Question 1

Accrual accounting:
A)is designed to match revenues and expenses.
B)results in the balance sheet showing the fair value of the entity's assets.
C)means that expenses are recorded when they are paid.
D)cannot result in the entity having net income unless cash is received from customers.

Accepted Answer

Accrual accounting is designed to match revenues and expenses in the period in which they are incurred, regardless of when cash transactions occur.

Question 2

At the beginning of the year, paid-in capital was $164 and retained earnings was $94.During the year, the stockholders invested $48 and dividends of $12 were declared and paid.Retained earnings at the end of the year were $104. Net income for the year was:
A)$20
B)$22
C)$30
D)$40

Accepted Answer

Net income = Beginning retained earnings + Net income - Dividends + Paid-in capital - Ending retained earnings= 94 + Net income - 12 + 48 - 104= Net income = 22

Question 3

The balance sheet shows the following accounts and amounts: Inventory, $84,000; Long-term Debt 125,000; Common Stock $60,000; Accounts Payable $44,000; Cash $132,000; Buildings and Equipment $390,000; Short-term Debt $48,000; Accounts Receivable $109,000; Retained Earnings $204,000; Notes Payable $54,000; Accumulated Depreciation $180,000.
Total current assets on the balance sheet are:
A)$216,000
B)$325,000
C)$535,000
D)$715,000

Accepted Answer

Total current assets include Inventory ($84,000), Cash ($132,000), and Accounts Receivable ($109,000), which sum up to $325,000.

Question 4

The principle of consistency means that:
A)the accounting methods used by an entity never change.
B)the same accounting methods are used by all firms in an industry.
C)the effect of any change in an accounting method will be disclosed in the financial statements or notes thereto.
D)there are no alternative methods of accounting for the same transaction.

Accepted Answer

The principle of consistency requires that any changes in accounting methods be disclosed in the financial statements or notes, ensuring transparency and comparability over time.

Question 5

Consolidated financial statements report financial position, results of operations, and cash flows for:
A)a parent corporation and its subsidiaries.
B)a parent corporation alone.
C)two corporations that are owned by the same individual.
D)a parent corporation and its 100% owned subsidiaries only.

Accepted Answer

Consolidated financial statements combine the financial information of a parent corporation and its subsidiaries, regardless of the percentage of ownership, to present the financial position, results of operations, and cash flows as a single economic entity.

Question 6

Matching revenues and expenses refers to:
A)having revenues equal expenses.
B)recording revenues when cash is received.
C)accurately reflecting the results of operations for a fiscal period.
D)recording revenues when a product is sold or a service is rendered.

Accepted Answer

The matching principle in accounting ensures that expenses are recorded in the same period as the revenues they help to generate, accurately reflecting the results of operations for that fiscal period.

Question 7

On January 31, an entity's balance sheet showed total assets of $2,250 and liabilities of $750.Stockholders' equity at January 31 was:
A)$1,500
B)$3,000
C)$1,250
D)$750

Accepted Answer

Stockholders' equity is calculated as total assets minus total liabilities. Therefore, $2,250 (total assets) - $750 (liabilities) = $1,500 (stockholders' equity).

Question 8

The balance sheet shows the following accounts and amounts: Inventory, $84,000; Long-term Debt 125,000; Common Stock $60,000; Accounts Payable $44,000; Cash $132,000; Buildings and Equipment $390,000; Short-term Debt $48,000; Accounts Receivable $109,000; Retained Earnings $204,000; Notes Payable (six-month)$54,000; Accumulated Depreciation $180,000.
Total current liabilities on the balance sheet are:
A)$98,000
B)$146,000
C)$271,000
D)$326,000

Accepted Answer

Total current liabilities include Accounts Payable ($44,000), Short-term Debt ($48,000), and Notes Payable (six-month) ($54,000), which sum up to $146,000.

Question 9

At the beginning of the year, paid-in capital was $164 and retained earnings was $94.During the year, the stockholders invested $48 and dividends of $12 were declared and paid.Retained earnings at the end of the year were $104. Total stockholders' equity at the end of the year was:
A)$164
B)$188
C)$212
D)$316

Accepted Answer

Total stockholders' equity at the end of the year is calculated by adding the ending retained earnings to the total paid-in capital. Ending retained earnings is $104, and paid-in capital is $164 + $48 = $212. Therefore, total stockholders' equity is $212 + $104 = $316.

Question 10

At the beginning of the fiscal year, the balance sheet showed assets of $2,728 and stockholders' equity of $1,672.During the year, assets increased $148 and liabilities decreased $76. Liabilities at the end of the year totaled:
A)$980
B)$1,056
C)$1,672
D)$1,820

Accepted Answer

At the beginning of the year, liabilities = Assets - Stockholders' equity = $2,728 - $1,672 = $1,056. During the year, assets increased by $148, making total assets $2,876. Liabilities decreased by $76, so the new liabilities = $1,056 - $76 = $980.

Question 11

A concept or principle that relates to transactions is:
A)materiality.
B)full disclosure.
C)original cost.
D)consistency.

Accepted Answer

Original cost is a principle that relates to transactions, as it refers to recording assets at their initial purchase price.

Question 12

Which of the following accounting methods accomplishes much of the matching of revenues and expenses?
A)Match accounting.
B)Cash accounting.
C)Accrual accounting.
D)Full disclosure accounting.

Accepted Answer

Accrual accounting matches revenues and expenses by recording them when they are earned or incurred, regardless of when cash transactions occur.

Question 13

The Statement of Cash Flows:
A)shows how cash changed during the period.
B)is an optional financial statement.
C)shows the change in the fair value of the entity's common stock during the period.
D)shows the dividends that will be paid in the future.

Accepted Answer

The Statement of Cash Flows provides information about how cash and cash equivalents changed during a specific period, detailing cash inflows and outflows from operating, investing, and financing activities.

Question 14

The balance sheet shows the following accounts and amounts: Cash $13,000; Short-term Debt $21,000; Buildings and Equipment $420,000; Inventory, $44,000; Notes Payable $60,000; Accumulated Depreciation $110,000; Common Stock $80,000; Accounts Receivable $38,000; Retained Earnings $237,000; Accounts Payable $17,000.
Total assets on the balance sheet are:
A)$367,000
B)$405,000
C)$515,000
D)$625,000

Accepted Answer

Total assets are calculated as: Cash ($13,000) + Inventory ($44,000) + Accounts Receivable ($38,000) + (Buildings and Equipment ($420,000) - Accumulated Depreciation ($110,000)) = $405,000.

Question 15

The principle of full disclosure means that the reporting entity must fully disclose:
A)all client data.
B)all proprietary information.
C)all necessary information to prevent a reasonably astute user of financial statements from being misled.
D)all necessary information to prevent all users of financial statements from being misled.

Accepted Answer

The principle of full disclosure requires that all necessary information be provided to ensure that a reasonably astute user of financial statements is not misled. It does not require disclosure of all client data or proprietary information.

Question 16

The balance sheet shows the following accounts and amounts: Cash $13,000; Short-term Debt $21,000; Buildings and Equipment $420,000; Inventory, $44,000; Notes Payable $60,000; Accumulated Depreciation $110,000; Common Stock $80,000; Accounts Receivable $38,000; Retained Earnings $237,000; Accounts Payable $17,000.
Total liabilities on the balance sheet are:
A)$77,000
B)$98,000
C)$178,000
D)$208,000

Accepted Answer

The answer of The balance sheet shows the following accounts...

Question 17

On January 31, an entity's balance sheet showed net assets of $3,075 and liabilities of $675.Stockholders' equity on January 31 was:
A)$2,400
B)$3,075
C)$3,750
D)$675

Accepted Answer

The answer of On January 31, an entity's balance sheet...

Question 18

At the end of the year, retained earnings totaled $5,100.During the year, net income was $750, and dividends of $360 were declared and paid.Retained earnings at the beginning of the year totaled:
A)$6,210
B)$3,990
C)$3,690
D)$4,710

Accepted Answer

Retained earnings at the beginning of the year can be calculated by subtracting net income and adding dividends to the end-of-year retained earnings: $5,100 - $750 + $360 = $4,710.

Question 19

The going concern concept refers to a presumption that:
A)the entity will be profitable in the coming year.
B)the entity will not be involved in a merger within a year.
C)the entity will continue to operate in the foreseeable future.
D)top management of the entity will not change in the coming year.

Accepted Answer

The going concern concept assumes that a business will continue its operations into the foreseeable future and not liquidate or be forced to discontinue operations.

Question 20

At the beginning of the fiscal year, the balance sheet showed assets of $2,728 and stockholders' equity of $1,672.During the year, assets increased $148 and liabilities decreased $76. Stockholders' equity at the end of the year totaled:
A)$1,672
B)$1,744
C)$1,896
D)$2,876

Accepted Answer

The accounting equation is Assets = Liabilities + Stockholders' Equity. Initially, Liabilities = $2,728 - $1,672 = $1,056. During the year, Assets increased by $148, making them $2,876, and Liabilities decreased by $76, making them $980. Therefore, Stockholders' Equity = $2,876 - $980 = $1,896.

Quiz 2: Financial Statements and Accounting Conceptsprinciples

Accrual accounting:

At the beginning of the year, paid-in capital was $164 and retained earnings was $94.During the year, the stockholders invested $48 and dividends of $12 were declared and paid.Retained earnings at the end of the year were $104. Net income for the year was:

The principle of consistency means that:

Consolidated financial statements report financial position, results of operations, and cash flows for:

Matching revenues and expenses refers to:

On January 31, an entity's balance sheet showed total assets of $2,250 and liabilities of $750.Stockholders' equity at January 31 was:

At the beginning of the year, paid-in capital was $164 and retained earnings was $94.During the year, the stockholders invested $48 and dividends of $12 were declared and paid.Retained earnings at the end of the year were $104. Total stockholders' equity at the end of the year was:

At the beginning of the fiscal year, the balance sheet showed assets of $2,728 and stockholders' equity of $1,672.During the year, assets increased $148 and liabilities decreased $76. Liabilities at the end of the year totaled:

A concept or principle that relates to transactions is:

Which of the following accounting methods accomplishes much of the matching of revenues and expenses?

The Statement of Cash Flows:

The principle of full disclosure means that the reporting entity must fully disclose:

On January 31, an entity's balance sheet showed net assets of $3,075 and liabilities of $675.Stockholders' equity on January 31 was:

At the end of the year, retained earnings totaled $5,100.During the year, net income was $750, and dividends of $360 were declared and paid.Retained earnings at the beginning of the year totaled:

The going concern concept refers to a presumption that:

At the beginning of the fiscal year, the balance sheet showed assets of $2,728 and stockholders' equity of $1,672.During the year, assets increased $148 and liabilities decreased $76. Stockholders' equity at the end of the year totaled: