Question 1

Which of the following would most likely increase retained earnings?

Accepted Answer

A)  An increase in expenses. 
B)  An increase in revenues. 
C) Declaring a cash dividend. 
D) Issuing additional common stock. 
A)  An increase in expenses. 
B)  An increase in revenues. 
C) Declaring a cash dividend. 
D) Issuing additional common stock.

Question 2

Indicate on which financial statement you would expect to find each of the following. If an item can be found on more than one statement, list each statement. $$\begin{array} { | l | l | } 
\hline \text { Example: Cash } & \text { Balance Sheet } \
\hline \text { Notes payable } & \
\hline \text { Wages expense } & \
\hline \text { Cost of goods sold } & \
\hline \text { Sales revenue } & \
\hline \text { Inventory } & \
\hline \text { Income tax expense } & \
\hline \text { Dividends } & \
\hline \text { Retained earnings } & \
\hline \text { Accounts payable } & \
\hline \text { Equipment } & \
\hline
\end{array}$$

Accepted Answer

The answer of Indicate on which financial statement you would...

Question 3

Madrid Company has provided the following data (ignore income taxes): 2014 revenues were $77,500.
2014 net income was $33,900.
Dividends declared and paid during 2014 totaled $5,700.
Total assets at December 31, 2014 were $217,000.
Total stockholders' equity at December 31, 2014 was $123,000.
Retained earnings at December 31, 2014 were $83,000.
Which of the following is not correct?

Accepted Answer

A)  2014 expenses were $43,600. 
B)  Total liabilities at December 31, 2014 were $94,000. 
C) Retained earnings increased $33,900 during 2014. 
D) Common stock at December 31, 2014 was $40,000. 
A)  2014 expenses were $43,600. 
B)  Total liabilities at December 31, 2014 were $94,000. 
C) Retained earnings increased $33,900 during 2014. 
D) Common stock at December 31, 2014 was $40,000.

Question 4

The income statement is a measure of an entity's economic performance for a period of time.

Accepted Answer

A) True 
 B)False

Question 5

Within which of the following would you find the inventory method(s) being used by a business entity?

Accepted Answer

A)  Balance sheet. 
B)  Income statement. 
C) Notes to the financial statements. 
D) Headings of the financial statements. 
A)  Balance sheet. 
B)  Income statement. 
C) Notes to the financial statements. 
D) Headings of the financial statements.

Question 6

The International Accounting Standards Board has worked to develop global accounting standards known as

Accepted Answer

A)  Generally accepted accounting principles. 
B)  Globally accepted financial standards. 
C) International financial reporting standards. 
D) Generally accepted international financial standards. 
A)  Generally accepted accounting principles. 
B)  Globally accepted financial standards. 
C) International financial reporting standards. 
D) Generally accepted international financial standards.

Question 7

Which of the following is considered to be an expense on the income statement?

Accepted Answer

A)  Accounts payable. 
B)  Notes payable. 
C) Wages payable. 
D) Cost of goods solD.Income statements begin with sales less cost of goods sold. 
A)  Accounts payable. 
B)  Notes payable. 
C) Wages payable. 
D) Cost of goods solD.Income statements begin with sales less cost of goods sold.

Question 8

Why is the CPA's role in performing audits important to our economic system?

Accepted Answer

A)  The auditors provide direct financial advice to potential investors. 
B)  The auditors have the primary responsibility for the information contained in financial statements. 
C) The auditors issue reports on the accuracy of each financial transaction. 
D) The audit of financial statements helps investors and others to know that they can rely on the information presented in the financial statements. 
A)  The auditors provide direct financial advice to potential investors. 
B)  The auditors have the primary responsibility for the information contained in financial statements. 
C) The auditors issue reports on the accuracy of each financial transaction. 
D) The audit of financial statements helps investors and others to know that they can rely on the information presented in the financial statements.

Question 9

Which financial statement would you use to determine a company's earnings performance during an accounting period?

Accepted Answer

A)  Balance sheet. 
B)  Statement of stockholders' equity. 
C) Income statement. 
D) Statement of cash flows. 
A)  Balance sheet. 
B)  Statement of stockholders' equity. 
C) Income statement. 
D) Statement of cash flows.

Question 10

Which of the following is primarily responsible for the information provided in the financial statements?

Accepted Answer

A)  Chief Executive Officer. 
B)  External Auditors. 
C) Board of Directors. 
D) Internal Accounting Staff. 
A)  Chief Executive Officer. 
B)  External Auditors. 
C) Board of Directors. 
D) Internal Accounting Staff.

Question 11

Which of the following statements is false?

Accepted Answer

A)  A positive net income results in an increase in retained earnings. 
B)  The ending retained earnings balance from the statement of retained earnings is reported on the balance sheet. 
C) The change in the cash balance on the statement of cash flows added to the beginning cash balance equals the ending cash balance. 
D) The dividends reported on the statement of retained earnings are also reported as dividend expense on the income statement. 
A)  A positive net income results in an increase in retained earnings. 
B)  The ending retained earnings balance from the statement of retained earnings is reported on the balance sheet. 
C) The change in the cash balance on the statement of cash flows added to the beginning cash balance equals the ending cash balance. 
D) The dividends reported on the statement of retained earnings are also reported as dividend expense on the income statement.

Question 12

Which of the following would not be found on the statement of cash flows?

Accepted Answer

A)  Cost flow from manufacturing activities. 
B)  Cash flow from operating activities. 
C) Cash flow from investing activities. 
D) Cash flow from financing activities. 
A)  Cost flow from manufacturing activities. 
B)  Cash flow from operating activities. 
C) Cash flow from investing activities. 
D) Cash flow from financing activities.

Question 13

A decision maker who wants to understand a company's financial statements must carefully read the notes to the financial statements because these disclosures provide useful supplemental information.

Accepted Answer

A) True 
 B)False

Question 14

For Glad Rags Shops, the following information is available for the year ended December 31, 2014: $$\begin{array} { | l | r | } 
\hline \text { Sales revenue } & \$ 4,200,000 \
\hline \text { Cost of goods sold } & 2,650,000 \
\hline \text { Salaries expense } & 500,000 \
\hline \text { Rent expense } & 300,000 \
\hline \text { Administrative expense } & 250,000 \
\hline \text { Dividends declared } & 10,000 \
\hline
\end{array}$$ The income tax is $150,000.
Requirement:
Prepare an income statement for Glad Rags Shops.

Accepted Answer

@#IMG-DLM& Note: Dividends declared of $

Question 15

Which of the following statements pertaining to the audit function is incorrect?

Accepted Answer

A)  The primary responsibility for the information in the financial statements lies with the auditors. 
B)  The audit report describes the auditor's opinion of the fairness of the financial statements. 
C) An audit ensures that the financial statements conform to generally accepted accounting principles. 
D) The auditor does not examine every transaction an entity incurreD.The primary responsibility for the information in the financial statements lies with the management. 
A)  The primary responsibility for the information in the financial statements lies with the auditors. 
B)  The audit report describes the auditor's opinion of the fairness of the financial statements. 
C) An audit ensures that the financial statements conform to generally accepted accounting principles. 
D) The auditor does not examine every transaction an entity incurreD.The primary responsibility for the information in the financial statements lies with the management.

Question 16

Parker Pool Supply, Inc. reported the following items for the year ended December 31, 2014: $$\begin{array} { | l | r | } 
\hline \text { Wages and salary expense } & \$ 527,000 \
\hline \text { Cost of goods sold } & 1,124,000 \
\hline \text { Rent expense } & 395,000 \
\hline \text { Sales revenue } & 2,564,000 \
\hline \text { Interest expense } & 30,000 \
\hline \text { Income tax expense } & 121,000 \
\hline \text { Accounts receivable } & 27,000 \
\hline
\end{array}$$ Requirement:
Prepare an income statement for the year ended December 31, 2014.

Accepted Answer

@#IMG-DLM& Note: Accounts rece

Question 17

Which of the following describes the primary objective of the balance sheet?

Accepted Answer

A)  To measure the net income of a business up to a particular point in time. 
B)  To report the difference between cash inflows and cash outflows for the period. 
C) To report the financial position of the reporting entity at a particular point in time. 
D) To report the market value of assets, liabilities, and stockholders' equity at a particular point in time. 
A)  To measure the net income of a business up to a particular point in time. 
B)  To report the difference between cash inflows and cash outflows for the period. 
C) To report the financial position of the reporting entity at a particular point in time. 
D) To report the market value of assets, liabilities, and stockholders' equity at a particular point in time.

Question 18

One of the advantages of a corporation when compared to a partnership is the limited liability of the owners.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following is a disadvantage of a corporation when compared to a partnership?

Accepted Answer

A)  The stockholders have limited liability. 
B)  The corporation is treated as a separate legal entity from the stockholders. 
C) The corporation and its stockholders are subject to double taxation. 
D) The corporation must account for the transactions of the business as separate and apart from those of the owners. 
A)  The stockholders have limited liability. 
B)  The corporation is treated as a separate legal entity from the stockholders. 
C) The corporation and its stockholders are subject to double taxation. 
D) The corporation must account for the transactions of the business as separate and apart from those of the owners.

Question 20

Which of the following transactions affects both retained earnings and net income?

Accepted Answer

A)  The payment of a cash dividend. 
B)  The recording of revenue for services provided. 
C) The issue of stock in exchange for cash. 
D) The borrowing of money from a bank. 
A)  The payment of a cash dividend. 
B)  The recording of revenue for services provided. 
C) The issue of stock in exchange for cash. 
D) The borrowing of money from a bank.

Which of the following would most likely increase retained earnings?

The income statement is a measure of an entity's economic performance for a period of time.

Within which of the following would you find the inventory method(s) being used by a business entity?

The International Accounting Standards Board has worked to develop global accounting standards known as

Which of the following is considered to be an expense on the income statement?

Why is the CPA's role in performing audits important to our economic system?

Which financial statement would you use to determine a company's earnings performance during an accounting period?

Which of the following is primarily responsible for the information provided in the financial statements?

Which of the following statements is false?

Which of the following would not be found on the statement of cash flows?

A decision maker who wants to understand a company's financial statements must carefully read the notes to the financial statements because these disclosures provide useful supplemental information.

Which of the following statements pertaining to the audit function is incorrect?

Which of the following describes the primary objective of the balance sheet?

One of the advantages of a corporation when compared to a partnership is the limited liability of the owners.

Which of the following is a disadvantage of a corporation when compared to a partnership?

Which of the following transactions affects both retained earnings and net income?

Investing and Financing Decisions and the Accounting System

Operating Decisions and the Accounting System

Adjustments, Financial Statements, and the Quality of Earnings

Communicating and Interpreting Accounting Information

Reporting and Interpreting Sales Revenue, Receivables, and Cash

Reporting and Interpreting Cost of Goods Sold and Inventory

Reporting and Interpreting Property, Plant, and Equipment; Intangibles; and Natural Resources

Reporting and Interpreting Liabilities

Reporting and Interpreting Bonds

Reporting and Interpreting Owners Equity

Statement of Cash Flows

Analyzing Financial Statements

Reporting and Interpreting Investments in Other Corporations

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Exam 1: Financial Statements and Business Decisions

Which of the following would most likely increase retained earnings?

The income statement is a measure of an entity's economic performance for a period of time.

Within which of the following would you find the inventory method(s) being used by a business entity?

The International Accounting Standards Board has worked to develop global accounting standards known as

Which of the following is considered to be an expense on the income statement?

Why is the CPA's role in performing audits important to our economic system?

Which financial statement would you use to determine a company's earnings performance during an accounting period?

Which of the following is primarily responsible for the information provided in the financial statements?

Which of the following statements is false?

Which of the following would not be found on the statement of cash flows?

A decision maker who wants to understand a company's financial statements must carefully read the notes to the financial statements because these disclosures provide useful supplemental information.

Which of the following statements pertaining to the audit function is incorrect?

Which of the following describes the primary objective of the balance sheet?

One of the advantages of a corporation when compared to a partnership is the limited liability of the owners.

Which of the following is a disadvantage of a corporation when compared to a partnership?

Which of the following transactions affects both retained earnings and net income?

Investing and Financing Decisions and the Accounting System

Operating Decisions and the Accounting System

Adjustments, Financial Statements, and the Quality of Earnings

Communicating and Interpreting Accounting Information

Reporting and Interpreting Sales Revenue, Receivables, and Cash

Reporting and Interpreting Cost of Goods Sold and Inventory

Reporting and Interpreting Property, Plant, and Equipment; Intangibles; and Natural Resources

Reporting and Interpreting Liabilities

Reporting and Interpreting Bonds

Reporting and Interpreting Owners Equity

Statement of Cash Flows

Analyzing Financial Statements

Reporting and Interpreting Investments in Other Corporations

Filters