Deck 3: Financial Statements

Question 1

Janet has a company that pays all employees a salary on the first and the fifteenth of the month.Her normal payroll is $10,000 per pay period.On the last day of the month she would have shown

A)$20,000 as an operating expense under salaries on the income statement.
B)$20,000 as a cash flow from operating expenses on the statement of cash flows.
C)$10,000 as payroll payable on the balance sheet.
D)All of the above would show on above statements.
E)Not enough information is provided to answer this question.

Answer 1

All of the above would show on above statements.

Question 2

The primary objective of Sarbanes- Oxley is to protect investors by:
I.improving the accuracy of corporate disclosures.
II.loosening the reigns on how information is reported.
III.improving the reliability of corporate disclosures.
IV.holding executive officers liable for the accuracy of corporate financial statements.

A)I,III,&IV
B)II only
C)I,II,& III
D)I,II,& IV

Answer 2

I,III,&IV

Question 3

The Tom Smith Corporation has the following items: Cash,$5,000;Machinery,$50,000;Building, $150,000;Note payable bank,$10,000;Savings,$10,000;Long term debt,$50,000;Accounts payable,
$30,000;Taxes payable,$5,000;Accounts receivable,$30,000;Inventory,$10,000;Depreciation Building,$35,000;Depreciation Machinery,$25,000;Land $50,000.Total liabilities for this Corporation are

A)$45,000.
B)$55,000.
C)$95,000.
D)$155,000.
E)$190,000.

Answer 3

$95,000.

Question 4

The normal accounting period for a business is one

A)quarter.
B)month.
C)year.
D)week.

Question 5

For most businesses operating expenses include

A)salaries for executives and administrative personnel,raw materials used in manufacturing,rent,insurance,utilities,and advertising expenses.
B)salaries for executives,administrative personnel,and assembly line workers;rent;insurance;utilities;and advertising expenses.
C)salaries for executives and administrative personnel,cost of merchandise to be sold,rent,insurance,utilities,and advertising expenses.
D)salaries for executives and administrative personnel,rent,insurance,utilities,and advertising expenses.
E)salaries for executives and administrative personnel,rent,freight on items to be sold,insurance,utilities,and advertising expenses.

Question 6

Cash payments made to employees for wages and salaries;payments made to vendors for the purchase of merchandise;taxes paid to government agencies;payments for rent,utilities,and insurance will show up on the statement of cash flows under the category of

A)cash flows from financing activities.
B)cash flows from operating activities.
C)cash flows from investing activities.
D)A and B above.
E)B and C above.

Question 7

Current assets include all of the following except

A)inventory.
B)cash.
C)buildings.
D)savings.
E)accounts receivable.

Question 8

The Tom Smith Corporation has the following items: Cash,$5,000;Machinery,$50,000;Building, $150,000;Note payable bank,$10,000;Savings,$10,000;Long term debt,$50,000;Accounts payable,
$30,000;Taxes payable,$5,000;Accounts receivable,$30,000;Inventory,$10,000;Depreciation Building,$35,000;Depreciation Machinery,$25,000;Land $50,000.Current assets for this Corporation are

A)$45,000.
B)$55,000.
C)$95,000.
D)$155,000.
E)$190,000.

Question 9

Depreciation expense

A)was listed on the income statement as a variable expense.
B)appears only on the income statement.
C)is added to the statement of cash flows because it is not an expenditure.
D)is subtracted from the statement of cash flows.

Question 10

Public corporations require independent audits due to requirements established by the

A)Occupational Safety and Health Administration (OSHA).
B)Securities and Exchange Commission (SEC).
C)Federal Reserve (Fed).
D)Financial Accounting Standards Board (FASB).
E)Small Business Administrations (SBA).

Question 11

Current assets include

A)accounts receivable.
B)inventory.
C)savings.
D)cash.
E)all of the above.

Question 12

Fixed assets are listed on the business balance sheet at the _ and on the individual's statement of financial position at the _ .

A)price paid for the asset;current market value
B)current market value;current market value
C)price paid for the asset;price paid for the asset
D)current market value;price paid for the asset

Question 13

Current assets are assets that will normally be converted to cash during

A)the next business year.
B)the next week.
C)the accounting year.
D)the current month.
E)all of the above.

Question 14

The income statement shows gross profit which is equal to

A)gross revenues minus returns and allowances.
B)operating income minus interest.
C)operating income minus operating expenses.
D)earnings before taxes minus taxes.
E)net sales minus cost of goods sold.

Question 15

Cash received from the sale of stocks or bonds and the actual cash paid to others in the form of dividends to owners and the payment of long- term debt would show up on the cash flow statement under the category of

A)cash flows from financing activities.
B)cash flows from investing activities.
C)cash flows from operating activities.
D)A and B above.
E)B and C above.

Question 16

Cash paid in the acquisition of land,buildings,or equipment;loans to other companies;and the proceeds from the sale of land,buildings,or equipment will show up on the cash flow statement under the category of

A)cash flows from financing activities.
B)cash flows from investing activities.
C)cash flows from operating activities.
D)A and B above.
E)B and C above.

Question 17

The personal statement of financial position and the balance sheet show the position of the individual or firm

A)for the accounting period,as determined by the Internal Revenue Service.
B)for the accounting period,as determined by the business firm.
C)as of a specific date.
D)with a beginning and ending date.
E)for a period of time,which is normally one year.

Question 18

The Tom Smith Corporation has the following items: Cash,$5,000;Machinery,$50,000;Building, $150,000;Note payable bank,$10,000;Savings,$10,000;Long term debt,$50,000;Accounts payable,
$30,000;Taxes payable,$5,000;Accounts receivable,$30,000;Inventory,$10,000;Depreciation Building,$35,000;Depreciation Machinery,$25,000;Land $50,000.Owner's equity for this Corporation are

A)$45,000.
B)$55,000.
C)$95,000.
D)$155,000.
E)$190,000.

Question 19

Variable expenses include all of the following except

A)food.
B)insurance.
C)gas.
D)automobile maintenance.
E)clothing.

Question 20

A company's net cash from operating activities is lower than its net income indicating that

A)the company had less available funds then its net income.
B)too much cash is being spent.
C)too little cash is being spent.
D)none of the above.

Question 21

Which of the following would be considered to be an operating expense for a computer manufacturing firm?

A)disk drives
B)assembly line wages
C)accountant's wages
D)speakers
E)memory chips

Question 22

The Tom Smith Corporation has the following items: Cash,$5,000;Machinery,$50,000;Building, $150,000;Note payable bank,$10,000;Savings,$10,000;Long term debt,$50,000;Accounts payable,
$30,000;Taxes payable,$5,000;Accounts receivable,$30,000;Inventory,$10,000;Depreciation Building,$35,000;Depreciation Machinery,$25,000;Land $50,000.Current liabilities for this Corporation are

A)$45,000.
B)$55,000.
C)$95,000.
D)$155,000.
E)$190,000.

Question 23

Which of the following fixed assets are always carried on the business books at the price paid for the asset,and cannot be depreciated?

A)machinery
B)equipment
C)store fixtures
D)land
E)buildings

Question 24

The income statement shows net profit which is equal to

A)earnings before taxes minus taxes.
B)net sales minus cost of goods sold.
C)gross revenues minus returns and allowances.
D)operating income minus operating expenses.
E)operating income minus interest.

Question 25

The actual value of a business can easily be found by finding

A)book value on the income statement.
B)book value on the cash flow statement.
C)book value on the balance sheet.
D)all of the above.
E)none of the above.

Question 26

The Tom Smith Corporation has the following items: Cash,$5,000;Machinery,$50,000;Building, $150,000;Note payable bank,$10,000;Savings,$10,000;Long term debt,$50,000;Accounts payable,
$30,000;Taxes payable,$5,000;Accounts receivable,$30,000;Inventory,$10,000;Depreciation Building,$35,000;Depreciation Machinery,$25,000;Land $50,000.Total assets for this Corporation are

A)$55,000.
B)$95,000.
C)$155,000.
D)$190,000.
E)$245,000.

Question 27

Which of the following is a cash outflow?

A)An increase in accounts payable.
B)A decrease in inventory.
C)An increase in accounts receivable.
D)A decrease in accounts receivable.

Question 28

Net income on the income statement is obtained after subtracting taxes for the

A)sole proprietorship.
B)Subchapter S corporation.
C)partnership.
D)corporation.
E)all of the above.

Question 29

Total assets on the balance sheet include

A)current assets + fixed assets + depreciation.
B)current assets - fixed assets - depreciation.
C)current assets - fixed assets + depreciation.
D)current assets + fixed assets - depreciation.
E)None of the above are correct.

Question 30

Janet has a company that pays all employees a salary on the first and the fifteenth of the month.Her normal payroll is $10,000 per pay period.On the last day of the month she would have shown

A)$10,000 as a cash flow from operating expenses on the statement of cash flows.
B)$10,000 as cost of good sold on the income statement.
C)$10,000 as an operating expense under salaries on the income statement.
D)$10,000 as payroll payable on the balance sheet.

Question 31

Alex bought $50,000 worth of computers for his firm,he will pay the vendor for these computers on the fifteenth of next month.These items would be carried on the and listed as .

A)balance sheet;accounts payable
B)income statement;notes payable
C)income statement;accounts payable
D)balance sheet;notes payable
E)none of the above

Question 32

The income statement shows earnings before taxes which is equal to

A)gross revenues minus returns and allowances.
B)operating income minus operating expenses.
C)net sales minus cost of goods sold.
D)operating income minus interest.
E)earnings before taxes minus taxes.

Question 33

For a manufacturing firm that makes computers,which of the following would not be considered part of cost of goods sold?

A)memory chips
B)accountant's wages
C)assembly line wages
D)disk drives
E)speakers

Question 34

Expenses that are contractual in nature and are normally paid every month are

A)fixed expenses.
B)monthly expenses
C)variable expenses.
D)automatic expenses.
E)accounting expenses.

Question 35

Which of the following is true for free cash flow?
I.Free cash flow is easier to calculate than operating cash flow.
II.Estimated capital expenditures are subtracted from operating cash flow.
III.Estimated capital expenditures are added to operating cash flow.
IV.A negative free cash flow indicates that the company needs additional financing.

A)I,II,& III
B)I & III
C)III & IV
D)II & IV

Question 36

The formula for the basic accounting equation is

A)OWNER'S EQUITY = TOTAL ASSETS + TOTAL LIABILITIES.
B)OWNER'S EQUITY = TOTAL LIABILITIES - TOTAL ASSETS.
C)TOTAL ASSETS = TOTAL LIABILITIES - OWNER'S EQUITY.
D)TOTAL ASSETS = TOTAL LIABILITIES + OWNER'S EQUITY.
E)TOTAL LIABILITIES = TOTAL ASSETS + OWNER'S EQUITY.

Question 37

The final step in generating a statement of cash flows is to

A)sum up cash flow from investing activities and transfer it to the balance sheet.
B)sum up cash flow from operations and transfer it to the balance sheet.
C)sum up cash flow from operations,financing and investment activities and transfer it to the balance sheet.
D)none of the above.

Question 38

For a retail firm that sells clothing,which of the following would be considered part of cost of goods sold?

A)freight
B)price paid for dresses to be sold
C)wages paid to sales clerks
D)A and B above
E)all of the above

Question 39

The Tom Smith Corporation has the following items: Cash,$5,000;Machinery,$50,000;Building, $150,000;Note payable bank,$10,000;Savings,$10,000;Long term debt,$50,000;Accounts payable,
$30,000;Taxes payable,$5,000;Accounts receivable,$30,000;Inventory,$10,000;Depreciation Building,$35,000;Depreciation Machinery,$25,000;Land $50,000.Fixed assets for this Corporation are

A)$45,000.
B)$55,000.
C)$95,000.
D)$155,000.
E)$190,000.

Question 40

Current assets are assets and fixed assets are assets .

A)that have an expected life in excess of one year;that have an expected life in excess of one year
B)converted to cash during the accounting year;that have an expected life in excess of one year
C)that have an expected life in excess of one year;converted to cash during the accounting year
D)converted to cash during the accounting year;converted to cash during the accounting year

Question 41

The business form which is equivalent to the personal statement of financial position is the balance sheet.

Question 42

The employer's contribution to Social Security is 6.20% of the employee's salary.

Question 43

The business form which is equivalent to the personal cash flow statement is the balance sheet.

Question 44

The income statement shows net sales which is equal to

A)net sales minus cost of goods sold.
B)earnings before taxes minus taxes.
C)gross revenues minus returns and allowances.
D)operating income minus interest.
E)operating income minus operating expenses.

Question 45

Joan has a $100,000 mortgage on her commercial building.This would be carried on her balance sheet as long term debt.

Question 46

Every business,regardless of its size,requires a full time accountant.

Question 47

Cash flow from operating activities is the first item on the statement of cash flows.

Question 48

U.S.government savings bonds are the most liquid asset that we can own because they can be converted to cash at any bank.

Question 49

An increase in inventory is a cash outflow.

Question 50

Every business,regardless of its size,should hire an accountant to help it set up its books.

Question 51

An increase in accounts receivable from last year's balance sheet to this year's balance sheet indicates that the business experienced a cash outflow

Question 52

Public Corporations have the ability to raise large quantities of cash by selling stocks and bonds.

Question 53

The statement of cash flows is based on the comparison of two consecutive balance sheets.

Question 54

Joan has a $100,000 mortgage on her commercial building.This would be carried on her balance sheet as a current liability.

Question 55

The income statement shows the cash flows of a business during the accounting period.

Question 56

An increase in accounts receivables is a cash inflow.

Question 57

The business form which is equivalent to the personal cash flow statement is the income statement.

Question 58

Liquidity is how fast an asset can be converted to cash.

Question 59

Medicare payments for both the employer and employee are not subject to an annual limit.

Question 60

How Owner's Equity is shown on the Balance Sheet for a partnership is based on the partnership agreement.

Question 61

In order to create a statement of cash flows depreciation must be subtracted from net income.

Question 62

The business form which is equivalent to the personal statement of financial position is the income statement.

Question 63

Partnerships have the ability to raise large quantities of cash by selling stocks and bonds.

Question 64

Free cash flow is cash flow from operations minus estimated capital expenditures.

Question 65

The general ledger uses a chart of accounts that lists only those transactions which are liabilities.

Question 66

The general ledger uses a chart of accounts that lists every transaction of the business.

Question 67

A refund of the purchase price,increased warranty,or partial credit on the next purchase would be listed on the income statement as cost of goods sold.

Question 68

A refund of the purchase price,increased warranty,or partial credit on the next purchase would be listed on the income statement as returns and allowances.

Question 69

The first section of the statement of cashflows is cash flow from financing activities.