Question 1

Accountants generally must meet educational requirements, pass a rigorous exam, and meet experience requirements before becoming licensed CAs, CGAs, or CMAs.

Accepted Answer

A) True 
 B)False

Question 2

If you wanted to know how much of its profit a corporation distributed as dividends, which financial statement would you look at?

Accepted Answer

A)   Statement of cash flows.
B)   Statement of changes in equity.
C)   Statement of financial position.
D)   Statement of earnings.E) C) and D)
F) None of the above

Question 3

When would a company report a net loss?

Accepted Answer

A)   When retained earnings decreased due to paying dividends to shareholders.
B)   When its liabilities increased during an accounting period.
C)   When its assets decreased during an accounting period.
D)   When its expenses exceeded its revenues for an accounting period.E) B) and C)
F) A) and B)

Question 4

If the retained earnings account increases from the beginning of the year to the end of the year, then

Accepted Answer

A)   profit is greater than dividends.
B)   dividends were paid.
C)   additional investments are less than reported losses.
D)   a loss is less than dividends.E) A) and B)
F) None of the above

Question 5

The purchase of equipment is an example of a financing activity.

Accepted Answer

A) True 
 B)False

Question 6

Accounting communicates financial information about a business to both internal and external users.

Accepted Answer

A) True 
 B)False

Question 7

Accounting is based on man-made rules that sometimes undergo change.

Accepted Answer

A) True 
 B)False

Question 8

Brown Corporation reported the following amounts at the end of the first year of operations, December 31, 20A: share capital $20,000; sales revenue $95,000; total assets $85,000, no dividends, and total liabilities $35,000. What would shareholders' equity and total expenses be?

Accepted Answer

A)   Shareholders' equity, $50,000 and expenses $65,000.
B)   Shareholders' equity, $80,000 and expenses $85,000.
C)   Shareholders' equity, $80,000 and expenses $40,000.
D)   Shareholders' equity, $60,000 and expenses $75,000.E) A) and B)
F) A) and C)

Question 9

On January 1, 20A, Taylor Corporation had retained earnings of $6,500,000. During 20A, Taylor had profit of $1,050,000 and dividends of $450,000. What is the amount of Taylor's retained earnings at the end of 20A?

Accepted Answer

A)   $6,050,000.
B)   $7,100,000.
C)   $7,550,000.
D)   $6,950,000.E) A) and C)
F) B) and C)

Question 10

What is one of the disadvantages of a corporation, when compared to a partnership?

Accepted Answer

A)   The corporation provides continuity of life.
B)   The corporation and its shareholders are potentially subject to double taxation.
C)   The shareholders are treated as a separate legal entity from the corporation.
D)   The shareholders have limited liability.E) A) and D)
F) None of the above

Question 11

The reasons for a decrease in cash can be determined by examining the statement of earnings.

Accepted Answer

A) True 
 B)False

Question 12

Why would Parker Bank, in deciding whether to make a loan to Davis Company, be interested in the amount of liabilities, Davis has on its statement of financial position?

Accepted Answer

A)   Parker would be interested in the amount of Davis's assets but not the amount of liabilities.
B)   If Davis already has many other obligations, it might not be able to repay the loan.
C)   Existing liabilities give an indication of how profitable Davis has been in the past.
D)   The liabilities represent resources that could be used to repay the loan.E) C) and D)
F) B) and C)

Question 13

What are the categories of cash flows that appear on a statement of cash flows?

Accepted Answer

A)   Cash flows from financing, production, and growth activities.
B)   Cash flows from operating, production, and internal activities.
C)   Cash flows from operating, investing, and financing activities.
D)   Cash flows from investing, financing, and service activities.E) A) and B)
F) B) and C)

Question 14

The statement of cash flows and the statement of financial position are interrelated because

Accepted Answer

A)   both disclose the corporation's profit.
B)   the ending amount of cash on the statement of cash flows must agree with the amount in the statement of financial position.
C)   the ending amount of cash on the statement of cash flows must agree with the amount on the statement of earnings.
D)   the ending amount of cash on the statement of cash flows must agree with the amount in the statement of changes in equity.E) All of the above
F) None of the above

Question 15

With whom does primary responsibility for the information in a corporation's financial statements rest?

Accepted Answer

A)   The managers of the corporation.
B)   The shareholders of the corporation.
C)   The Ontario Securities Commission.
D)   The public accountant who audited the financial statements.E) B) and C)
F) A) and B)

Question 16

Borrowing money is an example of a(n)

Accepted Answer

A)   investing activity.
B)   operating activity.
C)   delivering activity.
D)   financing activity.E) B) and C)
F) A) and B)

Question 17

Why is the operating activities section often believed to be the most important part of a statement of cash flows?

Accepted Answer

A)   It indicates a company's ability to generate cash from sales to meet current cash needs.
B)   It shows the net increase or decrease in cash during the period.
C)   It gives the most information about how operations have been financed.
D)   It shows the dividends that have been paid to shareholders.E) A) and B)
F) A) and C)

Question 18

Which financial statement would indicate whether the company relies more on debt or shareholders' equity to finance its assets?

Accepted Answer

A)   Statement of earnings.
B)   Statement of cash flows.
C)   Statement of changes in equity.
D)   Statement of financial position.E) A) and B)
F) A) and C)

Question 19

The ending retained earnings balance of the Brown Hat restaurant chain increased by $4.3 billion from the beginning of the year. The company had declared a dividend of
$1.5 billion. What was the profit earned during the year?

Accepted Answer

A)   $5.8 billion.
B)   $2.8 billion.
C)   $3.0 billion.
D)   There is no way to determine net income as not enough information was given.E) B) and C)
F) C) and D)

Question 20

For the items listed below, fill in the appropriate code letter to indicate whether th item is an asset, liability, or shareholders' equity item.

Accepted Answer

The answer of For the items listed below, fill in...

Exam 1: Financial Statements and Business Decisions

Accounting communicates financial information about a business to both internal and external users.

Correct AnswerverifiedShow Answer

On January 1, 20A, Taylor Corporation had retained earnings of $6,500,000. During 20A, Taylor had profit of $1,050,000 and dividends of $450,000. What is the amount of Taylor's retained earnings at the end of 20A?

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When would a company report a net loss?

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Which financial statement would indicate whether the company relies more on debt or shareholders' equity to finance its assets?

Correct AnswerverifiedShow Answer

Accounting is based on man-made rules that sometimes undergo change.

Correct AnswerverifiedShow Answer

Why would Parker Bank, in deciding whether to make a loan to Davis Company, be interested in the amount of liabilities, Davis has on its statement of financial position?

Correct AnswerverifiedShow Answer

For the items listed below, fill in the appropriate code letter to indicate whether th item is an asset, liability, or shareholders' equity item.

Correct AnswerverifiedShow Answer

Borrowing money is an example of a(n)

Correct AnswerverifiedShow Answer

Accountants generally must meet educational requirements, pass a rigorous exam, and meet experience requirements before becoming licensed CAs, CGAs, or CMAs.

Correct AnswerverifiedShow Answer

If you wanted to know how much of its profit a corporation distributed as dividends, which financial statement would you look at?

Correct AnswerverifiedShow Answer

The purchase of equipment is an example of a financing activity.

Correct AnswerverifiedShow Answer

The reasons for a decrease in cash can be determined by examining the statement of earnings.

Correct AnswerverifiedShow Answer

Why is the operating activities section often believed to be the most important part of a statement of cash flows?

Correct AnswerverifiedShow Answer

What are the categories of cash flows that appear on a statement of cash flows?

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With whom does primary responsibility for the information in a corporation's financial statements rest?

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If the retained earnings account increases from the beginning of the year to the end of the year, then

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The statement of cash flows and the statement of financial position are interrelated because

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What is one of the disadvantages of a corporation, when compared to a partnership?

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The ending retained earnings balance of the Brown Hat restaurant chain increased by $4.3 billion from the beginning of the year. The company had declared a dividend of $1.5 billion. What was the profit earned during the year?

Correct AnswerverifiedShow Answer

Brown Corporation reported the following amounts at the end of the first year of operations, December 31, 20A: share capital $20,000; sales revenue $95,000; total assets $85,000, no dividends, and total liabilities $35,000. What would shareholders' equity and total expenses be?

Correct AnswerverifiedShow Answer

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