Deck 2: Financial Statements: An Overview

Question 1

Owners of a corporation are referred to as

A) Debtors
B) Partners
C) Stockholders
D) Creditors

Answer 1

C

Question 2

Which of the following types of accounts show how resources came into a firm?

A) Liabilities
B) Owners' equity
C) Assets
D) Both liabilities and owners' equity

Answer 2

D

Question 3

A business owned by two or more individuals or entities is called a(n)

A) Nonprofit organization
B) Partnership
C) Institution
D) Sole proprietorship

Answer 3

B

Question 4

Distributions by a corporation to its stockholders are called

A) Dividends
B) Retained earnings
C) Income
D) Withdrawals

Question 5

A business owned by one person is called a

A) Nonprofit organization
B) Partnership
C) Corporation
D) Sole proprietorship

Question 6

Which of the following generally is NOT considered to be a liability?

A) Notes payable
B) Taxes payable
C) Inventory
D) Accounts payable

Question 7

Which of the following is generally considered to be a liability?

A) Accounts receivable
B) Capital stock
C) Notes payable
D) Retained earnings

Question 8

An enterprise's obligations to pay cash or other economic resources to others are called

A) Liabilities
B) Expenses
C) Losses
D) Assets

Question 9

Economic resources that are owned or controlled by an enterprise are called

A) Assets
B) Liabilities
C) Revenues
D) Gains

Question 10

Which of the following accounts is NOT an asset account?

A) Equipment
B) Accounts Receivable
C) Accounts Payable
D) Supplies

Question 11

Which of the following is generally considered to be an asset?

A) Notes payable
B) Mortgage payable
C) Accounts receivable
D) Unearned revenue

Question 12

Which of the following decreases owners' equity?

A) Additional investments in the company are made by the owners
B) Operations generate a loss
C) Operations generate a profit that is retained in the company
D) None of these decreases owners' equity

Question 13

Which of the following is the reason that the accounting equation is true by definition?

A) Liabilities are the source that funds the purchase of assets
B) Assets are the source that funds the purchase of liabilities and owner's equity
C) Liabilities and owner's equity are the sources that fund the purchase of assets
D) None of these are true, the accounting equation is merely a coincidence

Question 14

Another name for the balance sheet is the

A) Statement of cash flows
B) Statement of earnings
C) Statement of financial position
D) Retained earnings statement

Question 15

Which of the following usually is NOT considered to be an owners' equity account?

A) Capital stock
B) Retained earnings
C) Inventory
D) All these are owners' equity accounts

Question 16

Net assets are equal to

A) Total assets minus owners' equity
B) Total assets minus net income
C) Total assets minus dividends paid
D) Total assets minus total liabilities

Question 17

Which of the following types of accounts are NOT found on the balance sheet?

A) Revenues
B) Assets
C) Liabilities
D) Owners' equity

Question 18

The total amount invested to acquire an ownership interest in a corporation is called

A) Retained earnings
B) Capital stock
C) Net assets
D) Owners' equity

Question 19

The financial statement that reports resources owned, the obligations to transfer resources to other organizations, and the claims by the entity's owners is known as the

A) Income statement
B) Statement of retained earnings
C) Balance sheet
D) Statement of cash flows

Question 20

The basic accounting equation is

A) Assets = Liabilities + Owners' Equity
B) Assets + Liabilities = Owners' Equity
C) Assets + Owners' Equity = Liabilities
D) Liabilities - Owners' Equity = Assets

Question 21

If a corporation has total assets of $350,000, total liabilities of $150,000, and retained earnings of $100,000, what is the amount of capital stock?

A) $150,000
B) $0
C) $100,000
D) $250,000

Question 22

The idea that an increase or decrease on one side of the accounting equation must be offset exactly by an increase or decrease on the other side of the accounting equation is called

A) Additive concept
B) Going concern assumption
C) Monetary measurement concept
D) Double-entry accounting

Question 23

A transaction that causes an increase in an asset may also cause

A) A decrease in owners' equity
B) An increase in another asset
C) A decrease in a liability
D) An increase in a liability

Question 24

Which of the following includes a company's financial position for both the current year and the preceding year?

A) Comparative balance sheet
B) Income statement
C) Classified balance sheet
D) Liquidity balance sheet

Question 25

Exhibit 2-1 The following data were taken from the records of Moss Corporation for the year ending December 31, 2012:
Refer to Exhibit 2-1. Given the above information, assets on December 31, 2012, were

A) $16,830
B) $5,025
C) $18,060
D) $11,250

Question 26

Which of the following would be classified as a long-term asset?

A) Accounts payable
B) Land
C) Inventory
D) Accounts receivable

Question 27

Which of these is an economic asset that is NOT found on the balance sheet?

A) Name recognition
B) Land
C) Inventory
D) Goodwill

Question 28

Which of the following financial statements provides a picture of the enterprise at a particular point in time?

A) Balance sheet
B) Income statement
C) Statement of cash flows
D) Statement of retained earnings

Question 29

The price that would be paid today for an asset is the

A) Book value
B) Market value
C) Purchase cost
D) Economic value

Question 30

Exhibit 2-1 The following data were taken from the records of Moss Corporation for the year ending December 31, 2012:
Refer to Exhibit 2-1. Given the above information, owners' equity on January 1, 2012 was

A) $19,830
B) $2,670
C) $885
D) $7,695

Question 31

Which of the following would be considered a long-term liability?

A) Mortgage payable
B) Notes payable
C) Accounts payable
D) Land

Question 32

Expense and revenue accounts appear on the

A) Balance sheet
B) Income statement
C) Retained earnings statement
D) Funds statement

Question 33

Current assets usually are listed on a balance sheet in

A) Decreasing order of liquidity
B) Increasing order of liquidity
C) A random fashion
D) Decreasing order of profitability

Question 34

Which of the following would be classified as a current asset?

A) Accounts payable
B) Land
C) Capital stock
D) Accounts receivable

Question 35

What is the primary limitation of the balance sheet?

A) It does not reflect the net assets of a company
B) It does not reflect the current value of the company
C) It does not reflect the number of shares of capital stock issued
D) It does not reflect the undistributed earnings of a company

Question 36

Another name for the income statement is

A) Statement of cash flows
B) Statement of financial position
C) Statement of earnings
D) Retained earnings statement

Question 37

Companies prepare classified and comparative financial statements because

A) They are required by international accounting principles
B) They provide financial statement readers with useful information about trends in financial position and operating performance
C) They are required by the IRS
D) They show changes in a company's management policies

Question 38

Which of the following is true of the balance sheet?

A) It includes revenue and expense accounts.
B) It identifies a company's assets and liabilities as of a specific date.
C) It shows the results of operations for an accounting period.
D) It discloses the amount of dividends paid.

Question 39

Which of the following accounts is considered to be the most liquid?

A) Cash
B) Land
C) Accounts Receivable
D) Inventory

Question 40

Which of the following distinguishes between current and long-term assets?

A) Comparative balance sheet
B) Income statement
C) Classified balance sheet
D) Liquidity balance sheet

Question 41

The following information was taken from the records of McDyce Corporation for the year ended December 31, 2013: The net income at December 31, 2013 was

A) $23,500
B) $54,100
C) $43,400
D) $72,750

Question 42

Expenses generally cause

A) An increase in net assets
B) A decrease in net assets
C) No change in net assets
D) An increase in liabilities

Question 43

Which of the following would be included on an income statement?

A) Cash
B) Accounts receivable
C) Land
D) Rent expense

Question 44

If a company sells its equipment for more than it is valued on the balance sheet, the difference is called a(n)

A) Income
B) Revenue
C) Profit
D) Gain

Question 45

Which of the following is the correct way to date an income statement?

A) For the Year Ended December 31, 2012
B) At December 31, 2012
C) As of December 31, 2012
D) December 31, 2012

Question 46

Which of the following is an example of a nonoperating expense?

A) Salary expense
B) Interest expense
C) Cost of goods sold
D) Advertising expense

Question 47

Eddy Corporation reported the following data for the period: Earnings per share, $3.00; Retained Earnings, $27,000; Revenues, $75,000; Capital Stock, $15,000; Expenses, $64,500. With this information, determine how many shares of stock are outstanding.

A) 9,000
B) 5,000
C) 4,000
D) 3,500

Question 48

The following information was taken from the records of Merle Corporation for the period ending December 31, 2012: Assuming that 3,450 shares of stock are outstanding, earnings per share is approximately

A) $1.40
B) $0.40
C) $0.27
D) $0.23

Question 49

Which of the following is an overall measure of the performance of a business entity's activities?

A) Revenues
B) Net income (or net loss)
C) Assets
D) Owners' equity

Question 50

The difference between sales and cost of goods sold is called

A) Gross profit
B) Intermediate profit
C) Net income
D) Gross income

Question 51

Exhibit 2-2 The following information was taken from the records of Tellers Corporation for the month ended December 31, 2012:
Refer to Exhibit 2-2. If Tellers has 2,100 shares of stock outstanding, earnings per share is approximately

A) $46.51
B) $14.85
C) $16.81
D) $4.67

Question 52

Resource increases from the sale of goods or services are called

A) Net income
B) Assets
C) Gains
D) Revenues

Question 53

Which of the following is a revenue generating activity?

A) Borrowing money from a bank
B) Paying rent
C) Selling a product
D) Selling capital stock

Question 54

Costs that are incurred during the normal operations of a business to generate revenues are called

A) Losses
B) Liabilities
C) Expenses
D) Assets

Question 55

Exhibit 2-2 The following information was taken from the records of Tellers Corporation for the month ended December 31, 2012:
Refer to Exhibit 2-2. Given the above information, net income is

A) $45,110
B) $35,310
C) $31,185
D) $11,385

Question 56

During the year, Rigby Corporation earned revenues of $114,000 and incurred $98,000 for various operating expenses. There are 1,280 shares of stock outstanding. Earnings per share is

A) $12.80
B) $12.50
C) $8.80
D) $8.50

Question 57

Revenues cause

A) An increase in net assets
B) A decrease in net assets
C) No change in net assets
D) An increase in liabilities

Question 58

The financial statement that presents a summary of the revenues and expenses of a business for a specific period of time, such as a month or a year, is called a(n)

A) Statement of Cash Flows
B) Statement of Retained Earnings
C) Income Statement
D) Balance Sheet

Question 59

If a company has $528,000 of sales revenue, pays $26,400 in dividends, and has net income of $158,400, how much were the expenses for the year?

A) $343,200
B) $422,400
C) $396,000
D) $369,600

Question 60

Earnings per share is equal to

A) Net income divided by total number of shares of stock outstanding
B) Total revenues divided by total number of shares of stock outstanding
C) Total revenues divided by the number of shares of stock sold during the year
D) Net income divided by the number of shares of stock sold during the year

Question 61

Which of the following is a primary use of cash?

A) Borrowing
B) Investment by owners
C) Operating expenses
D) Sale of equipment

Question 62

Which of the following classifications refers to those activities that are part of the day-to-day business of a company?

A) Investing
B) Operating
C) Borrowing
D) Financing

Question 63

The following information was taken from the records of McDyce Corporation for the year ended December 31, 2013: The retained earnings balance at December 31, 2013 was

A) $216,425
B) $27,050
C) $146,550
D) $33,450

Question 64

A major source of cash from operating activities is

A) Receipts from sale of goods
B) Receipts from borrowing
C) Receipts from sale of building
D) Receipts from investment by owner

Question 65

Which of the following classifications refers to those activities associated with buying and selling long-term assets?

A) Investing
B) Operating
C) Borrowing
D) Financing

Question 66

Rolf Corporation reported the following data for the period end: Earnings per share, $6.00; Retained Earnings, $54,000; Revenues, $150,000; Capital Stock, $30,000; Expenses, $129,000; Dividends, $24,000. With this information, determine retained earnings for the prior period.

A) $54,000
B) $51,000
C) $57,000
D) $180,000

Question 67

Which of the following financial statements shows an entity's cash receipts and payments?

A) The statement of financial position
B) The statement of cash flows
C) The statement of earnings
D) The statement of changes in owners' equity

Question 68

Retained earnings are

A) The earnings of a company that have been distributed to the owners.
B) The earnings of a company that have been retained in the company.
C) The amount of cash that a company has.
D) The amount of cash required for company investments.

Question 69

The following information was taken from the records of Tellers Corporation for the year ended December 31, 2013: Given the above information, retained earnings on December 31, 2012 was

A) $45,110
B) $40,800
C) $31,185
D) $57,860

Question 70

Which of the following is NOT included in the statement of retained earnings?

A) Dividends
B) Net income
C) Beginning of year retained earnings
D) Owner investment

Question 71

Which of the following classifications refers to those activities whereby cash is obtained or repaid to owners and creditors?

A) Investing
B) Operating
C) Borrowing
D) Financing

Question 72

On April 1, Bonita Corporation's retained earnings account had a balance of $785,000. During April, Bonita had revenues of $135,000 and expenses of $93,000. On April 30, retained earnings had a balance of $811,500. What amount of dividends were paid during April?

A) $42,500
B) $30,750
C) $15,500
D) $13,250

Question 73

Which of the following classifications does NOT appear on the Statement of Cash Flows?

A) Investing
B) Operating
C) Borrowing
D) Financing

Question 74

The following information was taken from the records of Hart Corporation for the month ended December 31, 2013: Given the above information, retained earnings as of December 31, 2013 is

A) $79,045
B) $79,245
C) $55,795
D) $33,895

Question 75

The beginning balance of retained earnings will be greater than the ending balance if

A) The company has a net income greater than dividends paid
B) The company issues additional shares of stock during the period
C) The company has a net income less than dividends paid
D) The revenues earned for the period are greater than the expenses incurred and dividends paid

Question 76

Exhibit 2-3 During the month, Meridian Company had the following cash transactions:
Refer to Exhibit 2-3. Given the above information, compute cash flow from investing activities.

A) $4,250
B) ($4,250)
C) ($8,600)
D) $8,600

Question 77

Exhibit 2-3 During the month, Meridian Company had the following cash transactions:
Refer to Exhibit 2-3. Given the above information, compute cash flow from operating activities.

A) $4,250
B) $20,750
C) $15,750
D) $9,250

Question 78

Which of the following activities would NOT be classified as an investing activity?

A) Purchase of land
B) Purchase of inventory
C) Sale of Land
D) Sale of equipment

Question 79

During the year, Roger Company earned revenues of $114,000, incurred $98,000 for various operating expenses, and distributed $5,600 in dividends. If retained earnings for the previous year was $34,600, what is retained earnings for the current year?

A) $45,000
B) $24,200
C) $16,000
D) $34,600

Question 80

Which of the following activities would be classified as a financing activity?

A) Selling goods
B) Payment of wages
C) Repayment of a loan
D) Purchase of equipment