Question 1

Which one of the following is an operating activity of a business?
A)Paying for purchases of inventory
B)Issuing stock for cash
C)Borrowing money from a bank
D)Purchasing a manufacturing plant

Accepted Answer

Paying for purchases of inventory is an operating activity because it is directly related to a company's primary operations to generate revenue. The other options are either financing or investing activities.

Question 2

Although businesses engage in a wide variety of activities,all of these activities can be categorized into three types.Which of the following choices best reflects these three types of business activities?
A)Operating,financing,reporting
B)Investing,reporting,financing
C)Operating,financing,investing
D)Investing,reporting,operating

Accepted Answer

The three types of business activities are operating (day-to-day business activities like sales and production), financing (raising and using funds to run the business), and investing (purchasing assets or securities for long-term growth or return on investment). Choice C lists those three activities. Choices A, B, and D either have the activities in the wrong order or include an activity that is not one of the three main types.

Question 3

Which of the following represents the correct sequence of the three business activities on the statements of cash flows?
A)Financing,Operating,Investing
B)Investing,Operating,Financing
C)Operating,Investing,Financing
D)Financing,Investing,Operating

Accepted Answer

The correct sequence of the three business activities on the statements of cash flows is Operating, Investing, Financing. This represents the order in which cash flows are generated and expended in a typical business cycle. Operating activities refer to the cash flows from the company's core business operations, while investing activities relate to the company's investments in long-term assets such as property, plant, and equipment. Financing activities refer to cash flows from transactions with shareholders and creditors, such as issuing stocks or taking out loans. Therefore, option C represents the correct sequence of the three activities.

Question 4

____________________ is the magnitude of an omission or misstatement in accounting information that will affect the judgment of someone relying on the information.

Accepted Answer

The answer of ____________________ is the magnitude of an omission...

Question 5

Which one of the following sections is least likely to be found in a corporate annual report?
A)Notes to the Financial Statements
B)Forecasts of Cash Flows and Earnings
C)Report of Independent Accountants
D)Management's Discussion and Analysis

Accepted Answer

Forecasts of cash flows and earnings are typically not included in a corporate annual report as they are forward-looking statements and subject to change. The other sections mentioned (Notes to the Financial Statements, Report of Independent Accountants, and Management's Discussion and Analysis) are commonly found in annual reports.

Question 6

As used in accounting,the "Notes to the Financial Statement" should be
A)listed with the liabilities on the balance sheet.
B)omitted at the option of the company.
C)included as an integral part of the financial statements.
D)reported as expenses on the income statement.

Accepted Answer

The "Notes to the Financial Statement" are an integral part of the financial statements as they provide additional information and disclosures that are necessary for a complete understanding of the financial position and performance of a company. They are typically included at the end of the financial statements and are not listed with the liabilities on the balance sheet or reported as expenses on the income statement. Omitting them is not an option as they provide crucial information about the company's financial activities.

Question 7

Which of the following best describes a company's operating activities?
A)Operating activities focus on the sale of products and services.
B)Operating activities are necessary to provide the money to start a business.
C)Operating activities are needed to provide the valuable assets required to run a business.
D)Operating activities represent the right to receive a benefit in the future.

Accepted Answer

Operating activities refer to the primary sources of a company's revenues, which come from the sale of products and/or services. These activities are essential to the ongoing operation of the business and its ability to generate profits. Choices B, C, and D do not accurately describe operating activities.

Question 8

Which financial statement reports the sources and uses of an entity's cash resources?
A)Income statement
B)Statement of retained earnings
C)Balance sheet
D)Statement of cash flows

Accepted Answer

The statement of cash flows reports the sources and uses of an entity's cash resources, showing the change in cash balance over a period of time. It categorizes cash transactions into three sections - operating activities, investing activities, and financing activities. This statement provides valuable information about an entity's liquidity, solvency, and overall financial health.

Question 9

Which one of the following is a financing activity of a business?
A)Paying for purchases of inventory
B)Issuing stock for cash
C)Paying salaries
D)Purchasing a manufacturing plant

Accepted Answer

Issuing stock for cash is a financing activity because it involves raising money from investors in exchange for ownership (equity) in the company. The other choices are operating activities (purchasing inventory, paying salaries) and investing activities (purchasing a manufacturing plant).

Question 10

Business entities generally carry on
A)operating,investing,and financing activities.
B)operating activities,but only corporations engage in financing and investing activities.
C)investing and operating activities,but only corporations engage in financing activities.
D)either investing or financing activities,but not both.

Accepted Answer

Business entities generally engage in operating, investing, and financing activities. All types of business entities including sole proprietorships, partnerships, and corporations are involved in these activities to varying degrees. Operating activities involve the day-to-day operations of the business, investing activities involve the acquisition and disposal of long-term assets, and financing activities involve the borrowing and repaying of funds and the issuance and repurchase of equity securities.

Question 11

Which of the following represents one of the purposes of the notes to financial statements?
A)To provide a place for management to justify questionable items in the statements
B)To provide comparative ratios for the company's financial data
C)To provide the CPA's opinion of the fairness of the financial statements
D)To satisfy the need for full disclosure of all the facts relevant to a company's results and financial position

Accepted Answer

The notes to financial statements are included to satisfy the need for full disclosure of all the facts relevant to a company's financial results and position. They provide details and explanations about specific items on the financial statements, such as accounting policies, contingencies, and other significant events or transactions that are not presented directly in the financial statements. They also provide additional information to help users of the financial statements better understand the company's financial performance and position. Options A, B, and C are incorrect because they are not one of the purposes of the notes to financial statements.

Question 12

.____________________ is the impact of information to change decision-making.

Accepted Answer

The answer of .____________________ is the impact of information to...

Question 13

Which one of the following is an investing activity of a business?
A)Paying for purchases of inventory
B)Issuing stock for cash
C)Borrowing money from a bank
D)Purchasing a manufacturing plant for cash

Accepted Answer

Purchasing a manufacturing plant for cash is an investing activity because it involves the acquisition of long-term assets that will generate revenue for the business over an extended period of time. Paying for purchases of inventory, issuing stock for cash, and borrowing money from a bank are all financing activities.

Question 14

____________________ and ____________________ have claims to an entity's economic resources.

Accepted Answer

The answer of ____________________ and ____________________ have claims to an...

Question 15

Supplementary disclosures required by GAAP that help explain detail behind the accounting treatment of certain items in the financial statements is most likely found in which of the following sections of a corporate annual report?
A)Report of Independent Accountants
B)Notes to the Financial Statements
C)Management's Discussion and Analysis
D)Balance sheet

Accepted Answer

The supplementary disclosures required by GAAP are typically found in the Notes to the Financial Statements. This section provides additional information about specific accounting treatments and helps readers understand how certain amounts were calculated and reported in the financial statements. The Report of Independent Accountants provides the auditor's opinion on the fairness of the financial statements, while the Management's Discussion and Analysis and Balance Sheet provide broader overviews of the company's financial performance and position.

Question 16

During its fifth year of operations,Bright Creations Company reports a beginning cash balance of $132,000,cash inflows from investing activities of $210,000,cash outflows for financing activities of $79,000,and cash outflows for operating activities of $13,000.What was Bright Creations' cash balance at the end of the fifth year?
A)$250,000
B)$434,000
C)$276,000
D)$132,000

Accepted Answer

The ending cash balance is calculated by adding cash inflows and subtracting cash outflows from the beginning balance: $132,000 + $210,000 - $79,000 - $13,000 = $250,000.

Question 17

Which of the following is generally supplementary information required by GAAP concerning the accounting treatments used by a company?
A)A year-end worksheet
B)Management's Discussion and Analysis
C)Report of Independent Accountants
D)Notes to the Consolidated Financial Statements

Accepted Answer

According to GAAP, companies are required to provide supplementary information in the form of Notes to the Consolidated Financial Statements. These notes provide additional details and explanations about the accounting treatments used by the company and help ensure transparency and accuracy in financial reporting. Option A, a year-end worksheet, is not typically required by GAAP. Option B, Management's Discussion and Analysis, is a separate section in a company's annual report that discusses the company's financial performance and future prospects but is not specifically focused on accounting treatments. Option C, the Report of Independent Accountants, is a document prepared by external auditors that provides their opinion on the company's financial statements but does not provide additional information on accounting treatments used.

Question 18

An investor found the following in an annual report: "The financial statements,in our opinion,present fairly the financial position,operating results,and cash flows,in conformity with accounting principles generally accepted in the United States." In which section of the annual report did the investor find this?
A)Balance sheet
B)Notes to the Financial Statements
C)Management's Discussion and Analysis
D)Report of Independent Accountants

Accepted Answer

This statement is typically found in the "Report of Independent Accountants," which is also known as the auditor's report. This report is prepared by an external auditing firm and provides an opinion on whether the financial statements are presented fairly and in accordance with Generally Accepted Accounting Principles (GAAP).

Question 19

Which of the following best describes a company's financing activities?
A)Financing activities focus on the sale of products and services.
B)Financing activities include selling products.
C)Financing activities enable a company to acquire assets needed to run a business.
D)Financing activities are represented by the revenues and expenses on the income statement.

Accepted Answer

Financing activities involve obtaining funds from external sources to acquire assets needed to run a business, such as issuing stocks or bonds, taking out loans, or receiving investment from shareholders.

Question 20

Which of the following items will be found in a corporate annual report?
A)Company budgets
B)Notes to the financial statements
C)Selected financial data from competitor companies
D)Management's statement that the auditors are responsible for the financial statements

Accepted Answer

Notes to the financial statements are a standard component of a corporate annual report, providing additional context and detail to the figures presented in the financial statements.

Quiz 2: Financial Statements and the Annual Report

Which one of the following is an operating activity of a business?

Although businesses engage in a wide variety of activities,all of these activities can be categorized into three types.Which of the following choices best reflects these three types of business activities?

Which of the following represents the correct sequence of the three business activities on the statements of cash flows?

____________________ is the magnitude of an omission or misstatement in accounting information that will affect the judgment of someone relying on the information.

Which one of the following sections is least likely to be found in a corporate annual report?

As used in accounting,the "Notes to the Financial Statement" should be

Which of the following best describes a company's operating activities?

Which financial statement reports the sources and uses of an entity's cash resources?

Which one of the following is a financing activity of a business?

Business entities generally carry on

Which of the following represents one of the purposes of the notes to financial statements?

.____________________ is the impact of information to change decision-making.

Which one of the following is an investing activity of a business?

and have claims to an entity's economic resources.

Supplementary disclosures required by GAAP that help explain detail behind the accounting treatment of certain items in the financial statements is most likely found in which of the following sections of a corporate annual report?

Which of the following is generally supplementary information required by GAAP concerning the accounting treatments used by a company?

Which of the following best describes a company's financing activities?

Which of the following items will be found in a corporate annual report?