0)The income statement reveals
A.resources and equities of a firm for a period of time.
B.resources and equities of a firm at a point in time.
C.net earnings (net income) of a firm at a point in time.
D.net earnings (net income) of a firm for a period of time.
1)Which of the following would represent the least likely use of an income statement prepared for a business enterprise?
A.Use by labor unions to examine earnings closely as a basis for salary discussions.
B.Use by customers to determine a company"s ability to provide needed goods and services.
C.Use by government agencies to formulate tax and economic policy.
D.Use by investors interested in the financial position of the entity.
2)The single-step income statement emphasizes
A.total revenues and total expenses.
B.the gross profit figure.
C.extraordinary items and accounting changes more than these are emphasized in the multiple-step income statement.
D.the various components of income from continuing operations.
3)Which of the following is not a reason why revenue is recognized at time of sale?
A.The sale is the critical event.
B.Realization has occurred.
C.Title legally passes from seller to buyer.
D.All of these are reasons to recognize revenue at time of sale.
4)The process of formally recording or incorporating an item in the financial statements of an entity is
A.articulation.
B.allocation.
C.realization.
D.recognition.
5)The FASB concluded that if a company sells its product but gives the buyer the right to return the product, revenue from the sales transaction shall be recognized at the time of sale only if all of six conditions have been met. Which of the following is not one of these six conditions?
A.The seller"s price is substantially fixed or determinable at time of sale.
B.The buyer is obligated to pay the seller upon resale of the product.
C.The amount of future returns can be reasonably estimated.
D.The buyer"s obligation to the seller would not be changed in the event of theft or damage of the product.
7)The basis for classifying assets as current or noncurrent is conversion to cash within
A.the operating cycle or one year, whichever is longer.
B.the operating cycle or one year, whichever is shorter.
C.the accounting cycle or one year, whichever is shorter.
D.the accounting cycle or one year, whichever is longer.
8)The balance sheet contributes to financial reporting by providing a basis for all of the following except
A.evaluating the capital structure of the enterprise.
B.assessing the liquidity and financial flexibility of the enterprise.
C.computing rates of return.
D.determining the increase in cash due to operations.
9)Which of the following should be disclosed in a Summary of Significant Accounting Policies?
A.Amount for cumulative effect of change in accounting principle
B.Depreciation method followed
C.Types of executory contracts
D.Claims of equity holders
10)An example of an inventory accounting policy that should be disclosed in a Summary of Significant Accounting Policies is the
A.major backlogs of inventory orders.
B.composition of inventory into raw materials, work-in-process, and finished goods.
C.amount of income resulting from the involuntary liquidation of LIFO.
D.method used for pricing inventory.
11)The full disclosure principle, as adopted by the accounting profession, is best described by which of the following?
A.Information about each account balance appearing in the financial statements is to be included in the notes to the financial statements.
B.Disclosure of any financial facts significant enough to influence the judgment of an informed reader.
C.All information related to an entity"s business and operating objectives is required to be disclosed in the financial statements.
D.Enough information should be disclosed in the financial statements so a person wishing to invest in the stock of the company can make a profitable decision.
12)Companies should disclose all of the following in interim reports except
A.changes in accounting principles.
B.seasonal revenue, cost, or expenses.
C.basic and diluted earnings per share.
D.post-balance-sheet events.
13)A financial forecast per professional pronouncements presents to the best of the responsible party"s knowledge and belief,
A.an assessment of the company"s ability to be successful in the future.
B.an assessment of the company"s ability to be successful in the future under a number of different assumptions.
C.an entity"s expected financial position, results of operations, and cash flows.
D.given one or more hypothetical assumptions, an entity"s expected financial position, results of operations, and cash flows.
14)The MD&A section of an enterprise"s annual report is to cover the following three items:
A.income statement, balance sheet, and statement of cash flows.
B.changes in the stock price, mergers, and acquisitions.
C.income statement, balance sheet, and statement of owners" equity.
D.liquidity, capital resources, and results of operations.
15)The payout ratio is calculated by dividing
A.cash dividends by net income plus preferred dividends.
B.cash dividends by net income less preferred dividends.
C.dividends per share by earnings per share.
D.cash dividends by market price per share.
16)Which of the following ratios measures long-term solvency?
A.Receivables turnover
B.Current ratio
C.Acid-test ratio
D.Debt to total assets
17)The rate of return on common stock equity is calculated by dividing
A.net income less preferred dividends by average common stockholders’ equity.
B.net income less preferred dividends by ending common stockholders’ equity.
C.net income by average common stockholders’ equity.
D.net income by ending common stockholders’ equity.
18)The first step in the preparation of the statement of cash flows requires the use of information included in which comparative financial statements?
A.Statements of cash flows
B.Income statements
C.Statements of retained earnings
D.Balance sheets
19)A company borrows $10,000 and signs a 90-day nontrade note payable. In preparing a statement of cash flows (indirect method), this event would be reflected as a(n)
A.addition adjustment to net income in the cash flows from operating activities section.
B.cash inflow from investing activities.
C.cash inflow from financing activities.
D.cash outflow from investing activities.
20)An increase in inventory balance would be reported in a statement of cash flows using the indirect method (reconciliation method) as a(n)
A.addition to net income in arriving at net cash flow from operating activities.
B.cash outflow from investing activities.
C.cash outflow from financing activities.
D.deduction from net income in arriving at net cash flow from operating activities.
21)In a statement of cash flows, the cash flows from investing activities section should report
A.the issuance of common stock in exchange for a factory building.
B.a major repair to machinery charged to accumulated depreciation.
C.the assignment of accounts receivable.
D.stock dividends received.
22)Riley Company reports its income from investments under the equity method and recognized income of $25,000 from its investment in Wood Co. during the current year, even though no dividends were declared or paid by Wood during the year. On Riley"s statement of cash flows (indirect method), the $25,000 should
A.not be shown.
B.be shown as cash outflow from financing activities.
C.be shown as a deduction from net income in the cash flows from operating activities section.
D.be shown as cash inflow from investing activities.
23)Which of the following would be classified as a financing activity on a statement of cash flows?
A.Declaration and distribution of a stock dividend
B.Sale of a loan receivable
C.Payment of interest to a creditor
D.Deposit to a bond sinking fund
24)Which table would you use to determine how much you would need to have deposited three years ago at 10% compounded annually in order to have $1,000 today?
A.Future value of 1 or present value of 1
B.Future value of an ordinary annuity of 1
C.Present value of an ordinary annuity of 1
D.Future value of an annuity due of 1
25)Which table has a factor of XXXXXXXXXXfor 1 period at every interest rate?
A.Future value of 1
B.Future value of an ordinary annuity of 1
C.Present value of an ordinary annuity of 1
D.Present value of 1
26)Which of the following tables would show the smallest factor for an interest rate of 10% for six periods?
A.Future value of an ordinary annuity of 1
B.Future value of an annuity due of 1
C.Present value of an annuity due of 1
D.Present value of an ordinary annuity of 1