Question 1

Which of the following statements is correct?

Accepted Answer

A)  Assets on the balance sheet include retained earnings.
B)  Retained earnings includes common stock.
C)  The balance sheet equation states that assets equal liabilities.
D)  A corporation's net income does not necessarily equal its net cash flow from operations. D

Question 2

Larson Company ends its recent year of operations with $3,500,000 in retained earnings.During the year Larson's net income exceeded its dividend declarations by $200,000.Larson's dividend declarations were $25,000 greater than the dividend payments.
How much was Larson Company's beginning retained earnings?

Accepted Answer

Beginning retained earnings = $3,300,000 = Ending retained earnings ($3,500,000)minus the change in retained earnings during the year ($200,000).
The change in retained earnings during the year = Net income minus dividends declared,not dividends paid.
Net income minus dividends declared is provided as the amount of $200,000.

Question 3

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

Accepted Answer

The objective of the cash flow statement is to explain the change in the cash balance during a particular time period.The operating activities section describes the cash flows that resulted from normal profit seeking activities.The investing activities section describes cash flows resulting from acquisition and disposition of long-term assets and investments.The financing activities section describes the cash flows resulting from issuance and retirement of long-term debt and equity.

Question 4

A company's retained earnings increased $375,000 last year and its assets increased $973,000.The company declared a $79,000 cash dividend during the year.What was last year's net income?

Accepted Answer

A)  $296,000.
B)  $375,000.
C)  $454,000.
D)  $519,000.

Question 5

Which of the following is not one of the three steps taken by a corporation to assure the accuracy of its records?

Accepted Answer

A)  Implementing a system of controls over the company's records and assets.
B)  Hiring an independent auditor to report on the fairness of the financial statements.
C)  Hiring a financial analyst to ensure the actual results of operations are similar to planned results.
D)  Forming a committee made up of board of directors' members to oversee the integrity of the corporation's system of controls and the hiring of the independent auditors.

Question 6

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 rent 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.

Accepted Answer

The answer of Laker Company has provided the following information...

Question 7

A company's retained earnings balance increased $50,000 last year;therefore,net income last year must have been $50,000.

Accepted Answer

A) True 
 B)False

Question 8

For a business organized as a general partnership,which statement is true?

Accepted Answer

A)  The owners and the business are separate legal entities.
B)  Each partner is potentially responsible for the debts of the business.
C)  Formation of a partnership requires getting a charter from the state of incorporation.
D)  A partnership is not considered to be a separate accounting entity.

Question 9

Which of the following accounts would be reported as assets on the balance sheet?

Accepted Answer

A)  Cash,accounts payable,and notes payable.
B)  Cash,retained earnings,and accounts receivable.
C)  Cash,accounts receivable,and inventories.
D)  Inventories,property and equipment,and common stock.

Question 10

At the beginning of 2019,a corporation had assets of $270,000 and liabilities of $160,000.During 2019,assets increased $25,000 and liabilities increased $5,000.What was stockholders' equity at December 31,2019?

Accepted Answer

A)  $140,000.
B)  $130,000.
C)  $190,000.
D)  $80,000.

Question 11

Which of the following does not represent a professional accounting certification?

Accepted Answer

A)  Certified Management Accountant.
B)  Certified Public Accountant.
C)  Certified Internal Auditor.
D)  Certified Tax Accountant.

Question 12

Which of the following is the amount of revenue reported on the income statement of a retail company?

Accepted Answer

A)  The cash collected from customers during the current period.
B)  Both cash and credit sales for the period.
C)  Cash sales for the period and collections from customers.
D)  Cash sales and stockholders' investments.

Question 13

A business entity's accounting system creates financial accounting reports which are provided to external decision makers.

Accepted Answer

A) True 
 B)False

Question 14

Fulton Company was established at the beginning of 2019 when several investors paid a total of $200,000 to purchase Fulton common stock.No additional investments in common stock were made during the year.By December 31,2019,Fulton had cash on hand of $45,000,office equipment of $40,000,inventory of $156,000,and accounts payable of $10,000.Sales for the year were $812,000.Of this amount,customers still owed $20,000.Fulton declared and paid dividends of $25,000 to its stockholders during 2019.
1.Based on the information above,prepare a balance sheet for Fulton Company at December 31,2019.In the process of preparing the balance sheet,you must calculate the ending balance in retained earnings.
2.Prepare a statement of stockholders' equity for the year ended December 31,2019.
3.What was the amount of Fulton's net income for 2019?
4.Was Fulton successful during its first year in operation? Explain your answer.

Accepted Answer

The answer of Fulton Company was established at the beginning...

Question 15

Since 2002,there has been substantial movement toward the adoption of International Financial Reporting Standards (IFRS)issued by the:

Accepted Answer

A)  Financial Accounting Standards Board.
B)  Securities and Exchange Commission.
C)  International Accounting Standards Board.
D)  American Institute of Certified Public Accountants.

Question 16

Which of the following items is not reported as an expense on the income statement?

Accepted Answer

A)  Interest expense.
B)  Dividends paid.
C)  Selling,general,and administrative expenses.
D)  Cost of goods sold.

Question 17

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.

Question 18

The accounting equation states that Assets = Liabilities + Stockholders' Equity.

Accepted Answer

A) True 
 B)False

Question 19

During 2019,Canton Company's assets increased $95,500 and the liabilities decreased $17,300.Canton Company's stockholders' equity at December 31,2019 was $211,500.What amount was stockholders' equity at January 1,2019?

Accepted Answer

A)  $98,700.
B)  $324,300.
C)  $133,300.
D)  $289,700.

Question 20

The auditor can be held liable for malpractice in situations where the investors suffered losses while relying on the financial statements.

Accepted Answer

A) True 
 B)False

Exam 1: Financial Statements and Business Decisions

Which of the following statements is correct?

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

A company's retained earnings increased $375,000 last year and its assets increased $973,000.The company declared a $79,000 cash dividend during the year.What was last year's net income?

Which of the following is not one of the three steps taken by a corporation to assure the accuracy of its records?

A company's retained earnings balance increased $50,000 last year;therefore,net income last year must have been $50,000.

For a business organized as a general partnership,which statement is true?

Which of the following accounts would be reported as assets on the balance sheet?

At the beginning of 2019,a corporation had assets of $270,000 and liabilities of $160,000.During 2019,assets increased $25,000 and liabilities increased $5,000.What was stockholders' equity at December 31,2019?

Which of the following does not represent a professional accounting certification?

Which of the following is the amount of revenue reported on the income statement of a retail company?

A business entity's accounting system creates financial accounting reports which are provided to external decision makers.

Since 2002,there has been substantial movement toward the adoption of International Financial Reporting Standards (IFRS) issued by the:

Which of the following items is not reported as an expense on the income statement?

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

The accounting equation states that Assets = Liabilities + Stockholders' Equity.

During 2019,Canton Company's assets increased $95,500 and the liabilities decreased $17,300.Canton Company's stockholders' equity at December 31,2019 was $211,500.What amount was stockholders' equity at January 1,2019?

The auditor can be held liable for malpractice in situations where the investors suffered losses while relying on the financial statements.