Question 1

From the following list, select the proper section from the statement of cash flows in which it would be classified.
-Paid income taxes
A)Operating Activities
B)Investing Activities
C)Financing Activities

Accepted Answer

Payment of income taxes is an expense incurred in the normal course of business operations and is therefore classified as an operating activity on the statement of cash flows.

Question 2

Match the selected items from a classified balance sheet and multiple-step income statement to the section in which they would appear on the classified balance sheet or the income statement.
-Service revenues
A)Current Assets balance sheet
B)Property, Plant, & Equipment balance sheet
C)Current Liabilities balance sheet
D)Long-term Liabilities balance sheet
E)Stockholders' Equity balance sheet
F)Operating Revenue income statement
G)Operating Expenses income statement
H)Other Revenue & Expenses income statement
I)Income Taxes income statement

Accepted Answer

Service revenues would appear as Operating Revenue on the income statement.

Question 3

From the following choices, select the answer that describes the effect on working capital as a result of the transaction.
-Collected an account receivable
A)Working capital will increase
B)Working capital will decrease
C)Working capital will not change

Accepted Answer

Collecting an account receivable converts one current asset (accounts receivable) into another (cash), without changing the total amount of current assets or current liabilities, thus working capital remains unchanged.

Question 4

From the following list, select the proper section from the statement of cash flows in which it would be classified.
-Received cash from selling goods to customers
A)Operating Activities
B)Investing Activities
C)Financing Activities

Accepted Answer

Cash received from selling goods to customers is a cash inflow related to the core operations of the business and is therefore classified as an operating activity in the statement of cash flows.

Question 5

In preparing financial statements, accountants should consider all of the following except:
A) the objectives of financial reporting.
B) the characteristics that make accounting information useful.
C) the most useful way to display the information found on the financial statements.
D) the presentation of the value of a company.

Accepted Answer

Accountants should not focus solely on the presentation of the value of a company in preparing financial statements. They should also consider the objectives of financial reporting and the characteristics that make accounting information useful, as well as the most useful way to display the information found on the financial statements.

Question 6

From the following list, select the proper section from the statement of cash flows in which it would be classified.
-Paid a cash dividend on capital stock
A)Operating Activities
B)Investing Activities
C)Financing Activities

Accepted Answer

Payment of cash dividends on capital stock is a financing activity that is reflected in the financing section of the statement of cash flows. This is because it involves cash transactions that impact the company's capital structure, specifically the distribution of profits to its shareholders.

Question 7

From the following choices, select the answer that describes the effect on working capital as a result of the transaction.
-Purchased inventory on account
A)Working capital will increase
B)Working capital will decrease
C)Working capital will not change

Accepted Answer

Purchasing inventory on account increases inventory (an asset) and increases accounts payable (a liability) by the same amount, leaving working capital (current assets minus current liabilities) unchanged.

Question 8

From the following choices, select the answer that describes the effect on working capital as a result of the transaction.
-Purchased land for cash
A)Working capital will increase
B)Working capital will decrease
C)Working capital will not change

Accepted Answer

When land is purchased for cash, the cash balance decreases, leading to a decrease in working capital.

Question 9

From the following choices, select the answer that describes the effect on working capital as a result of the transaction.
-Paid cash for supplies
A)Working capital will increase
B)Working capital will decrease
C)Working capital will not change

Accepted Answer

The answer of From the following choices, select the answer...

Question 10

Match the selected items from a classified balance sheet and multiple-step income statement to the section in which they would appear on the classified balance sheet or the income statement.
-Wages payable
A)Current Assets balance sheet
B)Property, Plant, & Equipment balance sheet
C)Current Liabilities balance sheet
D)Long-term Liabilities balance sheet
E)Stockholders' Equity balance sheet
F)Operating Revenue income statement
G)Operating Expenses income statement
H)Other Revenue & Expenses income statement
I)Income Taxes income statement

Accepted Answer

Wages payable is a current liability and would be listed under the "Current Liabilities" section on the classified balance sheet.

Question 11

From the following list, select the proper section from the statement of cash flows in which it would be classified.
-Received cash from bond issuance
A)Operating Activities
B)Investing Activities
C)Financing Activities

Accepted Answer

Cash received from bond issuance is considered a financing activity because it involves raising funds from investors and creditors to support business operations or repay existing debts.

Question 12

From the following list, select the proper section from the statement of cash flows in which it would be classified.
-Purchased equipment for cash
A)Operating Activities
B)Investing Activities
C)Financing Activities

Accepted Answer

Purchasing equipment is an investing activity as it involves the acquisition of long-term assets that will be used in the business.

Question 13

Which of the following is the best description of the purpose of financial reporting?
A) To allow users to access to the daily detailed records of a business.
B) To help the users reach their decisions in an informed manner.
C) To provide users with an assessment of how long the company will continue as a going concern.
D) To allow users access to a list of all the individuals who owe the company money.

Accepted Answer

The purpose of financial reporting is to provide information to users (such as investors, creditors, and analysts) so that they can make informed decisions. Financial reports provide information about a company's financial performance, position, and cash flows, which can help users assess its risks and future prospects. Options A, C, and D are not accurate descriptions of the purpose of financial reporting.

Question 14

From the following list, select the proper section from the statement of cash flows in which it would be classified.
-Received cash from the sale of a building
A)Operating Activities
B)Investing Activities
C)Financing Activities

Accepted Answer

The sale of a building represents a cash inflow from investing activities, as it involves the sale of a long-term asset.

Question 15

From the following list, select the proper section from the statement of cash flows in which it would be classified.
-Sold equipment no longer used in the business
A)Operating Activities
B)Investing Activities
C)Financing Activities

Accepted Answer

The sale of equipment that is no longer used in the business would be classified as an investing activity, as it represents a disposal of a long-term asset.

Question 16

From the following choices, select the answer that describes the effect on working capital as a result of the transaction.
-Borrowed cash using a six-month note
A)Working capital will increase
B)Working capital will decrease
C)Working capital will not change

Accepted Answer

The answer of From the following choices, select the answer...

Question 17

Match the selected items from a classified balance sheet and multiple-step income statement to the section in which they would appear on the classified balance sheet or the income statement.
-Cost of goods sold
A)Current Assets balance sheet
B)Property, Plant, & Equipment balance sheet
C)Current Liabilities balance sheet
D)Long-term Liabilities balance sheet
E)Stockholders' Equity balance sheet
F)Operating Revenue income statement
G)Operating Expenses income statement
H)Other Revenue & Expenses income statement
I)Income Taxes income statement

Accepted Answer

The answer of Match the selected items from a classified...

Question 18

From the following list, select the proper section from the statement of cash flows in which it would be classified.
-Paid suppliers cash for inventory purchased
A)Operating Activities
B)Investing Activities
C)Financing Activities

Accepted Answer

Payment to suppliers for inventory purchases falls under operating activities since it is related to the primary business operations of the company.

Question 19

The quality of accounting information that allows a user to analyze two or more companies and look for similarities and differences is known as understandability.

Accepted Answer

The quality of accounting information that allows a user to analyze two or more companies and look for similarities and differences is known as comparability, not understandability. Understandability refers to the ability of financial information to be comprehended by users with reasonable knowledge of business and economic activities.

Question 20

From the following choices, select the answer that describes the effect on working capital as a result of the transaction.
-Borrowed cash using a long-term note
A)Working capital will increase
B)Working capital will decrease
C)Working capital will not change

Accepted Answer

When cash is borrowed using a long-term note, it increases the amount of cash available to the company, which in turn increases the current assets and hence increases the working capital.

Quiz 1: Accounting As a Form of Communication

From the following list, select the proper section from the statement of cash flows in which it would be classified. -Paid income taxes

Match the selected items from a classified balance sheet and multiple-step income statement to the section in which they would appear on the classified balance sheet or the income statement. -Service revenues

From the following choices, select the answer that describes the effect on working capital as a result of the transaction. -Collected an account receivable

From the following list, select the proper section from the statement of cash flows in which it would be classified. -Received cash from selling goods to customers

In preparing financial statements, accountants should consider all of the following except:

From the following list, select the proper section from the statement of cash flows in which it would be classified. -Paid a cash dividend on capital stock

From the following choices, select the answer that describes the effect on working capital as a result of the transaction. -Purchased inventory on account

From the following choices, select the answer that describes the effect on working capital as a result of the transaction. -Purchased land for cash

From the following choices, select the answer that describes the effect on working capital as a result of the transaction. -Paid cash for supplies

Match the selected items from a classified balance sheet and multiple-step income statement to the section in which they would appear on the classified balance sheet or the income statement. -Wages payable

From the following list, select the proper section from the statement of cash flows in which it would be classified. -Received cash from bond issuance

From the following list, select the proper section from the statement of cash flows in which it would be classified. -Purchased equipment for cash

Which of the following is the best description of the purpose of financial reporting?

From the following list, select the proper section from the statement of cash flows in which it would be classified. -Received cash from the sale of a building

From the following list, select the proper section from the statement of cash flows in which it would be classified. -Sold equipment no longer used in the business

From the following choices, select the answer that describes the effect on working capital as a result of the transaction. -Borrowed cash using a six-month note

Match the selected items from a classified balance sheet and multiple-step income statement to the section in which they would appear on the classified balance sheet or the income statement. -Cost of goods sold

From the following list, select the proper section from the statement of cash flows in which it would be classified. -Paid suppliers cash for inventory purchased

The quality of accounting information that allows a user to analyze two or more companies and look for similarities and differences is known as understandability.

From the following choices, select the answer that describes the effect on working capital as a result of the transaction. -Borrowed cash using a long-term note