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Exam 1: Accounting Information and Decision Making

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Question 51

Multiple Choice

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Net income appears in which two financial statements?

A) Balance sheet and income statement.
B) Statement of stockholders' equity and balance sheet.
C) Income statement and statement of stockholders' equity.
D) Net income appears in only one financial statement.

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Question 52

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The account type that represents payments to stockholders is called:

A) Liabilities.
B) Assets.
C) Stockholders' equity.
D) Dividends.

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Question 53

Multiple Choice

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For accounting information to be relevant, it must have which of the following characteristics?

Below are typical transactions for a company. Indicate whether each transaction is classified as a financing, investing, or operating activity.

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.

Below is information related to retained earnings for five independent situations. Calculate the answer to each. 1. A company reports an increase in retained earnings of $3,200 and net income of $4,800. What is the amount of dividends? 2. A company reports beginning retained earnings of $1,800, net income of $1,200, and $200 dividends. What is the amount of ending retained earnings? 3. A company reports an increase in retained earnings of $2,500 and dividends of $1,500. What is the amount of net income? 4. A company reports ending retained earnings of $2,700, net income of $900, and dividends of $500. What is the amount of beginning retained earnings? 5. A company reports an increase in retained earnings of $500 and net income of $1,200. What is the amount of dividends?

Materiality is based upon which factor(s) ?

Define accounting. Describe the two primary functions of financial accounting and its role in our society.

Expenses are regular cash payments by a corporation to its stockholders.

If a company reports revenues of $17,000 and expenses of $12,000, then net income equals $5,000.

Which of the following is an operating activity?

The two primary components of stockholders' equity include common stock and revenue.

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.

Financing activities are transactions involving externals sources of funding.

Financial accounting does not deal with which of the following?

The qualitative characteristic that says accounting information can influence users' decisions by allowing them to assess past performance is:

The owners' interest in a corporation is called:

Which definition below best describes financial accounting?

The balance sheet is a financial statement that reports the company's revenues and expenses over an interval of time.

Transactions of a company involving external sources of funding are referred to as: