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Exam 1: Accounting Information and Decision Making

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Question 71

True/False

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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.

A) True
B) False

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Question 72

Multiple Choice

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If a company has gone bankrupt, its financial statements likely violate the:

A) Periodicity assumption.
B) Monetary unit assumption.
C) Going concern assumption.
D) Economic entity assumption.

E) B) and C)
F) B) and D)

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Question 73

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Which statement below best describes the objectives of financial accounting?

At the end of the current period, Rogers Company reports the following amounts: Assets = $25,000; Liabilities = $15,000; Dividends = $3,000; Revenues = $20,000; Expenses = $13,000. Calculate net income and stockholders' equity at the end of the period.

The conceptual framework's qualitative characteristic of relevance includes:

The financial statement(s) that record activity over an interval of time is (are) the:

Each of the following independent situations represents amounts shown on the four basic financial statements. Fill in the missing blanks using your knowledge of amounts that appear on the financial statements. 1. Revenues = $27,000; Expenses = $18,000; Net income = ____. 2. Increase in stockholders' equity = $20,000; Issuance of common stock = $12,000; Dividends = $5,000; Net income = ____. 3. Assets = $25,000; Liabilities = $13,000; Stockholders' equity = ____. 4. Total change in cash = +$28,000; Net operating cash flows = +$30,000; Net financing cash flows = +$18,000; Net investing cash flows = ____.

Any transaction that affects the income statement ultimately affects the balance sheet through the balance of retained earnings.

One disadvantage of the corporate form of business is:

During its first five years of operations, Della Manufacturing reports net income and pays dividends as follows. Calculate the balance of retained earnings at the end of each year. Note that retained earnings will always equal $0 at the beginning of year 1.

Creditors' claims to a corporation's resources are referred to as:

Dividends represent a return of the company's profits to its owners, the stockholders.

Which accounting amount best represents value created for stockholders during the current period?

Which of the following best describes a revenue?

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.

Which of the following accounts appears in the statement of stockholders' equity?

Which of the following statements is NOT correct about the financial statements?

Which of the following is not a balance sheet item?

The major underlying assumptions of accounting include all of the following except:

Liabilities are best defined as: