79 test bank for financial accounting 8th

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79 Test Bank for Financial Accounting 8th

Edition by Libby Multiple Choice Questions -

Which of the following describes the primary objective of the

balance sheet?

1. A To measure the net income of a business up to a particular point in time

2. B To report the difference between cash inflows and cash outflowsfor the period

3. C To report the financial position of the reporting entity at a particular point in time

4. D To report the market value of assets, liabilities, and stockholders' equity at

a particular point in time

At the beginning of 2014, a corporation had assets of $270,000 and liabilities of $160,000 During 2014, assets increased $25,000 and liabilities increased $5,000 What was stockholders' equity on

December 31, 2014?

1. A $140,000

2. B $130,000

3. C $190,000

4. D $80,000

Which of the following best describes assets?

1. A They are equal to liabilities minus stockholders' equity

2. B They are considered to be the economic resources of the business

3. C They are all reported on the balance sheet at their current market value

4. D They equal financing provided by creditors

During the fiscal year ended 2014, a company had revenues of

$400,000, cost of goods sold of $280,000, and an income tax rate

of 30 percent on income beforeincome taxes What was the

company's 2014 net income?

1. A $120,000

2. B $36,000

3. C $84,000

4. D $400,000

Within which of the following would you find the inventory method(s) being used by a business entity?

1. A Balance sheet

2. B Income statement

3. C Notes to the financial statements

4. D Headings of the financial statements.

Which of the following are the components of stockholders' equity

on the balance sheet?

Which of the following describes the amount of insurance expense reported on the income statement?

1. A The amount of cash paid for insurance in the current period

2. B The amount of cash paid for insurance in the current period less any

unpaid insurance at the end of the period

3. C The amount of insurance used up (incurred) in the current period to help generate revenue

4. D The amount of cash paid for insurance that is reported within the statement

of cash flows

Madrid Company has provided the following data (ignore income taxes): 2014 revenues were $77,500; 2014 net income was

$33,900; Dividends declared and paid during 2014 totaled $5,700; Total assets at December 31, 2014 were $217,000; Total

stockholders' equity at December 31, 2014 was $123,000; Retained earnings at December 31, 2014 were $83,000 Which of the

following is not correct?

1. A 2014 expenses were $43,600

2. B Total liabilities at December 31, 2014 were $94,000

3. C Retained earnings increased $33,900 during 2014

4. D Common stock at December 31, 2014 was $40,000

Lena Company has provided the following data (ignore income

taxes): 2014 revenues were $99,000; 2014 expenses were

$47,800; Dividends declared and paid during 2014 totaled $9,500; Total assets at December 31, 2014 were $177,000; Total liabilities

at December 31, 2014 were $89,000; Common stock at December

31, 2014 was $28,000 Which of the following is not correct?

1. A 2014 net income was $51,200

2. B Total stockholders' equity at December 31, 2014 was $88,000

3. C Total liabilities and stockholders' equity at December 31, 2014was

$177,000

4. D Retained earnings on December 31, 2014 were $41,700

Which financial statement would you utilize to determine whether a company will be able to pay liabilities which are due in 30 days?

1. A Income statement

2. B Balance sheet

3. C Statement of stockholders' equity

4. D Statement of cash flows.

Which financial statement would you use to determine a company's earnings performance during an accounting period?

1. A Balance sheet

2. B Statement of stockholders' equity

3. C Income statement

4. D Statement of cash flows

Which of the following equations is the balance sheet equation?

1. A Assets + Liabilities = Stockholders' Equity

2. B Assets + Stockholder's Equity = Liabilities

3. C Assets = Liabilities + Stockholders' Equity

4. D Assets = Liabilities + Common Stock

Which of the following best describes the balance sheet?

1. A It includes a listing of assets at their market values

2. B It includes a listing of assets, liabilities, and stockholders' equity at their market values

3. C It provides information pertaining to a company's assets and the claims against sources of financing for those assets

4. D It provides information pertaining to a company's liabilities for a period of time

On January 1, 2014, Miller Corporation had retained earnings

of$8,000,000 During 2014, Miller reported net income of

$1,500,000, declared dividends of $500,000, and issued common stock for $1,000,000 What were Miller's retained earnings on

December 31, 2014?

1. A $7,000,000

2. B $9,500,000

3. C $9,000,000

4. D $7,500,000

A company's retained earnings increased $375,000 last year and its assets increased $973,000 The company declared a $79,000 cash dividend during the year What was last year's net income?

1. A $296,000

2. B $375,000

3. C $454,000

4. D $519,000

Which of the following would most likely increase retained

earnings?

1. A An increase in expenses

2. B An increase in revenues.

3. C Declaring a cash dividend

4. D Issuing additional common stock

Which of the following correctly describes the various financial

statements?

1. A An income statement covers a period of time

2. B The cash flow statement is a financial statement at a specific point in time

3. C The balance sheet is a financial statement that covers a period of time

4. D The statement of stockholders' equity is a financial statement at a specific point in time

Which of the following statements is correct?

1. A Assets on the balance sheet include retained earnings

2. B Retained earnings includes common stock

3. C The balance sheet equation states that assets equal liabilities

4. D A corporation's net income does not necessarily equal its net cash flow from operations

Madrid Company has provided the following data (ignore income taxes): 2014 revenues were $77,500; 2014 net income was

$33,900; Dividends declared and paid during 2014 totaled $5,700; Total assets at December 31, 2014 were $217,000; Total

stockholders' equity at December 31, 2014 was $123,000; Retained earnings at December 31, 2014 were $83,000 Which of the

following is correct?

1. A 2014 expenses were $37,900

2. B Total liabilities at December 31, 2014 were $11,000

3. C Retained earnings increased $28,200 during 2014

4. D Common stock at December 31, 2014 was $206,000

Which of the following statements describes the balance sheet? What are the categories of cash flows that appear on a statement of cash flows?

1. A Cash flows from investing, financing, and service activities

2. B Cash flows from operating, production, and internal activities

3. C Cash flows from financing, production, and growth activities

4. D Cash flows from operating, investing, and financing activities

Which of the following would immediately cause a change in a

corporation's retained earnings?

1. A Net income or net loss and declaration of dividends

2. B Declaration of dividends and issuance of common stock to new

stockholders

3. C Net income and issuance of stock to new stockholders

4. D Declaration of dividends and purchase of new machinery

Which of the following accounts is not a liability on the balance

sheet?

1. A Retained earnings

2. B Notes payable

3. C Accounts payable

4. D Interest payable

Which of the following accounts would be reported as assets on the balance sheet?

1. A Cash, accounts payable, and notes payable

2. B Cash, retained earnings, and accounts receivable

3. C Cash, accounts receivable, and inventories

4. D Inventories, property and equipment, and common stock

When would a company report a net loss on the income

statement?

1. A When revenues are less than the sum of expenses plus dividends during

an accounting period

2. B If assets decreased during an accounting period

3. C If liabilities increased during an accounting period

4. D When expenses exceeded revenues for an accounting period

Which of the following accounts would not be reported on the

balance sheet?

1. A Retained earnings

2. B Inventory

3. C Accounts payable

4. D Dividends

How are creditor and investor claims reported on a balance sheet?

1. A The claims of creditors are liabilities and those of investors are assets

2. B The claims of both creditors and investors are liabilities, butonly the claims

of investors are considered to be long-term

3. C The claims of creditors are reported as liabilities while the claims of

investors are recorded as stockholders' equity

4. D The claims of creditors and investors are considered to be essentially equivalent

Willie Company's retained earnings increased $20,000 during 2014 What was Willie's 2014 net income or loss given that Willie declared

$25,000 of dividends during 2014?

1. A Net income was $5,000.

2. B Net income was $45,000

3. C Net loss was $45,000

4. D Net loss was $5,000

Which of the following has primary responsibility to develop

Generally Accepted Accounting Principles?

1. A Financial Accounting Standards Board

2. B Company Executives

3. C Securities & Exchange Commission

4. D Public Company Accounting Oversight Board

Which of the following would not be found on the statement of cash flows?

1. A Cost flow from manufacturing activities

2. B Cash flow from operating activities

3. C Cash flow from investing activities

4. D Cash flow from financing activities

Lena Company has provided the following data (ignore income taxes): 2014 revenues were $99,000; 2014 expenses were

$47,800; Dividends declared and paid during 2014 totaled $9,500; Total assets at December 31, 2014 were $177,000; Total liabilities

at December 31, 2014 were $89,000; Common stock at December

31, 2014 was $28,000 Which of the following is correct?

1. A 2014 net income was $41,700

2. B Total stockholders' equity at December 31, 2014 was $236,000

3. C Retained earnings at December 31, 2014 were $60,000

4. D Retained earnings at December 31, 2014 were $41,700

Which of the following equations best describes the income

statement?

1. A Assets - Liabilities = Stockholders' Equity

2. B Net income = Revenues + Expenses

3. C Net income = Revenues - Expenses

4. D Retained earnings = Net Income + Dividends

Which of the following items is reported as an expense on the

income statement?

1. A Dividends declared

2. B Cost of goods sold

3. C Dividends paid

4. D Accounts payable

Atlantic Corporation reported the following amounts at the end of the first year of operations: common stock $200,000; sales revenue

$800,000; total assets $600,000; dividends declared $40,000; and total liabilities $320,000 What are Atlantics' retained earnings at the end of the year and what amount of expenses were incurred during the year?

1. A Retained earnings are $80,000 and expenses incurred totaled $680,000

2. B Retained earnings are $80,000 and expenses incurred totaled $720,000

3. C Retained earnings are $280,000 and expenses incurred totaled $480,000

4. D Retained earnings are $280,000 and expenses incurred totaled $520,000

During 2014, Canton Company's assets increased $95,500 and the liabilities decreased $17,300 Canton Company's stockholders'

equity at December 31, 2014 was $211,500 What amount was stockholders' equity at January 1, 2014?

1. A $98,700

2. B $324,300

3. C $133,300

4. D $289,700

Which of the following is the amount of revenue reported on the income statement of a retail company?

1. A The cash collected from customers during the current period

2. B Both cash and credit sales for the period

3. C Cash sales for the period and collections from customers

4. D Cash sales and stockholders' investments

What financial statement would you look at to determine the

dividends declared by a business?

1. A Income statement

2. B Statement of stockholders' equity

3. C Statement of cash flows

4. D Balance sheet

In what order would the items on the balance sheet appear?

1. A Assets, retained earnings, liabilities, and common stock

2. B Common stock, retained earnings, liabilities, and assets

3. C Assets, liabilities, common stock, and retained earnings

4. D Common stock, assets, liabilities, and retained earnings

Which of the following describes the operating activities section of a cash flow statement?

1. A It provides information about how operations have been financed

2. B It provides information pertaining to dividend payments to stockholders.

3. C It provides information with respect to a company's ability to generate cash flows to pay for goods and services

4. D It provides the net increase or decrease in cash during the period

Which of the following is considered to be an expense on the

income statement?

1. A Accounts payable

2. B Notes payable

3. C Wages payable

4. D Cost of goods sold

Which of the following best describes liabilities and stockholders' equity?

1. A They are the sources of financing an entity's assets

2. B They are the economic resources used by a business entity

3. C They are reported on the income statement

4. D They both increase when assets increase

79 Free Test Bank for Financial Accounting 8th Edition

by Libby Multiple Choice Questions - Page 2

Why is the CPA's role in performing audits important to our

economic system?

1. A The auditors provide direct financial advice to potential investors

2. B The auditors have the primary responsibility for the information contained in financial statements

3. C The auditors issue reports on the accuracy of each financial transaction

4. D The audit of financial statements helps investors and others to know that they can rely on the information presented in the financial statements

Which of the following statements is true about a sole

proprietorship?

1. A The owner and the business are separate legal entities but not separate accounting entities

2. B The owner and the business are separate accounting entities but not

separate legal entities

3. C The owner and the business are separate legal entities and separate

accounting entities

4. D Most large businesses in this country are organized as sole

proprietorships

During 2014, Rock Company's cash balance increased from

$79,000to $91,300 Rock's net cash flow from operating activities was $37,300 and its net cash flow from financing activities was

$11,100 How much was Rock's net cash flow from investing

activities?

1. A A net cash flow of $42,900

2. B A net cash flow of ($36,100)

3. C A net cash flow of $60,700

4. D A net cash flow of ($60,700)

Which of the following transactions affects both the income

statement and the statement of cash flows?

1. A Selling stock in exchange for cash

2. B Declaring and paying a cash dividend

3. C Selling a product to a customer which creates an account receivable

4. D Paying employee wages as they are earned

The International Accounting Standards Board has worked to

develop global accounting standards known as

1. A Generally accepted accounting principles

2. B Globally accepted financial standards

3. C International financial reporting standards

4. D Generally accepted international financial standards

Which of the following properly describes the impact on the financial statements when a company borrows $20,000 from a local bank?

1. A Net income increases $20,000

2. B Assets decrease $20,000

3. C Stockholders' equity increases $20,000

4. D Liabilities increase $20,000

The declaration of a $5,000 dividend by JLH Company would be reported on which of JLH's financial statements?

1. A The income statement only

2. B The statement of stockholders' equity

3. C The balance sheet only

4. D The statement of cash flows

Which of the following groups has primary responsibility for the

information contained in the financial statements?

1. A The company's management

2. B The company's auditors

3. C The company's investors

4. D SEC

Which of the following is a disadvantage of a corporation when

compared to a partnership?

1. A The stockholders have limited liability.

2. B The corporation is treated as a separate legal entity from the stockholders

3. C The corporation and its stockholders are subject to double taxation

4. D The corporation must account for the transactions of the business as

separate and apart from those of the owners

Which of the following does not represent a professional accounting certification?

1. A Certified Management Accountant

2. B Certified Public Accountant

3. C Certified Internal Auditor

4. D Certified Tax Accountant

An examination of the financial statements of a business to ensure that they conform to generally accepted accounting principles is called

1. A A certification

2. B An audit

3. C A verification

4. D A validation

Which of the following has the legal authority to determine financial reporting in the United States?

1. A Financial Accounting Standards Board

2. B American Accounting Association

3. C Securities & Exchange Commission

4. D Public Company Accounting Oversight Board

Which of the following is not an alternate title for the Statement of Income?

1. A Income Statement

2. B Statement of Net Income

3. C Statement of Operations

4. D Statement of Income

Which of the following best describes the purpose of an audit?

1. A To prove the accuracy of an entity's financial statements

2. B To lend credibility to an entity's financial statements

3. C To audit every transaction that an entity entered into

4. D To establish that a corporation's stock is a sound investment

Which of the following statements is correct?

1. A The payment of a cash dividend reduces net income

2. B Cash received from issuing common stock to stockholders is reported as a financing activity cash flow within the statement of cash flows