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Exam 1: Introducing Financial Statements

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Question 21

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If the assets of a company increase by $55,000 during the year and its liabilities increase by $25,000 during the same year,then the change in equity of the company during the year must have been:

A) An increase of $80,000.
B) A decrease of $80,000.
C) An increase of $30,000.
D) A decrease of $30,000.
E) An increase of $25,000.

F) A) and C)
G) A) and B)

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Question 22

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The first section of the income statement reports cash flows from operating activities.

A) True
B) False

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Question 23

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The measurement principle,also called the cost principle:

________ is the area of accounting aimed at serving external users by providing them with general-purpose financial statements.

________ are beliefs that separate right from wrong and are considered accepted standards of good and bad behavior.

The assets of a company total $700,000; the liabilities,$200,000.What are the net assets?

Ethics are beliefs that separate right from wrong.

Operating activities include long-term borrowing and repaying cash from lenders,and cash investments by or dividends paid to stockholders.

A financial statement providing information that helps users understand a company's financial status,and which lists the types and amounts of assets,liabilities,and equity as of a specific date,is called a(n) :

According to the measurement (cost)principle,it is necessary for managers to report an approximation of an asset's market value upon purchase.

External users of accounting information include all of the following except:

Cash investments by stockholders are listed on which of the following statement(s) ?

There are three major types of business activities.________activities are the means organizations use to pay for resources such as land,building,and equipment to carry out plans.

Assets are the resources a company owns or controls that are expected to yield future benefits.

The Sarbanes-Oxley Act (SOX)requires each issuer of securities to disclose whether it has adopted a code of ethics for its senior financial officers and the contents of that code.

The statement of cash flows shows the net effect of revenues and expenses for a reporting period.

The term ________ refers to a liability that promises a future outflow of resources.

Owner claims on assets,also known as net assets,is called ________.

A common characteristic of ________ is their ability to yield expected future benefits to a business.

Dividends paid to stockholders are subtracted as expenses in the calculation of net income.