ACC 556 WEEK 1 CHAPTER 1 EXERCISE

25 Jul ACC 556 WEEK 1 CHAPTER 1 EXERCISE

One way of stating the accounting equation is: Assets + Liabilities = Stockholders’ Equity.
True
False
Question 2

When expenses exceed revenues, which of the following is true?

a net loss results

a net income results

assets equal liabilities

assets are increased
Question 3

Match the items below by entering the appropriate code letter in the space provided.

Distributions of cash from a corporation to its stock holders.

Consumed assets or services.

Ownership is limited to one person.

Officers and others who manage the business.

Creditor claims against the assets of the business.

A separate legal entity under state laws.

A report prepared by management that presents financial information.

A section of the annual report that presents management’s views.

Resources expected to provide future economic benefits.

The acquiring of the resources necessary to run the business.
A. Dividends
B. Assets
C. Corporation
D. Annual report
E. Liabilities
F. Management discussion and analysis
G. Expenses
H. Investing activities
I. Internal users
J. Sole proprietorship

Question 4

A business organized as a corporation

is not a separate legal entity in most states.

requires that stockholders be personally liable for the debts of the business.

is owned by its stockholders.

has tax advantages over a proprietorship or partnership.
Question 5

A business organized as a separate legal entity owned by stockholders is a partnership.
True
False
Question 6

Which of the following is not a common way that managers use the balance sheet?

To analyze the balances of assets, liabilities, and stockholders’ equity throughout the accounting period

To determine if the cash balance is sufficient for future needs

To analyze the balance between debt and common stock financing

To analyze the balance of accounts receivable on the last day of the accounting period
MT
Question 7

Which of the following is not a common way that managers use the balance sheet?

To analyze the balances of assets, liabilities, and stockholders’ equity throughout the accounting period

To determine if the cash balance is sufficient for future needs

To analyze the balance between debt and common stock financing

To analyze the balance of accounts receivable on the last day of the accounting period
MT
Question 8

Ashley’s Accessory Shop started the year with total assets of $140,000 and total liabilities of $80,000. During the year the business recorded $220,000 in revenues, $110,000 in expenses, and dividends of $40,000. The net income reported by Ashley’s Accessory Shop for the year was

$80,000.

$100,000.

$130,000.

$110,000.
Question 9

Which of the following activities involves collecting the necessary funds to support the business?

Operating

Investing

Financing

Delivering
Question 10

Stockholders’ equity is comprised of

common stock and dividends.

common stock and retained earnings.

dividends and retained earnings.

net income and retained earnings.
Question 11

When expenses exceed revenues, which of the following is true?

a net loss results

a net income results

assets equal liabilities

assets are increased
Question 12

Which of the following would not be considered an external user of accounting data for the Julian Company?

Internal Revenue Service agent

Management

Creditors

Customers
Question 13

Accounting communicates financial information about a business to both internal and external users.
True
False
Question 14

Which of the following statements is not true regarding the Sarbanes-Oxley Act (SOX)?

The Act calls for increased oversight responsibilities for boards of directors.

The Act has resulted in increased penalties for financial fraud by top management.

The Act calls for decreased independence of outside auditors reviewing corporate financial statements.

The Act is meant to decrease the likelihood of unethical corporate behavior.
Question 15

External users want answers to all of the following questions except

Is the company earning satisfactory income?

Will the company be able to pay its debts as they come due?

Will the company be able to afford employee pay raises this year?

How does the company compare in profitability with competitors?
Question 16

External users want answers to all of the following questions except

Is the company earning satisfactory income?

Will the company be able to pay its debts as they come due?

Will the company be able to afford employee pay raises this year?

How does the company compare in profitability with competitors?
Question 17

Claims of creditors and owners on the assets of a business are called liabilities.
True
False
Question 18

The primary purpose of the statement of cash flows is to provide information about the cash receipts and cash payments of a company for a specific period of time.
True
False