ACCT 2401- Chapter 1 – Flashcards

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question
Stockholders are creditors of a corporation. T/F
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False
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All corporations acquire financing by issuing stock for sale on public stock exchanges. T/F
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False
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The daily activities involved in running a business, such as buying supplies and paying salaries and wages, are classified as operating activities on the statement of cash flows. T/F
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True
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Stockholders' equity is the difference between a company's assets and its liabilities. T/F
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True
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A company owes $200,000 on a bank loan. It will be reported by the company as Notes Payable. T/F
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True
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Amounts reported on financial statements are sometimes rounded to the nearest million.
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True
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Accounts Payable, Notes Payable, and Salaries and Wages Payable are examples of liabilities.
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True
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Dividends are subtracted from revenues on the income statement.
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False
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If a company reports net income on the income statement, then the statement of cash flows will report the same amount as cash flows from operating activities for the period.
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False
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Revenue is reported on the income statement only if cash was received at the point of sale.
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False
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Generally Accepted Accounting Principles (GAAP) require profitable companies to distribute some of their earnings to their stockholders.
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False
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Common Stock is reported as an asset on the balance sheet.
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False
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Creditors are mainly interested in the profitability of a company.
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False
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A stock that does not pay a dividend is an undesirable investment.
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False
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In the United States, generally accepted accounting principles (GAAP) are established by the PCAOB (Public Company Accounting Oversight Board).
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False
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The Securities and Exchange Commission (SEC) is the government agency that has primary responsibility for setting accounting standards in the U.S.
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False
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The Sarbanes-Oxley Act (SOX) requires top management of companies to sign a report certifying that the financial statements are free of error.
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False
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Public corporations are businesses:
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whose stock is bought and sold on a stock exchange.
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The owner(s) of a business are taxed on the profits of the business if the business is a:
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corporation.
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Accounting systems:
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analyze, record, summarize, and the activities affecting its financial condition and performance.
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Creditors are:
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people or organizations to whom a business owes money.
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Financing that individuals or institutions have provided to a corporation is:
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classified as a liability when provided by creditors and as stockholders' equity when provided by owners.
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An investor who is looking at a company's financial statements cannot determine whether the:
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company's owners are financially sound.
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Which business organization has only one owner?
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Sole proprietorship
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Internal users of financial data include:
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management.
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Which of the following statements about financial accounting is correct?
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Financial accounting reports are primarily prepared to provide information for external decision makers.
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Which of the following statements about organizational forms of a business is not correct?
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The owners of a corporation are legally responsible for the corporation's debts and taxes.
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A legal document called a stock certificate is used to indicate ownership in a:
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Corporation.
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Net income is the amount:
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by which revenues exceed expenses.
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Expenses are reported on the:
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income statement in the time period in which they are incurred.
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Cash flows from (used in) investing activities includes amounts:
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received from the sale of the company's office building.
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Which of the following would not represent a financing activity?
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Buying supplies on account.
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Operating activities include:
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interest paid on a bank loan
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The separate entity assumption means:
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a company's financial statements reflect only the business activities of that company.
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The types of business activities measured by the statement of cash flows are:
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operating activities, investing activities, and financing activities.
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Financial statements are most commonly prepared:
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monthly, quarterly and annually.
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Which of the following statements about a fiscal year is correct?
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Companies can choose to end their fiscal year on any date they feel is most relevant.
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Assets:
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represent the resources presently controlled by a company.
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