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The Securities and Exchange Commission (SEC) is the government agency that has jurisdiction over public companies in the United States.

A) True
B) False

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Which of the following statements is FALSE?


A) Cash flows from financing activities would appear on the Statement of Cash Flows.
B) Dividends would appear on the Statement of Retained Earnings.
C) Assets would appear on the Income Statement.
D) Revenues would appear on the Income Statement.

E) C) and D)
F) B) and D)

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The separate entity assumption means:


A) a company's financial statements reflect only the business activities of that company.
B) each separate owner's finances must be revealed in the financial statements.
C) each separate entity that has a claim on a company's assets must be shown in the financial statements.
D) if the business is a sole proprietorship, the owners' personal activities are included in the company's financial statements.

E) B) and C)
F) A) and D)

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Which of the following statements concerning financial reporting is TRUE?


A) The FASB requires all financial decision makers to adhere to a code of professional conduct.
B) The Sarbanes-Oxley Act does not require businesses to maintain an audited system of internal control.
C) A fundamental characteristic of useful financial information is that it fully depicts the economic substance of business activities.
D) There is no attempt to eliminate the difference in accounting rules in the U.S. and elsewhere as this would

E) A) and B)
F) C) and D)

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Contributed Capital is an asset on the balance sheet.

A) True
B) False

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Public corporations:


A) are businesses owned by two or more people, each of whom is personally liable for the debts of the business.
B) are businesses whose stock is bought and sold on a stock exchange.
C) are businesses whose stock is bought and sold privately.
D) are businesses where stock is not used as evidence of ownership.

E) B) and C)
F) A) and B)

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The stockholders' equity of a company is the difference between assets and liabilities.

A) True
B) False

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Which of the following would represent an operating activity?


A) Purchasing equipment with money borrowed from creditors.
B) An investment of financial capital by the owners.
C) Buying the company's office supplies.
D) Repaying a loan the company had taken out.

E) All of the above
F) B) and D)

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The amount of liabilities at the end of the year is


A) $30,000.
B) $33,000.
C) $28,000.
D) $32,000.

E) None of the above
F) A) and B)

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Cash flow from investing activities includes


A) money received from a company's stockholders for the sale of stock.
B) money received from the sale of the company's office building.
C) money paid for dividends to the company's stockholders.
D) money paid for salaries of employees.

E) B) and D)
F) C) and D)

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In the U.S., public companies have to be audited by independent auditors using rules approved by the:


A) 1933 Securities Act.
B) Public Company Accounting Oversight Board (PCAOB) .
C) Financial Accounting Standards Board (FASB) .
D) American Institute of Certified Public Accountants (AICPA) .

E) B) and C)
F) A) and B)

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What would a financial statement user learn from reading the auditors' report?


A) Whether the financial statements present a fair picture of the company's financial results and are prepared in accordance with GAAP.
B) Whether or not it is a good time to purchase the stock.
C) What the company plans to distribute as dividends.
D) Whether or not the company has plans for future expansion.

E) A) and D)
F) B) and C)

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What is the amount of stockholders' equity at the beginning of the year?


A) Zero
B) $25,000
C) $175,000
D) $100,000

E) C) and D)
F) A) and B)

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Investors and creditors look at the balance sheet to see whether the company


A) is profitable.
B) owns enough assets to pay what it owes to creditors.
C) has had a positive cash flow from operations.
D) is paying sufficient dividends to stockholders.

E) B) and C)
F) C) and D)

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The Whackem-Smackem Software Company sold $11 million of computer games in its first year of operations. The company received payments of $7.5 million for these computer games. The company's income statement would report:


A) sales revenue of $7.5 million.
B) accounts receivable of $3.5 million.
C) expenses of $3.5 million.
D) sales revenue of $11 million.

E) A) and B)
F) A) and C)

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Showing 121 - 135 of 135

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