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Exam 1: Accounting Information and Decision Making

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Question 41

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At the beginning of the year (January 1), Maurice and Sons has $12,000 of common stock outstanding and retained earnings of $4,200. During the year, the company reports net income of $3,200 and pays dividends of $1,200. In addition, the company issues additional common stock for $5,000. Prepare the statement of stockholders' equity at the end of the year (December 31).

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Question 42

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Define the four basic assumptions underlying Generally Accepted Accounting Principles:

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(a) economic entity, (b) going concern, ...

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Question 43

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The body of rules and procedures that guide the measurement and communication of financial accounting information is known as:

If accounting information is considered to have faithful representation, then which of the following is true?

Below are the account balances for Huffman Corporation at the end of December. Use only the appropriate accounts to prepare an income statement. $\begin{array} { l r } { \text { Accounts } } & \text { Balances } \\\hline \text { Cash } & \$ 5,200 \\\text { Salaries expense } & 2,300 \\\text { Retained earnings } & 2,500 \\\text { Advertising expense } & 1,200 \\\text { Equipment } & 12,400 \\\text { Service revenue } & 9,400 \\\text { Common stock } & 8,000 \\\text { Accounts payable } & 2,200\end{array}$

Use the following appropriate amounts to calculate net income: Revenues, $12,000; Liabilities, $5,000; Expenses, $4,000; Assets, $19,000; Dividends, $4,000.

Double taxation refers to a corporation's income being taxed twice-first when the company earns it and pays corporate income taxes on it, and then again when stockholders pay personal income taxes on any amounts the firm distributes to them as dividends.

The statement of stockholders' equity is a financial statement that summarizes the changes in stockholders' equity over an interval of time.

Today, financial accounting and reporting standards in the United States are established primarily by the:

Accounting information is used by creditors to decide whether to invest in a company's stock.

Sooner Company has had a net income of $8,000, $5,000, $12,000, and $10,000 over the first four years of the company's existence. If the average annual amount of dividends paid over the last four years is $3,000, what is the ending retained earnings balance?

The Financial Accounting Standards Board's conceptual framework does not prescribe Generally Accepted Accounting Principles. It provides an underlying foundation for the development of accounting standards and interpretation of accounting information.

The accounts which represent the resources of the company are called:

Transactions related to the primary business activities of the company, such as selling goods and services to customers, are referred to as:

Primary qualitative characteristics of accounting information are:

Which business form has the advantage of limited liability?

Operating cash flows generally include cash transactions for the purchase and sale of investments and productive long-term assets.

Given the information below about Thomas Corporation, what was the amount of dividends the company paid in the current period? $\begin{array} { | l | r | } \hline \text { Beginning retained earnings } & \$ 54,000 \\\hline \text { Ending retained earnings } & \$ 110,000 \\\hline \text { Decrease in cash } & \$ 10,000 \\\hline \text { Net income } & \$ 84,000 \\\hline \text { Change in stockholders' equity } & \$ 15,000 \\\hline\end{array}$

If total assets of a company equal $12,000 and total stockholders' equity equals $4,000, then total liabilities equal $8,000.

If total change in cash = $44,000, net operating cash flows = $22,000, and net investing cash flows = ($13,000) ; then net financing cash flows =