01 Practice Quiz

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traywick
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158614
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01 Practice Quiz
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2012-06-13 18:11:08
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Practice Quiz 01
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Kimmel: Financial Accounting, 6th Edition; Chapter 01
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  1. Which is not one of the three forms of business organization?
    (A) Sole proprietorship
    (B) Partnership
    (C) Corporation
    (D) Creditorship
    (D) Creditorship
    (this multiple choice question has been scrambled)
  2. Which is an advantage of corporations relative to partnerships and sole proprietorships?
    (A) Lower taxes
    (B) Harder to transfer ownership
    (C) Reduced legal liability for investors
    (D) Most common form of organization
    (C) Reduced legal liability for investors
    (this multiple choice question has been scrambled)
  3. Which statement about users of accounting information is incorrect?
    (A) Regulatory authorities are considered internal users.
    (B) Present creditors are considered external users.
    (C) Management is considered an internal user.
    (D) Taxing authorities are considered external users.
    (A) Regulatory authorities are considered internal users.
    (this multiple choice question has been scrambled)
  4. Which of the following did not result from the Sarbanes-Oxley Act?
    (A) Top management must now certify the accuracy of financial information.
    (B) Penalties for fraudulent activity increased.
    (C) Independence of auditors increased.
    (D) Tax rates on corporations increased.
    (D) Tax rates on corporations increased.
    (this multiple choice question has been scrambled)
  5. Which is not one of the three primary business activities?
    (A) Advertising
    (B) Financing
    (C) Operating
    (D) Investing
    (A) Advertising
    (this multiple choice question has been scrambled)
  6. Which of the following is an example of a financing activity?
    (A) Selling goods on account
    (B) Buying inventory
    (C) Issuing shares of common stock
    (D) Buying delivery equipment
    (C) Issuing shares of common stock
    (this multiple choice question has been scrambled)
  7. Net income will result during a time period when:
    (A) expenses exceed revenues.
    (B) assets exceed liabilities.
    (C) assets exceed revenues.
    (D) revenues exceed expenses.
    (D) revenues exceed expenses.
    (this multiple choice question has been scrambled)
  8. The financial statements for Joseph Corporation contained the following information:

    What was Joseph Corporation's net income?
    (A) $45,000
    (B) $65,000
    (C) $60,000
    (D) $15,000
    (A) $45,000
    (this multiple choice question has been scrambled)
  9. What section of a statement of cash flows indicates the cash spent on new equipment during the past accounting period?
    (A) The operating section
    (B) The investing section
    (C) The cash flow statement does not give this information
    (D) The financing section
    (B) The investing section
    (this multiple choice question has been scrambled)
  10. Which statement presents information as of a specific point in time?
    (A) Income statement
    (B) Statement of cash flows
    (C) Balance sheet
    (D) Retained earnings statement
    (C) Balance sheet
    (this multiple choice question has been scrambled)
  11. Which financial statement reports assets, liabilities, and stockholders' equity?
    (A) Statement of cash flows
    (B) Retained earnings statement
    (C) Income statement
    (D) Balance sheet
    (D) Balance sheet
    (this multiple choice question has been scrambled)
  12. Stockholders' equity represents:
    (A) claims of employees.
    (B) claims of creditors.
    (C) the difference between revenues and expenses.
    (D) claims of owners.
    (D) claims of owners.
    (this multiple choice question has been scrambled)
  13. As of December 31, 2012, Stoneland Corporation has assets of $3,500 and stockholders' equity of $1,500. What are the liabilities for Stoneland Corporation as of December 31, 2012?
    (A) $1,500
    (B) $2,500
    (C) $1,000
    (D) $2,000
    (D) $2,000
    (this multiple choice question has been scrambled)
  14. The element of a corporation's annual report that describes the corporation's accounting methods is the:
    (A) income statement.
    (B) auditor's report.
    (C) notes to the financial statements.
    (D) management discussion and analysis.
    (C) notes to the financial statements.
    (this multiple choice question has been scrambled)
  15. The element of the annual report that presents an opinion regarding the fairness of the presentation of the financial position and results of operations is/are the:
    (A) comparative statements.
    (B) auditor's opinion.
    (C) balance sheet.
    (D) income statement.
    (B) auditor's opinion.
    (this multiple choice question has been scrambled)
  16. True or False: A business organized as a separate legal entity owned by stockholders is a partnership.
    False
  17. True or False: Corporate stockholders generally pay higher taxes but have no personal liability.
    True
  18. True or False: Owners of business firms are the only people who need accounting information.
    False
  19. True or False: The information needs and questions of external users vary considerably.
    True
  20. True or False: Accounting communicates financial information about a business to both internal and external users.
    True
  21. True or False: Two primary external users of accounting information are investors and creditors.
    True
  22. True or False: Financing activities for corporations include borrowing money and selling shares of their own stock.
    True
  23. True or False: Investing activities involve collecting the necessary funds to support the business.
    False
  24. True or False: The purchase of equipment is an example of a financing activity.
    False
  25. True or False: Assets are resources owned by a business and provide future services or benefits to the business.
    True
  26. True or False: A business is usually involved in two types of activity - financing and investing.
    False
  27. True or False: The heading for the income statement might include the line "As of December 31, 20xx".
    False
  28. True or False: Net income is another term for revenue.
    False
  29. True or False: Cash is another term for Stockholders' Equity.
    False
  30. True or False: The balance sheet reports assets and claims to those assets at a specific point in time.
    True
  31. True or False: The basic accounting equation states that Assets = Liabilities.
    False
  32. True or False: One way of stating the account equation is:
    Assets + Liabilities = Stockholders' Equity
    False
  33. True or False: If the assets owned by a business total $100,000 and liabilities total $70,000, stockholders' equity totals $30,000.
    True
  34. True or False: If the assets owned by a business total $100,000 and liabilities total $65,000, stockholders' equity totals $25,000.
    False
  35. True or False: Creditors' rights to assets supersede owners' rights to the assets.
    True
  36. True or False: Examples of notes are descriptions of the significant accounting policies and methods used in preparing the statements, explanations of contingencies, and various statistics.
    True
  37. True or False: All publicly traded U.S. companies must provide their shareholders with an annual report each year.
    True
  38. True or False: An auditor is an accounting professional who conducts an independent examination of the accounting data presented by a company.
    True
  39. True or False: The management discussion and analysis (MD&A) section of an annual report covers various financial aspects of a company.
    True
  40. The proprietorship form of business organization:
    (A) is classified as a separate legal entity.
    (B) generally receives favorable tax treatment relative to a corporation.
    (C) combines the records of the business with the personal records of the owner.
    (D) must have at least two owners in most states.
    (B) generally receives favorable tax treatment relative to a corporation.
    (this multiple choice question has been scrambled)
  41. A business organized as a corporation:
    (A) is owned by its stockholders.
    (B) has tax advantages over a proprietorship or partnership.
    (C) is not a separate legal entity in most states.
    (D) requires that stockholders be personally liable for the debts of the business.
    (A) is owned by its stockholders.
    (this multiple choice question has been scrambled)
  42. Jack and Jill form a partnership. Jack runs the business in New York, while Jill vacations in Hawaii. During the time Jill is away from the business, Jack increases the debts of the business by $20,000. Which of the following statements is true regarding this debt?
    (A) Both Jack and Jill are personally liable for the business debt.
    (B) Neither Jack nor Jill is personally liable for the business debt, since the partnership is a separate legal entity.
    (C) Only Jill is personally liable for the debt of the business, since Jack has been working and she has not.
    (D) Only Jack is personally liable for the debt, since he has been the managing partner during that time.
    (A) Both Jack and Jill are personally liable for the business debt.
    (this multiple choice question has been scrambled)
  43. A local retail shop has been operating as a sole proprietorship. The business is growing and now the owner wants to incorporate. Which of the following is not a reason for this owner to incorporate?
    (A) The desire to limit the owner's personal liability
    (B) The ease in transferring shares of the corporation's stock
    (C) The ability to raise capital for expansion
    (D) The prestige of operating as a corporation
    (D) The prestige of operating as a corporation
    (this multiple choice question has been scrambled)
  44. Which of the following are internal reports that accounting provides to internal users?
    (A) Both a and b are internal reports
    (B) Forecasts of cash needs for next year
    (C) Neither a nor b is an internal report
    (D) Financial comparisons of operating activity alternative
    (A) Both a and b are internal reports
    (this multiple choice question has been scrambled)
  45. Which of the following statements is not true regarding the Sarbanes-Oxley Act (SOX) of 2002?
    (A) The Act calls for decreased independence of outside auditors reviewing corporate financial statements.
    (B) The Act has resulted in increased penalties for financial fraud by top management.
    (C) The Act is meant to decrease the likelihood of unethical corporate behavior.
    (D) The Act calls for increased oversight responsibilities for boards of directors.
    (A) The Act calls for decreased independence of outside auditors reviewing corporate financial statements.
    (this multiple choice question has been scrambled)
  46. Which of the following is not a step for solving an ethical dilemma?
    (A) Identifying the alternatives and weighing the impact of each alternative on various stakeholders.
    (B) Recognizing the ethical situation and issues involved.
    (C) Identifying and analyzing the principal elements in the situation.
    (D) Certifying the ethical accuracy of the financial information.
    (D) Certifying the ethical accuracy of the financial information.
    (this multiple choice question has been scrambled)
  47. The right to receive money in the future is called a(n):
    (A) revenue.
    (B) liability.
    (C) account payable.
    (D) account receivable.
    (D) account receivable.
    (this multiple choice question has been scrambled)
  48. The liability created by a business when it purchases coffee beans and coffee cups on credit from suppliers is termed a(n):
    (A) revenue.
    (B) account receivable.
    (C) account payable.
    (D) expense
    (C) account payable.
    (this multiple choice question has been scrambled)
  49. Which of the following groups uses accounting information to determine whether the company's net income will result in a stock price increase?
    (A) Marketing managers
    (B) Chief Financial Officer
    (C) Investors in common stock
    (D) Creditors
    (C) Investors in common stock
    (this multiple choice question has been scrambled)
  50. Which of the following is not a principal type of business activity?
    (A) Delivering
    (B) Investing
    (C) Financing
    (D) Operating
    (A) Delivering
    (this multiple choice question has been scrambled)
  51. Borrowing money is an example of a(n):
    (A) delivering activity.
    (B) financing activity.
    (C) investing activity.
    (D) operating activity.
    (B) financing activity.
    (this multiple choice question has been scrambled)
  52. Issuing shares of stock in exchange for cash is an example of a(n):
    (A) investing activity.
    (B) operating activity.
    (C) delivering activity.
    (D) financing activity.
    (D) financing activity.
    (this multiple choice question has been scrambled)
  53. Debt securities sold to investors that must be repaid at a particular date some years in the future are called:
    (A) notes receivable.
    (B) taxes payable.
    (C) accounts payable.
    (D) bonds payable.
    (D) bonds payable.
    (this multiple choice question has been scrambled)
  54. Which of the following is not a liability?
    (A) Unearned Revenue
    (B) Accounts Payable
    (C) Accounts Receivable
    (D) Interest Payable
    (C) Accounts Receivable
    (this multiple choice question has been scrambled)
  55. Which of the following is an asset?
    (A) Investments
    (B) Common stock
    (C) Retained earnings
    (D) Mortgage payable
    (A) Investments
    (this multiple choice question has been scrambled)
  56. When expenses exceed revenues, which of the following is true?
    (A) Assets equal liabilities
    (B) Assets are increased
    (C) A net income results
    (D) A net loss results
    (D) A net loss results
    (this multiple choice question has been scrambled)
  57. Which of the following financial statements is divided into major categories of operating, investing, and financing activities?
    (A) The balance sheet.
    (B) The statement of cash flows.
    (C) The income statement
    (D) The retained earnings statement
    (B) The statement of cash flows.
    (this multiple choice question has been scrambled)
  58. Ending retained earnings for a period is equal to:
    (A) Beginning retained earnings – Net income + Dividends
    (B) Beginning retained earnings – Net income – Dividends
    (C) Beginning retained earnings + Net income + Dividends
    (D) Beginning retained earnings + Net income – Dividends
    (D) Beginning retained earnings + Net income – Dividends
    (this multiple choice question has been scrambled)
  59. Which of the following statements is true?
    (A) Amounts paid out as dividends are reported on the income statement.
    (B) Amounts received from issuing stock are revenues.
    (C) Amounts paid out as dividends are not expenses.
    (D) Amounts received from issued stock are reported on the income statement.
    (C) Amounts paid out as dividends are not expenses.
    (this multiple choice question has been scrambled)
  60. Dividends are reported on the:
    (A) income statement.
    (B) retained earnings statement.
    (C) income statement and balance sheet.
    (D) balance sheet.
    (B) retained earnings statement.
    (this multiple choice question has been scrambled)
  61. Kilmer Corporation began the year with retained earnings of $140,000. During the year, the company issued $250,000 of common stock, recorded expenses of $475,000, and paid dividends of $65,000. If Kilmer's ending retained earnings was $175,000, what was the company's revenue for the year?
    (A) $760,000
    (B) $575,000
    (C) $825,000
    (D) $510,000
    (B) $575,000
    (this multiple choice question has been scrambled)
  62. Lankston Company began the year by issuing $50,000 of common stock for cash. The company recorded revenues of $305,000, expenses of $260,000, and paid dividends of $2,000. What was Lankston's net income for the year?
    (A) $45,000
    (B) $95,000
    (C) $93,000
    (D) $43,000
    (A) $45,000
    (this multiple choice question has been scrambled)
  63. Pinson Company began the year with retained earnings of $300,000. During the year, the company recorded revenues of $650,000, expenses of $520,000, and paid dividends of $65,000. What was Pinson’s retained earnings at the end of the year?
    (A) $885,000
    (B) $495,000
    (C) $430,000
    (D) $365,000
    (D) $365,000
    (this multiple choice question has been scrambled)
  64. A balance sheet shows:
    (A) revenues, liabilities, and stockholders' equity.
    (B) revenues, expenses, and dividends.
    (C) expenses, dividends, and stockholders' equity.
    (D) assets, liabilities, and stockholders' equity.
    (D) assets, liabilities, and stockholders' equity.
    (this multiple choice question has been scrambled)
  65. Jimmy's Repair Shop started the year with total assets of $100,000 and total liabilities of $40,000. During the year the business recorded $212,000 in revenues, $170,000 in expenses, and dividends of $13,000. Stockholders' equity at the end of the year was:
    (A) $89,000.
    (B) $63,000.
    (C) $76,000.
    (D) $102,000.
    (A) $89,000.
    (this multiple choice question has been scrambled)
  66. If total liabilities increased by $7,000 during a period of time and stockholders' equity decreased by $3,000 during the same period, then the amount and direction (increase or decrease) of the period's change in total assets is a(n):
    (A) $4,000 decrease.
    (B) $10,000 increase.
    (C) $7,000 increase.
    (D) $4,000 increase.
    (D) $4,000 increase.
    (this multiple choice question has been scrambled)
  67. Marvin Services Corporation had the following accounts and balances:

    If the balance of the Building account was $34,000, what would be the total of liabilities and stockholders' equity?
    (A) $58,000
    (B) $66,000
    (C) $52,000
    (D) $59,000
    (D) $59,000
    (this multiple choice question has been scrambled)
  68. Notes to the financial statements:
    (A) are generally brief and few in number.
    (B) help clarify information presented in the financial statements.
    (C) need not be read in detail if an unqualified opinion accompanies the financial statements.
    (D) are optional.
    (B) help clarify information presented in the financial statements.
    (this multiple choice question has been scrambled)
  69. Notes to the financial statements include all of the following except:
    (A) statistics needed to understand the statements.
    (B) explanations of uncertainties.
    (C) descriptions of significant accounting policies used.
    (D) quantifiable accounting information.
    (D) quantifiable accounting information.
    (this multiple choice question has been scrambled)
  70. In the annual report, where would a financial statement reader find out if the company's financial statements give a fair depiction of its financial position and operating results?
    (A) Notes to the financial statements
    (B) Balance sheet
    (C) Management discussion and analysis section
    (D) Auditor's report
    (D) Auditor's report
    (this multiple choice question has been scrambled)
  71. The information needed to determine whether a company is using accounting methods similar to those of its competitors would be found in the:
    (A) notes to the financial statements.
    (B) balance sheet.
    (C) management discussion and analysis section.
    (D) auditor's report.
    (A) notes to the financial statements.
    (this multiple choice question has been scrambled)
  72. Management's views on the company's short-term debt paying ability, expansion financing, and results of operations are found in the:
    (A) auditor's report.
    (B) president's state of the company report.
    (C) notes to the financial statements.
    (D) management discussion and analysis section.
    (D) management discussion and analysis section.
    (this multiple choice question has been scrambled)

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