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.

Accepted Answer

The company pays all employees a salary on the first and the fifteenth of the month. So, on the last day of the month, the company would have paid $20,000 in salaries. This would be shown as an operating expense on the income statement and as a cash flow from operating expenses on the statement of cash flows. The company would also have a payroll payable of $10,000 on the balance sheet.

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

Accepted Answer

The Sarbanes-Oxley Act aims to protect investors by enhancing the accuracy and reliability of corporate disclosures and holding executives accountable for financial reporting.

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.

Accepted Answer

Total liabilities include Note payable bank ($10,000), Long-term debt ($50,000), Accounts payable ($30,000), and Taxes payable ($5,000), which sum up to $95,000.

Question 4

The normal accounting period for a business is one
A)quarter.
B)month.
C)year.
D)week.

Accepted Answer

The normal accounting period for a business is one year, not a quarter, month, or week. This is because most businesses prepare financial statements on an annual basis, which helps them assess their performance and make strategic decisions for the future. However, some companies may choose to report on a shorter time frame, such as quarterly or monthly, for management reporting or regulatory requirements.

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.

Accepted Answer

Operating expenses typically include costs related to running the business such as salaries for executives and administrative personnel, rent, insurance, utilities, and advertising expenses, but not costs directly tied to production or sales like raw materials or cost of merchandise.

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.

Accepted Answer

The cash payments made to employees for wages and salaries; payments made to vendors for the purchase of merchandise; taxes paid to government agencies; and payments for rent, utilities, and insurance are all part of the normal operating activities of a business. Therefore, they will show up on the statement of cash flows under the category of cash flows from operating activities.

Question 7

Current assets include all of the following except
A)inventory.
B)cash.
C)buildings.
D)savings.
E)accounts receivable.

Accepted Answer

Current assets are assets that can be easily converted into cash within a year. Buildings are not easily convertible into cash and are classified as long-term assets.

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.

Accepted Answer

Current assets are cash, savings, accounts receivable, and inventory. 
Thus, the total current assets would be: 
$5,000 + $10,000 + $30,000 + $10,000 = $55,000.

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.

Accepted Answer

Depreciation expense is a non-cash charge, so it is added back to net income in the operating activities section of the statement of cash flows to reconcile net income to cash provided by operating activities.

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).

Accepted Answer

The Securities and Exchange Commission (SEC) requires independent audits of publicly traded corporations to ensure accuracy and transparency of financial statements for investors.

Question 11

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

Accepted Answer

Current assets include accounts receivable, inventory, cash, and any other assets that are expected to be converted into cash within a year. Savings are not always considered a current asset because they are typically intended for long-term use and not intended to be used for day-to-day operations. Therefore, the best choice is E, which includes 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

Accepted Answer

Fixed assets are recorded on a business balance sheet at their historical cost (price paid) and on an individual's financial statement at their current market value.

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.

Accepted Answer

The answer of Current assets are assets that will normally...

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.

Accepted Answer

Gross profit is calculated by subtracting cost of goods sold from net sales. Therefore, the answer is 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.

Accepted Answer

Cash received from the sale of stocks or bonds and the payment of long-term debt are financing activities, which involve raising capital through various forms of borrowing and issuing equity securities. Dividend payments to owners are also considered financing activities as they are a form of return to investors. Therefore, these transactions would show up on the cash flow statement under the category of cash flows from financing activities.

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.

Accepted Answer

Cash paid for the acquisition of land, buildings or equipment and proceeds from the sale of these assets are considered investing activities as they involve the acquisition or disposal of long-term assets. Loans to other companies are considered financing activities as they involve the lending and borrowing of funds with the aim of financing business operations. Therefore, the correct category is cash flows from investing activities.

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.

Accepted Answer

The personal statement of financial position and the balance sheet show the financial position of an individual or firm as of a specific date, typically the end of an accounting period or fiscal year. It is not determined by the Internal Revenue Service or a business firm, nor does it refer to a specific period of time or have a beginning and ending date.

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.

Accepted Answer

Total Assets = Cash + Machinery + Building + Savings + Accounts Receivable + Inventory + Depreciation Building + Land = $5,000 + $50,000 + $150,000 + $10,000 + $30,000 + $10,000 + $35,000 + $50,000 = $340,000.

Total Liabilities = Note Payable Bank + Long-term Debt + Accounts Payable + Taxes Payable = $10,000 + $50,000 + $30,000 + $5,000 = $95,000.

Owner's Equity = Total Assets - Total Liabilities = $340,000 - $95,000 = $245,000.

Therefore, the owner's equity for this corporation is $155,000 (Option D).

Question 19

Variable expenses include all of the following except
A)food.
B)insurance.
C)gas.
D)automobile maintenance.
E)clothing.

Accepted Answer

Insurance is typically considered a fixed expense, as the payments are usually the same amount each month or year, regardless of usage or consumption.

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.

Accepted Answer

Net cash from operating activities is the amount of cash generated from the company's operations. If this amount is lower than net income, it indicates that the company had less available funds than its net income.

Quiz 3: Financial Statements

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

The normal accounting period for a business is one

For most businesses operating expenses include

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

Current assets include all of the following except

Depreciation expense

Public corporations require independent audits due to requirements established by the

Current assets include

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

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

The income statement shows gross profit which is equal to

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

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

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

Variable expenses include all of the following except

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