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Exam 1: Financial Statements and Business Decisions

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Question 21

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Which of the following is not provided within the notes that accompany the financial statements?

A) A description of the accounting rules applied.
B) A description of the terms of a lease agreement.
C) A description pertaining to a particular line on the financial statements.
D) A description of net income for each of the prior three years.

E) All of the above
F) None of the above

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Question 22

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Which of the following is the amount of revenue reported on the income statement of a retail company?

A) The cash collected from customers during the current period.
B) Both cash and credit sales for the period.
C) Cash sales for the period.
D) Cash sales and stockholders' investments.

E) None of the above
F) B) and D)

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Question 23

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Which of the following is not one of the three steps taken by a corporation to assure the accuracy of its records?

Parker Pool Supply,Inc.reported the following items for the year ended December 31,2010: $\begin{array} { l r } \text { Wages and salary expense } & \$ 527,000 \\\text { Cost of goods sold } & 1,124,000 \\\text { Rent expense } & 395,000 \\\text { Sales revenue } & 2,564,000 \\\text { Interest expense } & 30,000 \\\text { Income tax expense } & 121,000 \\\text { Accounts receivable } & 27,000\end{array}$ Requirements: Prepare an income statement for the year ended December 31,2010.

During 2011,Canton Company's assets increased $95,500 and their liabilities decreased $17,300.Canton Company's stockholders' equity on December 31,2011 was $211,500.How much was stockholders' equity on January 1,2011?

Moss Company has provided the following data: 2010 revenues were $87,500. 2010 net income was $43,900. Dividends declared and paid by Moss during 2010 totaled $15,700. Total assets on December 31,2010 were $227,000. Total stockholders' equity on December 31,2010 was $133,000. Contributed capital on December 31,2010 was $93,000. What was the beginning retained earnings balance?

The Financial Accounting Standards Board (FASB)has been given the authority by the Securities and Exchange Commission (SEC)to develop generally accepted accounting principles.

What is the objective of the cash flow statement? Describe the three cash flow classifications that are reported within the cash flow statement.

For a business organized as a general partnership,which statement is true?

Sparty Corporation has provided the following information for its most recent year of operation: Revenues earned were $97,000,of which $9,000 were uncollected at the end of the year. Operating expenses incurred were $39,000,of which $7,000 were unpaid at the end of the year. Dividends declared were $11,000,of which $3,000 were unpaid at the end of the year. Income tax expense is 30% of pretax income. How much net income was reported on Sparty's income statement?

Why does a company hire independent auditors?

Total assets are $37,500,total liabilities are $20,000 and contributed capital is $10,000; therefore,retained earnings are $7,500.

The auditor can be held liable for malpractice in situations where the investors suffered losses while relying on the financial statements.

Which of the following transactions affects both the income statement and the statement of cash flows?

What financial statement would you look at to determine the dividends declared by a business?

Laker Company has provided the following information for its most recent year of operation: Cash collected from customers totaled $99,300. Cash borrowed from banks totaled $42,700. Cash paid to employees totaled $23,300. Cash paid for interest totaled $3,100. Cash received from selling an investment in Husky stock totaled $73,000. Cash payments to banks for repayment of money borrowed totaled $9,700. Cash paid for operating expenses totaled $11,200. Land costing $75,000 was sold for $75,000 cash. Cash paid for dividend payments to stockholders totaled $7,700. How much was Laker's net cash flow from investing activities?

Which of the following statements is false?

Madrid Company has provided the following data (ignore income taxes) : 2010 revenues were $77,500. 2010 net income was $33,900. Dividends declared and paid during 2010 totaled $5,700. Total assets on December 31,2010 were $217,000. Total stockholders' equity on December 31,2010 was $123,000. Retained earnings on December 31,2010 were $83,000. Which of the following is not correct?

Which of the following is considered to be an expense on the income statement?

Revenue is recognized within the income statement during the period in which cash is collected.