Issuu

9) Cash, inventory for sale to customers, supplies, and buildings are examples of liabilities. Answer: FALSE Explanation: These are examples of assets. Difficulty: 2 Medium Topic: Measuring Business Activities Learning Objective: 01-02 Understand the business activities that financial accounting measures. Bloom's: Understand AACSB: Reflective Thinking AICPA: FN Measurement 10) Amounts owed to suppliers, employees, the government in the form of taxes, and utility companies are examples of liabilities. Answer: TRUE Difficulty: 2 Medium Topic: Measuring Business Activities Learning Objective: 01-02 Understand the business activities that financial accounting measures. Bloom's: Understand AACSB: Reflective Thinking AICPA: FN Measurement 11) If total assets of a company equal $12,000 and total stockholders' equity equals $4,000, then total liabilities equal $8,000. Answer: TRUE Difficulty: 3 Hard Topic: Measuring Business Activities Learning Objective: 01-02 Understand the business activities that financial accounting measures. Bloom's: Apply AACSB: Knowledge Application AICPA: FN Measurement

12) If total liabilities of a company equal $16,000 and total stockholders' equity equals $9,000, then total assets equal $7,000. Answer: FALSE Explanation: Total assets = Total liabilities ($16,000) + Total stockholders' equity ($9,000) = $25,000. Difficulty: 3 Hard Topic: Measuring Business Activities Learning Objective: 01-02 Understand the business activities that financial accounting measures. Bloom's: Apply AACSB: Knowledge Application AICPA: FN Measurement 13) The accounting equation shows that a company's resources equal creditors' and owners' claims to those resources. Answer: TRUE Difficulty: 2 Medium Topic: Measuring Business Activities Learning Objective: 01-02 Understand the business activities that financial accounting measures. Bloom's: Understand AACSB: Reflective Thinking AICPA: FN Measurement 14) The costs related to rent, utilities, and salaries in the current reporting period are examples of liabilities. Answer: FALSE Explanation: These are examples of expenses. Difficulty: 2 Medium Topic: Measuring Business Activities Learning Objective: 01-02 Understand the business activities that financial accounting measures. Bloom's: Understand AACSB: Reflective Thinking AICPA: FN Measurement

15) The difference between revenues and expenses is referred to as net income or net loss. Answer: TRUE Difficulty: 1 Easy Topic: Measuring Business Activities Learning Objective: 01-02 Understand the business activities that financial accounting measures. Bloom's: Remember AACSB: Reflective Thinking AICPA: FN Measurement 16) If a company reports revenues of $17,000 and expenses of $12,000, then net income equals $5,000. Answer: TRUE Difficulty: 3 Hard Topic: Measuring Business Activities Learning Objective: 01-02 Understand the business activities that financial accounting measures. Bloom's: Apply AACSB: Knowledge Application AICPA: FN Measurement 17) Expenses include a company's costs of providing products and services to customers, as well as cash payments to its stockholders. Answer: FALSE Explanation: Expenses include costs of providing products and services. Cash payments to stockholders are called dividends. Difficulty: 2 Medium Topic: Measuring Business Activities Learning Objective: 01-02 Understand the business activities that financial accounting measures. Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking 18) Dividends represent a return of the company's profits to its owners, the stockholders. Answer: TRUE Difficulty: 1 Easy Topic: Measuring Business Activities Learning Objective: 01-02 Understand the business activities that financial accounting measures. Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking 5 Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

19) One of the differences between a partnership and a corporation is that owners of a partnership have limited liability. Answer: FALSE Explanation: Stockholders of a corporation have limited liability. Difficulty: 2 Medium Topic: Measuring Business Activities Learning Objective: 01-02 Understand the business activities that financial accounting measures. Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking 20) Limited liability means the stockholders are not held personally responsible for the financial obligations of the corporation. Answer: TRUE Difficulty: 1 Easy Topic: Measuring Business Activities Learning Objective: 01-02 Understand the business activities that financial accounting measures. Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking 21) A company's resources include assets and stockholders' equity. Answer: FALSE Explanation: Assets are resources of a company. Stockholders' equity represents stockholders' claims to those resources. Difficulty: 2 Medium Topic: Measuring Business Activities Learning Objective: 01-02 Understand the business activities that financial accounting measures. Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking

22) Double taxation refers to a corporation's income being taxed twice—first when the company pays corporate income taxes on income it earns, and then again when stockholders pay personal income taxes when the company distributes that income as dividends to them. Answer: TRUE Difficulty: 2 Medium Topic: Measuring Business Activities Learning Objective: 01-02 Understand the business activities that financial accounting measures. Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking 23) Financial statements are periodic reports published by the company for the purpose of providing information to managers. Answer: FALSE Explanation: Financial statements are designed to provide information to external users. Difficulty: 1 Easy Topic: Financial Statements - Income Statement Learning Objective: 01-03 Determine how financial accounting information is communicated through financial statements. Bloom's: Remember AACSB: Reflective Thinking AICPA: FN Reporting 24) The balance sheet is a financial statement that reports the company's revenues and expenses over an interval of time. Answer: FALSE Explanation: The income statement reports revenues and expenses. Difficulty: 1 Easy Topic: Financial Statements - Balance Sheet Learning Objective: 01-03 Determine how financial accounting information is communicated through financial statements. Bloom's: Remember AACSB: Reflective Thinking AICPA: FN Reporting

25) The statement of stockholders' equity is a financial statement that summarizes the changes in stockholders' equity over an interval of time. Answer: TRUE Difficulty: 1 Easy Topic: Financial Statements - Statement of Stockholders' Equity Learning Objective: 01-03 Determine how financial accounting information is communicated through financial statements. Bloom's: Remember AACSB: Reflective Thinking AICPA: FN Reporting 26) The two primary components of stockholders' equity include common stock and revenue. Answer: FALSE Explanation: The two components of stockholders' equity include common stock and retained earnings. Difficulty: 2 Medium Topic: Financial Statements - Statement of Stockholders' Equity Learning Objective: 01-03 Determine how financial accounting information is communicated through financial statements. Bloom's: Understand AACSB: Reflective Thinking AICPA: FN Measurement 27) Common stock represents an external source of stockholders' equity, whereas retained earnings represents an internal source. Answer: TRUE Difficulty: 2 Medium Topic: Financial Statements - Statement of Stockholders' Equity Learning Objective: 01-03 Determine how financial accounting information is communicated through financial statements. Bloom's: Understand AACSB: Reflective Thinking AICPA: FN Reporting

28) Retained earnings represents the cumulative amount of net income, over the life of the company, which has not been distributed to stockholders as dividends. Answer: TRUE Difficulty: 2 Medium Topic: Financial Statements - Statement of Stockholders' Equity Learning Objective: 01-03 Determine how financial accounting information is communicated through financial statements. Bloom's: Understand AACSB: Reflective Thinking AICPA: FN Reporting 29) Dividends are considered an expense in running the business and reported in the income statement. Answer: FALSE Explanation: Dividends are a distribution of resources to owners and not considered a cost in running the business to produce revenues. Dividends are reported in the statement of stockholders' equity. Difficulty: 2 Medium Topic: Financial Statements - Statement of Stockholders' Equity Learning Objective: 01-03 Determine how financial accounting information is communicated through financial statements. Bloom's: Understand AACSB: Reflective Thinking AICPA: FN Reporting 30) All cash transactions reported in the statement of cash flows are classified as (1) operating activities, (2) investing activities, or (3) financing activities. Answer: TRUE Difficulty: 2 Medium Topic: Financial Statements - Statement of Cash Flows Learning Objective: 01-03 Determine how financial accounting information is communicated through financial statements. Bloom's: Understand AACSB: Reflective Thinking AICPA: FN Reporting

31) Investing cash flows generally include cash receipts and cash payments for transactions involving revenue and expense activities during the period. Answer: FALSE Explanation: These are operating activities. Difficulty: 2 Medium Topic: Financial Statements - Statement of Cash Flows Learning Objective: 01-03 Determine how financial accounting information is communicated through financial statements. Bloom's: Understand AACSB: Reflective Thinking AICPA: FN Reporting 32) Operating cash flows generally include cash transactions for the purchase and sale of investments and long-term assets. Answer: FALSE Explanation: These are investing activities. Difficulty: 2 Medium Topic: Financial Statements - Statement of Cash Flows Learning Objective: 01-03 Determine how financial accounting information is communicated through financial statements. Bloom's: Understand AACSB: Reflective Thinking AICPA: FN Reporting 33) Financing cash flows include cash transactions with lenders, such as borrowing money and repaying debt, and with stockholders, such as issuing stock and paying dividends. Answer: TRUE Difficulty: 2 Medium Topic: Financial Statements - Statement of Cash Flows Learning Objective: 01-03 Determine how financial accounting information is communicated through financial statements. Bloom's: Understand AACSB: Reflective Thinking AICPA: FN Reporting

34) Any transaction that affects the income statement ultimately affects the balance sheet through the balance of retained earnings. Answer: TRUE Difficulty: 2 Medium Topic: Financial Statements - Income Statement; Financial Statements - Balance Sheet Learning Objective: 01-03 Determine how financial accounting information is communicated through financial statements. Bloom's: Understand AACSB: Reflective Thinking AICPA: FN Reporting 35) Financial accounting has an impact on everyday business decisions as well as wide-ranging economic consequences. Answer: TRUE Difficulty: 1 Easy Topic: Making Decisions with Accounting Information Learning Objective: 01-04 Describe the role that financial accounting plays in the decisionmaking process. Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking 36) Investors and creditors rely heavily on financial accounting information in making investment and lending decisions. Answer: TRUE Difficulty: 1 Easy Topic: Making Decisions with Accounting Information Learning Objective: 01-04 Describe the role that financial accounting plays in the decisionmaking process. Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking 37) In general, if a company's net income is increasing, so will its stock price. Answer: TRUE Difficulty: 3 Hard Topic: Making Decisions with Accounting Information Learning Objective: 01-04 Describe the role that financial accounting plays in the decisionmaking process. Bloom's: Analyze AACSB: Analytical Thinking AICPA: FN Decision Making 11 Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

38) The rules of financial accounting are called Generally Accepted Accounting Principles (GAAP). Answer: TRUE Difficulty: 1 Easy Topic: Financial Accounting Standards Learning Objective: 01-05 Explain the term generally accepted accounting principles (GAAP) and describe the role of GAAP in financial accounting. Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking 39) Financial accounting and reporting standards in the United States are established primarily by the Financial Accounting Standards Board (FASB). Answer: TRUE Difficulty: 1 Easy Topic: Financial Accounting Standards Learning Objective: 01-05 Explain the term generally accepted accounting principles (GAAP) and describe the role of GAAP in financial accounting. Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking 40) The 1933 Securities Act and the 1934 Securities Exchange Act were designed to restore investor confidence in financial accounting following the stock market crash in 1929. Answer: TRUE Difficulty: 1 Easy Topic: Financial Accounting Standards Learning Objective: 01-05 Explain the term generally accepted accounting principles (GAAP) and describe the role of GAAP in financial accounting. Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking

41) The 1934 Securities Exchange Act gives the Securities and Exchange Commission (SEC) the power to require companies that publicly trade their stock to prepare periodic financial statements for distribution to investors and creditors. Answer: TRUE Difficulty: 2 Medium Topic: Financial Accounting Standards Learning Objective: 01-05 Explain the term generally accepted accounting principles (GAAP) and describe the role of GAAP in financial accounting. Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking 42) The role of independent auditors is to help ensure that management has in fact appropriately applied Generally Accepted Accounting Principles (GAAP) in preparing the company's financial statements. Answer: TRUE Difficulty: 1 Easy Topic: Financial Accounting Standards Learning Objective: 01-05 Explain the term generally accepted accounting principles (GAAP) and describe the role of GAAP in financial accounting. Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking 43) Auditors are trained individuals hired by a company as an independent party to express a professional opinion of the fairness of that company's financial statements. Answer: TRUE Difficulty: 1 Easy Topic: Financial Accounting Standards Learning Objective: 01-05 Explain the term generally accepted accounting principles (GAAP) and describe the role of GAAP in financial accounting. Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking

44) The primary objective of financial accounting is to provide useful information to managers in making decisions. Answer: FALSE Explanation: Financial accounting is intended primarily to provide information to investors and creditors. Difficulty: 2 Medium Topic: Financial Accounting Standards Learning Objective: 01-05 Explain the term generally accepted accounting principles (GAAP) and describe the role of GAAP in financial accounting. Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking 45) Public accounting firms are professional service firms that traditionally have focused on three areas: auditing, tax preparation/planning, and business consulting. Answer: TRUE Difficulty: 2 Medium Topic: Career Options in Accounting Learning Objective: 01-06 Identify career opportunities in accounting. Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking 46) The Financial Accounting Standards Board's conceptual framework does not prescribe Generally Accepted Accounting Principles. It provides an underlying foundation for the development of accounting standards and interpretation of accounting information. Answer: TRUE Difficulty: 2 Medium Topic: Conceptual Framework Learning Objective: 01-07 Explain the nature of the conceptual framework used to develop generally accepted accounting principles. Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking

47) The two fundamental decision-specific qualitative characteristics that make accounting information useful are comparability and understandability. Answer: FALSE Explanation: The two fundamental characteristics are relevance and faithful representation. Difficulty: 1 Easy Topic: Conceptual Framework Learning Objective: 01-07 Explain the nature of the conceptual framework used to develop generally accepted accounting principles. Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking 48) Relevance refers to accounting information having confirmatory value and/or predictive value. Answer: TRUE Difficulty: 1 Easy Topic: Conceptual Framework Learning Objective: 01-07 Explain the nature of the conceptual framework used to develop generally accepted accounting principles. Bloom's: Remember AACSB: Reflective Thinking AICPA: FN Decision Making 49) To be a faithful representation of business activities, accounting information should be complete, neutral, and free from error. Answer: TRUE Difficulty: 1 Easy Topic: Conceptual Framework Learning Objective: 01-07 Explain the nature of the conceptual framework used to develop generally accepted accounting principles. Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking

50) The periodicity assumption indicates that the economic life of an enterprise can be divided into artificial time periods for financial reporting purposes. Answer: TRUE Difficulty: 1 Easy Topic: Conceptual Framework Learning Objective: 01-07 Explain the nature of the conceptual framework used to develop generally accepted accounting principles. Bloom's: Remember AACSB: Reflective Thinking AICPA: FN Reporting 51) The economic entity assumption states that in the absence of information to the contrary, the business entity will continue to operate indefinitely. Answer: FALSE Explanation: The economic entity assumption states that we identify all economic events with a particular economic entity. In other words, only business transactions involving the specific company should be reported as part of the company's financial accounting information. Difficulty: 2 Medium Topic: Conceptual Framework Learning Objective: 01-07 Explain the nature of the conceptual framework used to develop generally accepted accounting principles. Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking 52) What is the primary purpose of financial accounting? A) Determine the amount of tax liability owed to the government. B) Communicate business activities to internal management. C) Measure business activities and communicate those measures to external users to make decisions. D) Measure the profitability of the company in order to assist employees with making decisions. Answer: C Difficulty: 1 Easy Topic: Defining Accounting Learning Objective: 01-01 Describe the two primary functions of financial accounting. Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking

53) The primary purpose(s) of financial accounting is(are) to: A) Measure and record business transactions. B) Prepare federal and state tax returns. C) Communicate financial results to investors and creditors. D) Both measure and communicate financial information to external parties. Answer: D Difficulty: 1 Easy Topic: Defining Accounting Learning Objective: 01-01 Describe the two primary functions of financial accounting. Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking 54) Which definition below best describes financial accounting? A) Process of measuring income taxes owed to the government. B) System of maintaining communication with a company's customers and suppliers. C) Procedures designed to enhance the company's image to potential investors. D) Measuring business activities and communicating them to external parties. Answer: D Difficulty: 2 Medium Topic: Defining Accounting Learning Objective: 01-01 Describe the two primary functions of financial accounting. Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking 55) Financial accounting does not deal with which of the following? A) Measuring a company's economic activity. B) Providing information to internal users. C) Preparing financial reports. D) Communicating financial results to investors. Answer: B Difficulty: 2 Medium Topic: Defining Accounting Learning Objective: 01-01 Describe the two primary functions of financial accounting. Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking

56) Financial accounting: A) Provides information primarily for external decision makers. B) Provides information primarily for a company's employees. C) Provides information primarily for the use of managers of the company. D) Is primarily used to compute a company's tax obligation. Answer: A Difficulty: 1 Easy Topic: Defining Accounting Learning Objective: 01-01 Describe the two primary functions of financial accounting. Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking 57) The primary focus for financial accounting information is to provide information useful for: Investing decisions

Credit decisions

Yes

A) Investing decisions and credit decisions. B) Investing decisions but not credit decisions. C) Credit decisions but not investing decisions. D) Neither investing decisions nor credit decisions. Answer: A Difficulty: 1 Easy Topic: Defining Accounting Learning Objective: 01-01 Describe the two primary functions of financial accounting. Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking

58) Which of the following groups is not among the external users for whom financial statements are prepared? A) Creditors. B) Regulators. C) Investors. D) Managers. Answer: D Difficulty: 1 Easy Topic: Defining Accounting Learning Objective: 01-01 Describe the two primary functions of financial accounting. Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking 59) Which of the following groups is not among the external users for whom financial statements are prepared? A) Customers. B) Suppliers. C) Employees. D) Customers, suppliers, and employees are all external users of financial statements. Answer: D Difficulty: 1 Easy Topic: Defining Accounting Learning Objective: 01-01 Describe the two primary functions of financial accounting. Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking 60) The form of business organization that is legally separate from its owners is a: A) Partnership. B) Sole proprietorship. C) Corporation. D) Separation entity. Answer: C Difficulty: 1 Easy Topic: Measuring Business Activities Learning Objective: 01-02 Understand the business activities that financial accounting measures. Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking

61) Which business form has the advantage of limited liability? A) Corporation. B) Sole proprietorship. C) Partnership. D) All business forms share equal limited liability. Answer: A Difficulty: 1 Easy Topic: Measuring Business Activities Learning Objective: 01-02 Understand the business activities that financial accounting measures. Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking 62) Limited liability means: A) Stockholders of a corporation are not obligated to pay the corporation's debts out of their own pocket. B) Liabilities of a company cannot exceed its assets. C) Companies are not allowed to borrow unless they are profitable. D) Companies are less likely to be sued if they are formed as a corporation. Answer: A Difficulty: 2 Medium Topic: Measuring Business Activities Learning Objective: 01-02 Understand the business activities that financial accounting measures. Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking 63) One disadvantage of the corporate form of business is: A) Limited liability. B) Access to more capital. C) Smaller in size. D) Double taxation. Answer: D Difficulty: 2 Medium Topic: Measuring Business Activities Learning Objective: 01-02 Understand the business activities that financial accounting measures. Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking

64) Which of the following is an operating activity? A) Issuing common stock. B) Paying dividends. C) Borrowing cash from a bank to acquire a building. D) Paying electricity bills for the month. Answer: D Difficulty: 2 Medium Topic: Measuring Business Activities Learning Objective: 01-02 Understand the business activities that financial accounting measures. Bloom's: Understand AACSB: Reflective Thinking AICPA: FN Measurement 65) How many of the following transactions are operating activities? Borrow $50,000 from the bank. Purchase $12,000 in supplies. Provide services to customers for $27,000. Pay the utility bill of $750. Purchase a delivery truck for $12,000. Receive $25,000 from issuing common stock. A) One. B) Two. C) Three. D) Four. Answer: C Explanation: (1) Purchase supplies, (2) Provide services to customers, and (3) Pay utility bill. Difficulty: 3 Hard Topic: Measuring Business Activities Learning Objective: 01-02 Understand the business activities that financial accounting measures. Bloom's: Apply AACSB: Knowledge Application AICPA: FN Measurement

66) Transactions related to the primary business activities of the company, such as selling goods and services to customers, are referred to as: A) Investing activities. B) Operating activities. C) Management activities. D) Financing activities. Answer: B Difficulty: 2 Medium Topic: Measuring Business Activities Learning Objective: 01-02 Understand the business activities that financial accounting measures. Bloom's: Understand AACSB: Reflective Thinking AICPA: FN Measurement 67) Stimpleton Company engages in the following cash payments: Purchase equipment Pay rent Repay loan to the bank Pay workers' salaries

2,000 500 5,000 1,000

What is the total amount of cash paid for operating activities? A) $6,000. B) $2,000. C) $7,000. D) $1,500. Answer: D Explanation: $500 + $1,000 = $1,500. Difficulty: 3 Hard Topic: Measuring Business Activities Learning Objective: 01-02 Understand the business activities that financial accounting measures. Bloom's: Apply AACSB: Knowledge Application AICPA: FN Measurement

68) Accountants are responsible for measuring various operating, investing and financing activities. Which of the following correctly matches the activity with its type? A) Investing - paying utilities for the month. B) Investing - purchasing land. C) Operating - paying dividends to stockholders. D) Financing - selling equipment for cash. Answer: B Difficulty: 2 Medium Topic: Measuring Business Activities Learning Objective: 01-02 Understand the business activities that financial accounting measures. Bloom's: Understand AACSB: Reflective Thinking AICPA: FN Measurement 69) Transactions of a company that include the purchase and sale of long-term assets are referred to as: A) Investing activities. B) Financing activities. C) Expenditure activities. D) Operating activities. Answer: A Difficulty: 2 Medium Topic: Measuring Business Activities Learning Objective: 01-02 Understand the business activities that financial accounting measures. Bloom's: Understand AACSB: Reflective Thinking AICPA: FN Measurement 70) McGill purchases additional office equipment to better serve its customers. This purchase is classified as what type of activity? A) Company activity. B) Financing activity. C) Investing activity. D) Operating activity. Answer: C Difficulty: 2 Medium Topic: Measuring Business Activities Learning Objective: 01-02 Understand the business activities that financial accounting measures. Bloom's: Understand AACSB: Reflective Thinking AICPA: FN Measurement 23 Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

71) Transactions of a company involving external sources of funding are referred to as: A) Investing activities. B) Financing activities. C) External activities. D) Operating activities. Answer: B Difficulty: 2 Medium Topic: Measuring Business Activities Learning Objective: 01-02 Understand the business activities that financial accounting measures. Bloom's: Understand AACSB: Reflective Thinking AICPA: FN Measurement 72) Financing activities include: A) Primary operations such as selling goods to customers. B) Transactions with company employees. C) Transactions involving external sources of funding. D) The purchase and sale of long-term assets. Answer: C Difficulty: 2 Medium Topic: Measuring Business Activities Learning Objective: 01-02 Understand the business activities that financial accounting measures. Bloom's: Understand AACSB: Reflective Thinking AICPA: FN Measurement 73) Financing activities include: A) The purchase of a building. B) Issuing common stock to stockholders. C) Transactions with company employees. D) Selling goods or services to customers. Answer: B Difficulty: 2 Medium Topic: Measuring Business Activities Learning Objective: 01-02 Understand the business activities that financial accounting measures. Bloom's: Understand AACSB: Reflective Thinking AICPA: FN Measurement

74) The accounting equation is defined as: A) Assets = Liabilities + Stockholders' Equity. B) Assets = Liabilities − Stockholders' Equity. C) Net Income = Revenues − Expenses. D) Liabilities + Revenues = Assets. Answer: A Difficulty: 1 Easy Topic: Measuring Business Activities Learning Objective: 01-02 Understand the business activities that financial accounting measures. Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking 75) Which statement below best describes the accounting equation? A) The change in retained earnings equals net income less dividends. B) Equality of revenue and expense transactions over time. C) Resources of the company equal creditors' and owners' claims to those resources. D) Financing activities equal investing and operating activities. Answer: C Explanation: Assets = Liabilities + Stockholders' Equity. Difficulty: 2 Medium Topic: Measuring Business Activities Learning Objective: 01-02 Understand the business activities that financial accounting measures. Bloom's: Understand AACSB: Reflective Thinking AICPA: FN Measurement 76) If a company has stockholders' equity of $60,000 at the end of the year, which of the following statements must be true? A) The company's assets exceed liabilities by $60,000. B) The company has issued $60,000 of common stock. C) Net income for the year equals $60,000. D) Total revenues during the year equal $60,000. Answer: A Explanation: Assets − Liabilities = Stockholders' Equity. Difficulty: 3 Hard Topic: Measuring Business Activities Learning Objective: 01-02 Understand the business activities that financial accounting measures. Bloom's: Analyze AACSB: Analytical Thinking AICPA: FN Measurement 25 Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

77) Emmitt had the following final balances after the first year of operations: assets, $55,000; stockholders' equity, $25,000; dividends, $3,000; and net income, $10,000. What is the amount of Emmitt's liabilities? A) $55,000. B) $30,000. C) $13,000. D) $7,000. Answer: B Explanation: Assets ($55,000) = Liabilities ($30,000) + Stockholders' Equity ($25,000). Difficulty: 3 Hard Topic: Measuring Business Activities Learning Objective: 01-02 Understand the business activities that financial accounting measures. Bloom's: Apply AACSB: Knowledge Application AICPA: FN Measurement 78) An alternative form of the accounting equation is: A) Net Income = Revenues − Expenses. B) Stockholders' Equity = Assets + Liabilities. C) Assets = Liabilities − Stockholders' Equity. D) Assets − Liabilities = Stockholders' Equity. Answer: D Difficulty: 2 Medium Topic: Measuring Business Activities Learning Objective: 01-02 Understand the business activities that financial accounting measures. Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking

79) The accounts that represent the resources of the company are called: A) Liabilities. B) Revenues. C) Expenses. D) Assets. Answer: D Difficulty: 1 Easy Topic: Measuring Business Activities Learning Objective: 01-02 Understand the business activities that financial accounting measures. Bloom's: Remember AACSB: Reflective Thinking AICPA: FN Measurement 80) The assets of a company represent: A) Amounts owed to creditors. B) Sales of goods or services to customers. C) Resources that will be used to benefit the company. D) Investments by stockholders. Answer: C Difficulty: 1 Easy Topic: Measuring Business Activities Learning Objective: 01-02 Understand the business activities that financial accounting measures. Bloom's: Remember AACSB: Reflective Thinking AICPA: FN Measurement 81) Which of the following accounts represents a resource of the company? A) Common stock. B) Service revenue. C) Supplies. D) Salaries expense. Answer: C Difficulty: 2 Medium Topic: Measuring Business Activities Learning Objective: 01-02 Understand the business activities that financial accounting measures. Bloom's: Understand AACSB: Reflective Thinking AICPA: FN Measurement

82) Which of the following does not represent an asset of a company? A) Supplies held by the company. B) Amounts owed to suppliers. C) Equipment owned and used for operations. D) Land owned by the company. Answer: B Difficulty: 2 Medium Topic: Measuring Business Activities Learning Objective: 01-02 Understand the business activities that financial accounting measures. Bloom's: Understand AACSB: Reflective Thinking AICPA: FN Measurement 83) Creditors' claims to a corporation's resources are referred to as: A) Dividends. B) Assets. C) Liabilities. D) Stockholders' equity. Answer: C Difficulty: 1 Easy Topic: Measuring Business Activities Learning Objective: 01-02 Understand the business activities that financial accounting measures. Bloom's: Remember AACSB: Reflective Thinking AICPA: FN Measurement 84) Liabilities are best defined as: A) Amounts the company expects to collect in the future from customers. B) Debts or obligations the company owes resulting from past transactions. C) The amounts that owners have invested in the business. D) Payments to stockholders. Answer: B Difficulty: 1 Easy Topic: Measuring Business Activities Learning Objective: 01-02 Understand the business activities that financial accounting measures. Bloom's: Remember AACSB: Reflective Thinking AICPA: FN Measurement

85) Amounts owed to suppliers for supplies purchased on account are defined as a(n): A) Revenue. B) Asset. C) Liability. D) Expense. Answer: C Difficulty: 1 Easy Topic: Measuring Business Activities Learning Objective: 01-02 Understand the business activities that financial accounting measures. Bloom's: Remember AACSB: Reflective Thinking AICPA: FN Measurement 86) Which of the following does not represent a liability of a company? A) Salaries owed to employees. B) Taxes owed to the government. C) Amounts owed to suppliers. D) All of the other answers are liabilities. Answer: D Difficulty: 2 Medium Topic: Measuring Business Activities Learning Objective: 01-02 Understand the business activities that financial accounting measures. Bloom's: Understand AACSB: Reflective Thinking AICPA: FN Measurement 87) The accounts that represent resources owed to creditors are called: A) Assets. B) Liabilities. C) Dividends. D) Stockholders' equity. Answer: B Difficulty: 1 Easy Topic: Measuring Business Activities Learning Objective: 01-02 Understand the business activities that financial accounting measures. Bloom's: Remember AACSB: Reflective Thinking AICPA: FN Measurement

88) Liabilities can be best described as: A) The amount of expenses over the past year. B) The amount expected to be distributed to stockholders. C) The amount owed to creditors. D) The amount of services provided to customers during the year. Answer: C Difficulty: 1 Easy Topic: Measuring Business Activities Learning Objective: 01-02 Understand the business activities that financial accounting measures. Bloom's: Remember AACSB: Reflective Thinking AICPA: FN Measurement 89) The stockholders' interest in a corporation is called: A) Dividends. B) Assets. C) Liabilities. D) Stockholders' equity. Answer: D Difficulty: 1 Easy Topic: Measuring Business Activities Learning Objective: 01-02 Understand the business activities that financial accounting measures. Bloom's: Remember AACSB: Reflective Thinking AICPA: FN Measurement 90) Stockholders' claims to the company's resources are referred to as: A) Stockholders' equity. B) Revenues. C) Assets. D) Liabilities. Answer: A Difficulty: 1 Easy Topic: Measuring Business Activities Learning Objective: 01-02 Understand the business activities that financial accounting measures. Bloom's: Remember AACSB: Reflective Thinking AICPA: FN Measurement

91) Using the information below from the accounting records of Thomas Corporation, stockholders' claims to the company's resources amount to: Assets Liabilities Net income Retained earnings

$ $ $ $

1,200,000 800,000 100,000 250,000

A) $1,200,000. B) $800,000. C) $250,000. D) $400,000. Answer: D Explanation: Stockholders' claims (Stockholders' Equity) = Assets ($1,200,000) − Liabilities ($800,000) Difficulty: 3 Hard Topic: Measuring Business Activities Learning Objective: 01-02 Understand the business activities that financial accounting measures. Bloom's: Analyze AACSB: Analytical Thinking AICPA: FN Measurement 92) Which of the following best describes revenue? A) Resources of a company. B) Sales of goods and services to a customer. C) Cash received from a customer. D) Dividends paid to stockholders. Answer: B Difficulty: 1 Easy Topic: Measuring Business Activities Learning Objective: 01-02 Understand the business activities that financial accounting measures. Bloom's: Remember AACSB: Reflective Thinking AICPA: FN Measurement

93) The costs of providing goods and services to customers are referred to as: A) Assets. B) Expenses. C) Liabilities. D) Revenues. Answer: B Difficulty: 1 Easy Topic: Measuring Business Activities Learning Objective: 01-02 Understand the business activities that financial accounting measures. Bloom's: Remember AACSB: Reflective Thinking AICPA: FN Measurement 94) The costs associated with producing revenues are referred to as: A) Dividends. B) Assets. C) Liabilities. D) Expenses. Answer: D Difficulty: 1 Easy Topic: Measuring Business Activities Learning Objective: 01-02 Understand the business activities that financial accounting measures. Bloom's: Remember AACSB: Reflective Thinking AICPA: FN Measurement 95) Net income can best be described as: A) Net cash received by a company during the year. B) Revenues minus expenses. C) The amount of profits retained in a company for the year. D) Resources of a company. Answer: B Difficulty: 1 Easy Topic: Measuring Business Activities Learning Objective: 01-02 Understand the business activities that financial accounting measures. Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; Measurement

96) Use the following appropriate amounts to calculate net income: Revenues, $12,000; Liabilities, $5,000; Expenses, $4,000; Assets, $19,000; Dividends, $4,000. A) $6,000. B) $8,000. C) $4,000. D) $14,000. Answer: B Explanation: Revenues ($12,000) − Expenses ($4,000) = Net Income ($8,000). Difficulty: 3 Hard Topic: Measuring Business Activities Learning Objective: 01-02 Understand the business activities that financial accounting measures. Bloom's: Apply AACSB: Knowledge Application AICPA: FN Measurement 97) The account type that represents payments to stockholders is called: A) Liabilities. B) Assets. C) Stockholders' equity. D) Dividends. Answer: D Difficulty: 1 Easy Topic: Measuring Business Activities Learning Objective: 01-02 Understand the business activities that financial accounting measures. Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking 98) Dividends represent: A) Resources of the company. B) Cash payments to stockholders. C) Amounts owed to creditors. D) Expenses of operating the company. Answer: B Difficulty: 1 Easy Topic: Measuring Business Activities Learning Objective: 01-02 Understand the business activities that financial accounting measures. Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking 33 Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

99) The equation best describing the income statement is: A) Revenues − Expenses = Net Income. B) Assets = Revenues − Expenses. C) Assets = Liabilities + Stockholders' Equity. D) Revenues + Expenses = Net Income. Answer: A Difficulty: 2 Medium Topic: Financial Statements - Income Statement Learning Objective: 01-03 Determine how financial accounting information is communicated through financial statements. Bloom's: Understand AACSB: Reflective Thinking AICPA: FN Reporting 100) Expenses are shown in which of the following statements? A) Income statement. B) Statement of cash flows. C) Balance sheet. D) Statement of stockholders' equity. Answer: A Difficulty: 2 Medium Topic: Financial Statements - Income Statement Learning Objective: 01-03 Determine how financial accounting information is communicated through financial statements. Bloom's: Understand AACSB: Reflective Thinking AICPA: FN Reporting 101) Which of the following items would not appear in an income statement? A) Salaries expense. B) Advertising expense. C) Service revenue. D) Cash. Answer: D Difficulty: 2 Medium Topic: Financial Statements - Income Statement Learning Objective: 01-03 Determine how financial accounting information is communicated through financial statements. Bloom's: Understand AACSB: Reflective Thinking AICPA: FN Reporting

102) Which of the following items would not appear in an income statement? A) Delivery Expense. B) Accounts Payable. C) Service Revenue. D) Utilities Expense. Answer: B Difficulty: 2 Medium Topic: Financial Statements - Income Statement Learning Objective: 01-03 Determine how financial accounting information is communicated through financial statements. Bloom's: Understand AACSB: Reflective Thinking AICPA: FN Reporting 103) Consider the following account balances of the Shattuck Law Firm at the end of the year: Accounts Payable Salaries Expense Cash Common Stock Service Revenue Supplies Retained Earnings Utilities Expense

4,400 12,800 1,700 2,400 8,300 4,300 1,100 5,000

How many of these accounts would appear in Shattuck's year-end income statement? A) Five. B) Four. C) Three. D) Two. Answer: C Explanation: Salaries Expense, Service Revenue, and Utilities Expense. Difficulty: 3 Hard Topic: Financial Statements - Income Statement Learning Objective: 01-03 Determine how financial accounting information is communicated through financial statements. Bloom's: Apply AACSB: Knowledge Application AICPA: FN Reporting

104) Given the information below, calculate net income in the current period. Accounts Receivable Rent Expense Insurance Expense Common Stock Service Revenue Supplies Equipment Income Tax Expense

14,700 7,500 2,100 24,000 28,300 4,300 21,600 4,200

A) $27,300. B) $29,200. C) $14,500. D) $10,200. Answer: C Explanation: Service Revenue ($28,300) − Rent Expense ($7,500) − Insurance Expense ($2,100) − Income Tax Expense ($4,200) = $14,500. Difficulty: 3 Hard Topic: Financial Statements - Income Statement Learning Objective: 01-03 Determine how financial accounting information is communicated through financial statements. Bloom's: Analyze AACSB: Analytical Thinking AICPA: FN Reporting

105) A company had the following amounts at the end of the year: Cash Supplies Expense Dividends Service Revenue Prepaid Rent Salaries Expense Accounts Payable Land

11,200 1,500 2,600 23,500 4,300 8,200 12,700 36,900

What amount would the company report for net income? A) $11,200. B) $6,900. C) $13,800. D) $42,300. Answer: C Explanation: Service Revenue ($23,500) − Supplies Expense ($1,500) − Salaries Expense ($8,200) = $13,800. Difficulty: 3 Hard Topic: Financial Statements - Income Statement Learning Objective: 01-03 Determine how financial accounting information is communicated through financial statements. Bloom's: Analyze AACSB: Analytical Thinking AICPA: FN Measurement 106) Net income (loss) appears in which two financial statements? A) Balance sheet and income statement. B) Income statement and statement of stockholders' equity. C) Statement of stockholders' equity and balance sheet. D) Net income appears in only one financial statement. Answer: B Difficulty: 2 Medium Topic: Financial Statements - Income Statement; Financial Statements - Statement of Stockholders' Equity Learning Objective: 01-03 Determine how financial accounting information is communicated through financial statements. Bloom's: Understand AACSB: Reflective Thinking AICPA: FN Reporting

107) Which of the following items is reported in the statement of stockholders' equity? A) Total assets. B) Total expenses. C) Net income. D) Operating cash flows. Answer: C Difficulty: 2 Medium Topic: Financial Statements - Statement of Stockholders' Equity Learning Objective: 01-03 Determine how financial accounting information is communicated through financial statements. Bloom's: Understand AACSB: Reflective Thinking AICPA: FN Reporting 108) Which of the following accounts appears in the statement of stockholders' equity? A) Accounts Payable. B) Accounts Receivable. C) Common Stock. D) Supplies. Answer: C Difficulty: 2 Medium Topic: Financial Statements - Statement of Stockholders' Equity Learning Objective: 01-03 Determine how financial accounting information is communicated through financial statements. Bloom's: Understand AACSB: Reflective Thinking AICPA: FN Reporting 109) Which of the following accounts appears in the statement of stockholders' equity? A) Supplies. B) Cash. C) Salaries Payable. D) Retained Earnings. Answer: D Difficulty: 2 Medium Topic: Financial Statements - Statement of Stockholders' Equity Learning Objective: 01-03 Determine how financial accounting information is communicated through financial statements. Bloom's: Understand AACSB: Reflective Thinking AICPA: FN Reporting

110) Which one of the following statements regarding financial reports is correct? A) The balance sheet classifies all assets according to operating, investing, and financing activities. B) The income statement is used to show that a company's resources equal claims to those resources. C) The statement of stockholders' equity updates the balances of common stock and retained earnings for related transactions during the year. D) The statement of cash flows shows cash inflows and outflows from operating activities only. Answer: C Difficulty: 2 Medium Topic: Financial Statements - Income Statement; Financial Statements - Balance Sheet; Financial Statements - Statement of Stockholders' Equity; Financial Statements - Statement of Cash Flows Learning Objective: 01-03 Determine how financial accounting information is communicated through financial statements. Bloom's: Understand AACSB: Reflective Thinking AICPA: FN Reporting 111) Which of the following best explains the meaning of total stockholders' equity? A) The difference between total revenues and total expenses, less dividends for the year. B) The amount of common stock less dividends over the life of the company. C) All revenues, expenses, and dividends over the life of the company. D) The amount of capital invested by stockholders plus profits retained over the life of the company. Answer: D Explanation: Total stockholders' equity equals the amount of common stock plus retained earnings. Common stock is the amount of capital invested by stockholders, and retained earnings are profits retained over the life of the company. Difficulty: 3 Hard Topic: Financial Statements - Balance Sheet; Financial Statements - Statement of Stockholders' Equity Learning Objective: 01-03 Determine how financial accounting information is communicated through financial statements. Bloom's: Apply AACSB: Knowledge Application AICPA: FN Reporting

112) Which of the following statements regarding financial reports is not correct? A) A balance sheet contains assets, liabilities, and stockholders' equity information. B) An income statement shows revenues and expenses. C) A statement of stockholders' equity reports revenues, net income, and dividends information. D) A statement of cash flows shows cash inflows and outflows from operating, investing, and financing activities. Answer: C Difficulty: 2 Medium Topic: Financial Statements - Income Statement; Financial Statements - Balance Sheet; Financial Statements - Statement of Stockholders' Equity; Financial Statements - Statement of Cash Flows Learning Objective: 01-03 Determine how financial accounting information is communicated through financial statements. Bloom's: Understand AACSB: Reflective Thinking AICPA: FN Reporting 113) Retained earnings at the end of the year is calculated using: A) Beginning retained earnings, net income, and dividends. B) Common stock and dividends. C) Stockholders' equity, net income, and dividends. D) Net income and dividends. Answer: A Difficulty: 2 Medium Topic: Financial Statements - Statement of Stockholders' Equity Learning Objective: 01-03 Determine how financial accounting information is communicated through financial statements. Bloom's: Understand AACSB: Reflective Thinking AICPA: FN Measurement

114) DW has an ending Retained Earnings balance of $51,100. If during the year DW paid dividends of $4,300 and had net income of $22,500, then what was the beginning Retained Earnings balance? A) $24,300. B) $32,900. C) $300. D) $69,300. Answer: B Explanation: Beginning Retained Earnings ($32,900) + Net Income ($22,500) − Dividends ($4,300) = Ending Retained Earnings ($51,100). Difficulty: 3 Hard Topic: Financial Statements - Statement of Stockholders' Equity Learning Objective: 01-03 Determine how financial accounting information is communicated through financial statements. Bloom's: Analyze AACSB: Analytical Thinking AICPA: FN Reporting 115) The ending Retained Earnings balance of Boomer Inc. decreased by $1.0 million from the beginning of the year. The company declared a dividend of $5.4 million during the year. What was the net income for the year? A) $7.5 million. B) $6.4 million. C) $4.4 million. D) $1.0 million. Answer: C Explanation: Beginning Retained Earnings ($0) + Net Income ($4.4) − Dividends ($5.4) = Ending Retained Earnings ($−1.0). Difficulty: 3 Hard Topic: Financial Statements - Statement of Stockholders' Equity Learning Objective: 01-03 Determine how financial accounting information is communicated through financial statements. Bloom's: Analyze AACSB: Analytical Thinking AICPA: FN Reporting

116) Given the information below about Thomas Corporation, what was the amount of dividends the company paid in the current period? Beginning retained earnings Ending retained earnings Decrease in cash Net income Change in stockholders' equity

$ 54,000 $ 110,000 $ 10,000 $ 84,000 $ 15,000

A) $13,000. B) $110,000. C) $28,000. D) $18,000. Answer: C Explanation: Beginning Retained Earnings ($54,000) + Net Income ($84,000) − Dividends ($28,000) = Ending Retained Earnings ($110,000). Difficulty: 3 Hard Topic: Financial Statements - Statement of Stockholders' Equity Learning Objective: 01-03 Determine how financial accounting information is communicated through financial statements. Bloom's: Analyze AACSB: Analytical Thinking AICPA: FN Reporting

117) For the past five years, Mookie Consulting Services reported the following annual net income and dividend amounts: Year 1 2 3 4 5

Net Income $ 22,000 17,000 9,000 14,000 25,000

Dividends $ 2,000 2,000 1,000 3,000 4,000

If Mookie had Retained Earnings of $88,000 at the end of year 5, what was the company's Retained Earnings at the beginning of Year 1? A) $13,000. B) $25,000. C) $7,000. D) $1,000. Answer: A Explanation: Beginning Retained Earnings ($13,000) = Ending Retained Earnings ($88,000) Total Net Income ($87,000) + Total Dividends ($12,000). Difficulty: 3 Hard Topic: Financial Statements - Statement of Stockholders' Equity Learning Objective: 01-03 Determine how financial accounting information is communicated through financial statements. Bloom's: Analyze AACSB: Analytical Thinking AICPA: FN Measurement 118) Nina Corp. had the following net income (loss) for the first three years of operations, respectively: $7,100, ($1,600), and $3,600. If the Retained Earnings balance at the end of year three is $1,100, what was the total amount of dividends paid over these three years? A) $500. B) $0. C) $9,100. D) $8,000. Answer: D Explanation: Beginning Retained Earnings ($0) + Net Income ($7,100 − $1,600 + $3,600) − Dividends ($8,000) = Ending Retained Earnings ($1,100). Difficulty: 3 Hard Topic: Financial Statements - Statement of Stockholders' Equity Learning Objective: 01-03 Determine how financial accounting information is communicated through financial statements. Bloom's: Analyze AACSB: Analytical Thinking AICPA: FN Reporting 43 Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

119) Aikman Company paid dividends of $2,410, $0, $1,570 and $1,060 over the first four years of the company's existence, respectively. If Retained Earnings has an ending balance of $9,700 at the end of year four, what was the average annual amount of net income (loss) over the first four years for Aikman? A) $3,685. B) $14,740. C) $840. D) $1,260. Answer: A Explanation: Beginning Retained Earnings ($0) + Net Income ($14,740) − Dividends ($2,410 + $0 + $1,570 + $1,060) = Ending Retained Earnings ($9,700). Divide net income amount by 4 to get average ($14,470 / 4 years) = $3,685. Difficulty: 3 Hard Topic: Financial Statements - Statement of Stockholders' Equity Learning Objective: 01-03 Determine how financial accounting information is communicated through financial statements. Bloom's: Analyze AACSB: Analytical Thinking AICPA: FN Reporting 120) On January 1, Gucci Brothers Inc. started the year with a $492,000 balance in Retained Earnings and a $605,000 balance in Common Stock. During the year, the company reported net income of $92,000, paid a dividend of $15,200, and issued more common stock for $27,500. What is total stockholders' equity at the end of the year? A) $1,231,700. B) $1,097,000. C) $1,201,300. D) $1,588,300. Answer: C Explanation: Total Stockholders' Equity = Common Stock ($605,000 + $27,500) + Retained Earnings ($492,000 + $92,000 − $15,200) = $1,201,300. Difficulty: 3 Hard Topic: Financial Statements - Statement of Stockholders' Equity Learning Objective: 01-03 Determine how financial accounting information is communicated through financial statements. Bloom's: Analyze AACSB: Analytical Thinking AICPA: FN Reporting

121) The financial statement that represents the accounting equation is the: A) Income statement. B) Statement of cash flows. C) Balance sheet. D) Statement of stockholders' equity. Answer: C Difficulty: 2 Medium Topic: Financial Statements - Balance Sheet Learning Objective: 01-03 Determine how financial accounting information is communicated through financial statements. Bloom's: Understand AACSB: Reflective Thinking AICPA: FN Reporting 122) The equation best describing the balance sheet is: A) Assets = Liabilities + Stockholders' Equity. B) Revenues − Expenses = Net Income. C) Ending Retained Earnings + Dividends = Net Income. D) Revenues + Expenses = Net Income. Answer: A Difficulty: 2 Medium Topic: Financial Statements - Balance Sheet Learning Objective: 01-03 Determine how financial accounting information is communicated through financial statements. Bloom's: Understand AACSB: Reflective Thinking AICPA: FN Reporting 123) The financial statement that represents activity over the entire life of the company is the: A) Income statement. B) Balance sheet. C) Statement of financial accounting. D) Statement of cash flows. Answer: B Difficulty: 2 Medium Topic: Financial Statements - Balance Sheet Learning Objective: 01-03 Determine how financial accounting information is communicated through financial statements. Bloom's: Understand AACSB: Reflective Thinking AICPA: FN Reporting

124) Liabilities are shown in which of the following statements? A) Income statement. B) Statement of cash flows. C) Balance sheet. D) Statement of stockholders' equity. Answer: C Difficulty: 2 Medium Topic: Financial Statements - Balance Sheet Learning Objective: 01-03 Determine how financial accounting information is communicated through financial statements. Bloom's: Understand AACSB: Reflective Thinking AICPA: FN Reporting 125) Consider the following account balances of the Shattuck Law Firm at the end of the year: Accounts Payable Salaries Expense Cash Common Stock Service Revenue Supplies Retained Earnings Utilities Expense

4,400 12,800 1,700 2,400 8,300 4,300 1,100 5,000

How many of these accounts would appear in Shattuck's year-end balance sheet? A) Five. B) Four. C) Three. D) Two. Answer: A Explanation: Accounts Payable, Cash, Common Stock, Supplies, and Retained Earnings. Difficulty: 3 Hard Topic: Financial Statements - Balance Sheet Learning Objective: 01-03 Determine how financial accounting information is communicated through financial statements. Bloom's: Apply AACSB: Knowledge Application AICPA: FN Reporting

126) The two categories of stockholders' equity usually found in the balance sheet of a corporation are: A) Common stock and liabilities. B) Assets and liabilities. C) Common stock and retained earnings. D) Revenues and expenses. Answer: C Difficulty: 2 Medium Topic: Financial Statements - Balance Sheet Learning Objective: 01-03 Determine how financial accounting information is communicated through financial statements. Bloom's: Understand AACSB: Reflective Thinking AICPA: FN Reporting 127) Which of the following is not a balance sheet item? A) Assets. B) Retained Earnings. C) Expenses. D) Liabilities. Answer: C Difficulty: 2 Medium Topic: Financial Statements - Balance Sheet Learning Objective: 01-03 Determine how financial accounting information is communicated through financial statements. Bloom's: Understand AACSB: Reflective Thinking AICPA: FN Reporting 128) Which of the following is a balance sheet item? A) Net Income. B) Dividends. C) Utilities Expense. D) Cash. Answer: D Difficulty: 2 Medium Topic: Financial Statements - Balance Sheet Learning Objective: 01-03 Determine how financial accounting information is communicated through financial statements. Bloom's: Understand AACSB: Reflective Thinking AICPA: FN Reporting

129) Which of the following statements is NOT correct about the financial statements? A) An income statement reports revenues, expenses, and net income information. B) The statement of stockholders' equity presents common stock, dividends, and retained earnings information. C) A balance sheet reports assets, liabilities, revenues, and expenses. D) The statement of cash flows shows cash inflows and outflows from operating, financing, and investing activities. Answer: C Difficulty: 2 Medium Topic: Financial Statements - Income Statement; Financial Statements - Balance Sheet; Financial Statements - Statement of Stockholders' Equity; Financial Statements - Statement of Cash Flows Learning Objective: 01-03 Determine how financial accounting information is communicated through financial statements. Bloom's: Understand AACSB: Reflective Thinking AICPA: FN Reporting 130) The balance sheet depicts which of the following equations? A) Net income = revenue − expenses. B) Ending retained earnings = beginning retained earnings + net income − dividends. C) Assets = liabilities + stockholders' equity. D) Net cash flows = total cash inflows − total cash outflows. Answer: C Difficulty: 2 Medium Topic: Financial Statements - Balance Sheet Learning Objective: 01-03 Determine how financial accounting information is communicated through financial statements. Bloom's: Understand AACSB: Reflective Thinking AICPA: FN Reporting

131) Which of the following financial statements reports a company's retained earnings? A) Income statement. B) Balance sheet. C) Statement of cash flows. D) All of the other answers are statements that report retained earnings. Answer: B Difficulty: 2 Medium Topic: Financial Statements - Balance Sheet Learning Objective: 01-03 Determine how financial accounting information is communicated through financial statements. Bloom's: Understand AACSB: Reflective Thinking AICPA: FN Reporting 132) Which of the following is not a balance sheet item? A) Assets. B) Common stock. C) Retained earnings. D) Revenues. Answer: D Difficulty: 2 Medium Topic: Financial Statements - Balance Sheet Learning Objective: 01-03 Determine how financial accounting information is communicated through financial statements. Bloom's: Understand AACSB: Reflective Thinking AICPA: FN Reporting 133) Which of the following is not a major section in the statement of cash flows? A) Cash flows from operating activities. B) Cash flows from customers. C) Cash flows from financing activities. D) Cash flows from investing activities. Answer: B Difficulty: 2 Medium Topic: Financial Statements - Statement of Cash Flows Learning Objective: 01-03 Determine how financial accounting information is communicated through financial statements. Bloom's: Understand AACSB: Reflective Thinking AICPA: FN Reporting

134) Cash paid for which of the following activities would affect the amount reported for operating cash flows in the statement of cash flows? A) Issuing common stock. B) Paying dividends. C) Paying electricity bill for the month. D) Borrowing cash from a bank to acquire a building. Answer: C Difficulty: 2 Medium Topic: Financial Statements - Statement of Cash Flows Learning Objective: 01-03 Determine how financial accounting information is communicated through financial statements. Bloom's: Understand AACSB: Reflective Thinking AICPA: FN Reporting 135) How many of the following transactions would affect operating cash flows reported in the statement of cash flows (all transaction involve cash)? Repay $40,000 borrowed from the bank. Pay $11,000 in salaries to employees. Receive $25,000 from customers for services provided. Pay $750 for advertising. Purchase equipment for $15,000. Receive $25,000 from the sale of land. A) One. B) Two. C) Three. D) Four. Answer: C Explanation: (1) Pay salaries, (2) Receive from customers, and (3) Pay advertising. Difficulty: 3 Hard Topic: Financial Statements - Statement of Cash Flows Learning Objective: 01-03 Determine how financial accounting information is communicated through financial statements. Bloom's: Apply AACSB: Knowledge Application AICPA: FN Reporting

136) Investing cash flows in the statement of cash flows would include which of the following? A) Paying salaries for the month. B) Purchase of land. C) Paying dividends to stockholders. D) Selling goods or services to customers. Answer: B Difficulty: 2 Medium Topic: Financial Statements - Statement of Cash Flows Learning Objective: 01-03 Determine how financial accounting information is communicated through financial statements. Bloom's: Understand AACSB: Reflective Thinking AICPA: FN Reporting 137) FlintCo purchases additional office equipment to better serves its customers. This cash purchase is reported in the statement of cash flows as what type of activity? A) Company activity. B) Investing activity. C) Financing activity. D) Operating activity. Answer: B Difficulty: 2 Medium Topic: Financial Statements - Statement of Cash Flows Learning Objective: 01-03 Determine how financial accounting information is communicated through financial statements. Bloom's: Understand AACSB: Reflective Thinking AICPA: FN Reporting 138) Financing cash flows in the statement of cash flows would include which of the following? A) Paying salaries for the month. B) Purchase of land. C) Paying dividends to stockholders. D) Selling goods or services to customers. Answer: C Difficulty: 2 Medium Topic: Financial Statements - Statement of Cash Flows Learning Objective: 01-03 Determine how financial accounting information is communicated through financial statements. Bloom's: Understand AACSB: Reflective Thinking AICPA: FN Reporting

139) Cash received from bank borrowing would be reported in the statement of cash flows as what type of activity? A) Investing. B) Organizing. C) Operating. D) Financing. Answer: D Difficulty: 2 Medium Topic: Financial Statements - Statement of Cash Flows Learning Objective: 01-03 Determine how financial accounting information is communicated through financial statements. Bloom's: Understand AACSB: Reflective Thinking AICPA: FN Reporting 140) If total change in cash = $44,000, net operating cash flows = $22,000, and net investing cash flows = ($13,000); then net financing cash flows = A) $15,000. B) $35,000. C) $25,000. D) $45,000. Answer: B Explanation: Total change in cash ($44,000) = net operating cash flows ($22,000) + net investing cash flows (−$13,000) + net financing cash flows ($35,000). Difficulty: 3 Hard Topic: Financial Statements - Statement of Cash Flows Learning Objective: 01-03 Determine how financial accounting information is communicated through financial statements. Bloom's: Analyze AACSB: Analytical Thinking AICPA: FN Reporting