True/false. Write 'T' if the statement is true and 'F' if the statement is false



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Exam

Name___________________________________





TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.

1)



The sale of additional shares of capital stock will cause retained earnings to increase.

1)


_______


2)



A business entity is regarded as separate from the personal activities of its owners whether it is a sole proprietorship, a partnership, or a corporation.

2)


_______


3)



Assets need not always have physical characteristics as do buildings, machinery, or inventory.

3)


_______


4)



The going concern principle assumes that the business will continue indefinitely.

4)


_______


5)



Notes payable and accounts payable both require a company to pay an amount owed by a certain date. Notes payable generally have interest, while accounts payable generally do not.

5)


_______


6)



Any business event that might affect the future profitability of a business should be reported in its balance sheet.

6)


_______


7)



The practice of showing assets on the balance sheet at their cost, rather than at their current market value is explained, in part, by the fact that cost is supported by objective evidence that can be verified by independent experts.

7)


_______


8)



Liabilities are usually listed in order of magnitude, from smallest dollar amount to largest dollar amount.

8)


_______


9)



The entity principle states that the affairs of the owners are not part of the financial operations of a business entity and should be separated.

9)


_______


10)



The accounting equation may be stated as "assets minus liabilities equals owners' equity."

10)


______


11)



Total assets plus total liabilities must equal total owners' equity.

11)


______


12)



A transaction that causes an increase in an asset may also cause a decrease in another asset, an increase in a liability, or an increase in owners' equity.

12)


______


13)



The collection of an account receivable will cause total assets to decrease.

13)


______


14)



The payment of a liability causes an increase in owners' equity.

14)


______


15)



When a business borrows money from a bank, the immediate effect is an increase in total assets and a decrease in liabilities or owners' equity.

15)


______


16)



The purchase of an asset, such as office equipment, for cash will cause owners' equity to decrease.

16)


______


17)



Total assets must always equal total liabilities plus total owners' equity.

17)


______


18)



If a company purchases equipment with cash, its total assets will increase.

18)


______


19)



If a company purchases equipment by issuing a note payable, its total assets will not change.

19)


______


20)



The balance sheet shows assets, liabilities, and equity, as an extension of the accounting equation.

20)


______


21)



A net profit results from having more revenues than liabilities.

21)


______


22)



A statement of cash flows reports revenue and expense activities for a specific time period such as one month or one year.

22)


______


23)



It is not unusual for an entity to report a significant increase in cash from operating activities, but a decrease in the total amount of cash.

23)


______


24)



The statement of cash flows provides a link between two balance sheets by showing how net income (or loss) has changed owners' equity from one balance sheet date to the next.

24)


______


25)



Articulation between the financial statements means that they relate closely to each other on the basis of the same underlying transaction information.

25)


______


26)



Limited liability means that owners of a business are only liable for the debts of the business up to the amounts they can afford.

26)


______


27)



In a business organized as a corporation, it is not necessary to list the equity of each stockholder on the balance sheet.

27)


______


28)



The owner of a sole proprietorship is personally liable for the debts of the business, whereas the stockholders of a corporation are not personally liable for the debts of the business.

28)


______


29)



Window dressing occurs when management attempts to make a company look financially stronger than it actually is.

29)


______


30)



Decision makers outside the organization base their credit decisions on weekly, or even daily, financial statements.

30)


______


31)



The major outgrowth from business failures and allegations of fraudulent financial reporting during the 1990s was the passage of the Securities and Exchange Act.

31)


______


MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

32)



Which of the following is the primary objective of an income statement?

32)


______

A)



Indicating to investors in a particular company the current market values of their investments.

B)



Providing managers with detailed information about where the enterprise stands at a specific date.

C)



Reporting to the Internal Revenue Service the company's taxable income.

D)



Providing users outside the business organization with information about the company's operating results for a period of time.


33)



Which of the following describes the proper form of a balance sheet?

33)


______

A)



Owners' equity is always the first section listed because it is the most important to external users.

B)



Liabilities are listed before owners' equity.

C)



A subtotal for total assets plus total liabilities is shown.

D)



Cash is always the first asset listed, followed by permanent assets (such as land and buildings), and finally by assets such as receivables and supplies.


34)



A balance sheet is designed to show

34)


______

A)



How much a business is worth.

B)



The assets, liabilities, and owners' equity of a business as of a particular date.

C)



The cost of replacing the assets and of paying off the liabilities at December 31.

D)



The profitability of the business during the current year.


35)



Blue Wholesale Shirt Co. sold shirts to Pink Retail Shoppe. The owner of Pink Retail said she would pay Blue at a later date, which Blue Wholesale agreed to. Blue Wholesale Shirt Co. is considered to be a

35)


______

A)



borrower.

B)


creditor.

C)


liability.

D)


debtor.


36)



Which of the following best defines an asset?

36)


______

A)



An economic resource representing cash or the right to receive cash in the near future.

B)



Something with physical form that is valued at cost in the accounting records.

C)



Something owned by a business that has a ready market value.

D)



An economic resource owned by a business and expected to benefit future operations.


37)



From an accounting viewpoint, when is a business considered as an entity separate from its owner(s)?

37)


______

A)



A business is always considered as an accounting entity separate from the activities of the owner(s).

B)



Only when organized as a partnership.

C)



Only when organized as a sole proprietorship.

D)



Only when organized as a corporation.


38)



The accounting principle that assumes that a company will operate in the foreseeable future is

38)


______

A)



Objectivity.

B)


Disclosure.

C)



Liquidity.

D)


Going concern.


39)



The valuation of assets in the balance sheet is based primarily upon

39)


______

A)



Current fair market value as established by independent appraisers.

B)



What it would cost to replace the assets.

C)



Cost, because cost is usually factual and verifiable.

D)



Cost, because in the event of liquidation, the assets would be sold at an amount equal to their original cost.


40)



Which of the following is not a generally accepted accounting principle relating to the valuation of assets?

40)


______

A)



The cost principle - in general, assets are valued at cost, rather than at estimated market values.

B)



The objectivity principle - accountants prefer to use objective, rather than subjective, information as the basis for accounting information.

C)



The going-concern assumption - one reason for valuing assets such as buildings and equipment at cost rather than at their current market values is the assumption that the business will use these assets rather than sell them.

D)



The safety principle - assets are valued at no more than the value for which they are insured.


41)



Each year, the accountant for Southern Real Estate Company adjusts the recorded value of each asset to its market value. Using these market value figures on the balance sheet violates

41)


______

A)



The cost principle.

B)


The accounting equation.

C)



The business entity concept.

D)


The stable-dollar assumption.


42)



The owner of Westhampton Fish Eatery purchased a new car for his daughter who is away at college at a cost of $43,000 and reported this amount as Delivery Vehicle in the restaurant's balance sheet. The reporting of this item in this manner violated the

42)


______

A)



Objectivity principle.

B)


Going-concern assumption.

C)



Cost principle.

D)


Business entity concept.


43)



Eton Corporation purchased land in 1998 for $190,000. In 2018, it purchased a nearly identical parcel of land for $430,000. In its 2018 balance sheet, Eton valued these two parcels of land at a combined value of $860,000. Reporting the land in this manner violated the

43)


______

A)



Going-concern assumption.

B)


Cost principle.

C)



Objectivity principle.

D)


Principle of the business entity.


44)



Bob Bertolucci, owner of Bob's Bazaar, also owns a personal residence that costs $575,000. The market value of his residence is $725,000. During preparation of the financial statements for Bob's Bazaar, the accounting principle most relevant to the presentation of Bob's home is

44)


______

A)



The concept of the business entity.

B)


The going-concern assumption.

C)



The cost principle.

D)


The objectivity principle.


45)



Which of the following will not cause a change in the owners' equity of a business?

45)


______

A)



Losses from unprofitable operations.

B)


Purchase of land with cash.

C)



Sale of land at a profit.

D)


Withdrawal of cash by the owner.


46)



Which of the following is correct when a corporation uses cash to pay for an expense?

46)


______

A)



Liabilities will increase.

B)


Owners' equity will increase.

C)



Total assets will decrease.

D)


Retained earnings will increase.


47)



Deerpark Corporation recently borrowed $70,000 cash from its bank. Which of the following was unaffected by this transaction?

47)


______

A)



Assets.

B)


Cash.

C)



Liabilities.

D)


Owners' equity.


48)



Which of the following transactions would cause an increase in both assets and owners' equity?

48)


______

A)



Borrowing money from a bank.

B)



Sale of land for a price less than its cost.

C)



Investment of cash in the business by the owner.

D)



Sale of land for cash at a price equal to its cost.


49)



A transaction caused an increase in both assets and owners' equity. This transaction could have been resulted from the

49)


______

A)



Sale of land for a price less than its cost.

B)



Sale of land for cash at a price equal to its cost.

C)



Borrowing money from a bank.

D)



Sale of services to a customer.


50)



The amount of owners' equity in a business is not affected by

50)


______

A)



The investments made in the business by the owner.

B)



The amount of dividends paid to stockholders.

C)



The percentage of total assets held in cash.

D)



The profitability of the business.


51)



Decreases in owners' equity are caused by

51)


______

A)



Purchases of assets and payment of liabilities.

B)



Distributions of assets to the owners and unprofitable operations.

C)



Purchases of assets and incurrence of liabilities.

D)



Payment of liabilities and unprofitable operations.


52)



Which of the following transactions would cause a change in owners' equity?

52)


______

A)



Borrowing money from a bank.

B)



Sale of land on credit for a price above cost.

C)



Repayment of the principal on a bank loan.

D)



Purchase of a delivery truck on credit.


53)



On the statement of financial position, how are assets and liabilities normally presented?

53)


______

A)



Assets are presented in order of profitability; liabilities are presented in order of liquidity.

B)



Assets are presented in order of liquidity; liabilities are presented in order of profitability.

C)



Assets are presented in the order in which they become due; liabilities are presented in their order of permanence.

D)



Assets are presented in their order of permanence; liabilities are presented in the order in which they become due.


54)



Which of the following assets would most likely be listed last on a statement of financial position?

54)


______

A)



Cash.

B)


Equipment.

C)



Accounts receivable.

D)


Land.


55)



Which of the following liabilities would most likely be listed last on a statement of financial position?

55)


______

A)



Note payable, due in 3 years.

B)


Income taxes payable.

C)



Accounts payable.

D)


Bonds payable, due in 20 years.


56)



If a transaction causes an asset account to decrease, which of the following related effects may occur?

56)


______

A)



An increase in a liability account.

B)



An increase of equal amount in an owners' equity account.

C)



An increase of equal amount in another asset account.

D)



An increase in the combined total of liabilities and owners' equity.


57)



A payment of a business debt not including interest

57)


______

A)



Increases the owners' equity in the business.

B)



Decreases the owners' equity in the business.

C)



Decreases total assets.

D)



Increases total liabilities.


58)



If total assets equal $270,000 and total liabilities equal $202,500, the total owners' equity must equal

58)


______

A)



$270,000.

B)



$472,500.

C)



$67,500.

D)



Cannot be determined from the information given.


59)



If total assets equal $345,000 and total owners' equity equal $120,000, then total liabilities must equal

59)


______

A)



$225,000.

B)



$465,000.

C)



$120,000.

D)



Cannot be determined from the information given.


60)



Owners' equity in a business increases as a result of which of the following?

60)


______

A)



Payments of cash to the owners.

B)



Borrowing from a commercial bank.

C)



Losses from unprofitable operation of the business.

D)



Earnings from profitable operation of the business.


61)



Owners' equity in a business decreases as a result of which of the following?

61)


______

A)



Losses from unprofitable operation of the business.

B)



Investments of cash by the owners.

C)



Repaying a loan to a commercial bank.

D)



Profits from operating the business.


62)



To appear in a balance sheet of a business entity, an asset need not

62)


______

A)



Be an economic resource.

B)



Be expected to benefit future operations.

C)



Have a ready market value.

D)



Be owned by the business.


63)



A balance sheet

63)


______

A)



Shows the assets, liabilities, and owners' equity of a business entity, valued in conformity with generally accepted accounting principles.

B)



Provides owners, investors, and other interested parties with all the financial information they need to evaluate the financial strength, profitability, and future prospects of a given business entity.

C)



Shows the current market value of the owners' equity in the business at the balance sheet date.

D)



Assists creditors in evaluating the debt-paying ability of a business by showing the assets and liabilities of the business, plus the assets and liabilities of its owner (or owners).


64)



Which of the following is correct if a company purchases equipment for $70,000 cash?

64)


______

A)



Total assets will decrease by $70,000.

B)



Total assets will remain the same.

C)



Total owners' equity will decrease.

D)



Total assets will increase by $70,000.


65)



If a company purchases equipment for $65,000 by issuing a note payable

65)


______

A)



Total owners' equity will decrease.

B)



Total assets will increase by $65,000.

C)



Total assets will remain the same.

D)



Total assets will decrease by $65,000.


66)



If a company has a profit

66)


______

A)



Assets will be less than liabilities plus owners' equity.

B)



Owners' equity will be greater than its assets.

C)



Assets will be equal to liabilities plus owners' equity.

D)



Assets will be greater than liabilities plus owners' equity.


67)



Capital stock represents

67)


______

A)



The owners' equity accumulated through profitable operations that have not been paid out as dividends.

B)



The amount invested in the business by stockholders when shares of stock were initially issued by a corporation.

C)



The owners' equity for a business organized as a corporation.

D)



The price paid by the current owners to acquire shares of stock in the corporation, regardless of whether they bought the shares directly from the corporation or from another stockholder.


68)



The balance sheet item that represents the portion of owners' equity resulting from profitable operations of the business is

68)


______

A)



Accounts receivable.

B)


Cash.

C)



Retained earnings.

D)


Capital stock.


69)



Retained earnings appears on

69)


______

A)



The balance sheet.

B)


The statement of cash flows.

C)



The income statement.

D)


All three of the financial statements.


At December 31, 2018, the accounting records of Braun Corporation contain the following items

















Accounts Payable

$

16,000



Accounts Receivable

$

40,000



Land

$

240,000




Cash




?




Capital Stock




?




Equipment

$

120,000




Building

$

180,000




Notes Payable

$

190,000




Retained Earnings

$

160,000
















-




70)



If Capital Stock is $260,000, what is the December 31, 2018 cash balance?

70)


______

A)



$94,000.

B)


$686,000.

C)


$86,000.

D)


$46,000.


71)



If Capital Stock is $320,000, total assets of Braun Corporation at December 31, 2018, amounts to

71)


______

A)



$926,000.

B)


$686,000.

C)


$106,000.

D)


$726,000.


72)



If Cash at December 31, 2018, is $86,000, Capital Stock is

72)


______

A)



$260,000.

B)


$168,000.

C)


$620,000.

D)


$300,000.


73)



If Cash at December 31, 2018, is $26,000, total owners' equity is

73)


______

A)



$160,000.

B)


$606,000.

C)


$400,000.

D)


$366,000.


74)



If Cash at December 31, 2018, is $66,000, total assets amounts to

74)


______

A)



$662,000.

B)


$606,000.

C)


$646,000.

D)


$806,000.


At December 31, 2018, the accounting records of Hercules Manufacturing, Inc. contain the following items

















Accounts Payable

$

12,000



Accounts Receivable

$

30,000



Land

$

90,000




Cash

$

7,000




Building




250,000




Equipment

$

?




Notes Payable

$

135,000




Capital Stock




188,000




Retained Earnings




?
















-




75)



If total assets of Hercules Manufacturing, Inc. are $556,000, Equipment is carried in Hercules Manufacturing accounting records at

75)


______

A)



$377,000.

B)


$ 90,000.

C)


$179,000.

D)


$150,000.


76)



If total assets of Hercules Manufacturing, Inc. are $556,000, Retained Earnings at December 31, 2018, must be

76)


______

A)



$335,000.

B)


$221,000.

C)


$180,000.

D)


$811,000.


77)



If Retained Earnings at December 31, 2018, is $140,000, total assets amounts to

77)


______

A)



$475,000.

B)


$188,000.

C)


$ 98,000.

D)


$377,000.


78)



If Retained Earnings at December 31, 2018, is $100,000, Equipment is carried in Hercules Manufacturing, Inc. accounting records at

78)


______

A)



$ 42,000.

B)


$ 43,500.

C)


$ 58,000.

D)


$345,000.


79)



Assume that the Equipment shown above was acquired by the business five years ago and has a book value of $156,000, but has a current appraised value of $200,000. Hercules Manufacturing's Retained Earnings at December 31, 2018, amounts to

79)


______

A)



$345,000.

B)


$356,000.

C)


$533,000.

D)


$198,000.


At December 31, 2018 the accounting records of Gordon, Inc. contain the following items

















Accounts Payable

$

2,500



Accounts Receivable

$

18,750



Land

$

30,000




Cash




?




Building

$

31,250




Equipment

$

40,000




Notes Payable




?




Capital Stock

$

12,500




Retained Earnings

$

125,000

















80)



If the Notes Payable is $10,000, the December 31, 2018 cash balance is

80)


______

A)



$ 30,000.

B)


$ 20,000.

C)


$160,000.

D)


$ 60,000.


81)



If the Notes Payable balance is $25,000, then the total assets of Gordon, Inc. at December 31, 2018 amount to

81)


______

A)



$ 27,500.

B)


$120,000.

C)


$165,000.

D)


$152,500.


82)



If the Cash balance at December 31, 2018 is $67,500, the Notes Payable balance is

82)


______

A)



$ 47,500.

B)


$140,000.

C)


$137,500.

D)


$118,750.


83)



Refer to the information above. If the Cash balance at December 31, 2018 is $62,500 then Total Liabilities amounts to

83)


______

A)



$ 42,500.

B)


$182,500.

C)


$ 45,000.

D)


$140,000.


84)



Which of the following is correct if at the end of Crystal Imports' first year of operations, Assets are $800,000 and Owners' Equity is $720,000?

84)


______

A)



Liabilities are $1,520,000.

B)



The business must be operating profitably.

C)



Liabilities are $80,000.

D)



The owner(s) must have invested $800,000 to start the business.


85)



During the current year, the assets of Wheatley's increased by $362,000, and the liabilities increased by $260,000. The owners' equity in the business must have

85)


______

A)



Increased by $622,000.

B)


Decreased by $102,000.

C)



Increased by $102,000.

D)


Decreased by $622,000.


86)



The total liabilities of Hogan's Company on the balance sheet are $270,000; this amount is equal to three-fourths of the total assets. What is the amount of owners' equity?

86)


______

A)



$630,000.

B)


$360,000.

C)


$ 90,000.

D)


$202,500.


87)



Thirty percent of the total assets of Shanahan Corporation have been financed through borrowing. The total liabilities of the company are $600,000. What is the amount of owners' equity?

87)


______

A)



$1,400,000.

B)


$2,600,000.

C)


$ 180,000.

D)


$2,000,000.


88)



A transaction caused a $60,000 increase in both total assets and total liabilities. This transaction could have been which of the following?

88)


______

A)



Repayment of a $60,000 bank loan.

B)



Purchase of office equipment for $120,000, paying $60,000 cash and issuing a note payable for the balance.

C)



Investment of $60,000 cash in the business by the owner.

D)



Purchase for office equipment for $60,000 cash.


89)



If $9,600 cash and a $31,000 note payable are given in exchange for some office machines to be used in a business

89)


______

A)



Total liabilities are decreased.

B)


Total assets are decreased.

C)



Total assets are increased.

D)


The owners' equity is increased.


90)



If during the current year, liabilities of Corbett's Store increased by $220,000 and owners' equity increased by $160,000, then

90)


______

A)



Assets decreased during the year by $60,000.

B)



Assets at the end of the year total $380,000.

C)



Assets increased during the year by $380,000.

D)



Assets at the end of the year total $60,000.


91)



If during the current year, liabilities of Hayden Travel decreased by $50,000 and owners' equity increased by $75,000, then

91)


______

A)



Assets at the end of the year total $25,000.

B)



Assets increased during the year by $25,000.

C)



Assets decreased during the year by $125,000.

D)



Assets at the end of the year total $125,000.


92)



At the end of the current year, the owners' equity in Barclay Bakery is $246,000. During the year, the assets of the business had increased by $120,000 and the liabilities had increased by $72,000. Owners' equity at the beginning of the year must have been

92)


______

A)



$284,000.

B)


$438,000.

C)


$198,000.

D)


$174,000.


93)



At the end of the current year, the owners' equity in Durante Co. is $360,000. During the year, the assets of the business had increased by $68,000 and the liabilities had increased by $118,000. Owners' equity at the beginning of the year must have been

93)


______

A)



$174,000.

B)


$546,000.

C)


$410,000.

D)


$310,000.


94)



During the current year, the assets of Quality Stairs increased by $175,000 and the liabilities decreased by $15,000. If the owners' equity in the business is $475,000 at the end of the year, the owners' equity at the beginning of the year must have been

94)


______

A)



$335,000.

B)


$665,000.

C)


$615,000.

D)


$285,000.


95)



An expense is best defined as

95)


______

A)



Past payments of cash required to generate revenues.

B)



Future payments of cash required to generate revenues.

C)



Any payment of cash for the benefit of the company.

D)



Past, present, or future payments of cash required to generate revenues.


96)



A revenue transaction may result in all of the following except

96)


______

A)



An increase in liabilities.

B)



An increase in owners' equity.

C)



An increase in assets.

D)



A positive cash flow in either the past, present, or future.


[The following information applies to the questions displayed below.]
Astoria Co. had the following transactions during the month of August 2018
(1) Cash received from bank loans was $20,000.

(2) Dividends of $9,500 were paid to stockholders in cash.

(3) Revenues earned and received in cash amounted to $33,500.

(4) Expenses incurred and paid were $26,000.





97)



What amount of net income will be reported on an income statement for the month of August?

97)


______

A)



$33,500.

B)


$0.

C)


$7,500.

D)


$20,000.


98)



At the beginning of August, 2018, owners' equity in Astoria was $160,000. Given the transactions of August, what will be the owners' equity be at the end of the month?

98)


______

A)



$193,500.

B)


$150,500.

C)


$158,000.

D)


$167,500.


99)



For the month of August, net cash flows from operating activities for Astoria were

99)


______

A)



$20,000.

B)


$33,500.

C)


$7,500.

D)


$26,000.


[The following information applies to the questions displayed below.]
Waldorf Co. had the following transactions during the month of October 2018
(1) Cash received from bank loans was $60,000.

(2) Dividends of $18,500 were paid to stockholders in cash.

(3) Revenues earned and received in cash amounted to $100,500.

(4) Expenses incurred and paid were $78,000.





100)



What amount of net income will be reported on an income statement for the month of October?

100)


_____

A)



$ 78,000.

B)


$ 18,500.

C)


$ 22,500.

D)


$100,500.


101)



At the beginning of October, owners' equity in Waldorf was $480,000. Given the transactions in October 2018, what will be the owners' equity at the end of the month?

101)


_____

A)



$480,000.

B)


$484,000.

C)


$580,500.

D)


$502,500.


102)



Refer to the information above. For the month of October, net cash flows from operating activities for Waldorf were

102)


_____

A)



$ 22,500.

B)


$ 18,500.

C)


$ 78,000.

D)


$100,500.


103)



Which of the following activities is not a category into which cash flows are classified?

103)


_____

A)



Operating activities.

B)


Investing activities.

C)



Marketing activities.

D)


Financing activities.


104)



A strong statement of cash flows indicates that significant cash is being generated by

104)


_____

A)



Effective tax planning.

B)


Operating activities.

C)



Investing activities.

D)


Financing activities.


105)



During the month of May, Henderson Company had the following transactions

(1) Revenues of $60,000 were earned and received in cash.

(2) Bank loans of $9,000 were paid off.

(3) Equipment of $20,000 was purchased.

(4) Expenses of $36,800 were paid.

(5) Stockholders purchased additional shares for $22,000 cash.


A statement of cash flows for May would report net cash flows from operating activities of
105)

_____


A)



$23,200.

B)


$16,200.

C)


$20,000.

D)


$60,000.


[The following information applies to the questions displayed below.]
During the month of August, Boyce Company had the following transactions
(1)Revenues of $120,000 were earned and received in cash.

(2)Bank loans of $18,000 were paid off.

(3)Equipment of $40,000 was purchased with cash.

(4)Expenses of $73,600 were paid.

(5)Stockholders purchased additional shares for $44,000 cash.



106)



A statement of cash flows for August would report net cash flows from operating activities of

106)


_____

A)



$26,000.

B)


$46,400.

C)


$40,000.

D)


$32,400.


107)



A statement of cash flows for August would report net cash flows from financing activities of

107)


_____

A)



$46,400.

B)


$32,400.

C)


$40,000.

D)


$26,000.


108)



A statement of cash flows for August would report net cash flows from investing activities of

108)


_____

A)



($40,000).

B)


$32,400.

C)


($26,000).

D)


$46,400.


109)



A statement of cash flows for August would report an increase in cash of

109)


_____

A)



$46,400.

B)


$32,400.

C)


$40,000.

D)


$26,000.


[The following information applies to the questions displayed below.]
During the month of February, Fadness Company had the following transactions
(1) Revenues of $225,000 were earned and received in cash.

(2) Bank loans of $18,000 were paid off.

(3) New bank loans of $15,000 were incurred.

(4) Equipment of $40,000 was purchased with cash.

(5) Equipment was sold for its book value of $36,000. Cash was received.

(6) Expenses of $171,400 were paid.

(7) Stockholders purchased additional shares for $50,000 cash.



110)



A statement of cash flows for February would report net cash flows from operating activities of

110)


_____

A)



$96,600.

B)


$35,600.

C)


$ 4,000.

D)


$53,600.


111)



A statement of cash flows for February would report net cash flows from financing activities of

111)


_____

A)



$96,600.

B)


$4,000.

C)


$47,000.

D)


$83,000.


112)



A statement of cash flows for February would report net cash flows from investing activities of

112)


_____

A)



$47,000.

B)


$53,600.

C)


$76,000.

D)


($ 4,000).


113)



A statement of cash flows for February would report an increase in cash of

113)


_____

A)



$53,600.

B)


($ 4,000).

C)


$47,000.

D)


$96,600.


114)



If cash flows from operating activities is a positive amount, then

114)


_____

A)



The company must have had a net profit for the year.

B)



The company may still have a decrease in the total amount of cash for the period.

C)



The amount will be shown on the statement of cash flows in parentheses.

D)



The company must have paid off more debts than it earned during the year.


115)



The change in owners' equity due to only revenue and expense transactions is explained by the

115)


_____

A)



Tax return.

B)


Income statement.

C)



Statement of financial position.

D)


Statement of cash flows.


116)



Which one of the following is not considered as one of the three primary financial statements?

116)


_____

A)



Statement of cash flows.

B)


Statement of budgeting activities.

C)



Balance sheet.

D)


Income statement.


117)



The way in which financial statements relate is known as

117)


_____

A)



Objectivity.

B)


Articulation.

C)


Entity.

D)


Solvency.


118)



Which business organization is recognized as a separate legal entity under the law?

118)


_____

A)



All business organizations are separate legal entities.

B)



Sole proprietorship.

C)



Partnership.

D)



Corporation.


119)



Retained earnings is

119)


_____

A)



The owners' equity that has accumulated as a result of profitable operations.

B)



The net worth of a company.

C)



Equal to the total assets of a company.

D)



The positive cash flows of a company.


120)



Which of the following best describes liquidity?

120)


_____

A)



The ability to pay the debts of the company as they become due.

B)



Being able to buy everything the company requires for cash.

C)



Purchasing everything the company requires on credit.

D)



The ability to increase the value of retained earnings.


121)



Profitability may be defined as

121)


_____

A)



The ability to pay the debts of the company as they become due.

B)



The ability to increase retained earnings.

C)



Having excess cash.

D)



Distributing dividends out of retained earnings.


122)



The principle of adequate disclosure means that a company should disclose

122)


_____

A)



Only the important monetary information.

B)



Any financial facts that a reasonably informed person would consider necessary for the proper interpretation of the financial statements.

C)



All confidential information regarding the company.

D)



Only subsequent events.


123)



Which of the following statements regarding liquidity and profitability is not true?

123)


_____

A)



A business may operate profitably, yet be unable to meet its obligations.

B)



A business may be liquid, yet operate unprofitably for several years.

C)



If a business is unable to pay its debts as they come due, it is operating unprofitably.

D)



In order to survive in the long run, a business must both remain liquid and operate profitably.


124)



The concept of adequate disclosure means that

124)


_____

A)



The financial statements should include a comprehensive list of each transaction that occurred during the year.

B)



The accounting department of a business must inform management of the accounting principles used in preparing the financial statements.

C)



The independent auditors must disclose in the financial statements any and all errors detected in the company's accounting records.

D)



The company must inform users of any significant facts necessary for proper interpretation of the financial statements, including events occurring after the financial statement date.


125)



According to the Sarbanes-Oxley Act, CEOs and CFOs must certify to the accuracy of their company's financial statements

125)


_____

A)



Monthly and Quarterly.

B)



Quarterly and Annually.

C)



CEOs and CFOs are not required to certify to the company's financial statement; only CPAs do.

D)



Monthly and Annually.


126)



A strong statement of financial position shows

126)


_____

A)



That profits are being generated by operations.

B)



That cash is being generated by operations.

C)



Large amounts of debt relative to stockholders' equity.

D)



Large amounts of liquid assets relative to the liabilities due in the near future.




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