67 test bank for financial accounting the impact on decision makers 8th

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67 Test Bank for Financial Accounting The Impact on Decision Makers 8th

Edition by Porter Multiple Choice Questions - Part 1

Which of the following best describes the term “expenses”?

1 The amount of total profits earned by a business since it began operations.

2 The amount of interest or claim that the owners have in the business.

3 The future economic resources of a business entity.

4 The outflow of assets resulting from the sale of goods and services.

Which one of the following items is correct concerning the time element of financial statements?

1 The balance sheet covers a period of time.

2 The statement of retained earnings explains changes during a particular period.

3 An income statement lists amounts at a specific point in time.

4 Both the income statement and the balance sheet cover a period of time. Which of the following is the correct date format for the financial statement heading?

1 Balance sheet for the year ended June 30, 2014

2 Income statement at December 31, 2014

3 Balance sheet at December 31, 2014

4 Statement of retained earnings at December 31, 2014

Which of the following statements best describes the term

“revenues”?

1 Revenues represent an outflow of assets resulting from the sale of goods or services.

2 Revenues represent assets received from the sale of products or services.

3 Revenues represent assets used or consumed in the sale of products or services.

4 Revenues represent the dollar amount of bonds sold to the public.

Which one of the following is a correct expression of the accounting equation?

1 Assets + Liabilities = Owners’ Equity

2 Assets = Liabilities - Owners’ Equity

3 Assets + Owners’ Equity = Liabilities

4 Assets = Liabilities + Owners’ Equity

Which of the following invests funds into a business and is

considered an owner?

1 Stockholders

2 Creditors

3 Bankers

4 Lenders

Which one of the following is an economic obligation for a business entity?

1 Salaries paid to employees for services rendered

2 Amounts owed to creditors

3 Materials used in manufacturing products

4 Payment of rent for the next year

Which one of the following is not one of the three activities included

in the definition of accounting?

1 Communicating

2 Identifying

3 Measuring

4 Operating

What is the name of the branch of accounting concerned with

providing managers and administrators with information to facilitate the planning and control of business operations?

1 Management accounting

2 Auditing

3 Financial accounting

4 Bookkeeping

All of the following are examples of manufacturers except:

1 Whirlpool

2 Boeing

3 Amazon.com

4 Ford

Which one of the following business decisions will least likely

require financial information?

1 The National Bank is reviewing the loan application from Petra’s Restaurant.

2 Petra’s Restaurant is attempting to sell its stock to the public.

3 The labor union representing Winn’s Fitness Spa employees is negotiating a pay raise as part of a new labor agreement.

4 Petra’s Restaurant management is deciding whether to wash its catering vans today or tomorrow.

Which financial statement would you refer to in order to determine whether a company owed funds to creditors?

1 Balance Sheet

2 Statement of Retained Earnings

3 Income Statement

4 Statement of Public Accounting

How is the balance sheet linked to the other financial statements?

1 The amount of retained earnings reported on the balance sheet is equal to net income.

2 Retained earnings is added to total assets and reported on the balance sheet.

3 Net income increases retained earnings on the statement of retained

earnings, which ultimately increases retained earnings on the balance sheet.

4 There is no link between the balance sheet and other statements, as each contains different accounts and provides different information.

The inflow of assets resulting from the sale of products and services

is called a(n)

1 asset

2 liability

3 revenue

4 expense

Which statement summarizes the income earned and the dividends paid?

1 Statement of cash flows

2 Statement of retained earnings

3 Balance sheet

4 Income statement

Which of the following is an organization that lends funds to a

business entity and expects repayment of the funds?

1 A partner

2 A stockholder

3 An owner

4 A creditor

Which of the following statements is true?

1 Profits distributed to the creditors are called dividends.

2 The balance sheet shows the assets, liabilities, and profits of a company.

3 Dividends are an expense, and are reported on the income statement as a deduction from net income.

4 The income statement reports the revenues and expenses of a company.

Which one of the following groups is considered an internal user of financial statements?

1 A bank reviewing a loan application from a corporation.

2 The labor union representing employees of a company that is involved in labor negotiations

3 The financial analysts for a brokerage firm who are preparing

recommendations for the firm’s brokers on companies in a certain industry,

4 Factory managers that supervise production line workers.

Which one of the following financial statements reports an entity’s financial position at a specific date?

1 Balance sheet

2 Statement of retained earnings

3 Income statement

4 Both the income statement and the balance sheet

Which of the following would be classified as external users of financial statements?

1 Stockholders and management of the company

2 The controller of the company and a company's stockholders

3 The company's marketing managers

4 The creditors and stockholders of the company

Which financial statement would you analyze to determine if a

company distributed any of its profits to its shareholders?

1 Balance Sheet

2 Statement of Retained Earnings

3 Income Statement

4 Statement of Public Accounting

Which of the following terms best describes a distribution of the net income of a business to its owners?

1 Revenue

2 Dividends

3 Earnings

4 Monetary unit

Which one of the following correctly represents one of the basic financial statement models?

1 Assets - Liabilities = Net Income

2 Assets + Liabilities = Owners’ Equity

3 Revenues + Expenses = Net Income

4 Beginning Retained Earnings + Net Income - Dividends = Ending Retained Earnings

Which one of the following items appears on a balance sheet?

1 Accounts payable

2 Sales revenue

3 Utilities expense

4 Cost of goods sold

Trailways Busline is an example of a

1 producer

2 supplier

3 retailer

4 service provider

Which of the following statements would be true if you own stock in

a company?

1 You are an owner of the retained earnings and capital stock of the company.

2 You have a claim to the assets of the business

3 You have the right to receive interest on an annual basis.

4 You have the right to a portion of the company’s revenues each accounting period.

Which of the following best describes the term “retained earnings”?

1 The amount of total profits earned by a business since it began operations.

2 The amount of interest or claim that the owners have on the assets of the business.

3 The future economic resources of a business entity.

4 The cumulative profits earned by the business less any dividends distributed.

The three forms of business entities are:

1 Government, cooperatives, and philanthropic organizations

2 Financing, investing, and operating

3 Sole proprietorships, partnerships, and corporations

4 Wholesaler, manufacturer, and retailer

You are a potential stockholder and are concerned that a particular company you are ready to invest in might have too much debt Which financial statement would provide you information needed in order to evaluate your concern?

1 Balance sheet

2 Income statement

3 Statement of retained earnings

4 Statement of public accounting

Which one of the following is not an external user of financial

statements?

1 Suppliers

2 Creditors

3 Investors

4 The company’s controller

Clip Joint Company is ready to sell its bonds Which one of the following financial questions is most relevant to the issue of the bonds and that investors will most likely want answered before they purchase the bonds?

1 How many product lines did Clip Joint Company have last year?

2 What will be Clip Joint Company’s cost to start operations in another city?

3 How much debt does Clip Joint Company already have?

4 Will Clip Joint Company pay dividends?

The costs of doing business through the sale of goods and services are called

1 Net income

2 Expenses

3 Revenues

4 Dividends

Which one of the following is not an external user of financial

information?

1 Company management

2 Internal Revenue Service

3 Creditors

4 Stockholders

Which of the following would be internal users of accounting

information?

1 Customers and vendors

2 Employees and managers

3 Government and banks

4 Employees and customers

Which one of the following events involves a liability for a

business?

1 Loans to be repaid to banks

2 Inventories purchased for cash

3 Amounts invested by the owners

4 Stock sold to the general public

Which one of the following is least likely to be a user of financial information of a grocery store?

1 The manager of the grocery store.

2 The supplier of milk to the grocery store.

3 A stockbroker looking for a possible investment.

4 A customer at the grocery store.

Which of the following best describes the term “assets”?

1 The amount of total profits earned by a business since it began operations.

2 The amount of interest or claim that the owners have in the business.

3 The economic resources of a business entity.

4 The cumulative profits earned by a business less any dividends distributed.

67 Free Test Bank for Financial Accounting The Impact

on Decision Makers 8th Edition by Porter Multiple

Choice Questions - Part 2

On January 1, 2014, Francisco Company's balance in retained earnings was $70,000 During 2014, the company earned net

income of $43,000 and paid $15,000 in dividends Calculate the retained earnings balance at December 31, 2014

1 $42,000

2 $90,000

3 $98,000

4 $113,000

Which of the following is a five-member body that has the authority from Congress to set standards for conducting audits?

1 FASB

2 SEC

3 PCAOB

4 AICPA

Lewis Corporation reported the following information for the year ended December 31, 2014: Net income $ 10,000; Dividends 6,000; Retained earnings at December 31, 2014 25,000 What was the economic effect of the payment of Lewis’ dividends?

1 The dividend reduced net income for 2014.

2 The dividend should be equal to net income if the company’s accounting equation is in balance.

3 The dividends reduce total retained earnings for the year.

4 The dividends must be paid whenever Raymond Corp reports net income.

Gyro’s Shop reported a net loss of $15,000 and total expenses of

$80,000 How much are total revenues?

1 $ 15,000

2 $ 65,000

3 $ 95,000

4 The answer cannot be determined from the information given.

Which concept is the reason the dollar is used in the preparation of financial statements?

1 Going concern

2 Legal entity

3 Monetary unit

4 Time Period

The statement of retained earnings accomplishes which of the following?

1 It summarizes income earned and dividends paid over a single period of the business.

2 It accumulates all revenues for the year.

3 It summarizes the balance sheet accounts.

4 It summarizes the capital stock accounts over the life of the business.

Lewis Corporation reported the following information for the year ended December 31, 2014: Net income $ 10,000; Dividends 6,000; Retained earnings at December 31, 2014 25,000 What was the balance of Lewis’ retained earnings at January 1, 2014?

1 $21,000

2 $29,000

3 $31,000

4 $35,000

If a company has $152,000 of revenues, declares and pays

$55,000 in dividends, and has net income of $89,000, how much were expenses for the year?

1 $ 8,000

2 $ 63,000

3 $144,000

4 Unable to determine the amount due to incomplete information.

Which one of the following is an assumption made in the

preparation of financial statements?

1 Financial statements are prepared for a specific entity that is distinct from the entity owners.

2 Financial statements are prepared assuming that inflation has a distinct effect

on the monetary unit

3 Preparation of financial statements for a specific time period assumes that the balance sheet covers a period of time.

4 Market values are always assumed to be irrelevant when preparing financial statements.

Cerrato Company has assets of $350,000, liabilities of $130,000, and retained earnings of $180,000 How much is total owners’

equity?

1 $ 40,000

2 $ 170,000

3 $ 220,000

4 $ 350,000

Mobile Power Corp reported the following information for the year ended December 31, 2014 Revenue $ 40,000; Expenses 23,000; Dividends 10,000; Retained earnings at December 31, 2014

175,000 What was the retained earnings balance for Mobile Power

at December 31, 2013?

1 $ 165,000

2 $ 168,000

3 $ 182,000

4 $ 192,000

To which of the following entities must a company report if it sells its stock on the organized stock market?

1 American Institute of Certified Public Accountants (AICPA)

2 American Accounting Association (AAA)

3 International Accounting Standards Board (IASB)

4 Securities and Exchange Commission (SEC)

The following information is provided by the Ferrara Corporation: Beginning retained earnings $ 50,000; Ending retained earnings 70,000; Dividends declared and paid 10,000; Revenue 50,000 What is the net income for Ferrara Corp.?

1 $10,000

2 $20,000

3 $30,000

4 Unable to tell from the information provided.

Cranston Enterprises purchased land for $2,000,000 in 1999 In

2014, an independent appraiser assessed the value at $4,400,000 What amount should appear on the financial statements in 2014 with respect to the land?

1 $2,000,000

2 $2,400,000

3 $4,400,000

4 Whatever amount the company believes is the best indicator of the true value

of the land.

The following information is provided by the Ferrara Corporation: Beginning retained earnings $ 50,000; Ending retained earnings 70,000; Dividends declared and paid 10,000; Revenue 50,000 Calculate Ferrara Corporation’s expenses

1 $20,000

2 $30,000

3 $40,000

4 Cannot tell from the information provided.

Which the following organizations is primarily responsible for

establishing GAAP today?

1 Financial Accounting Standards Board (FASB)

2 Securities and Exchange Commission (SEC)

3 Internal Revenue Service (IRS)

4 Federal Government

Sawaddee Enterprises began the year with total assets of $450,000 and total liabilities of $230,000 If Sawaddee’s total assets doubled

to $900,000 and its owners’ equity remained the same during the year, what was the amount of its total liabilities at the end of the year?

1 $670,000

2 $680,000

3 $440,000

4 $900,000

Marcos Inc had net income for 2014 of $40,000 It declared and paid a $3,500 cash dividend in 2014 If the company’s retained earnings for the end of the year was $38,200, what was the

company’s retained earnings balance at the beginning of 2014?

1 $81,700

2 $74,700

3 $5,300

4 $1,700

The natural progression in items from one statement to another and preparation of financial statements is best represented by the

following order:

1 Balance sheet and statement of cash flows > statement of retained earnings > income statement

2 Balance sheet and statement of cash flows > income statement > statement

of retained earnings.

3 Statement of retained earnings > income statement > balance sheet and statement of cash flows

4 Income statement > statement of retained earnings > balance sheet and statement of cash flows

Which of the following organizations is responsible for setting

auditing standards followed by public accounting firms in conducting independent audits of financial statements?