Ch1Student: ___________________________________________________________________________ 1. Accounting is a system of maintaining records of a company's operations and communicating this information to decision makers. True False 2. Accounting information is used by investors to decide whether to invest in a company's stock. True False 3. Accounting information is used by creditors to decide whether to invest in a company's stock. True False 4. The primary functions of financial accounting are to measure business activities of a company and to communicate those measurements to internal parties for decision-making purposes. True False 5. Financing activities are transactions involving externals sources of funding. True False 6. Investing activities include the purchase and sale of (1) long-term resources and (2) any resources not directly related to a company's normal operations. True False 7. Operating activities include transactions that relate to the primary operations of the company. True False 8. A corporation is an entity that is legally separate from its owners. True False 9. Cash, inventory, supplies, and buildings are examples of liabilities. True False 10. Amounts owed to suppliers, workers, governments, and utility companies are examples of liabilities. True False 11. If total assets of a company equal $12,000 and total stockholders' equity equals $4,000, then total liabilities equal $8,000. True False 12. If total liabilities of a company equal $16,000 and total stockholders' equity equals $9,000, then total assets equal $7,000. True False 13. The accounting equation shows that a company's resources equal creditors' and owners' claims to those resources. True False 14. The costs of advertising, utilities, and salaries in the current reporting period are examples of liabilities. True False 15. The difference between revenues and expenses is referred to as net income or net loss. True False 16. If a company reports revenues of $17,000 and expenses of $12,000, then net income equals $5,000. True False 17. Expenses are regular cash payments by a corporation to its stockholders. True False 18. Dividends represent a return of the company's profits to its owners, the stockholders. True False 19. One of the differences between a partnership and a corporation is that owners of a partnership have limited liability. True False 20. Limited liability means the stockholders are not held personally responsible for the financial obligations of the corporation. True False 21. One advantage of the corporate form of business is double taxation. True False 22. Double taxation refers to a corporation's income being taxed twice—first when the company earns it and pays corporate income taxes on it, and then again when stockholders pay personal income taxes on any amounts the firm distributes to them as dividends. True False 23. Financial statements are periodic reports published by the company for the purpose of providing information to managers. True False 24. The balance sheet is a financial statement that reports the company's revenues and expenses over an interval of time. True False 25. The statement of stockholders' equity is a financial statement that summarizes the changes in stockholders' equity over an interval of time. True False 26. The two primary components of stockholders' equity include common stock and revenue. True False 27. Common stock represents an external source of stockholders' equity, whereas retained earnings represents an internal source. True False 28. Retained earnings represents the cumulative amount of net income earned over the life of the company that has not been distributed to stockholders as dividends. True False 29. Dividends are considered an expense in running the business and reported in the income statement. True False 30. All cash transactions reported in the statement of cash flows are classified as either (1) operating activities, (2) investing activities, or (3) financing activities. True False 31. Investing cash flows generally include cash receipts and cash payments for transactions involving revenues and expenses. True False 32. Operating cash flows generally include cash transactions for the purchase and sale of investments and productive long-term assets. True False 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. True False 34. Any transaction that affects the income statement ultimately affects the balance sheet through the balance of retained earnings. True False 35. Financial accounting has an impact on everyday business decisions as well as wide-ranging economic consequences. True False 36. Investors and creditors rely heavily on financial accounting information in making investment and lending decisions. True False 37. In general, if a company's net income is increasing, so will its stock price. True False 38. The rules of financial accounting are called Generally Accepted Accounting Principles (GAAP). True False 39. Today, financial accounting and reporting standards in the United States are established primarily by the Financial Accounting Standards Board (FASB). True False 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. True False 41. The 1934 act gives the Securities and Exchange Commission (SEC) the power to require companies with publicly traded securities to prepare periodic financial statements for distribution to investors and creditors. True False 42. The role of auditors is to help ensure that management has in fact appropriately applied Generally Accepted Accounting Principles (GAAP) in preparing the company's financial statements. True False 43. Auditors are trained individuals hired by a company as an independent party to express a professional opinion of the accuracy of that company's financial statements. True False 44. The primary objective of financial reporting is to provide useful information to managers in making decisions. True False 45. Public accounting firms are professional service firms that traditionally have focused on three areas: auditing, tax preparation/planning, and business consulting. True False Assets = Liabilities -Stockholders' Equity. Investors. Provides information primarily for external decision makers. 51. D. Preparing financial reports. Provides information primarily for a company's employees. The primary focus for financial accounting information is to provide information useful for: A.46. The accounting equation is defined as: A. B. Making business decisions. Creditors. Measuring a company's economic activity. C. Communicating financial results to investors. 49. Managers. D. It provides an underlying foundation for the development of accounting standards and interpretation of accounting information. C. Assets = Liabilities + Stockholders' Equity. B. B. Financial accounting: A. D. C. 52. Which of the following groups is not among the external users for whom financial statements are prepared? A. Option d 48. D. 50. Measure the profitability of the company in order to assist employees with making decisions. Is primarily used to compute a company's tax obligation. C. Financial accounting does not deal with which of the following? A. Communicate business transactions to internal management. D. Option c D. Net Income = Revenues -Expenses. B. . Determine the amount of tax liability owed to the government. The Financial Accounting Standards Board's conceptual framework does not prescribe Generally Accepted Accounting Principles. True False 47. Regulators. C. Provides information primarily for the use of managers of the company. Option b C. B. Measure business transactions and communicate those measures to external users to make decisions. Liabilities + Revenues = Assets. What is the primary purpose of financial accounting? A. Option a B. D. External activities. which of the following statements must be true? A. The change in retained earnings equals net income less dividends. Emmitt had the following final balances after the first year of operations: assets. C. and net income.000. Investing activities. 54. B.000. C. 57.000 at the end of the year. B. D. 59. McGill purchases additional office equipment to better serves its customers. $10. Management activities. D. D. Investing activities. This purchase is classified as what type of activity? A. Resources of the company equal creditors' and owners' claims to those resources. Net income for the year equals $60. $25. D. B. If a company has stockholders' equity of $60.000. What is the amount of Emmitt's liabilities? A. Investing activities. B. stockholders' equity. C. Transactions of a company involving external sources of funding are referred to as: A. $55. Financing activity. are referred to as: A. B.000. Transactions related to the primary business activities of the company. 58. Operating activities. Operating activity.000. $7. The company's assets exceed liabilities by $60. The company has issued $60. $3. C. D. C. Equality of revenue and expense transactions over time. Which statement below best describes the accounting equation? A. Financing activities. $30. Total revenues earned during the year equal $60.000. Financing activities.000. B. Company activity.53. . D. 55. Expenditure activities. 56.000 of common stock.000.000.000. $13. $55. Financing activities. Financing activities equal investing and operating activities. Investing activity. Transactions of a company that include the purchase and sale of long-term productive assets are referred to as: A.000. Operating activities. B. C. Operating activities. dividends. C. such as selling goods and services to customers. B. $1. Revenues.000. C. C. B. C. Assets. $2. D. Partnership. Limited liability. $6. 61. 62. Expenses. D. Double taxation. C. Separation entity. 63. Sole proprietorship. Expenses. Corporation. 64. The accounts which represent the resources of the company are called: A. D. Limited liability means: A. All business forms share equal limited liability. Revenues. Stimpleton Company engages in the following cash payments: What is the total amount of cash paid for operating activities? A.60. 66. $7. Liabilities. D. B. Corporation. B. B. The form of business organization that is legally separate from its owners is a: A.500. D. C. Partnership. Companies are less likely to be sued if they are formed as a corporation. Which business form has the advantage of limited liability? A.000. One disadvantage of the corporate form of business is: A. Sole proprietorship. Stockholders of a corporation are not obligated to pay the corporation's debts out of their own pocket. C. C. The costs of providing goods and services to customers are referred to as: A. Access to more capital. B. D. Liabilities of a company cannot exceed its assets. B. 65. D.000. Liabilities. Smaller in size. . Companies are not allowed to borrow unless they are profitable. Assets. Liabilities. D. Revenues minus expenses. The owners' interest in a corporation is called: A. 73. Which of the following best describes a revenue? A. Creditors' claims to a corporation's resources are referred to as: A. Assets -Liabilities = Stockholders' Equity. 72.000. C. Assets = Liabilities -Stockholders' Equity.000. 68. C. D. $19. B. Liabilities are best defined as: A. Debts or obligations the company owes resulting from past transactions. B. D. $5. $4. C. The amount of profits retained in a company for the year. Dividends paid to stockholders. $6. Stockholders' equity. C.000. . $4. Stockholders' Equity = Assets + Liabilities. Amounts earned from providing goods and services to a customer. B. Dividends.000. $8. Net income can best be described as: A. B. Stockholders' equity. Dividends. 71. B. 69. Resources owned. Net Income = Revenues -Expenses.67.000. Dividends. Cash received from a customer. D. Resources owned by a company. C. Payments to stockholders. D. Assets. $4. Liabilities. C. $12. D.000. 70.000. Amounts the company expects to collect in the future from customers. B. Assets. The amounts that owners have invested in the business. Use the following appropriate amounts to calculate net income: Revenues. An alternative form of the accounting equation is: A.000. Liabilities. C. Net cash received by a company during the year. B. A. $14. Assets. D.000. Expenses. Revenues -Expenses = Net Income. D. $1. Balance sheet. 78. Balance sheet. Income statement. Gucci Brothers Inc. $7. and balance sheet. D. 75. $47. statement of stockholders' equity.300. paid a dividend of $15. Retained Earnings.000.000. Salaries Payable. statement of stockholders' equity.201. what is the ending retained earnings balance? A.000. The equation best describing the income statement is: A. 77. C. started the year with a $492. income statement. and income statement. Assets = Liabilities + Stockholders' Equity. Dividends. the company earned net income of $92. The financial statement that represents activity over the entire life of the company is the: A. D. Stockholders' equity.74.000.000. If the average annual amount of dividends paid over the last four years is $3.000. . Income statement. and statement of stockholders' equity.000.588.000. Liabilities.300. Revenues + Expenses = Net Income. Assets.097. Which of the following is the correct order for preparing the financial statements? A. B. B. and $10. During 2012. 76. $35. $1.000. $12. Balance sheet. On January 1. Which of the following accounts appears in the statement of stockholders' equity? A.231. B. C. B. and issued more common stock for $27. $23. C. The account type that represents payments to stockholders is called: A. Supplies. Cash. B. Statement of stockholders' equity.000 balance in Common Stock. D. C. Assets = Revenues -Expenses. 80. $1. D. 2012. income statement. C.700. and balance sheet. D. $1. B.000 balance in Retained Earnings and a $605. 2012? A.200. 79. C.000.500. C. What is total stockholders' equity on December 31. B. Statement of financial accounting. D.000 over the first four years of the company's existence. Sooner Company has had a net income of $8. Statement of cash flows. $5. B. 86. Income statement and statement of cash flows. 82. D. B. and $3. Revenues. and stockholders' equity information. Assets and liabilities. C. In what order are the following financial statements prepared: (1) balance sheet.100. and (3) statement of stockholders' equity? A. Common stock and retained earnings. 1. 84. $0. C. Advertising expense. had the following net income (loss) the first three years of operation: $7. B. Common stock and liabilities. 1.600.100. C. D. 3. D. 2. C. B. B. D. 85. C. Salaries expense. liabilities. Which of the following statements regarding financial reports is not correct? A. Which of the following is not a balance sheet item? A. An income statement shows revenues and expenses. investing. 3. Common stock. D. 1. Nina Corp. 83. The financial statement(s) that record activity over an interval of time is (are) the: A. and financing activities. Cash. $8. A statement of cash flows shows cash inflows and outflows from operating. C. A statement of stockholders' equity reports revenues.600). and dividends information. 1. Balance sheet and income statement. $9. 87. net income. A balance sheet contains assets. The two categories of stockholders' equity usually found in the balance sheet of a corporation are: A. 2. 2. (2) income statement. Service revenue. Balance sheet. B.81. C. 2. 3. Assets. ($1. $500. .100. D. Revenues and expenses. Retained earnings. 3. Income statement. Which of the following items would not appear in an income statement? A. If the Retained Earnings balance at the end of year three is $1. what was the total amount of dividends paid over these three years? A.000. B. D. 260.900. D. Income statement. 89. $3.0 million. 90. Balance sheet. D. Revenues -Expenses = Net Income. $4.4 million.88.700. D. What was the net income earned during the year? A.4 million during the year. C. 93.300 and had net income of $22. then what was the beginning Retained Earnings balance? A. B.740.5 million. what is the average annual amount of net income (loss) over the past four years for Aikman? A.685. Ending Retained Earnings + Dividends = Net Income. Which financial statement is typically prepared first? A. The company declared a dividend of $5. D. B. $840. $69. $24. If Retained Earnings after year four has an ending balance of $9. The equation best describing the balance sheet is: A. $7. 91. $300. C. B. B. 92. C. $1.0 million from the beginning of the year. C. Balance sheet.4 million. D. $0. If during the year DW paid dividends of $4.100. .500. $14.300.570 and $1. Statement of stockholders' equity. $1. B. C. C. Statement of stockholders' equity.060 over the first four years of the company's existence. Statement of cash flows. Expenses are shown in which of the following statements? A. Statement of cash flows.410. Assets = Liabilities + Stockholders' Equity. Income statement. DW has an ending Retained Earnings balance of $51. B. The ending Retained Earnings balance of Boomer Inc. D. $32. Revenues + Expenses = Net Income. $1. decreased by $1. Aikman Company has paid dividends of $2.300. $6. $110. C. C. Statement of cash flows. Cash flows from financing activities. $0. C.000. . $30. The financial statement that represents the accounting equation is the: A. B. Given the information below about David Corporation. Retained earnings at the end of the year is calculated using: A. Given the information below about Thomas Corporation. D. C. 99. B. B. B.000. C.000. B.000. Statement of cash flows.000. and dividends. what was the amount of dividends the company paid in the current period? A. Statement of stockholders' equity. 96. D. Cash flows from customers. Beginning retained earnings. net income. $20. 95. net income. D. Balance sheet. C. $140. what was the amount of dividends the company paid in the current period? A. Statement of stockholders' equity. D. Balance sheet.94.000. Income statement. Which of the following is not a major section in the statement of cash flows? A. Stockholders' equity. Cash flows from investing activities. 97. $28. Cash flows from operating activities. and dividends. Net income and dividends. Income statement. 98. D. Liabilities are shown in which of the following statements? A.000. B. $13. $18. Common stock and dividends. D. Generally accepted accounting principles. Retained earnings. C. financial accounting and reporting standards in the United States are established primarily by the: A. Useful to investors and creditors in making decisions. Standards or methods for presenting financial accounting information. C. C.100. Total dividends. Securities and Exchange Commission. To determine market values. . Net income. 101. That tells about a company's economic resources and claims to those resources. B. B. B. D. Stockholders' equity. The group of individuals that create and enforce all accounting rules.Financial reporting objectives do not include providing information: A.Which accounting number has the single greatest impact on stock prices? A. Total assets. D. C. Determining taxable income. Generally accepted auditing practices. 105. Government-mandated rules that companies must follow. Rules that best estimate profitability for a company. C.Today. assess profit potential.Generally Accepted Accounting Principles (GAAP) are best defined as: A. B. International Accounting Standards Board. Total revenues. the most important objective for financial reporting is to provide information useful for: A. Predicting cash flows.S. Increasing future profits. B. and evaluate management. Helpful to investors in predicting cash flows. B. Providing accountability. Generally authorized accounting procedures. D. 104. D.Which accounting amount best represents value created for stockholders during the current period? A.Of the following. Net income. 102. D. U. D. C. Generally applied accounting procedures. C.GAAP is an abbreviation for: A. B. Congress. 106. Total assets. 103. D. Financial Accounting Standards Board. The qualitative characteristic that says accounting information can influence users' decisions by allowing them to assess past performance is: A. D. Legal liability. D. C. 111. C. Is the primary standard-setting body in the United States. 110. 109. D. D. Economic entity assumption. Neutrality. Economic entity assumption. C. B.The major underlying assumptions of accounting include all of the following except: A. C. 108. . Quality of a company's workforce. Going concern. Securities and Exchange Commission. B. Monetary unit assumption. Relevance.S. D. Amount of income taxes a company owes to the government. Materiality. Can overrule the FASB when their policies disagree. Predictive value. Monetary unit assumption. Periodicity assumption. B.The assumption that a business can continue to remain in operation into the future is the: A. B.107. Consistency. B. Promotes the use of high-quality. Quality of the company's products.Independent auditors express an opinion on the: A. B. Economic entity. Confirmatory value. 112. Periodicity assumption. Neutrality. Fairness of financial statements. Going concern assumption. Monetary unit. C. D. Timeliness.Accounting information that does not provide measurement bias in favor of a particular set of companies has the characteristic of: A. C. Going concern assumption. understandable global accounting standards. D.The assumption that the assets and liabilities of the business are accounted for on the books of the company but not included in the records of the owner is the: A. C. B.The International Accounting Standards Board: A. Is governed by the U. 113. B. D. feedback value. Predictive value. Completeness. Verifiability. Relevance of an item.Constraints on qualitative characteristics of accounting information include: A. The information represents to users what it claims to represent. C. 120. 118. or completeness. Neutrality. 115. Large in amount and timely. Comparability or consistency. B. Cost effectiveness.114. Predictive value. C. The information follows conservatism principles and is also material. Freedom from material error. Neutrality. Periodicity assumption.Materiality is based upon which factor(s)? A. Freedom from material error. C. D. Economic entity assumption. B. 116. C.If accounting information is considered to have faithful representation. Comparability. The information will have predictive value. Consistency of an item.The conceptual framework's qualitative characteristic of faithful representation includes: A. B. . C. Amount and nature of an item. and is timely. neutrality. C. The information is considered pertinent to or affects decisions. Going concern. B. Neutrality. Confirmatory value. D. then which of the following is true? A.If a company has gone bankrupt. D. Going concern assumption. 119. B. D. D. B.The conceptual framework's qualitative characteristic of relevance includes: A. C. Monetary unit assumption. its financial statements likely violate the: A. Timeliness of an item.For accounting information to be relevant. D. Predictive value or confirmatory value. 117. it must have which of the following characteristics? A. revenue. Faithful representation and consistency. Cost effectiveness and materiality. Faithful representation and relevance. or expense. liability. indicate whether a company would classify the related account as an asset. Comparability and consistency. . stockholders' equity.Enhancing qualitative characteristics of accounting information include: A. 122. B. Comparability and consistency. Faithful representation and relevance. dividend. D.Primary qualitative characteristics of accounting information are: A. C. D. Relevance and comparability. Relevance and comparability. 123. C.For each transaction.121. B. and expenses. . or operating. 125. liabilities.Account classifications include assets. revenues. stockholders' equity. dividends.Indicate whether a company would classify the transaction as financing. investing. Indicate the account classification for each account name.124. 127. investing.Below are typical transactions for a company. Indicate whether each transaction is classified as a financing. investing. or operating activity.Below are typical transactions for a company. Indicate whether each transaction is classified as a financing. or operating activity.126. . Expenses = $13.At the end of the current period. 130.000.000.000.Below are the account balances for Huffman Corporation at the end of December. Expenses = $16. Rogers Company reports the following amounts: Assets = $25.000. Revenues = $22.000.000.128.000. . Calculate net income and stockholders' equity at the end of the period. Revenues = $20. Dividends = $3. Use only the appropriate accounts to prepare an income statement.000. 129. Calculate net income and stockholders' equity at the end of the period.000. Liabilities = $15.At the end of the current period. Liabilities = $28. reports the following amounts: Assets = $50.000. Maltese. Inc. Dividends = $4. the company reports net income of $3. Use only the appropriate accounts to prepare a balance sheet.200. Maurice and Sons has $12. In addition.000 of common stock outstanding and retained earnings of $4.200 and pays dividends of $1.000.131. the company issues additional common stock for $5. 132.Klein Interiors has the following account balances at the end of the year.200.At the beginning of the year (January 1). During the year. . Prepare the statement of stockholders' equity at the end of the year (December 31). Net operating cash flows = $30.000.Thomason Financial has the following cash transactions for the year.000.000.000. 4. Liabilities = $13.000. 3. Assume cash at the beginning of the period is $6. Dividends = $5. 1.000. Stockholders' equity = ____. Total change in cash = $28. Increase in stockholders' equity = $20.000. Revenues = $27. .Each of the following independent situations represents amounts shown on the four basic financial statements. Assets = $25. Fill in the missing blanks using your knowledge of amounts that appear on the financial statements. 134. Net income = ____. Net investing cash flows = ____. Net income = ____.000. Net financing cash flows = $18. 2.000.133. Issuance of common stock = $12. Prepare a statement of cash flows. Expenses = $18.000.000. A company reports an increase in retained earnings of $3. A company reports ending retained earnings of $2.200. A company reports beginning retained earnings of $1. 1.200 and net income of $4. What is the amount of dividends? 2.800. What is the amount of beginning retained earnings? 5. net income of $900.800.900 and net income of $1. Calculate the answer to each.500 and dividends of $1. Calculate the balance of retained earnings at the end of each year. net income of $1. What is the amount of net income? 4. Note that retained earnings will always equal $0 at the beginning of year 1. A company reports an increase in retained earnings of $2. and dividends of $500. A company reports an increase in retained earnings of $1.500.During its first five years of operations.135.Below is information related to retained earnings for five independent situations.700.200. and $200 dividends. 136. What is the amount of ending retained earnings? 3. What is the amount of dividends? . Della Manufacturing reports net income and pays dividends as follows. financing cash flows of $900. A company reports operating cash flows of $600. A company reports total liabilities of $2. A company reports operating cash flows of $1.400 and stockholders' equity of $1.200. and financing cash flows of $400. investing cash flows of $300. 1. A company reports total assets of $2. A company reports operating cash flows of $700. financing cash flows of $400. What is the amount of total liabilities? 4.700 and an increase in liabilities of $400. Calculate the answer to each. What is the amount of total assets? 3.Below is balance sheet information for five independent situations. If the beginning cash amount is $500. 1. investing cash flows of $400. investing cash flows of $700.Below is cash flow information for five independent situations. What is the amount of stockholders' equity? 2. What is the amount of cash flows from investing activities? 5. A company reports total assets of $2. what is the ending cash amount? 3. and a change in total cash of $100. What is the amount of cash flows from financing activities? 4.137. Calculate the answer to each. A company reports an increase in liabilities of $300 and a decrease in stockholders' equity of $800. and financing cash flows of $1. A company reports operating cash flows of $3. A company reports an increase in assets of $1.100. What is the amount of the change in stockholders' equity? 5.800. What is the amount of cash flows from operating activities? . What is the amount of the change in total cash? 2. and a change in total cash of $200. A company reports investing cash flows of $1.100.000 and total liabilities of $900.700 and total stockholders' equity of $700.400. and a change in total cash of $100. What is the amount of the change in total assets? 138. 140.Riley Incorporated reports the following amounts at the end of the year: In addition.000 during the year. . The company also had retained earnings of $20.Below are incomplete financial statements for Beasley.000 during the year.139. Prepare the income statement.700 at the beginning of the year and paid dividends of $2. the company had common stock of $65. statement of stockholders' equity.000 at the beginning of the year and issued an additional $5. Incorporated. Calculate the missing amounts. and balance sheet. $7. 143.000 Interest cost on the note for the year.500 Accounts receivable.Define accounting.000 Accounts payable.000 Retained earnings at the end of the year. Describe the two primary functions of financial accounting and its role in our society. 2012.500 Supplies cost for the year. They are not intended to be examples of complete student responses.400 Rent cost for the year.700 Supplies on hand. 11. $18. It might be helpful to provide detailed instructions to students on how brief or in-depth you want their answers to be. What account classifications are typically associated with each type of business activity? . $120.300 Miscellaneous costs for the year $8.000 Common stock that has been issued. 142. $9.141.700 Notes payable outstanding $30. $3. 71.Use the following information available at the end of 2012 to prepare an income statement and balance sheet on December 31. for Goldie Company. $17.200 Salaries cost for the year.Describe the three fundamental business activities that accountants measure. $12. $60. Fees for services performed during the year.100 The following answers point out the key phrases that should appear in students' answers.400 Cash on hand.000 Equipment 84. $2. . (c) periodicity. (d) monetary unit.Define the four basic assumptions underlying Generally Accepted Accounting Principles: (a) economic entity.How does the value of an audit affect financial statements? 146.List and describe the four financial statements most frequently provided to external users. 147. 145.Match each account classification with its example.144. (b) going concern. Match each financial statement with the accounts reported in it. 149. .148.Match each business activity with its example. Standards of Professional Compliance (SPC). . D. C. FASB. IASB. Generally Accepted Accounting Principles (GAAP). Generally Accepted Auditing Standards (GAAS). 151.150. 152. B. D. B. IRS. Rules of Financial Reporting (RFR). SEC. private-sector group that is primarily responsible for setting financial reporting standards in the United States is the: A.The independent.The body of rules and procedures that guide the measurement and communication of financial accounting information is known as: A. C.Match each qualitative characteristic with its definition. B.400 Service Revenue 8. 2012: Accounts Payable $4.000 How many of these accounts would appear in Shattuck's 2012 income statement? A.400 Salaries Expense 12.If total change in cash = $44. D.000. Five.300 Retained Earnings 1. . Two. D. 2012: Accounts Payable $4. $45. Two.000. Five. $35. D.000.Consider the following account balances of the Shattuck Law Firm as of December 31.800 Cash 1.000.300 Supplies 4.100 Utilities Expense 5. C.300 Retained Earnings 1. B.153. and net investing cash flows = ($13. B.Consider the following account balances of the Shattuck Law Firm as of December 31.400 Salaries Expense 12. $15.000 How many of these accounts would appear in Shattuck's 2012 balance sheet? A. then net financing cash flows = A.700 Common Stock 2. $25.400 Service Revenue 8.700 Common Stock 2. Three.100 Utilities Expenses 5. Three. 154. Four.000). net operating cash flows = $22. Four. C.000. 155.000.800 Cash 1. C. $7. Assets.000 If Mookie had Retained Earnings of $88. 157. Total assets. C. Prepare federal and state tax returns.000 at the end of year 5. Measure and record business transactions. 161. D. 159.The accounts that represent resources owed to creditors are called: A. C.The primary purpose(s) of financial accounting is (are) to: A.For the past five years. The statement of cash flows shows cash inflows and outflows from operating. 158. Net income. D. C. D.000. Stockholders' equity.000 4.000. revenues. Total expenses. Common stock. and retained earnings information. A balance sheet reports assets.000 $2. D. Dividends.Which financial accounting number impacts stock prices more than any other single piece of information? A. $25. a and c 160. C. Mookie Consulting Services reported the following annual net income and dividend amounts: Year Net Income Dividends 1.000 1.000 3. B.000 3 9. expenses. D. liabilities. and net income information.156. C. B. B. Total assets. what was the company's Retained Earnings at the beginning of Year 1? A.000 2 17. B. $22. An income statement reports revenues.000 4 14. D. and investing activities. and expenses.Which of the following statements is NOT correct about the financial statements? A. . Liabilities. $1. B. financing.Which of the following items is reported in the statement of stockholders' equity? A. $13. Communicate financial results to investors and creditors. Operating cash flows. The statement of stockholders' equity presents common stock.000. dividends. C. Net income. Retained earnings.000. B.000 2.000 5 25. C. Balance sheet. Paying electricity bills for the month. C. Income statement.000 Received $25.dividends. Net income = revenue . 1. All of the above.000 from issuing common stock A. owners' claims to the company's resources amount to: A. B. C. $400. Provide information that is useful in making decisions.How many of the following transactions are operating activities? Borrowed $50. C. C.The balance sheet depicts which of the following equations? A. 166. B.000 from the bank Purchased $12.Which financial statement reports a company's retained earnings? A.Which statement below best describes the objectives of financial accounting? A.200. D. Issuing common stock. 4.000.000. B. Paying dividends.000. Borrowing cash from a bank to acquire a factory. B. D. D. Provide information that helps predict cash flows.000. 165.expenses.000 in supplies Provide services to customers for $27. D. $800. 3. 2. Statement of cash flows. All of the above are correct. Provide information about the economic resources. $1. B. D. 167. C.162. $250.Using the information below from the accounting records of Thomas Corporation. B.000 Paid the utility bill of $750 Purchased a delivery truck for $12. Ending retained earnings = beginning retained earnings + net income . 164.Which of the following is an operating activity? A. . 163. D. claims to resources and changes in resources and claims.total cash outflows. Net cash flows = total cash inflows . Assets = liabilities + stockholders' equity. purchasing land. 172.paying utilities for the month. Service revenue. Assets. Income statement and statement of stockholders' equity.The costs associated with producing revenues are referred to as: A. Accounts payable.Which of the following accounts appears in the statement of stockholders' equity? A. Investing . 171. Liabilities. D. 174.Accountants are responsible for measuring various operating. Expenses. B. C. Process of measuring income taxes owed to the government. B. Statement of stockholders' equity and balance sheet. Common Stock D. 169. D. investing and financing activities. B.Which definition below best describes financial accounting? A. B.paying dividends to stockholders. C. Expenses.168. C. C. Utilities expense. Procedures designed to enhance the company's image to potential investors. Accounts Receivable C. . Retained Earnings. Measuring business activities and communicating them to external parties.Net income appears in which two financial statements? A. D. Dividends. System of maintaining communication with a company's customers and suppliers.selling equipment for cash.Which of the following accounts appears in the statement of stockholders' equity? A. Financing .Which of the following is not a balance sheet item? A. B. D. D. C. Delivery expense. Operating . B. Which of the following correctly matches the activity with its type? A. Accounts Payable B. Balance sheet and income statement. Net income appears in only one financial statement. D. Supplies 173. Assets. Investing . C. 170. Liabilities. FALSE 24. TRUE 21. Ch1 Key 1. TRUE 17. FALSE 25. FALSE 5. FALSE 30. TRUE 19. TRUE 3. TRUE 16. TRUE 6. TRUE 31. FALSE 13. TRUE 8. FALSE 22. FALSE 18. FALSE 20. TRUE 26. TRUE 7. FALSE 4. TRUE 23. TRUE 11. FALSE 10. TRUE 14. FALSE 27. TRUE 29. FALSE 32. FALSE . TRUE 9. TRUE 12. TRUE 2. TRUE 28. FALSE 15. TRUE 47. D 61. A 48. TRUE 37. TRUE 43. D 51. C 50. A 55. C 49. TRUE 46. C 59. D . B 57. TRUE 35. D 65. B 56. A 64. TRUE 34.33. B 66. TRUE 42. C 54. TRUE 39. TRUE 40. C 62. A 52. A 53. A 58. TRUE 44. A 63. TRUE 36. D 67. C 60. TRUE 38. TRUE 41. FALSE 45. C 95. C 92. C 79.68. A 96. C 100. D 88. D 76. D 83. C 84. C 101. C 74. A 78. D 82. D 81. C 99. C 97. B 72. A 89. D 87. C 91. B 93. D 102. B 73. C 85. D 75. A 94. D 69. B 71. A 90. C 80. D 86. C 98. C 77. C 70. D . Operating. Revenue. 126. 1. 8. Investing. Asset. 3. C 111. Operating. 4. Operating. B 117. D 110. Expense. A 115. 127. 2. Operating. B 106. 4. C 105. Operating. 6. A 107.103. 5. Liability. A 104. Expense. 9. Expense. Operating. C 118. 3. B 120. 2. 4. Financing. D 121. 7. A 109. . 5. Financing. 1. Operating. Operating. B 123. D 114. 128. 124. Financing. Financing. 5. Operating. 10. Stockholders' equity. 7. 6. C 122. 6. Asset. Financing. Operating. 7. Financing. 1. Operating. C 113. 1. 2. 9. 10. Investing. Operating. Dividend. 8. 125. 2. C 108. 3. Investing. 5. Operating. A 119. Dividends. 3. Revenue. C 112. 4. 2. 8. 4. 1. Asset. Investing. A 116. Asset. 3. 5. Stockholders' equity. Liability. 131.129. . 132. 130. 134.133. 135. * Retained earnings = beginning retained earnings + net income -dividends . 136. . 138.137. . 000 + $30. (a) -$20.000 (c) = $5.000 (f) = $60. 140.000 (in the statement of stockholders' equity) (i) = $15.000 (a) = $25.000 In the statement of stockholders' equity.000 (e) = $3.000 (in the statement of stockholders' equity) In the income statement.000 + 5.000 In the income statement.000 (d) = $2.000 In the balance sheet. (b) = $5.139.000 -$35. $12.000 -$7.000 . $25. (g) = $30. In the statement of stockholders' equity.000 (i) (e) = $60.000 (f) -$15.000 and (h) $15.000 + (c) = $30.000 (g) + $15.000 (h) (i) = $60.000 = $5.000 -(d) = $15. 2. 1. financing activities are associated with long-term liabilities and stockholders' equity (including dividends).S. 145. 3.In the absence of information to the contrary. 148.. The statement of shareholders' equity summarizes the changes in stockholders' equity (common stock and retained earnings) over an interval of time. It assumes that the value of a dollar is stable over time. 5. it is anticipated that a business entity will continue to operate indefinitely. 149. The statement of cash flows presents the cash flows over an interval of time for operating. 2. 3. 2. b. In general. advertising. taxes. & financing activities. and machinery. c. 6. and (2) any resources not directly related to a company's normal operations. Economic entity . a. 4. 1. B 152. wages. a. a. including investors and creditors. A . and operating activities are associated with revenues and expenses. Periodicity . dollar. like utilities. Investing activities include the purchase and sale of (1) long-term resources such as land. The income statement presents revenues and expenses over an interval of time. rely on financial accounting information to make informed. financial statement elements should be measured in terms of the U. 5. c. 3. Outside auditors add credibility to financial statements.141. 144. 151. liabilities. increasing the confidence of capital market participants who rely on financial statements in making investment and credit decisions and recommendations. investing. rent. The balance sheet presents the assets. f. Financing activities are transactions involving external sources of funding." The functions of financial accounting are to measure the business activities of a company and to communicate those measurements to external parties for decision-making purposes.The life of a company can be divided into artificial time periods to provide timely information to external users.S. 150. Monetary unit . b. 1. buildings. d. a. c. A large number of people. 1. and stockholders' equity at a point in time. such as providing products and services to customers and the associated costs of doing so. d. better decisions about companies. 6. 4. 2. c. 146. Accounting is "the language of business. b. investing activities are associated with long-term assets. and creditors who lend money to the company. f. e. 3. b. equipment. and maintenance.In the U. Going concern . Operating activities include transactions that relate to the primary operations of the company.All economic events can be identified with a particular economic entity. 142. and presumably. 143. 147. e. There are two basic sources of this external funding—the owners of the company who invest their own funds in the business. C 159. C 156. C 167. B 165. D 160. D 172. D 164. C . B 174. B 162.153. D 168. A 155. C 173. B 171. C 158. C 163. D 166. D 170. A 157. C 169. C 154. B 161. Learning Objective: 01-05 Explain the term generally accepted accounting principles (GAAP) and describe the role of 18 GAAP in financial accounting. Learning Objective: 01-06 Identify career opportunities in accounting. Ch1 Summary Category # of Questions AACSB: Analytic 2 AACSB: Analytical 24 AACSB: Reflective Thinking 148 AICPA: Critical Thinking 119 AICPA: Decision Making 1 AICPA: Measurement 12 AICPA: Reporting 42 Blooms: Analysis 27 Blooms: Comprehension 2 Blooms: Knowledge 140 Blooms: Synthesis 5 Difficulty: Easy 90 Difficulty: Hard 23 Difficulty: Medium 61 Learning Objective: 01-01 Describe the two primary functions of financial accounting. 12 Learning Objective: 01-02 Identify the three fundamental business activities that financial accounting measures. 57 Learning Objective: 01-03 Discuss how financial accounting information is communicated through financial 64 statements.Chapter 01 175 . Learning Objective: 01-04 Describe the role that financial accounting plays in the efficient distribution of societys 5 resources. 1 Learning Objective: 01-07 Explain the nature of the conceptual framework used to develop generally accepted 17 accounting principles. Spiceland .