Ch.1 Wiley Plus MC – Flashcards
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The proprietorship form of business organization
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Generally receives favorable tax treatment relative to a corporation.
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Which forms of business organization are considered to be separate accounting entities?
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Sole proprietorships, corporations, and partnerships.
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To which of the following questions will internal users want answers?
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All of the above -What selling price for our product will maximize the company's net income? -Which product line is most profitable? -Is cash sufficient to pay dividends to stockholders?
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Which of the following is not an external user of accounting data?
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Chief Financial Officer. (CFO)
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Which statement about users of accounting information is incorrect?
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Regulatory authorities are considered internal users.
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Which of the following did not result from the Sarbanes-Oxley Act?
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Tax rates on corporations increased. (Created to stop unethical behavior)
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Which of the following is the most appropriate and modern definition of accounting?
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The information system that identifies, records, and communicates the economic events of an organization to interested users.
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Which of the following became required as a result of SOX?
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Top management must certify the financial statements for their company.
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Paying interest expense and receiving interest revenue are examples of
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Operating activities.
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The payment of dividends is an example of a(n)
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Financing activity.
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Which of the following is not one of the three primary business activities?
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Advertising.
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Which of the following is an example of a financing activity?
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Issuing shares of common stock
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Resources owned by a business are referred to as
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Assets.
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In terms of the principal types of business activities, paying salaries expense is an example of
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Operating activities.
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What kind of classification is cost of goods sold?
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Expense.
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Which of the following would not appear on the income statement?
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Dividends paid.
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Which of the following would not appear on the retained earnings statement?
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Service revenue. (Service revenue is reported on the income statement.)
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In which of the following sequences are the financial statements usually prepared?
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Income statement, retained earnings statement, balance sheet, and statement of cash flows.
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Saira's Maid Service began the year with total assets of $120,000 and stockholders' equity of $40,000. During the year the company earned $90,000 in net income and paid $20,000 in dividends. Total assets at the end of the year were $215,000. How much was stockholders' equity at the end of the year?
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$110,000 (The sum of the beginning balance of stockholders' equity ($40,000) plus net income ($90,000) less the dividends paid ($20,000) during the period results in the ending balance of $110,000.)
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Net income will result during a time period when
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Revenues exceed expenses.
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The financial statements for Harold Corporation contained the following information. Accounts receivable $5,000 Sales revenue 75,000 Cash 15,000 Salaries expense 20,000 Rent expense 10,000 How much was Harold's net income?
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$45,000 (Net income = Sales revenue - Salaries expense - Rent expense: $75,000 - $20,000 - $10,000 = $45,000.)
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Which statement presents information as of a specific point in time?
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Balance sheet.
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Which financial statement reports assets, liabilities, and stockholders' equity?
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Balance sheet.
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The ending retained earnings balance appears on:
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Both the retained earnings statement and the balance sheet.
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Saira's Maid Service began the year with total assets of $120,000 and stockholders' equity of $40,000. During the year the company earned $90,000 in net income and paid $20,000 in dividends. Total assets at the end of the year were $215,000. How much are total liabilities at the end of the year?
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$105,000 (First, determine the ending balance of stockholders' equity, which is the sum of the beginning balance of stockholders' equity plus net income less the dividends. $40,000 + $90,000 - $20,000 = $110,000 At the end of the period, total assets must equal the total of liabilities plus stockholders' equity. Assets = Liabilities + Stockholders' Equity $215,000 = Liabilities + $110,000 Liabilities = $105,000)
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The balance sheet
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Reports the assets, liabilities, and stockholders' equity at a specific date.
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If total liabilities decreased by $15,000 and stockholders' equity increased by $5,000 during a period of time, then total assets must change by what amount and direction during that same period?
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$10,000 decrease (Assets = Liabilities + Stockholders' Equity, can be used to determine the answer: ($15,000) + $5,000 = ($10,000))
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Stockholders' equity represents
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Claims of owners.
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As of December 31, 2012, Stoneland Corporation has assets of $3,500 and stockholders' equity of $2,000. How much are the liabilities for Stoneland Corporation as of December 31, 2012?
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$1,500 (Using the accounting equation, liabilities can be computed by subtracting stockholders' equity from assets, or $3,500 - $2,000 = $1,500.)
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The segment of a corporation's annual report that describes the corporation's accounting methods is the:
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Notes to the financial statements.
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The segment 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:
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Auditor's opinion.
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When the auditor is satisfied that the financial statements are provide a fair representation of the company's financial position and results of operation in accordance with generally accepted accounting principles, the auditor will express
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Unqualified opinion.
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An annual report includes all of the following except
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A listing of all of the stockholders.
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Which section of the annual report presents highlights of favorable or unfavorable trends and identifies significant events and uncertainties affecting a company's ability to pay near-term obligations, and a company's ability to fund operations and expansion?
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Management discussion and analysis.
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