81 test bank for financial accounting 4th

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81 Test Bank for Financial Accounting 4th

Edition by Harrison

Multiple Choice Questions

Which of the following financial statements would a potential

investor most likely use to evaluate a company's financial

performance for the current period?

1. A balance sheet

2. B income statement

3. C cash flow statement

4. D retained earnings statement

Net income is:

1. A deducted from beginning retained earnings on the retained earnings statement

2. B added to beginning retained earnings on the retained earnings statement

3. C added to assets on the balance sheet

4. D deducted from net sales on the income statement

The accounting equation can be stated as:

1. A Assets + Liabilities = Shareholders' equity

2. B Assets = Liabilities + Shareholders' equity

3. C Assets = Liabilities - Shareholders' equity

4. D Assets + Shareholders' equity = Liabilities

The cash flow statement is divided into three categories relating

to cash flows from operating, investing, and:

1. A management planning activities

2. B financing activities

3. C strategic positioning activities

4. D marketing activities

All of the following are forms of business organizations except:

1. A proprietorship

2. B partnership

3. C restaurant

4. D corporation

Which of the following represent(s claims to economic

resources?

1. A assets, but not liabilities or owners' equity

2. B owners' equity, but not assets or liabilities

3. C liabilities, but not assets or owners' equity

4. D liabilities and owners' equity, but not assets

Cost of goods sold is:

1. A added to sales on the income statement

2. B deducted from sales on the balance sheet

3. C deducted from sales on the income statement

4. D added to sales on the retained earnings statement

Common shares appear on the:

1. A balance sheet

2. B income statement

3. C cash flow statement

4. D retained earnings statement

The ending balance in retained earnings appears on the:

1. A balance sheet only

2. B balance sheet and statement of retained earnings

3. C statement of retained earnings only

4. D income statement

What is the proper order for the cash flow statement?

1. A financing activities, investing activities, and operating activities

2. B operating activities, investing activities, and financing activities

3. C operating activities, financing activities, and investing activities

4. D investing activities, financing activities, and operating activities

The owners' interest in the assets of a corporation is known as:

1. A assets

2. B shareholders' equity

Losses are reported on the:

1. A income statement

2. B balance sheet

3. C cash flow statement

4. D statement of retained earnings

Shareholders' equity for Raisin Corporation on January 1, 2010 and December 31, 2010 were $60,000 and $75,000, respectively Assets on January 1, 2010 and December 31, 2010 were

$115,000 and $105,000, respectively Liabilities on January 1,

2010 were $55,000 What is the amount of liabilities on December

31, 2010?

1. A $40,000

2. B $15,000

3. C $30,000

4. D indeterminable from the given information

Operating expenses appear on the income statement:

1. A directly after gross margin

2. B directly after cost of goods sold

3. C directly after revenue

4. D do not appear on the income statement

Which of the following persons or groups have the ultimate

control of a corporation?

1. A the chief executive officer

2. B the board of directors

3. C the audit committee

4. D the shareholders

Cash dividends:

1. A decrease revenue on the income statement

2. B increase expenses on the income statement

3. C decrease retained earnings on the retained earnings statement

4. D decrease operating activities on the cash flow statement

The date of the income statement:

1. A covers one day in time

2. B covers a period of time, usually for an accounting period

3. C is not dated

4. D may cover a period of time or only one day in time, like a snapshot

photograph

Notes receivable due in 60 days would be classified as a:

1. A long-term asset on the balance sheet

2. B current asset on the balance sheet

3. C current liability on the balance sheet

4. D long-term liability on the balance sheet

To determine a company's gross margin for the period, an

investor would look on the:

1. A balance sheet

2. B cash flow statement

3. C income statement

4. D statement of retained earnings

Common shares is a component of:

1. A total assets

2. B total liabilities

3. C share capital

4. D retained earnings

Expenses are:

1. A increases in assets resulting from operations

2. B increases in retained earnings resulting from operations

3. C increases in liabilities resulting from purchasing assets

4. D decreases in retained earnings resulting from operations

Revenues are:

1. A increases in liabilities resulting from delivering goods or services to customers

2. B increases in retained earnings resulting from delivering goods or

services to customers

3. C decreases in assets resulting from delivering goods or services to

customers

4. D decreases in retained earnings resulting from delivering goods or

services to customers

Gains and losses appear on which of the financial statements listed below?

1. A the balance sheet

2. B the income statement

3. C the retained earnings statement

4. D the cash flow statement

Suppose The Fruit Group buys a kiwi for $.10 and sells the kiwi for $.50 The cost of goods sold would be:

1. A $.10

2. B $.40

3. C $.50

4. D $.05

Which of the following best describes a liability?

1. A Liabilities are a form of share capital

2. B Liabilities are future economic benefits to which a company is entitled

3. C Liabilities are accounts receivable of the company

4. D Liabilities are economic obligations to creditors to be paid at some future date by the company

Cash received from the sale of shares would appear:

1. A as an operating activity on the cash flow statement

2. B would not appear on a cash flow statement

3. C as an investing activity on the cash flow statement

4. D as a financing activity on the cash flow statement

On January 1, 2010, total assets for Liftoff Technologies were

$125,000; on December 31, 2010, total assets were $145,000

On January 1, 2010, total liabilities were $110,000; on December

31, 2010, total liabilities were $115,000 What are the amount of the change and the direction of the change in Liftoff Technologies shareholders' equity for 2010?

1. A decrease of $15,000

2. B increase of $15,000

3. C increase of $30,000

4. D decrease of $30,000

Which of the following represent(s claims to economic

resources?

1. A assets, but not liabilities or owners' equity

2. B owners' equity, but not assets or liabilities

3. C liabilities, but not assets or owners' equity

4. D liabilities and owners' equity, but not assets

The balance sheet is sometimes also called the:

1. A statement of operations

2. B statement of cash position

3. C statement of financial position

4. D statement of income and expense

How do revenues for a period relate to the beginning and ending balances in retained earnings?

1. A Revenues will increase the beginning balance of retained earnings for the period

2. B Revenues will decrease the beginning balance of retained earnings for the period

3. C Revenues less expenses will either increase or decrease the beginning balance of retained earnings for the period

4. D Revenues less expenses will either increase or decrease the ending balance of retained earnings for the period

Dividends:

1. A always affect net income

2. B are distributions to shareholders of assets (usually cash generated by net income

3. C are expenses

4. D are distributions to shareholders of assets (usually cash generated by a favourable balance in retained earnings

Claims held by the shareholders (owners of a corporation are referred to as:

1. A retained earnings

2. B share capital

3. C share capital minus retained earnings

4. D share capital plus retained earnings

If liabilities increase $120,000 during a given period and

shareholders' equity decreases $25,000 during the same period, assets must:

1. A decrease $145,000

2. B increase $145,000

3. C increase $95,000

4. D decrease $95,000

Dividends appear on the:

1. A retained earnings statement

2. B income statement

3. C balance sheet

4. D both the retained earnings statement and the income statement

Receivables are classified as:

1. A increases in earnings

2. B assets

3. C decreases in earnings

4. D liabilities

If assets increase $120,000 during a given period and liabilities decrease $25,000 during the same period, shareholders' equity must:

1. A increase $95,000

2. B decrease $145,000

3. C decrease $95,000

4. D increase $145,000

Financial statements are:

1. A reports issued by outside consultants who are hired to analyze key operations of the business

2. B reports created by management that states it is responsible for the acts

of the corporation

3. C standard documents that tell us how well a business is performing and where it stands in financial terms

4. D standard documents issued by outside consultants who are hired to analyze key operations of the business in financial terms

Payables are classified as:

1. A increases in earnings

2. B assets

3. C decreases in earnings

4. D liabilities

Assets appear on the:

1. A balance sheet

2. B income statement

3. C retained earnings statement

4. D cash flow statement

An investor wishes to assess a company's financial position at the end of the period Which financial statement would the investor probably examine?

1. A the cash flow statement

2. B the income statement

3. C the balance sheet

4. D the statement of retained earnings

81 Free Test Bank for Financial Accounting 4th

Canadian Edition by Harrison Multiple Choice

Questions-Page 2

According to the Canadian Institute of Chartered Accountants (CICA., the primary objective of financial reporting is to provide information:

1. A to the federal government about tax matters

2. B useful for making investment and lending decisions

3. C regarding the cash flows of the business

4. D about the profitability of the business

Increases in shareholders' equity arise from:

1. A investments by the owner

2. B payment of dividends

3. C net income earned during the period

4. D both investments by the owner and net income earned during the period

Cash would appear on the:

1. A income statement with the revenues

2. B retained earnings statement with the net income

3. C balance sheet with the current assets

4. D balance sheet with the current liabilities

Accounting standards for accountants in Canada are established by:

1. A the Canadian Institute of Chartered Accountants

2. B the Society of Management Accountants of Canada

3. C the Certified General Accountants Association of Canada

4. D the Canadian Institute of Chartered Accountants, the Society of

Management Accountants of Canada, and the Certified General Accountants Association of Canada

Purchases and sales of long-term assets are examples of:

1. A investing activities

2. B dividend activities

3. C financing activities

4. D operating activities

Depreciation is normally associated with which asset on the

balance sheet?

2. B accounts receivable

3. C inventory

4. D equipment

The principle that states that assets acquired by the business should be recorded at their actual price is the:

1. A objectivity assumption

2. B stable monetary unit assumption

3. C cost assumption

4. D reliability assumption

Cash spent to purchase a new building would appear on the cash flow statement as:

1. A a financing activity

2. B an operating activity

3. C an investing activity

4. D purchases of new equipment do not appear on a cash flow statement

The issuance of shares for cash would be classified as a(n.:

1. A investing activity on a cash flow statement

2. B financing activity on a cash flow statement

3. C operating activity on a cash flow statement

4. D current asset on the balance sheet

The balance sheet contains information about:

1. A liabilities, equity, and expenses

2. B assets, revenues, and liabilities

3. C assets, liabilities, and equity

4. D revenues, expenses, and equity

What is one component of shareholders' equity?

1. A common shares

2. B notes payable

3. C property, plant, and equipment

The stable-monetary-unit assumption is the basis for ignoring:

1. A the possibility that the value of inventory might drop below its historical cost

2. B fluctuations in the value of the Canadian dollar relative to foreign currencies

3. C the effect of inflation in the accounting records

4. D the difference between the appraised value and the actual cost when recording an asset at its historical cost

When a repurchase of shares is done by a company it:

1. A increases the amount of owners' equity

2. B decreases the amount of owners' equity

3. C decreases the amount of total liabilities

4. D increases the amount of total liabilities

Which financial statement is based on the accounting equation?

1. A statement of retained earnings

2. B income statement

3. C cash flow statement

4. D balance sheet

The income statement presents a summary of the:

1. A revenues and expenses of an entity for a specific time period

2. B assets and liabilities of an entity

3. C cash inflows and outflows of an entity

4. D changes that occurred in the shareholders' equity of an entity

All of the following are considered standard financial statements except the:

1. A statement of earnings

2. B statement of assets

3. C statement of retained earnings

4. D cash flow statement

Which of the following statements below is true?

1. A The value of a dollar changes over time.

2. B British accountants are required to record transactions in dollars

3. C The stable-monetary-unit assumption requires adjustments to the

accounting records for the effects of inflation

4. D High inflation rates indicate a dollar's purchasing power is stable when compared with other currencies

Current assets are assets expected to be converted to cash, sold,

or consumed:

1. A within the next 12 months or within the business's normal operating cycle

if less than a year

2. B within the next 12 months or within the business's normal operating cycle

if longer than a year

3. C within the next 6 months

4. D within the next 24 months

Retained earnings appears on which of the following financial statements?

1. A statement of retained earnings, cash flow statement, and income

statement, but not the balance sheet

2. B statement of retained earnings and balance sheet, but not the income statement or cash flow statement

3. C statement of retained earnings, cash flow statement, and balance sheet, but not the income statement

4. D statement of retained earnings and cash flow statement, but not the income statement or balance sheet

Which of the following financial statements provides a "snapshot photo" of one moment in time?

1. A balance sheet

2. B income statement

3. C statement of retained earnings

4. D cash flow statement

The payment of salaries would appear:

1. A on the cash flow statement with the operating activities

2. B on the balance sheet with the current liabilities

3. C on the income statement with the revenues

4. D on the income statement as part of cost of goods sold

The repayment of a note payable would be classified as a(n.:

1. A investing activity on a cash flow statement

2. B financing activity on a cash flow statement

3. C operating activity on a cash flow statement

4. D current asset on the balance sheet