Question 1

One of the disadvantages of a corporation when compared to a partnership is the limited liability of the owners.

Accepted Answer

A) True 
 B)False

Question 2

When a company ships products to a customer and bills the customer,the company should recognize revenue as earned.

Accepted Answer

A) True 
 B)False

Question 3

On the statement of cash flows,how would a company report the purchase of machinery?

Accepted Answer

A)  As cash used in operating activities.
B)  As cash used in financing activities.
C)  As cash used in purchasing activities.
D)  As cash used in investing activities.E) A) and C)
F) A) and D)

Question 4

What are the categories of cash flows that appear on a statement of cash flows?

Accepted Answer

A)  cash flows from investing,financing,and service activities.
B)  cash flows from operating,production,and internal activities.
C)  cash flows from financing,production,and growth activities.
D)  cash flows from operating,investing,and financing activities.E) A) and B)
F) B) and C)

Question 5

In what order would the assets of Mertz Company be listed on their statement of financial positiont?

Accepted Answer

A)  Cash,Trade Receivables,Inventory,Plant and Equipment.
B)  Cash,Inventory,Trade Receivables,Plant and Equipment.
C)  Cash,Trade Receivables,Marketable Securities,Inventory.
D)  Cash,Trade Receivables,Plant and Equipment,Inventory.E) None of the above
F) C) and D)

Question 6

If total liabilities increased by $25,000 and shareholders' equity increased by $5,000 during a period of time,then total assets must change by what amount and direction during that same period?

Accepted Answer

A)  $20,000 decrease
B)  $20,000 increase
C)  $25,000 increase
D)  $30,000 increaseE) C) and D)
F) None of the above

Question 7

Match each element with its financial statement by entering the appropriate letter in the space provided.

Accepted Answer

(1)C,(2)A,...

Question 8

Which of the following is true of financial accounting?

Accepted Answer

A)  It provides information primarily for external decision makers.
B)  It is required for corporations but probably would not be done by other business entities.
C)  It provides information primarily for the use of managers of the company.
D)  It has been practiced in this country for approximately the last 15 years.E) A) and C)
F) A) and D)

Question 9

Accountants generally must meet educational requirements,pass a rigorous exam,and meet experience requirements before becoming licensed CAs,CGAs,or CMAs.

Accepted Answer

A) True 
 B)False

Question 10

In terms of economic importance,the sole proprietorship is the dominant form of organization in Canada because of its ease of formation.

Accepted Answer

A) True 
 B)False

Question 11

For each of the following items that appear on the statement of financial position,identify each as an asset (A),liability (L),or element of shareholders' equity (SE).For any item that would not appear on the statement of financial position,write the letter,N.

Accepted Answer

The answer of For each of the following items that...

Question 12

Which of the following statements is TRUE?

Accepted Answer

A)  Publicly traded enterprises must use IFRS for external reporting for fiscal years that start on or after January 1,2011.
B)  The Accounting Standards Board is a government body.
C)  The SEC is the most influential Canadian regulator of the flow of financial information provided by publicly traded companies in Canada.
D)  Publicly traded enterprises must use the accounting standards prescribed for private enterprises for external reporting.E) A) and B)
F) A) and C)

Question 13

Assets are economic resources controlled by the entity as a result of past transactions or events and from which future economic benefits can be obtained.

Accepted Answer

A) True 
 B)False

Question 14

If expenses are understated on the income statement,shareholders' equity is overstated on the statement of financial position.

Accepted Answer

A) True 
 B)False

Question 15

Lloyd Company ends the first year of operations with $2.2 million in retained earnings when no dividends were paid out.Since the company began operations on January 1st,20B of the current year ending December 31st,20B calculate the amount of beginning retained earnings and explain your answer.

Accepted Answer

The beginning balance of retained earnin...

Question 16

If Bender Corporation recently purchased goods from you on account,which of Bender's financial statements would you look at to determine whether Bender has sufficient resources to be able to pay for the goods when payment is due in 30 days?

Accepted Answer

A)  Income statement.
B)  Statement of financial position.
C)  Statement of changes in equity.
D)  Statement of cash flows.E) A) and D)
F) A) and C)

Question 17

The amount of cash paid by a business for office rent would be reported on the statement of cash flows as a financing activity.

Accepted Answer

A) True 
 B)False

Question 18

Pool Supply,Inc.,reported the following items for the year ended December 31,20C:
Required:
Prepare an income statement for the year.

Accepted Answer

The answer of Pool Supply,Inc.,reported the following items for the...

Question 19

What results from the purchase of goods or services on credit and from borrowing?

Accepted Answer

A)  Assets.
B)  Liabilities.
C)  Share capital.
D)  Revenues.E) B) and C)
F) All of the above

Question 20

Which of the following statements is true about the price earnings (P/E) ratio?

Accepted Answer

A)  It is a ratio of importance to creditors.
B)  A high P/E ratio indicates investors have little confidence in the future profit potential of the company.
C)  The P/E ratio could be used to approximate the value investors would be willing to pay for the company's acquisition from existing owners.
D)  The P/E ratio increases as profit increases.E) B) and C)
F) A) and D)

Exam 1: Financial Statements and Business Decisions

If expenses are understated on the income statement,shareholders' equity is overstated on the statement of financial position.

Correct AnswerverifiedShow Answer

If total liabilities increased by $25,000 and shareholders' equity increased by $5,000 during a period of time,then total assets must change by what amount and direction during that same period?

Correct AnswerverifiedShow Answer

What are the categories of cash flows that appear on a statement of cash flows?

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On the statement of cash flows,how would a company report the purchase of machinery?

Correct AnswerverifiedShow Answer

Which of the following is true of financial accounting?

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Which of the following statements is TRUE?

Correct AnswerverifiedShow Answer

The amount of cash paid by a business for office rent would be reported on the statement of cash flows as a financing activity.

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For each of the following items that appear on the statement of financial position,identify each as an asset (A),liability (L),or element of shareholders' equity (SE).For any item that would not appear on the statement of financial position,write the letter,N.

Correct AnswerverifiedShow Answer

Which of the following statements is true about the price earnings (P/E) ratio?

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One of the disadvantages of a corporation when compared to a partnership is the limited liability of the owners.

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Accountants generally must meet educational requirements,pass a rigorous exam,and meet experience requirements before becoming licensed CAs,CGAs,or CMAs.

Correct AnswerverifiedShow Answer

When a company ships products to a customer and bills the customer,the company should recognize revenue as earned.

Correct AnswerverifiedShow Answer

Match each element with its financial statement by entering the appropriate letter in the space provided.

Correct Answerverified(1)C,(2)A,...View AnswerShow Answer

In terms of economic importance,the sole proprietorship is the dominant form of organization in Canada because of its ease of formation.

Correct AnswerverifiedShow Answer

Lloyd Company ends the first year of operations with $2.2 million in retained earnings when no dividends were paid out.Since the company began operations on January 1st,20B of the current year ending December 31st,20B calculate the amount of beginning retained earnings and explain your answer.

Correct AnswerverifiedThe beginning balance of retained earnin...View AnswerShow Answer

What results from the purchase of goods or services on credit and from borrowing?

Correct AnswerverifiedShow Answer

If Bender Corporation recently purchased goods from you on account,which of Bender's financial statements would you look at to determine whether Bender has sufficient resources to be able to pay for the goods when payment is due in 30 days?

Correct AnswerverifiedShow Answer

In what order would the assets of Mertz Company be listed on their statement of financial positiont?

Correct AnswerverifiedShow Answer

Assets are economic resources controlled by the entity as a result of past transactions or events and from which future economic benefits can be obtained.

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Pool Supply,Inc.,reported the following items for the year ended December 31,20C: Required: Prepare an income statement for the year.

Correct AnswerverifiedShow Answer

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(1)C,(2)A,...
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Lloyd Company ends the first year of operations with $2.2 million in retained earnings when no dividends were paid out.Since the company began operations on January 1^st,20B of the current year ending December 31^st,20B calculate the amount of beginning retained earnings and explain your answer.

Correct Answer
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The beginning balance of retained earnin...
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