Question 1

The business records of a sole proprietorship should include the proprietor's personal finances.

Accepted Answer

A) True 
 B)False

Question 2

Identify each of the following items with its appropriate financial statement, using the following abbreviations: Income Statement (IS), Statement of Retained Earnings (RE), Balance Sheet (BS), and Statement of Cash Flows (CF). Some items may appear on more than one financial statement.

Accepted Answer

The answer of Identify each of the following items with...

Question 3

The accounting equation shows the relationship among assets, liabilities and net income.

Accepted Answer

A) True 
 B)False

Question 4

Which financial statement is dated at the moment in time when the accounting period ends?

Accepted Answer

A)   Balance sheet
B)   Income statement
C)   Statement of retained earnings and income statement
D)   Statement of cash flowsE) C) and D)
F) A) and B)

Question 5

Elements are the building blocks of the financial statements.

Accepted Answer

A) True 
 B)False

Question 6

The accounting process begins and ends with people making decisions.

Accepted Answer

A) True 
 B)False

Question 7

Owners' equity is called stockholders' equity for a corporation.

Accepted Answer

A) True 
 B)False

Question 8

Which is the correct order for items to appear on the income statement?

Accepted Answer

A)   Revenues, income from operations, gross profit
B)   Income before income taxes, operating expenses, gross profit
C)   Revenues, net income, operating expenses
D)   Gross profit, income from operations, net incomeE) B) and C)
F) A) and D)

Question 9

Another way to state the accounting equation is:

Accepted Answer

A)   Assets = Liabilities + Paid-in Capital - Common Stock
B)   Assets = Liabilities + Retained Earnings
C)   Assets = Liabilities + Paid-in Capital + Retained Earnings
D)   Assets = Liabilities - Paid-in Capital - DividendsE) C) and D)
F) B) and C)

Question 10

Exhibit 1.5.1 The following financial statements are to be used to answer the following questions:
  
-Refer to Exhibit 1.5-1. If trucks are depreciated over ten years with no residual value, how many years has Jane Austin Bookstore had this truck?

Accepted Answer

A)   1 year
B)   6 years
C)   9 years
D)   10 yearsE) A) and B)
F) None of the above

Question 11

The owners' equity of any business is its:

Accepted Answer

A)   revenues minus expenses.
B)   assets minus liabilities.
C)   assets plus liabilities.
D)   paid-in capital plus assets.E) A) and B)
F) B) and C)

Question 12

Accumulated depreciation is normally associated with which asset on the Balance Sheet?

Accepted Answer

A)   Inventory
B)   Accounts receivable
C)   Land
D)   Property, plant and equipmentE) A) and B)
F) None of the above

Question 13

Stockholders' equity consists of:

Accepted Answer

A)   additional paid-in capital, which is equal to the par value of the stock.
B)   treasury stock, which represents stock of another corporation that the company has purchased.
C)   accumulated other comprehensive income, which represents items of gain or loss that bypass the income statement.
D)   common stock, which is recorded at its market value.E) None of the above
F) A) and B)

Question 14

A net loss occurs when:

Accepted Answer

A)   not enough cash exists.
B)   total revenues exceed total expenses.
C)   total expenses exceed total revenues.
D)   total revenues and dividends exceed total expenses.E) A) and D)
F) B) and D)

Question 15

The word "payable" always signifies a liability.

Accepted Answer

A) True 
 B)False

Question 16

Dividends are distributions to the stockholders and represent an expense of the business.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following would be considered a financing activity that decreases cash?

Accepted Answer

A)   The company pays a long-term loan.
B)   The company sells common stock.
C)   The company purchases a building.
D)   The company pays its monthly utility bill.E) B) and C)
F) All of the above

Question 18

Cost is a verifiable measure that is relatively free from bias.

Accepted Answer

A) True 
 B)False

Question 19

Liabilities are:

Accepted Answer

A)   a form of paid-in capital.
B)   future economic benefits to which a company is entitled.
C)   debts payable to outsiders called creditors.
D)   the outflow of resources that decrease common stock.E) A) and B)
F) None of the above

Question 20

Generally accepted accounting principles, or GAAP, are the rules and procedures established by the Financial Accounting Standards Board, or the FASB.

Accepted Answer

A) True 
 B)False

Exam 1: The Financial Statements

The accounting equation shows the relationship among assets, liabilities and net income.

Correct AnswerverifiedShow Answer

Another way to state the accounting equation is:

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The owners' equity of any business is its:

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Which of the following would be considered a financing activity that decreases cash?

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Liabilities are:

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Generally accepted accounting principles, or GAAP, are the rules and procedures established by the Financial Accounting Standards Board, or the FASB.

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Cost is a verifiable measure that is relatively free from bias.

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Stockholders' equity consists of:

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Elements are the building blocks of the financial statements.

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Identify each of the following items with its appropriate financial statement, using the following abbreviations: Income Statement (IS), Statement of Retained Earnings (RE), Balance Sheet (BS), and Statement of Cash Flows (CF). Some items may appear on more than one financial statement.

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The accounting process begins and ends with people making decisions.

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Dividends are distributions to the stockholders and represent an expense of the business.

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Which is the correct order for items to appear on the income statement?

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Accumulated depreciation is normally associated with which asset on the Balance Sheet?

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Exhibit 1.5.1 The following financial statements are to be used to answer the following questions: -Refer to Exhibit 1.5-1. If trucks are depreciated over ten years with no residual value, how many years has Jane Austin Bookstore had this truck?

Correct AnswerverifiedShow Answer

Which financial statement is dated at the moment in time when the accounting period ends?

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A net loss occurs when:

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Owners' equity is called stockholders' equity for a corporation.

Correct AnswerverifiedShow Answer

The business records of a sole proprietorship should include the proprietor's personal finances.

Correct AnswerverifiedShow Answer

The word "payable" always signifies a liability.

Correct AnswerverifiedShow Answer

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