Exam 1: Financial Statements and Business Decisions

Which of the following groups has primary responsibility for the information contained in the financial statements?

Which of the following statements is correct?

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

Which of the following items is reported as an expense on the income statement?

Husky Company has provided the following information for its most recent year of operation: Cash collected from customers totaled $89,300. Cash borrowed from banks totaled $31,700. Cash paid to employees for salaries totaled $32,100. Cash received from selling Husky common stock to stockholders totaled $41,000. Cash payments to banks for repayment of money borrowed totaled $7,500. Cash paid to suppliers totaled $12,500. Land costing $25,000 was sold for $25,000 cash. Cash paid for dividends to stockholders totaled $3,300. How much was Husky's cash flow from financing activities?

Which of the following would be reported in the financing activities section of a cash flow statement?

Revenue is recognized within the income statement during the period in which cash is collected.

Alfred Company manufactures men's clothing. During 2016, the company reported the following items that affected cash. Indicate whether each of these items is a cash flow from operating activities (O), investing activities (I), or financing activities (F).

Which of the following best describes assets?

Baseline Corporation was formed two years ago to manufacture fitness equipment. It has been profitable and is growing rapidly. It currently has 150 stockholders and 90 employees; most of the employees own at least a few shares of Baseline's common stock. The company has received financing from two banks. It will sell additional shares of common stock within the next three months and will also seek additional loans and hire new employees to support its continued growth. Required: 1. Explain who relies on the information in financial statements prepared by Baseline Corporation. 2. Why is compliance with generally accepted accounting principles and accuracy in accounting important for Baseline?

When would a company report a net loss on the income statement?

During the fiscal year ended 2016, a company had revenues of $400,000, cost of goods sold of $280,000, and an income tax rate of 30 percent on income before income taxes. What was the company's 2016 net income?

Madrid Company has provided the following data (ignore income taxes): 2016 revenues were $77,500. 2016 net income was $33,900. Dividends declared and paid during 2016 totaled $5,700. Total assets at December 31, 2016 were $217,000. Total stockholders' equity at December 31, 2016 was $123,000. Retained earnings at December 31, 2016 were $83,000. Which of the following is correct?

If a U.S. domestic company does business in a foreign country, the Securities and Exchange Commission (SEC) requires the use of International Financial Reporting Standards (IFRS) for the company's financial reporting in the U.S.

Lena Company has provided the following data (ignore income taxes): 2016 revenues were $99,000. 2016 expenses were $47,800. Dividends declared and paid during 2016 totaled $9,500. Total assets at December 31, 2016 were $177,000. Total liabilities at December 31, 2016 were $89,000. Common stock at December 31, 2016 was $28,000. Which of the following is not correct?

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

Cosmos Corporation was established on December 31, 2015, by a group of investors who invested a total of $1,000,000 for shares of the new corporation's common stock. During the month of January 2016, Cosmos provided services to customers for which the total revenue was $100,000. Of this amount, $10,000 had not been collected by the end of January. Cosmos recorded salary expense of $20,000, of which 90% had been paid by the end of the month; rent expense of $5,000, which had been paid on January 1; and other expenses of $12,000, which had been paid by check. On January 31, 2016, Cosmos purchased a van by paying cash of $30,000. There were no other transactions that affected cash. Required: 1. In which section of the statement of cash flows would the amount of cash paid for rent be reported? 2. In which section of the statement of cash flows would the amount of cash paid for the van purchase be reported? 3. By how much did Cosmos's cash increase or decrease during January 2016? 4. What was Cosmos's net income or net loss (after income tax expense) for the month of January 2016? The income tax expense was $18,900. 5. Explain why the net increase or decrease in cash for a business generally will be different than the net income, or net loss, for the same period.

What is the objective of the cash flow statement? Describe the three cash flow classifications that are reported within the cash flow statement.

Which of the following statements describes the balance sheet?

Laker Company has provided the following information for its most recent year of operation: Cash collected from customers totaled $99,300. Cash borrowed from banks totaled $42,700. Cash paid to employees totaled $23,300. Cash paid for interest totaled $3,100. Cash received from selling an investment in Husky stock totaled $73,000. Cash payments to banks for repayment of money borrowed totaled $9,700. Cash paid for operating expenses totaled $11,200. Land costing $75,000 was sold for $75,000 cash. Cash paid for dividend payments to stockholders totaled $7,700. Calculate Laker's net cash flow from financing activities.