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Exam 1: Business Decisions and Financial Accounting

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Question 1

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Which of the following statements about financial accounting is correct?

A) Financial accounting reports are used primarily by employees to make business decisions related to production.
B) Financial accounting reports are used primarily by management to understand whether a product line should be discontinued.
C) Financial accounting reports are primarily prepared to provide information for external decision makers.
D) Financial accounting reports primarily contain detailed internal records of the company.

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

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Question 2

Multiple Choice

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-Use the information above to answer the following question.What is the missing amount for Notes Payable?

A) $207,100.
B) $437,800.
C) $1,439,200.
D) $3,347,700.

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

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B

Question 3

Multiple Choice

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During Year 3,a company's assets increase by $56,000 and its liabilities increase by $38,000.If no dividends were paid and there were no changes in the amount of common stock issued during the year,net income for Year 3 was:

Choose the appropriate letter to match the term and the definition.(There are more definitions than terms.) TERM 1._____ Investors 2._____ Audit 3._____ Balance Sheet 4._____ Operating Activities 5._____ Unit of Measure Assumption 6._____ Retained Earnings 7._____ Investing Activities 8._____ Income Statement DEFINITION A.An example of an internal user of financial statements. B.A financial statement showing a company's assets,liabilities and stockholders' equity. C.When a company acquires money from investors. D.A financial statement that summarizes a company's past and current cash situation. E.An example of external users of financial statements. F.The idea that the financial statements of a company include the results of only that company's business activities. G.Activities directly related to running the business to earn profit. H.A financial statement that shows a company's revenues and expenses. I.Borrowing money from lenders. J.The total amount of profits that are kept by the company. K.The idea that a company should report its financial data in the relevant currency. L.A procedure by which independent evaluators assess the accounting procedures and financial reports of a company. M.Transactions with lenders (borrowing and repaying cash)and stockholders (selling company stock and paying dividends).

Following is a list of financial statement items and amounts for Tim Burr's Tree Service as of 12/31/X3,the end of its first year in operation. Required: Use this information to prepare the Income Statement,Statement of Retained Earnings,and Balance Sheet.

Internal users of financial data include:

Paying a cash dividend to stockholders is a(n) :

Match the acronym with the description that best reflects it.(There are more descriptions than acronyms.) ACRONYM 1._____ SEC 2._____ GAAP 3._____ PCAOB 4._____ FASB 5._____ IASB 6._____ SOX 7._____ AICPA DESCRIPTION A.The Board that establishes international accounting standards. B.This organization regulates activities associated with the stock market such as the reporting of financial data by publicly owned companies. C.The U.S.agency that must approve mergers between very large publicly owned corporations. D.The national professional organization of accountants. E.A set of laws established to strengthen corporate reporting in the United States. F.The U.S.Board that approves the rules for auditing publicly owned companies. G.Rules of financial accounting created by the FASB for use in the United States. H.The organization that establishes business laws in the U.S. I.The U.S.agency that certifies foreign accounting firms to practice in the U.S. J.The Board that establishes the accounting rules that govern American publicly owned corporations.

The separate entity assumption assumes:

Which of the following is typically not a benefit of corporations over other organizational forms?

When several parties can reach similar values in financial statements by using similar methods,the information is said to be:

Use the following information to answer questions 130 - 132: A company's financial records at the end of the year including the following amounts: -Use the information above to answer the following question.What is the amount of total stockholders' equity that would be reported on the Balance Sheet at the end of the year?

A company might report negative cash flows from financing activities when:

The Sarbanes-Oxley Act (SOX)requires top management of companies to sign a report certifying that the financial statements are free of error.

Use the information above to answer the following question.As of September 30,Year 3,who provided more financing for Anonymous,Inc.?

The financial reports of a business include only the results of that business's activities.This is:

Characteristics that make information useful do not include:

Information that always makes a difference in a decision is:

If a company reports a negative dollar amount under cash flows from investing activities,a possible explanation is that:

A company started the year with the following: Assets $100,000; Liabilities $30,000; Common Stock $60,000; Retained Earnings $10,000.During the year, the company earned revenue of $5,000, all of which was received in cash, and incurred expenses of $3,000, all of which were unpaid as of the end of the year.In addition, the company paid dividends of $1,000 to owners.Assume no other activities occurred during the year. -Use the information above to answer the following question.What was the amount of net income for the year?