b. operating, investing, and financing activities. c. beginning balance plus income less dividends. d. how much cash the company owes its employees. Ans: B KP 3 BT: K Difficulty: Easy TOT: 1 min. AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting 11. The retained earnings section of the statement of shareholders’ equity communicates a. beginning balance plus income less dividends. b. revenues less expenses during a period of time. c. how much cash that management has paid for bonuses. d. operating, investing, and financing activities. Ans: A KP 3 BT: K Difficulty: Easy TOT: 1 min. AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting 12. An investor wants to find the amount of cash and land that a company has. Where will the investor look? a. Statement of shareholders’ equity b. Income statement c. Balance sheet d. Statement of cash flows Ans: C KP 3 BT: C Difficulty: Easy TOT: 1 min. AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting 13. Dividends declared and paid to the owners are found in the a. management letter. b. income statement. c. dividends statement. d. statement of shareholders’ equity. Ans: D KP 3 BT: K Difficulty: Easy TOT: 1 min. AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting 14. Cash received by a company from its regular operations during the year is found in its a. balance sheet. b. statement of cash flows. c. statement of shareholders’ equity. d. auditor’s report. Ans: B KP 3 BT: K Difficulty: Easy TOT: 1 min. AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting 15. A company’s profits during its most recent year are found in its a. balance sheet and income statement. b. statement of cash flows only. c. statement of shareholders’ equity only.
AICPA BB: Critical Thinking AICPA FN: Reporting 40. Equity investments are bought and sold only on the first day of each year. in stock exchanges such as the NASDAQ. by a company’s independent auditors. from and to the SEC. Ans: B KP 4 BT: K Difficulty: Easy TOT: 1 min. AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting 41. Generally accepted accounting principles are determined by a. annual voting by all certified public accountants. b. a privately financed body known as the FASB. c. the SEC. d. a congressional committee that passes laws governing accounting practice. Ans: B KP 5 BT: K Difficulty: Moderate TOT: 1 min. AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting 42. Shareholders and employees are the owners of a company. receive repayment of the cash they have invested in a business. receive payment from a company regardless if the company is profitable or not. may benefit from increases in the value of their investment of a company. Ans: D KP 4 BT: K Difficulty: Easy TOT: 1 min. AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting 43. When management goes beyond ethical boundaries in its attempt to make financial statements appear attractive, management a. should be commended for its creativity. b. will not need an annual audit. c. should pay its employees larger bonuses. d. is perpetrating fraud or possible criminal activity. Ans: D KP 5 BT: C Difficulty: Easy TOT: 1 min. AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting 44. Generally accepted accounting principles are laws created and enacted by Congress. define the standards for internal management reporting. increase the level of credibility in financial statements. are created by the Securities and Exchange Commission. Ans: C KP 5 BT: K Difficulty: Easy TOT: 1 min. AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting
KP 1,2,4 BT: C Difficulty: Easy TOT: 2 min. AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting 2. For each description listed in items 1 through 4 below, select the letter of the accounting term (A through F) it best describes. You may use each letter more than once. Accounting Terms A. Asset B. Liability C. Retained earnings D. Revenue E. Expenses F. Equity investment _______ 1. Total measured past growth less the amount distributed to owners _______ 2. A measure of assets generated from the products and services sold _______ 3. Owed and must be paid in the future _______ 4. Amount invested in the firm by its owners Solution: 1. C 2. D 3. B 4. F KP 2 BT: K Difficulty: Easy TOT: 1 min. AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting 3. For each financial statement listed in 1 through 4 below, place the letter (A through D) of the best description in the space provided. You may use each letter more than once or not at all. Descriptions A. Assets, liabilities, and shareholders’ equity B. Increased by net income and decreased by dividends C. Operating, investing, and financing activities D. Revenues less expenses _______ 1. Balance sheet _______ 2. Income statement _______ 3. The retained earnings section of the statement of shareholders’ equity _______ 4. Statement of cash flows Solution: 1. A 2. D