Question 1

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

Accepted Answer

Issuing stock for cash is a financing activity because it involves raising funds from investors in exchange for ownership in the company. Paying for purchases of inventory and paying salaries are operating activities, while purchasing a manufacturing plant is an investing activity.

Question 2

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

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.

Question 3

Marvel Shoes Marvel Shoes reported the following items on its statement of cash flows for the current year:
 Read the information about Marvel Shoes.What was the cash balance for Marvel Shoes at the end of the current year?

Accepted Answer

The cash flow statement shows an increase in cash from $10,000 to $40,000 during the current year, indicating that the ending cash balance for Marvel Shoes was $40,000.

Question 4

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

Accepted Answer

The "Notes to the Financial Statements" are an integral part of the financial statements, providing additional information and details about the financial data presented in the statements. They are not listed as liabilities on the balance sheet, nor are they considered expenses on the income statement. Omitting them is not an option, as they are required by accounting standards to provide a complete understanding of a company's financial position and performance.

Question 5

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

Accepted Answer

Operating activities refer to the day-to-day business activities of a company, including sales of products and services, production, and purchasing materials. These activities generate revenue and incur expenses for the company.

Question 6

Which of the following represents the correct sequence of the three business activities on the Statement of Cash Flows?

Accepted Answer

Operating activities are listed first on the Statement of Cash Flows because they represent the cash inflows and outflows directly related to a company's primary operations. Investing activities are listed second because they pertain to the purchase and sale of long-term assets, such as property, plant, and equipment. Financing activities are listed last because they involve cash inflows and outflows related to the issuance and repayment of debt and equity.

Question 7

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

Accepted Answer

Paying for purchases of inventory is an operating activity because it relates to the day-to-day operations of the business. It is an expense necessary to generate revenue. Issuing stock for cash, borrowing money from a bank, and purchasing a manufacturing plant are all financing or investing activities.

Question 8

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

Accepted Answer

Financing activities refer to the transactions that enable a company to acquire the funds needed to run its business, such as issuing stocks or bonds, obtaining loans, or receiving investments. It does not involve the sale of products or services, which are a part of operating activities. Financing activities are also not represented by the revenues and expenses on the income statement, which belong to operating activities.

Question 9

A discussion of the financial statements with explanations of certain amounts in the statements is most likely found in which of the following sections of a corporate annual report?

Accepted Answer

The Management's Discussion and Analysis (MD&A) section of a corporate annual report provides a narrative explanation of the financial statements, including discussions of certain amounts and the reasons behind them.

Question 10

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

Accepted Answer

Purchasing a manufacturing plant for cash is an investing activity as it involves acquiring a long-term asset that will be used in the business's operations. Paying for purchases of inventory is an operating activity as it is a regular expense for the business. Issuing stock for cash is a financing activity as it involves raising capital from investors. Borrowing money from a bank is also a financing activity as it involves obtaining funds from an external source.

Question 11

The Financial Accounting Standards Board created the objectives of financial reporting.

Accepted Answer

The Financial Accounting Standards Board (FASB) is the organization responsible for creating accounting standards in the United States. The FASB created the objectives of financial reporting, which are to provide useful financial information to investors, creditors, and other users for decision-making purposes.

Question 12

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?

Accepted Answer

The three types of business activities are operating, financing, and investing. Operating activities involve the daily operations of the business, such as producing and selling goods or services. Financing activities involve obtaining funding for the business, such as through loans or issuing stocks. Investing activities involve using the business's funds to acquire assets that will generate income or increase in value, such as investing in stocks or purchasing property. Choice C is the only option that accurately reflects these three types of activities.

Question 13

Accountants are the main reason financial statements are prepared.

Accepted Answer

While accountants play a significant role in preparing financial statements, they are not the main reason for their preparation. Financial statements are prepared to provide information to stakeholders such as investors, creditors, and government agencies to make informed decisions about the company.

Question 14

Marvel Shoes Marvel Shoes reported the following items on its statement of cash flows for the current year:
 Read the information about Marvel Shoes.What was the amount of net increase or decrease in the cash balance for Marvel Shoes for the current year?

Accepted Answer

The answer of Marvel Shoes Marvel Shoes reported the following...

Question 15

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?

Accepted Answer

To find the ending cash balance, we need to add the beginning cash balance to the cash inflows from investing activities and subtract the cash outflows from financing and operating activities. Therefore: 
$132,000 (beginning balance) + $210,000 (investing inflows) - $79,000 (financing outflows) - $13,000 (operating outflows) = $250,000 (ending cash balance).

Question 16

Business entities generally carry on:

Accepted Answer

Business entities usually engage in operating activities (such as manufacturing, selling their products, etc.), investing activities (such as purchasing stocks, bonds or other assets for the purpose of generating profit) and financing activities (such as obtaining funds from creditors, issuing stocks or other securities for the purpose of raising capital).

Question 17

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?

Accepted Answer

The statement is part of the Report of the Independent Accountants, also known as the auditor's report, which is typically found at the end of the annual report. This section provides an opinion on the fairness of the financial statements and the conformity with accounting principles generally accepted in the United States.

Question 18

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

Accepted Answer

The purpose of the notes to financial statements is to provide additional information about the company's financial position, results, and changes in financial position. This information should include all material facts relevant to the financial statements, including accounting policies, explanatory material, and any other necessary information to ensure that the financial statements are fair, accurate, and complete. The notes also provide information about significant events or changes that have taken place since the date of the financial statements that may affect their interpretation.

Question 19

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

Accepted Answer

Forecasts of cash flows and earnings are typically not included in a corporate annual report, as they are forward-looking statements and can be challenging to predict accurately. The other sections (Notes to the Financial Statements, Report of the Independent Accountants, and Management's Discussion and Analysis) are common components of annual reports.

Question 20

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

Accepted Answer

The statement of cash flows reports the inflows and outflows of cash for a business during a specific time period, and shows the sources and uses of cash resources.

Quiz 2: Financial Statements and the Annual Report