75 test bank for financial ACCT2 2nd edition by godwin

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75 Test Bank for Financial ACCT2 2nd Edition by Godwin Multiple Choice Questions - Part 1

Ponzi Corporation reported the following information for the year ended December 31, 2012 Net income $100,000; Dividends 6,000; Retained earnings

at December 31, 2012 $120,000 Refer to the information provided above for Ponzi Corporation What was the balance of retained earnings at January 1, 2012?

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

4 Financial statements are prepared assuming that inflation has a distinct effect on the monetary unit.

Who among the following generally lends funds to a business entity and expects repayment of the funds?

1 A partner

2 A stockholder

3 An owner

4 A creditor

Ponzi Corporation reported the following information for the year ended

December 31, 2012 Net income $100,000; Dividends 6,000; Retained earnings

at December 31, 2012 $120,000 Refer to the information provided above for Ponzi Corporation What was the economic effect of the payment of Ponzi's dividends?

1 The dividend reduced net income for 2012.

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

3 The dividend reduced total retained earnings.

4 The dividends must be paid whenever Ponzi Corporation reports net income.

You are a potential creditor and are concerned that a particular company you are ready to give a loan to 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 cash flows

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

1 Retained earnings

2 Sales revenue

3 Utilities expense

4 Dividends

Which statement demonstrates the financial success or failure of the

company over that specific period of time?

1 Statement of changes in stockholders’ equity

2 Statement of retained earnings

3 Balance sheet

4 Income statement

Which of the following underlying assumptions for the conceptual framework

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

4 Statement of cash flows

Which of the following is a correct fundamental accounting equation?

1 Assets + Liabilities = Equity

2 Assets + Retained Earnings = Equity

3 Assets + Equity = Liabilities

4 Assets = Liabilities + Equity

"Economic resources" are known as:

1 assets.

2 liabilities.

3 owners' equity.

4 retained earnings.

The income statement shows:

1 how much profit the company has earned since it began operations.

2 net income equal to the amount of cash on the balance sheet.

3 a summary of the results of operations for a period of time.

4 the liquidity of the company on an annual basis

Doughtry's Pet Shop reported a net loss of $1,500,000 and total expenses of

$2,900,000 How much were the total sales?

1 $4,400,000

2 $1,400,000

3 $2,900,000

4 $1,500,000

What does the phrase, "Revenue is recognized when earned" mean?

1 Revenue is recorded in the accounting records when the goods are received from a supplier, and reported on the income statement when sold to the customer.

2 Revenue is recorded in the accounting records and reported on the income statement when the cash is received from the customer.

3 Revenue is recorded in the accounting records when the goods are sold to a customer, and reported on the income statement when the cash payment is received from the customer.

4 Revenue is recorded in the accounting records and reported on the income statement when goods are sold and delivered to a customer.

Which of the following is the correct date format for the financial statement heading?

1 Balance Sheet for the Year Ended June 30, 2012

2 Statement of Retained Earnings as of December 31, 2012

3 Income Statement for the Year Ending December 31, 2012

4 Statement of Retained Earnings at December 31, 2012

Which of the following terms best describes a distribution of the net income

of a corporation to its owners?

1 July.

2 June.

3 August.

4 April.

Which financial statement would you analyze to determine its operating performance for the past year?

1 Balance sheet

2 Statement of retained earnings

3 Income statement

4 Statement of cash flows

Which one of the following events creates a liability for a business?

1 An obligation to pay for goods purchased on credit from a supplier

2 Inventories purchased for cash

3 Amounts invested by the owners

4 Stock sold to the general public

The going concern assumption is concerned with:

1 the company's ability to continue operations long enough to carry out its existing obligations.

2 any information that is capable of influencing the decisions of anyone using the financial statements.

3 measuring ongoing business activities at their exchange price at the time of the initial external transaction.

4 offsetting management's natural optimism by providing a prudent approach to

uncertainty in financial statement items.

On January 1, 2012, Blackstone Company reported assets of $1,000,000 and liabilities of $600,000 During 2012 assets decreased by $200,000 and Equity decreased $250,000 What is the amount of Equity on December 31, 2012

Expenses can be matched against revenues:

1 if the earnings process is not complete.

2 when cash is collected from the sale of products.

3 in the same period as the revenue that it helped to generate.

4 when payment is made for costs related to revenue.

Monaco Lawn Service Company creates revenue each time:

1 it is scheduled for service.

2 amount is paid in full.

3 a lawn is mowed.

4 money is received in advance.

Which of the following best describes the term "expenses"?

1 The cost of assets used in the investing activities of a business.

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

3 The future economic resources of a business entity.

4 A decrease in resources resulting from the sale of goods or provision of services.

The assets and liabilities of the company are $175,000 and $40,000, respectively Equity should equal:

1 $215,000.

2 $135,000.

3 $175,000.

4 $40,000.

"Revenues" are best described as:

1 decreases in resources resulting from the purchase of goods for the provision of services.

2 increases in resources resulting from the sale of goods or the provision of services.

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

4 an increase in the financing activities section of the statement of cash flows.

Which of the following concepts relates to separating the reporting of

business and personal economic transactions?

1 Cost principle

2 Monetary unit assumption

3 Economic entity assumption

4 Objectivity assumption

"Matching principle" is best described as:

1 the principle that a revenue should be recorded when a resource has been earned.

2 an increase in resources resulting from the sale of goods or the provision of services.

3 the principle that expenses should be recorded in the period resources are used to generate revenues.

4 an increase in the financing activities.

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 Statement of cash flows

The time period assumption is necessary because:

1 inflation exists and causes confusing swings in financial statement amounts over time.

2 external users of financial statements want accurately-reported net income for a specific period of time.

3 financial statements users expect full disclosure of all events throughout the entire time period translated in dollars.

4 it is required by the federal government.

65 Free Test Bank for Financial ACCT2 2nd Edition by Godwin Multiple Choice Questions - Part 2

The principle of conservatism is concerned with:

1 the avoidance of overstating assets or income in the preparation of financial

statements.

2 the minimization of costs associated with providing financial information.

3 the company's ability to carry out its existing commitments.

4 the company's procedures for recording activities at their initial exchange price.

Cash received from customers for mowing their lawns is reported on the statement of cash flows in the:

1 financing activities section.

2 investing activities section.

3 operating activities section.

4 both relevant and reliable.

Which one of the following is not one of the three business activities as

shown in statement of cash flows?

1 Financing

2 Operating

3 Investing

4 Measuring

On January 1, 2012, Money Company's balance in retained earnings was

$10,000,000 At the end of the year, December 31, 2012, the balance in retained earnings was $9,400,000 During 2012, the company earned net income of

$440,000 How much were dividends?

1 $1,040,000

2 $1,000,000

4 Statement of retained earnings

An accountant is uncertain about the best estimate of an amount for a

business transaction If there are two possible amounts that could be

recorded, the amount least likely to overstate assets and earnings is selected Which of the following qualities is characterized by this action?

1 Beginning retained earnings + net income + dividends = ending retained earnings

2 Beginning retained earnings + cash inflows 0 cash outflows = ending retained earnings

3 Beginning retained earnings + dividends 0 net income = ending retained earnings

4 Beginning retained earnings + net income 0 dividends = ending retained earnings

Information that is material means that an error in recording the dollar amount

of a transaction would:

1 likely affect the judgment of someone relying on the financial statements.

2 not affect the decisions of financial statement users.

3 not impact a business decision of a creditor.

4 result in the overstatement of assets or income.

Which one of the following financial statements shows the end of the year cash balance for a business entity?

1 Income statement and statement of retained earnings

2 Balance sheet and statement of cash flows

3 Statement of retained earnings and statement of cash flows

4 Balance sheet and statement of retained earnings

Davis Construction began operation on January 1, 2012, with an initial

investment of $100,000 from each of its three stockholders During the year ending 2012 Davis Construction had net income of $125,000 and paid

dividends of $50,000 Refer to the information provided for Davis

Construction, Inc The dividends for the year:

1 increases the amount of capital stock reported by the company.

2 are part of Davis Construction's operating expense.

3 are reported on the statement of retained earnings.

4 are reported on the income statement.

One of the qualitative characteristics of accounting information include:

1 reliability.

2 cash flow information.

3 all accounting information.

4 assets reported on the balance sheet.

The statement of cash flows has which of the following economic activity categories?

1 Financing, investing, and operating

2 Cash, credit, and noncash

3 Financing, credit, and operating

4 Financing, management, and operating

Beginning retained earnings $550,000; Ending retained earnings 700,000; Dividends paid 100,000; Revenue 525,000 Refer to the selected information provided for Tarp Corporation The company's expenses are:

2 Investing activities

3 Business activities

4 Financing activities

Davis Construction began operation on January 1, 2012, with an initial

investment of $100,000 from each of its three stockholders During the year ending 2012 Davis Construction had net income of $125,000 and paid

dividends of $50,000 Refer to the information provided for Davis

Construction, Inc and calculate its retained earnings balance at December 31,

Which of the following qualitative characteristic of useful accounting

information implies that only items that meet or exceed certain thresholds will affect decisions?

2 investing activities section.

3 operating activities section.

4 supplemental section.

Bailout Corporation reported the following information for the year ended December 31, 2012 Revenues $2,500,000; Expenses 2,000,000; Retained earnings at December 31, 2011 100,000; Retained earnings at December 31,

2012 450,000 Refer to the selected information provided for Bailout

Corporation How much was paid out in dividends in 2012?

1 $500,000

2 $150,000

3 $350,000

4 $250,000

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

1 The amount of retained earnings is reported on the balance sheet as a liability.

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

3 Retained earnings from the statement of retained earnings is reported 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.

Which one of the following is a correct basic structure of the cash flow

statement?

1 Cash flows provided (used) by operating activities + / - cash flows provided (used) by business activities + / - cash flows provided (used) by financing activities = net increase (decrease) in cash

2 Cash flows provided (used) by operating activities + / - cash flows provided (used) by investing activities + / - cash flows provided (used) by business activities = net increase (decrease) in cash

3 Cash flows provided (used) by operating activities + / - cash flows provided (used) by financing activities + / - net change in working capital = net increase (decrease) in cash

4 Cash flows provided (used) by operating activities + / - cash flows provided (used) by investing activities + / - cash flows provided (used) by financing activities = net increase (decrease) in cash

Cash investments made by stockholders in exchange for capital stock in a business are reported on the statement of cash flows in the:

1 financing activities section.

2 investing activities section.

3 operating activities section.

4 supplemental section.

Beginning retained earnings $550,000; Ending retained earnings 700,000; Dividends paid 100,000; Revenue 525,000 Refer to the selected information provided for Tarp Corporation What is the net income for Tarp Corporation?

1 $150,000

2 $250,000

3 $525,000

4 $350,000

Four financial statements are usually prepared for a business The statement

of cash flows is usually prepared last The retained earnings statement (RE), the balance sheet (B), and the income statement (I) are prepared in a certain order to obtain information needed for the next statement In what order are these three statements prepared?

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

1 Operating activities are cash flows directly related to earning income.

2 Operating activities are necessary to provide the money to start a business.

3 Operating activities are needed to provide the valuable assets required to run a business.