Test bank for financial accounting 4th edition

Test Bank for Financial Accounting 4th Edition

Which of the following persons or groups have the ultimate control of a
corporation?

1. A) the chief executive officer
2. B) the board of directors
3. C) the audit committee
4. D) the shareholders


Financial statements are:

1. A) reports issued by outside consultants who are hired to analyze key
operations of the business
2. B) reports created by management that states it is responsible for the acts of
the corporation
3. C) standard documents that tell us how well a business is performing and
where it stands in financial terms
4. D) standard documents issued by outside consultants who are hired to
analyze key operations of the business in financial terms
All of the following are forms of business organizations except:

1. A) proprietorship
2. B) partnership
3. C) restaurant
4. D) corporation
The accounting equation can be stated as:

1. A) Assets + Liabilities = Shareholders' equity
2. B) Assets = Liabilities + Shareholders' equity

3. C) Assets = Liabilities - Shareholders' equity
4. D) Assets + Shareholders' equity = Liabilities
The owners' interest in the assets of a corporation is known as:

1. A) assets


2. B) shareholders' equity
3. C) expenses
4. D) revenues
On January 1, 2010, total assets for Liftoff Technologies were $125,000; on
December 31, 2010, total assets were $145,000. On January 1, 2010, total
liabilities were $110,000; on December 31, 2010, total liabilities were
$115,000. What are the amount of the change and the direction of the change
in Liftoff Technologies shareholders' equity for 2010?

1. A) decrease of $15,000
2. B) increase of $15,000
3. C) increase of $30,000
4. D) decrease of $30,000
Claims held by the shareholders (owners) of a corporation are referred to
as:

1. A) retained earnings
2. B) share capital
3. C) share capital minus retained earnings
4. D) share capital plus retained earnings
Payables are classified as:

1. A) increases in earnings

2. B) assets
3. C) decreases in earnings
4. D) liabilities


Receivables are classified as:

1. A) increases in earnings
2. B) assets
3. C) decreases in earnings
4. D) liabilities
Revenues are:

1. A) increases in liabilities resulting from delivering goods or services to
customers
2. B) increases in retained earnings resulting from delivering goods or services
to customers
3. C) decreases in assets resulting from delivering goods or services to
customers
4. D) decreases in retained earnings resulting from delivering goods or services
to customers
If assets increase $120,000 during a given period and liabilities decrease
$25,000 during the same period, shareholders' equity must:

1. A) increase $95,000
2. B) decrease $145,000
3. C) decrease $95,000
4. D) increase $145,000

If liabilities increase $120,000 during a given period and shareholders' equity
decreases $25,000 during the same period, assets must:

1. A) decrease $145,000
2. B) increase $145,000
3. C) increase $95,000
4. D) decrease $95,000
Expenses are:

1. A) increases in assets resulting from operations
2. B) increases in retained earnings resulting from operations
3. C) increases in liabilities resulting from purchasing assets
4. D) decreases in retained earnings resulting from operations
How do revenues for a period relate to the beginning and ending balances in
retained earnings?

1. A) Revenues will increase the beginning balance of retained earnings for the
period.
2. B) Revenues will decrease the beginning balance of retained earnings for the
period.
3. C) Revenues less expenses will either increase or decrease the beginning
balance of retained earnings for the period.
4. D) Revenues less expenses will either increase or decrease the ending
balance of retained earnings for the period.


Which of the following best describes a liability?

1. A) Liabilities are a form of share capital.
2. B) Liabilities are future economic benefits to which a company is entitled.

3. C) Liabilities are accounts receivable of the company.
4. D) Liabilities are economic obligations to creditors to be paid at some future
date by the company.
Shareholders' equity for Raisin Corporation on January 1, 2010 and December
31, 2010 were $60,000 and $75,000, respectively. Assets on January 1, 2010
and December 31, 2010 were $115,000 and $105,000, respectively. Liabilities
on January 1, 2010 were $55,000. What is the amount of liabilities on
December 31, 2010?

1. A) $40,000
2. B) $15,000
3. C) $30,000
4. D) indeterminable from the given information
Dividends:

1. A) always affect net income
2. B) are distributions to shareholders of assets (usually cash) generated by net
income
3. C) are expenses
4. D) are distributions to shareholders of assets (usually cash) generated by a
favourable balance in retained earnings


Which of the following financial statements would a potential investor most
likely use to evaluate a company's financial performance for the current
period?

1. A) balance sheet
2. B) income statement
3. C) cash flow statement

4. D) retained earnings statement
Dividends appear on the:

1. A) retained earnings statement
2. B) income statement
3. C) balance sheet
4. D) both the retained earnings statement and the income statement
Assets appear on the:

1. A) balance sheet
2. B) income statement
3. C) retained earnings statement
4. D) cash flow statement
An investor wishes to assess a company's financial position at the end of the
period. Which financial statement would the investor probably examine?

1. A) the cash flow statement
2. B) the income statement


3. C) the balance sheet
4. D) the statement of retained earnings
The balance sheet is sometimes also called the:

1. A) statement of operations
2. B) statement of cash position
3. C) statement of financial position
4. D) statement of income and expense
The cash flow statement is divided into three categories relating to cash
flows from operating, investing, and:

1. A) management planning activities
2. B) financing activities
3. C) strategic positioning activities
4. D) marketing activities
To determine a company's gross margin for the period, an investor would look
on the:

1. A) balance sheet
2. B) cash flow statement
3. C) income statement
4. D) statement of retained earnings


Gains and losses appear on which of the financial statements listed
below?

1. A) the balance sheet
2. B) the income statement
3. C) the retained earnings statement
4. D) the cash flow statement
Which of the following represent(s) claims to economic resources?

1. A) assets, but not liabilities or owners' equity
2. B) owners' equity, but not assets or liabilities
3. C) liabilities, but not assets or owners' equity
4. D) liabilities and owners' equity, but not assets
The date of the income statement:

1. A) covers one day in time

2. B) covers a period of time, usually for an accounting period
3. C) is not dated
4. D) may cover a period of time or only one day in time, like a snapshot
photograph
Operating expenses appear on the income statement:

1. A) directly after gross margin
2. B) directly after cost of goods sold


3. C) directly after revenue
4. D) do not appear on the income statement
Common shares is a component of:

1. A) total assets
2. B) total liabilities
3. C) share capital
4. D) retained earnings
Cost of goods sold is:

1. A) added to sales on the income statement
2. B) deducted from sales on the balance sheet
3. C) deducted from sales on the income statement
4. D) added to sales on the retained earnings statement
Suppose The Fruit Group buys a kiwi for $.10 and sells the kiwi for $.50. The
cost of goods sold would be:

1. A) $.10
2. B) $.40
3. C) $.50

4. D) $.05


Net income is:

1. A) deducted from beginning retained earnings on the retained earnings
statement
2. B) added to beginning retained earnings on the retained earnings statement
3. C) added to assets on the balance sheet
4. D) deducted from net sales on the income statement
Which of the following represent(s) claims to economic resources?

1. A) assets, but not liabilities or owners' equity
2. B) owners' equity, but not assets or liabilities
3. C) liabilities, but not assets or owners' equity
4. D) liabilities and owners' equity, but not assets
Notes receivable due in 60 days would be classified as a:

1. A) long-term asset on the balance sheet
2. B) current asset on the balance sheet
3. C) current liability on the balance sheet
4. D) long-term liability on the balance sheet
Cash received from the sale of shares would appear:

1. A) as an operating activity on the cash flow statement
2. B) would not appear on a cash flow statement
3. C) as an investing activity on the cash flow statement


4. D) as a financing activity on the cash flow statement

Losses are reported on the:

1. A) income statement
2. B) balance sheet
3. C) cash flow statement
4. D) statement of retained earnings
What is the proper order for the cash flow statement?

1. A) financing activities, investing activities, and operating activities
2. B) operating activities, investing activities, and financing activities
3. C) operating activities, financing activities, and investing activities
4. D) investing activities, financing activities, and operating activities
The ending balance in retained earnings appears on the:

1. A) balance sheet only
2. B) balance sheet and statement of retained earnings
3. C) statement of retained earnings only
4. D) income statement
Cash dividends:

1. A) decrease revenue on the income statement
2. B) increase expenses on the income statement


3. C) decrease retained earnings on the retained earnings statement
4. D) decrease operating activities on the cash flow statement
Common shares appear on the:

1. A) balance sheet
2. B) income statement

3. C) cash flow statement
4. D) retained earnings statement
The repayment of a note payable would be classified as a(n):

1. A) investing activity on a cash flow statement
2. B) financing activity on a cash flow statement
3. C) operating activity on a cash flow statement
4. D) current asset on the balance sheet
The issuance of shares for cash would be classified as a(n):

1. A) investing activity on a cash flow statement
2. B) financing activity on a cash flow statement
3. C) operating activity on a cash flow statement
4. D) current asset on the balance sheet
Income taxes owed to the federal government would be classified as a:

1. A) current asset on the balance sheet


2. B) current liability on the balance sheet
3. C) long-term asset on the balance sheet
4. D) financing activity on the cash flow statement
The balance sheet contains information about:

1. A) liabilities, equity, and expenses
2. B) assets, revenues, and liabilities
3. C) assets, liabilities, and equity
4. D) revenues, expenses, and equity
Which of the following financial statements provides a "snapshot photo" of
one moment in time?

1. A) balance sheet
2. B) income statement
3. C) statement of retained earnings
4. D) cash flow statement
Assets are generally divided into:

1. A) current assets and solvent assets
2. B) current assets and reliable assets
3. C) long-term assets and solvent assets
4. D) current assets and long-term assets


Current assets are assets expected to be converted to cash, sold, or
consumed:

1. A) within the next 12 months or within the business's normal operating cycle
if less than a year
2. B) within the next 12 months or within the business's normal operating cycle
if longer than a year
3. C) within the next 6 months
4. D) within the next 24 months
Equipment would appear on the:

1. A) income statement with the revenues
2. B) balance sheet with the long-term assets
3. C) balance sheet with the current assets
4. D) income statement with the operating expenses
Depreciation is normally associated with which asset on the balance
sheet?

1. A) Land
2. B) accounts receivable
3. C) inventory
4. D) equipment
Cash would appear on the:

1. A) income statement with the revenues


2. B) retained earnings statement with the net income
3. C) balance sheet with the current assets
4. D) balance sheet with the current liabilities
Which of the following persons or groups have the ultimate control of a
corporation?

1. A) the chief executive officer
2. B) the board of directors
3. C) the audit committee
4. D) the shareholders
Financial statements are:

1. A) reports issued by outside consultants who are hired to analyze key
operations of the business
2. B) reports created by management that states it is responsible for the acts of
the corporation
3. C) standard documents that tell us how well a business is performing and
where it stands in financial terms
4. D) standard documents issued by outside consultants who are hired to
analyze key operations of the business in financial terms

All of the following are forms of business organizations except:

1. A) proprietorship
2. B) partnership
3. C) restaurant
4. D) corporation


The accounting equation can be stated as:

1. A) Assets + Liabilities = Shareholders' equity
2. B) Assets = Liabilities + Shareholders' equity
3. C) Assets = Liabilities - Shareholders' equity
4. D) Assets + Shareholders' equity = Liabilities
The owners' interest in the assets of a corporation is known as:

1. A) assets
2. B) shareholders' equity
3. C) expenses
4. D) revenues
On January 1, 2010, total assets for Liftoff Technologies were $125,000; on
December 31, 2010, total assets were $145,000. On January 1, 2010, total
liabilities were $110,000; on December 31, 2010, total liabilities were
$115,000. What are the amount of the change and the direction of the change
in Liftoff Technologies shareholders' equity for 2010?

1. A) decrease of $15,000
2. B) increase of $15,000
3. C) increase of $30,000
4. D) decrease of $30,000

Claims held by the shareholders (owners) of a corporation are referred to
as:

1. A) retained earnings


2. B) share capital
3. C) share capital minus retained earnings
4. D) share capital plus retained earnings
Payables are classified as:

1. A) increases in earnings
2. B) assets
3. C) decreases in earnings
4. D) liabilities
Receivables are classified as:

1. A) increases in earnings
2. B) assets
3. C) decreases in earnings
4. D) liabilities
Revenues are:

1. A) increases in liabilities resulting from delivering goods or services to
customers
2. B) increases in retained earnings resulting from delivering goods or services
to customers
3. C) decreases in assets resulting from delivering goods or services to
customers
4. D) decreases in retained earnings resulting from delivering goods or services

to customers


If assets increase $120,000 during a given period and liabilities decrease
$25,000 during the same period, shareholders' equity must:

1. A) increase $95,000
2. B) decrease $145,000
3. C) decrease $95,000
4. D) increase $145,000
If liabilities increase $120,000 during a given period and shareholders' equity
decreases $25,000 during the same period, assets must:

1. A) decrease $145,000
2. B) increase $145,000
3. C) increase $95,000
4. D) decrease $95,000
Expenses are:

1. A) increases in assets resulting from operations
2. B) increases in retained earnings resulting from operations
3. C) increases in liabilities resulting from purchasing assets
4. D) decreases in retained earnings resulting from operations
How do revenues for a period relate to the beginning and ending balances in
retained earnings?

1. A) Revenues will increase the beginning balance of retained earnings for the
period.

2. B) Revenues will decrease the beginning balance of retained earnings for the
period.
3. C) Revenues less expenses will either increase or decrease the beginning
balance of retained earnings for the period.
4. D) Revenues less expenses will either increase or decrease the ending
balance of retained earnings for the period.
Which of the following best describes a liability?

1. A) Liabilities are a form of share capital.
2. B) Liabilities are future economic benefits to which a company is entitled.
3. C) Liabilities are accounts receivable of the company.
4. D) Liabilities are economic obligations to creditors to be paid at some future
date by the company.
Shareholders' equity for Raisin Corporation on January 1, 2010 and December
31, 2010 were $60,000 and $75,000, respectively. Assets on January 1, 2010
and December 31, 2010 were $115,000 and $105,000, respectively. Liabilities
on January 1, 2010 were $55,000. What is the amount of liabilities on
December 31, 2010?

1. A) $40,000
2. B) $15,000
3. C) $30,000
4. D) indeterminable from the given information
Dividends:

1. A) always affect net income
2. B) are distributions to shareholders of assets (usually cash) generated by net
income

3. C) are expenses
4. D) are distributions to shareholders of assets (usually cash) generated by a
favourable balance in retained earnings
Which of the following financial statements would a potential investor most
likely use to evaluate a company's financial performance for the current
period?

1. A) balance sheet
2. B) income statement
3. C) cash flow statement
4. D) retained earnings statement
Dividends appear on the:

1. A) retained earnings statement
2. B) income statement
3. C) balance sheet
4. D) both the retained earnings statement and the income statement
Assets appear on the:

1. A) balance sheet
2. B) income statement
3. C) retained earnings statement
4. D) cash flow statement


An investor wishes to assess a company's financial position at the end of the
period. Which financial statement would the investor probably examine?

1. A) the cash flow statement
2. B) the income statement

3. C) the balance sheet
4. D) the statement of retained earnings
The balance sheet is sometimes also called the:

1. A) statement of operations
2. B) statement of cash position
3. C) statement of financial position
4. D) statement of income and expense
The cash flow statement is divided into three categories relating to cash
flows from operating, investing, and:

1. A) management planning activities
2. B) financing activities
3. C) strategic positioning activities
4. D) marketing activities
To determine a company's gross margin for the period, an investor would look
on the:

1. A) balance sheet
2. B) cash flow statement


3. C) income statement
4. D) statement of retained earnings
Gains and losses appear on which of the financial statements listed
below?

1. A) the balance sheet
2. B) the income statement
3. C) the retained earnings statement

4. D) the cash flow statement
Which of the following represent(s) claims to economic resources?

1. A) assets, but not liabilities or owners' equity
2. B) owners' equity, but not assets or liabilities
3. C) liabilities, but not assets or owners' equity
4. D) liabilities and owners' equity, but not assets
The date of the income statement:

1. A) covers one day in time
2. B) covers a period of time, usually for an accounting period
3. C) is not dated
4. D) may cover a period of time or only one day in time, like a snapshot
photograph


Operating expenses appear on the income statement:

1. A) directly after gross margin
2. B) directly after cost of goods sold
3. C) directly after revenue
4. D) do not appear on the income statement
Common shares is a component of:

1. A) total assets
2. B) total liabilities
3. C) share capital
4. D) retained earnings
Cost of goods sold is:

1. A) added to sales on the income statement
2. B) deducted from sales on the balance sheet
3. C) deducted from sales on the income statement
4. D) added to sales on the retained earnings statement
Suppose The Fruit Group buys a kiwi for $.10 and sells the kiwi for $.50. The
cost of goods sold would be:

1. A) $.10
2. B) $.40
3. C) $.50


4. D) $.05
Net income is:

1. A) deducted from beginning retained earnings on the retained earnings
statement
2. B) added to beginning retained earnings on the retained earnings statement
3. C) added to assets on the balance sheet
4. D) deducted from net sales on the income statement
Which of the following represent(s) claims to economic resources?

1. A) assets, but not liabilities or owners' equity
2. B) owners' equity, but not assets or liabilities
3. C) liabilities, but not assets or owners' equity
4. D) liabilities and owners' equity, but not assets
Notes receivable due in 60 days would be classified as a:

1. A) long-term asset on the balance sheet
2. B) current asset on the balance sheet

3. C) current liability on the balance sheet
4. D) long-term liability on the balance sheet
Cash received from the sale of shares would appear:

1. A) as an operating activity on the cash flow statement
2. B) would not appear on a cash flow statement