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UNIT 1 Questions (T-F and Multichoice) With Results

The document contains a series of true/false and multiple choice questions about financial statements and business decisions. It tests understanding of key elements of the balance sheet, income statement, accounting equation, and how the different financial statements are used. The questions cover topics such as the objectives of different statements, how to calculate net income and retained earnings, and identifying accounts that belong on each statement.

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29 views3 pages

UNIT 1 Questions (T-F and Multichoice) With Results

The document contains a series of true/false and multiple choice questions about financial statements and business decisions. It tests understanding of key elements of the balance sheet, income statement, accounting equation, and how the different financial statements are used. The questions cover topics such as the objectives of different statements, how to calculate net income and retained earnings, and identifying accounts that belong on each statement.

Uploaded by

jorgecuestaguisasola
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Questions Unit 1

Financial Statements and Business


Decisions

TRUE/FALSE. Write 'T' if the statement is true and 'F' if


the statement is false.
Statement T/F
1 A business entity's accounting system creates financial accounting
reports which are provided to external decision makers. T
2 Business managers utilize managerial accounting reports to plan
and manage the daily operations. T
3 Borrowing money is an investing activity. F
4 The balance sheet includes assets, liabilities, and stockholders'
equity as of a point in time. T
5 Revenue is recognized within the income statement during the
period in which cash is collected. F
6 Total assets are $37,500, total liabilities are $20,000 and
common stock is $10,000; therefore, retained earnings are
$7,500. T
7 For the year 2016, net income of Carol Company is $20,000 and
dividends declared are $6,000; therefore, retained earnings
have increased $26,000 during the year. F
8 The income statement is a measure of an entity's economic
performance for a period of time. T
9 The accounting equation states that Assets = Liabilities +
Stockholders' Equity. T
10 A decision maker who wants to understand a company's
financial statements must carefully read the notes to the
financial statements because these disclosures provide useful
supplemental information. T

MULTIPLE CHOICE. Choose the one alternative that


best completes the statement or answers the
question.
11. Which of the following describes the primary objective of the balance sheet?

A. To report the market value of assets, liabilities, and stockholders' equity


at a particular point in time.
B. To measure the net income of a business up to a particular point in time.
C. To report the financial position of the reporting entity at a particular
point in time.
D. To report the difference between cash inflows and cash outflows for the
period.

12. During the fiscal year ended 2016, a company had revenues of $400,000,
cost of goods sold of $280,000, and an income tax rate of 30 percent on
income before income taxes. What was the company's 2016 net income?

A. $400,000
B. $84,000
C. $120,000
D. $36,000

13. Atlantic Corporation reported the following amounts at the end of the first
year of operations:

 Common stock $200,000


 Sales revenue $800,000
 Total assets $600,000
 Dividends declared $40,000
 Total liabilities $320,000

What are the retained earnings of Atlantic at the end of the year, and what
amount of expenses were incurred during the year?

A. RE are $280,000 and E incurred totaled $480,000.


B. RE are $80,000 and E incurred totaled $680,000.
C. RE are $80,000 and E incurred totaled $720,000.
D. RE are $280,000 and E incurred totaled $520,000.

14. Which of the following best describes the balance sheet?

A. It includes a listing of assets, liabilities, and stockholders' equity at their


market values.
B. It includes a listing of assets at their market values.
C. It provides information pertaining to a company's assets and the
claims against sources of financing for those assets.
D. It provides information pertaining to a company's liabilities for a period of
time.

15. Which of the following statements is correct?

A. The balance sheet equation states that assets equal liabilities.


B. A corporation's net income does not necessarily equal its net cash
flow from operations.
C. Assets on the balance sheet include retained earnings.
D. Retained earnings includes common stock.

16. Which of the following correctly describes the various financial statements?
A. The statement of stockholders' equity is a financial statement at a
specific point in time.
B. An income statement covers a period of time.
C. The balance sheet is a financial statement that covers a period of time.
D. The cash flow statement is a financial statement at a specific point in
time.

17. Which of the following accounts would not be reported on the balance
sheet?

A. Retained earnings.
B. Dividends.
C. Accounts payable.
D. Inventory.

18. Which of the following would not be found on the statement of cash flows?

A. Cash flow from operating activities.


B. Cash flow from investing activities.
C. Cash flow from financing activities.
D. Cost flow from manufacturing activities.

19. Which of the following accounts is not a liability on the balance sheet?

A. Notes payable.
B. Retained earnings.
C. Accounts payable.
D. Interest payable.

20. What financial statement would you look at to determine the dividends
declared by a business?

A. Balance sheet.
B. Statement of stockholders' equity.
C. Income statement.
D. Statement of cash flows.

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