Question 1

Retained earnings is:

Accepted Answer

A)  The positive cash flows of a company. 
B)  Net worth of a company. 
C)  The owners' equity that has accumulated as a result of profitable operations. 
D)  Equal to the total assets of a company. 
A)  The positive cash flows of a company. 
B)  Net worth of a company. 
C)  The owners' equity that has accumulated as a result of profitable operations. 
D)  Equal to the total assets of a company.

Question 2

Which of the following is (are) correct about a company's balance sheet?

Accepted Answer

A)  It displays sources and uses of cash for the period. 
B)  It is an expansion of the basic accounting equation: Assets = Liabilities + Owners' Equity. 
C)  It is sometimes referred to as a statement of financial position. 
D)  It is unnecessary if both an income statement and statement of cash flows are available. 
A)  It displays sources and uses of cash for the period. 
B)  It is an expansion of the basic accounting equation: Assets = Liabilities + Owners' Equity. 
C)  It is sometimes referred to as a statement of financial position. 
D)  It is unnecessary if both an income statement and statement of cash flows are available.

Question 3

The major provisions of the Sarbanes-Oxley Act of 2002 include all of the following except:

Accepted Answer

A)  The creation of a new agency to oversee the public accounting profession. 
B)  Restrictions on the types of consulting services that accounting firms can provide to audit clients. 
C)  Reducing responsibility for audit committees when overseeing the financial reporting process. 
D)  Requiring the chief executive office and the chief financial officer to certify the accuracy of their company's financial statements. 
A)  The creation of a new agency to oversee the public accounting profession. 
B)  Restrictions on the types of consulting services that accounting firms can provide to audit clients. 
C)  Reducing responsibility for audit committees when overseeing the financial reporting process. 
D)  Requiring the chief executive office and the chief financial officer to certify the accuracy of their company's financial statements.

Question 4

An expense is best defined as:

Accepted Answer

A)  Any payment of cash for the benefit of the company. 
B)  Past, present, or future payments of cash required to generate revenues. 
C)  Past payments of cash required to generate revenues. 
D)  Future payments of cash required to generate revenues. 
A)  Any payment of cash for the benefit of the company. 
B)  Past, present, or future payments of cash required to generate revenues. 
C)  Past payments of cash required to generate revenues. 
D)  Future payments of cash required to generate revenues.

Question 5

A strong statement of cash flows indicates that significant cash is being generated by:

Accepted Answer

A)  Operating activities. 
B)  Financing activities. 
C)  Investing activities. 
D)  Effective tax planning. 
A)  Operating activities. 
B)  Financing activities. 
C)  Investing activities. 
D)  Effective tax planning.

Question 6

A statement of cash flows for February, would report an increase in cash of:

Accepted Answer

A)  $4,000. 
B)  $47,000. 
C)  $53,600. 
D)  $96,600. 
A)  $4,000. 
B)  $47,000. 
C)  $53,600. 
D)  $96,600.

Question 7

A cash flows statement reports revenue and expense activities for a specific time period such as one month or one year.

Accepted Answer

A) True 
 B)False

Question 8

The Public Company Accounting Oversight Board was created by the American Institute of CPAs to oversee the public accounting profession.

Accepted Answer

A) True 
 B)False

Question 9

What information would you find in a statement of cash flows that you would not be able to get from the other two primary financial statements?

Accepted Answer

A)  Cash provided by or used in financing activities. 
B)  Cash balance at the end of the period. 
C)  Total liabilities due to creditors at the end of the period. 
D)  Net income. 
A)  Cash provided by or used in financing activities. 
B)  Cash balance at the end of the period. 
C)  Total liabilities due to creditors at the end of the period. 
D)  Net income.

Question 10

Notes payable and accounts payable are written promises to pay an amount owed by a certain date. Notes payable generally have interest, while accounts payable generally do not.

Accepted Answer

A) True 
 B)False

Question 11

Assume the Equipment shown above was acquired by the business five years ago and has a book value of $156,000, but has a current appraised value of $200,000. Hercules Manufacturing's Retained Earnings at December 31, 2010, amounts to:

Accepted Answer

A)  $533,000. 
B)  $345,000. 
C)  $198,000. 
D)  $356,000. 
A)  $533,000. 
B)  $345,000. 
C)  $198,000. 
D)  $356,000.

Question 12

What amount of net income will be reported on an income statement for the month of October?

Accepted Answer

A)  $18,500. 
B)  $22,500. 
C)  $78,000. 
D)  $100,500. 
A)  $18,500. 
B)  $22,500. 
C)  $78,000. 
D)  $100,500.

Question 13

If the Cash balance at December 31, 2011 is $62,500 then total liabilities amount to:

Accepted Answer

A)  $42,500. 
B)  $140,000. 
C)  $45,000. 
D)  $182,500. 
A)  $42,500. 
B)  $140,000. 
C)  $45,000. 
D)  $182,500.

Question 14

The cash flows statement provides a link between two balance sheets by showing how net income (or loss) has changed owners' equity from one balance sheet date to the next.

Accepted Answer

A) True 
 B)False

Question 15

A statement of cash flows for February, would report net cash flows from financing activities of:

Accepted Answer

A)  $4,000. 
B)  $47,000. 
C)  $53,600. 
D)  $96,600. 
A)  $4,000. 
B)  $47,000. 
C)  $53,600. 
D)  $96,600.

Question 16

Which of the following is correct if at the end of Crystal Imports' first year of operations, assets are $800,000 and owners' equity is $720,000?

Accepted Answer

A)  The owner must have invested $720,000 to start the business. 
B)  The business must be operating profitably. 
C)  Liabilities are $80,000. 
D)  Liabilities are $1,520,000. 
A)  The owner must have invested $720,000 to start the business. 
B)  The business must be operating profitably. 
C)  Liabilities are $80,000. 
D)  Liabilities are $1,520,000.

Question 17

Which of the following is correct if a company purchases equipment for $70,000 cash?

Accepted Answer

A)  Total assets will increase by $70,000. 
B)  Total assets will decrease by $70,000. 
C)  Total assets will remain the same. 
D)  The company's total owners' equity will decrease. 
A)  Total assets will increase by $70,000. 
B)  Total assets will decrease by $70,000. 
C)  Total assets will remain the same. 
D)  The company's total owners' equity will decrease.

Question 18

If Cash at December 31, 2009, is $86,000, Capital Stock is:

Accepted Answer

A)  $260,000. 
B)  $300,000. 
C)  $620,000. 
D)  $168,000. 
A)  $260,000. 
B)  $300,000. 
C)  $620,000. 
D)  $168,000.

Question 19

If total assets equal $345,000 and total owners' equity equal $120,000, then total liabilities must equal:

Accepted Answer

A)  $465,000. 
B)  $225,000. 
C)  $120,000. 
D)  Cannot be determined from the information given. 
A)  $465,000. 
B)  $225,000. 
C)  $120,000. 
D)  Cannot be determined from the information given.

Question 20

Effects of transactions on elements of the accounting equation. Some of the transactions carried out by Tsang Company during the first month of the company's operations are listed below. You are to determine the dollar effect of each transaction on the total assets, the total liabilities, and the owners' equity of Tsang Company. Use the symbols (+) for increase, (?) (-) for decrease, and (NC) for no change. An answer is provided for the first transaction to serve as an example.

Accepted Answer

The answer of Effects of transactions on elements of the...

Exam 2: Basic Financial Statements

Retained earnings is:

Which of the following is (are) correct about a company's balance sheet?

The major provisions of the Sarbanes-Oxley Act of 2002 include all of the following except:

An expense is best defined as:

A strong statement of cash flows indicates that significant cash is being generated by:

A statement of cash flows for February, would report an increase in cash of:

A cash flows statement reports revenue and expense activities for a specific time period such as one month or one year.

The Public Company Accounting Oversight Board was created by the American Institute of CPAs to oversee the public accounting profession.

What information would you find in a statement of cash flows that you would not be able to get from the other two primary financial statements?

Notes payable and accounts payable are written promises to pay an amount owed by a certain date. Notes payable generally have interest, while accounts payable generally do not.

Assume the Equipment shown above was acquired by the business five years ago and has a book value of $156,000, but has a current appraised value of $200,000. Hercules Manufacturing's Retained Earnings at December 31, 2010, amounts to:

What amount of net income will be reported on an income statement for the month of October?

If the Cash balance at December 31, 2011 is $62,500 then total liabilities amount to:

The cash flows statement provides a link between two balance sheets by showing how net income (or loss) has changed owners' equity from one balance sheet date to the next.

A statement of cash flows for February, would report net cash flows from financing activities of:

Which of the following is correct if at the end of Crystal Imports' first year of operations, assets are $800,000 and owners' equity is $720,000?

Which of the following is correct if a company purchases equipment for $70,000 cash?

If Cash at December 31, 2009, is $86,000, Capital Stock is:

If total assets equal $345,000 and total owners' equity equal $120,000, then total liabilities must equal:

Accounting: Information for Decision Making

The Accounting Cycle: Capturing Economic Events

The Accounting Cycle: Accruals and Deferrals

The Accounting Cycle: Reporting Financial Results

Merchandising Activities

Financial Assets

Inventories and the Cost of Goods Sold

Plant and Intangible Assets

Liabilities

Stockholders Equity: Paid-In Capital

Income and Changes in Retained Earnings

Statement of Cash Flows

Financial Statement Analysis

Global Business and Accounting

Management Accounting: a Business Partner

Job Order Cost Systems and Overhead Allocations

Process Costing

Costing and the Value Chain

Cost-Volume-Profit Analysis

Incremental Analysis

Responsibility Accounting and Transfer Pricing

Operational Budgeting

Standard Cost Systems

Rewarding Business Performance

Capital Budgeting

Forms of Business Organization

The Time Value of Money: Future Amounts and Present Values Answer Key

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