Question 2

The information needs and questions of external users vary considerably.

Accepted Answer

A) True 
 B)False

Question 3

Issuing shares of stock in exchange for cash is an example of a(n)

Accepted Answer

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

Question 4

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 5

Which of the following statements is true?

Accepted Answer

A)   Amounts received from issuing stock are revenues.
B)   Amounts paid out as dividends are not expenses.
C)   Amounts paid out as dividends are reported on the income statement.
D)   Amounts received from issued stock are reported on the income statement.

Question 6

The financial statement that summarizes the changes in retained earnings for a specific period of time is the

Accepted Answer

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

Question 7

Jack and Jill form a partnership. Jack runs the business in New York, while Jill vacations in Hawaii. During the time Jill is away from the business, Jack increases the debts of the business by $20,000. Which of the following statements is true regarding this debt?

Accepted Answer

A)   Only Jack is personally liable for the debt, since he has been the managing partner during that time.
B)   Only Jill is personally liable for the debt of the business, since Jack has been working and she has not.
C)   Both Jack and Jill are personally liable for the business debt.
D)   Neither Jack nor Jill is personally liable for the business debt, since the partnership is a separate legal entity.

Question 8

Cash is another term for stockholders' equity.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following would not be considered an internal user of accounting data for the Xanadu Company?

Accepted Answer

A)   President of the company
B)   Production manager
C)   Merchandise inventory clerk
D)   President of the employees' labor union

Question 10

Investing activities involve collecting the necessary funds to support the business.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following groups uses accounting information primarily to insure the entity is operating within prescribed rules?

Accepted Answer

A)   Taxing authorities
B)   Regulatory agencies
C)   Labor Unions
D)   Management

Question 12

Jimmy's Repair Shop started the year with total assets of $200,000 and total liabilities of $160,000. During the year the business recorded $420,000 in revenues, $220,000 in expenses, and dividends of $40,000. The net income reported by Jimmy's Repair Shop for the year was

Accepted Answer

A)   $160,000.
B)   $200,000.
C)   $120,000.
D)   $380,000.

Question 13

Stockholders' equity

Accepted Answer

A)   is usually equal to cash on hand.
B)   is equal to liabilities and retained earnings.
C)   includes retained earnings and common stock.
D)   is shown on the income statement.

Question 14

Debt securities sold to investors that must be repaid at a particular date some years in the future are called

Accepted Answer

A)   accounts payable.
B)   notes receivable.
C)   taxes payable.
D)   bonds payable.

Question 15

Claims of owners are called

Accepted Answer

A)   dividends.
B)   stockholders' equity.
C)   liabilities.
D)   income payable.

Question 16

One item is omitted in each of the following summaries of balance sheet and income statement data for three different corporations, A, B, and C.
Determine the amounts of the missing items, identifying each corporation by letter.

Accepted Answer

The answer of One item is omitted in each of...

Question 17

An advantage of the corporate form of business is that

Accepted Answer

A)   it has limited life.
B)   its owner's personal resources are at stake.
C)   its ownership is easily transferable via the sale of shares of stock.
D)   it is simple to establish.

Question 18

Why should the income statement be prepared first?

Accepted Answer

A)   The statement of cash flows should be prepared first because it determines the sources of cash. That information is then used in preparing the income statement.
B)   Net income from the income statement flows into the retained earnings statement. The ending retained earnings balance then flows into the balance sheet.
C)   The income statement does not have to be prepared first. Financial statements can be prepared in any order.
D)   None of these answer choices are correct.

Question 19

Which of the following statements concerning users of accounting information is incorrect?

Accepted Answer

A)   Management is considered an internal user.
B)   Present creditors are considered external users.
C)   Regulatory authorities are considered internal users.
D)   Taxing authorities are considered external users.

Question 20

Which of the following is not a satisfactory statement of the accounting equation?

Accepted Answer

A)   Assets = Stockholders' Equity - Liabilities
B)   Assets = Liabilities + Stockholders' Equity
C)   Assets - Liabilities = Stockholders' Equity
D)   Assets - Stockholders' Equity = Liabilities

Exam 1: Introduction to Financial Statements

Jack and Jill form a partnership. Jack runs the business in New York, while Jill vacations in Hawaii. During the time Jill is away from the business, Jack increases the debts of the business by $20,000. Which of the following statements is true regarding this debt?

Correct AnswerverifiedShow Answer

Which of the following is not a satisfactory statement of the accounting equation?

Correct AnswerverifiedShow Answer

Investing activities involve collecting the necessary funds to support the business.

Correct AnswerverifiedShow Answer

Jimmy's Repair Shop started the year with total assets of $200,000 and total liabilities of $160,000. During the year the business recorded $420,000 in revenues, $220,000 in expenses, and dividends of $40,000. The net income reported by Jimmy's Repair Shop for the year was

Correct AnswerverifiedShow Answer

The financial statement that summarizes the changes in retained earnings for a specific period of time is the

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Claims of owners are called

Correct AnswerverifiedShow Answer

Stockholders' equity

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Which of the following would not be considered an internal user of accounting data for the Xanadu Company?

Correct AnswerverifiedShow Answer

The group of users of accounting information charged with achieving the goals of the business is its

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Which of the following statements concerning users of accounting information is incorrect?

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The information needs and questions of external users vary considerably.

Correct AnswerverifiedShow Answer

An advantage of the corporate form of business is that

Correct AnswerverifiedShow Answer

Which of the following statements is true?

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Which of the following groups uses accounting information primarily to insure the entity is operating within prescribed rules?

Correct AnswerverifiedShow Answer

Debt securities sold to investors that must be repaid at a particular date some years in the future are called

Correct AnswerverifiedShow Answer

One item is omitted in each of the following summaries of balance sheet and income statement data for three different corporations, A, B, and C. Determine the amounts of the missing items, identifying each corporation by letter.

Correct AnswerverifiedShow Answer

Why should the income statement be prepared first?

Correct AnswerverifiedShow Answer

Cash is another term for stockholders' equity.

Correct AnswerverifiedShow Answer

Issuing shares of stock in exchange for cash is an example of a(n)

Correct AnswerverifiedShow Answer

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