Question 1

The portion of net income that the company has kept over a period of years and not used for dividends is called:

Accepted Answer

A)  common stock.
B)  retained earnings.
C)  revenue.
D)  gross profit.

Question 2

All of the following line items are found on the income statement EXCEPT for:

Accepted Answer

A)  cost of goods sold.
B)  interest expense.
C)  operating expense.
D)  dividends declared.

Question 3

An entity's equity consists of two accounts,Amy Jones,Capital,and Mindy Lenz,Capital.This indicates the entity is a:

Accepted Answer

A)  proprietorship.
B)  corporation.
C)  not-for-profit.
D)  partnership.

Question 4

Which financial statement reports cash payments and cash receipts over a period of time?

Accepted Answer

A)  statement of retained earnings
B)  income statement
C)  balance sheet
D)  statement of cash flows

Question 5

All of the following are true statements about the entity assumption EXCEPT for:

Accepted Answer

A)  the entity assumption draws a sharp boundary around each entity.
B)  the transactions of the business cannot be combined with the transactions of the owner.
C)  the entity assumption ensures that the business will continue indefinitely.
D)  under the entity assumption,the entity is any organization that stands apart as a separate economic unit.

Question 6

Accumulated depreciation is normally associated with which asset on the Balance Sheet?

Accepted Answer

A)  Inventory
B)  Accounts receivable
C)  Land
D)  Property,plant and equipment

Question 7

The two main components of stockholders' equity are paid-in capital and dividends.

Accepted Answer

A) True 
 B)False

Question 8

The owners' equity of any business is equal to:

Accepted Answer

A)  revenues minus expenses.
B)  assets minus liabilities.
C)  assets plus liabilities.
D)  paid-in capital plus assets.

Question 9

Potter Company reports the following line items:  What is net income?

Accepted Answer

A)  $22,000
B)  $42,000
C)  $62,500
D)  $99,000

Question 10

Current assets as reported on the Balance Sheet do NOT include:

Accepted Answer

A)  cash equivalents.
B)  inventory.
C)  prepaid insurance.
D)  goodwill.

Question 11

Which of the following entities pays federal income taxes?

Accepted Answer

A)  limited liability partnership
B)  general partnership
C)  limited liability company
D)  corporation

Question 12

All of the following line items are found on the Statement of Cash Flows EXCEPT for:

Accepted Answer

A)  net cash used by investing activities.
B)  net cash provided by operating activities.
C)  net cash used by financing activities.
D)  total stockholders' equity.

Question 13

The major types of transactions that affect retained earnings are:

Accepted Answer

A)  paid-in capital and common stock.
B)  assets and liabilities.
C)  revenues,expenses,and dividends.
D)  revenues and liabilities.

Question 14

Federal income taxes are paid by ________ in a limited liability company.

Accepted Answer

A)  the company
B)  limited partners only
C)  general partners only
D)  members

Question 15

A company's balance sheet:

Accepted Answer

A)  is dated for a period of time.
B)  has three main categories of assets.
C)  has two main categories of liabilities.
D)  lists liabilities before assets.

Question 16

Accounting is moving in the direction of reporting more and more assets and liabilities at their fair values.

Accepted Answer

A) True 
 B)False

Question 17

The International Accounting Standards Board is responsible for establishing:

Accepted Answer

A)  the code of professional conduct for accountants.
B)  the Securities and Exchange Commission.
C)  Generally Accepted Accounting Principles used in the United States.
D)  International Financial Reporting Standards.

Question 18

Since we live in a global economy,all countries have adopted the same accounting standards for business transactions.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following is a CORRECT statement about long-term assets?

Accepted Answer

A)  Accumulated depreciation increases the cost of property,plant,and equipment on the balance sheet.
B)  Intangible assets are long-term assets with no physical form.
C)  Long-term investments can never be sold by the company.
D)  Other long-term assets include supplies.

Question 20

Advantages of a corporation include:

Accepted Answer

A)  each stockholder can enter into agreements that legally bind all the stockholders.
B)  the double taxation of distributed profits.
C)  limited liability of the stockholders for the corporation's debts.
D)  each stockholder can conduct business in the name of the corporation.

Exam 1: The Financial Statements

Which of the following entities pays federal income taxes?

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Accumulated depreciation is normally associated with which asset on the Balance Sheet?

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Federal income taxes are paid by ________ in a limited liability company.

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The International Accounting Standards Board is responsible for establishing:

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All of the following are true statements about the entity assumption EXCEPT for:

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Current assets as reported on the Balance Sheet do NOT include:

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An entity's equity consists of two accounts,Amy Jones,Capital,and Mindy Lenz,Capital.This indicates the entity is a:

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Which of the following is a CORRECT statement about long-term assets?

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The owners' equity of any business is equal to:

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Advantages of a corporation include:

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The portion of net income that the company has kept over a period of years and not used for dividends is called:

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The two main components of stockholders' equity are paid-in capital and dividends.

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Potter Company reports the following line items: What is net income?

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All of the following line items are found on the income statement EXCEPT for:

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A company's balance sheet:

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All of the following line items are found on the Statement of Cash Flows EXCEPT for:

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Since we live in a global economy,all countries have adopted the same accounting standards for business transactions.

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Which financial statement reports cash payments and cash receipts over a period of time?

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Accounting is moving in the direction of reporting more and more assets and liabilities at their fair values.

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The major types of transactions that affect retained earnings are:

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