Question 1

If the liabilities of a business increased $75,000 during a period of time and the stockholders' equity in the business decreased $30,000 during the same period, the assets of the business must have:

Accepted Answer

Assets = Liabilities + Stockholders' Equity
Change in Assets = Change in Liabilities + Change in Stockholders' Equity
Change in Assets = Increase of $75,000 + Decrease of $30,000
Change in Assets = Increase of $45,000

Question 2

Speedy has net income of $18,955, and assets at the beginning of the year of $200,000. Assets at the end of the year total $246,000. Compute its return on assets.

Accepted Answer

Return on Assets = Net Income/Average Assets
Return on Assets =$18,955/[($200,000 + $246,000)/2]
Return on Assets = $18,955/$223,000 = 0.085 = 8.5%

Question 3

The statement of cash flows reports all of the following except:

Accepted Answer

The statement of cash flows reports cash flows from operating activities, investing activities, and financing activities, as well as the net increase or decrease in cash for the period reported. However, it does not report the net increase or decrease in assets for the period reported. That information can be found on the balance sheet.

Question 4

The financial statement that shows the beginning balance of retained earnings; the changes in retained earnings that resulted from , net income (or net loss); dividends; and the ending balance, is the:

Accepted Answer

The statement that shows the beginning balance of retained earnings; the changes in retained earnings that resulted from, net income (or net loss); dividends; and the ending balance, is the Statement of Retained Earnings. This statement is a part of the financial statements that also include the income statement, balance sheet, and statement of cash flows. While the balance sheet shows a company's assets, liabilities, and equity, the income statement shows the revenues, expenses, and net income (or net loss), and the statement of cash flows shows the cash inflows and outflows.

Question 5

If the liabilities of a company increased $74,000 during a period of time and equity in the company decreased $19,000 during the same period, what was the effect on the assets?

Accepted Answer

Assets = Liabilities + Stockholders' Equity
Change in Assets = Change in Liabilities + Change in Stockholders' Equity
Change in Assets = Increase of $74,000 + Decrease of $19,000
Change in Assets = Increase of $55,000

Question 6

The basic financial statements include all of the following except:

Accepted Answer

The basic financial statements include the Balance Sheet, Income Statement, Statement of Retained Earnings, and Statement of Cash Flows. The Statement of Changes in Assets is not a basic financial statement.

Question 7

If a company paid $38,000 of its accounts payable in cash, what was the effect on the accounting equation?

Accepted Answer

Assets = Liabilities + Stockholders' Equity
Assets will decrease by $38,000 in Cash due to the payment of the debt.
Liabilities will decrease by $38,000 in Accounts payable due to the payment of the debt.
Stockholders' Equity would not be affected by this transaction.

Question 8

Cage Company had income of $350 million and average invested assets of $2,000 million. Its return on assets (ROA) is:

Accepted Answer

Return on Assets = Net Income/Average Assets
Return on Assets = $350 million/$2,000 million = 0.175 = 17.5%

Question 9

Chou Co. has a net income of $43,000, assets at the beginning of the year are $250,000 and assets at the end of the year are $300,000. Compute its return on assets.

Accepted Answer

Return on Assets = Net Income/Average Assets
Return on Assets =$43,000/[($250,000 + $300,000)/2]
Return on Assets = $43,000/$275,000 = 0.15636 = 15.6%

Question 10

Contessa Company collected $42,000 cash on its accounts receivable. The effects of this transaction as reflected in the accounting equation are:

Accepted Answer

The answer of Contessa Company collected $42,000 cash on its...

Question 11

A financial statement providing information that helps users understand a company's financial status, and which lists the types and amounts of assets, liabilities, and equity as of a specific date, is called a(n):

Accepted Answer

A balance sheet provides a snapshot of a company's financial position by listing its assets, liabilities, and equity as of a specific date. It is an important financial statement that helps users understand a company's financial status. The other options listed (income statement, statement of cash flows, statement of retained earnings, and financial status statement) provide different types of financial information and are not synonymous with a balance sheet.

Question 12

Risk is:

Accepted Answer

Risk is the uncertainty or variability of returns associated with a particular investment. It refers to the possibility of losing some or all of the investment.

Question 13

U. S. government bonds are:

Accepted Answer

U.S. government bonds are considered to be low-risk investments as they are backed by the full faith and credit of the U.S. government. However, they also typically offer lower returns compared to higher-risk investments such as stocks.

Question 14

The financial statement that identifies a company's cash receipts and cash payments over a period of time is the:

Accepted Answer

The statement of cash flows is the only financial statement that specifically focuses on a company's cash transactions over a period of time. The statement of financial position (balance sheet) shows a snapshot of a company's assets, liabilities, and equity at a specific point in time, while the income statement and statement of changes in stockholders' equity focus on the company's performance and changes in shareholders' equity over a period of time.

Question 15

If the assets of a business increased $89,000 during a period of time and its liabilities increased $67,000 during the same period, equity in the business must have:

Accepted Answer

Assets = Liabilities + Stockholders' Equity
Change in Assets = Change in Liabilities + Change in Stockholders' Equity
Increase of $89,000 = Increase of $67,000 + Change in Stockholders' Equity
Change in Stockholders' Equity = Increase of $22,000

Question 16

A balance sheet lists:

Accepted Answer

A balance sheet lists the types and amounts of assets, liabilities, and equity of a business as of a specific date. It does not include information about revenues, expenses, cash flows, or retained earnings over a period of time.

Question 17

The financial statement that reports whether the business earned a profit and also lists the revenues and expenses is called the:

Accepted Answer

The income statement shows whether the business earned a profit by subtracting expenses from revenues. It is also called the profit and loss statement (P&L statement) or statement of operations. The balance sheet shows the assets, liabilities, and equity of the business at a specific point in time. The statement of retained earnings shows the changes in a company's retained earnings over a period of time. The statement of cash flows shows the inflows and outflows of cash for a period of time. The statement of financial position is another name for the balance sheet.

Question 18

Rushing had income of $150 million and average invested assets of $1,800 million. Its return on assets is:

Accepted Answer

Return on Assets = Net Income/Average Assets
Return on Assets = $150 million/$1,800 million = 0.833 = 8.3%

Question 19

If assets are $365,000 and equity is $120,000, then liabilities are:

Accepted Answer

Assets = Liabilities + Stockholders' Equity
$365,000 = Liabilities + $120,000
Liabilities = $245,000

Question 20

The statement of retained earnings:

Accepted Answer

The statement of retained earnings reports how retained earnings changes over a period of time. It summarizes changes in retained earnings from net income (or loss) and dividends over the period. This statement is typically prepared as an intermediate calculation before the preparation of the balance sheet.

Quiz 1: Accounting in Business