Accounting Chapter 1-4

Which of the following is NOT true regarding the Sarbanes-Oxley Act (SOX)?

The Act does not require independent outside auditors to attest to the adequacy of firms’ internal control system

Which of the following activities involves collecting the necessary funds to support the
business?

Financing activities

The best definition of assets is the

Resources belonging to a company that have future benefit to the company

The liability created by a business when it purchases coffee beans and coffee cups on credit
from suppliers is termed a(n)

accounts payable

If total liabilities decreased by $50,000 and stockholders’ equity increased by $10,000 during
a period of time, then total assets must change by what amount and direction during that same
period

40,000 decrease

L Inc. began the year with retained earnings of $670,000. During the year, the company
recorded revenues of $600,000, expenses of $380,000, and paid dividends of $140,000. What
was L Inc.’s retained earnings at the end of the year?

750,000

The financial statement which presents a picture on a particular date of what a business owns
and owes is a(n)

balance sheet.

To report the success or failure of the company’s operations during the period is the purpose
of the

income statement

The primary purpose of the statement of cash flows is to report

information about cash receipts and cash payments of a company

The elements of a corporation’s annual report that describes the corporation’s accounting methods is/are the

notes to the financial statements

The element of the annual report that presents an opinion regarding the fairness of the
presentation of the financial position and results of operations is/are the

auditor’s opinion

In a classified balance sheet, assets are usually classified as

current assets; long-term investments; property, plant, and equipment; and intangible assets

Cash, and other resources that are reasonably expected to be realized in cash or sold or consumed in the business within one year or the operating cycle, are called

Current assets

In which balance sheet section would trademarks be reported?

Intangible assets

Which of the following is generally not classified as a current liability?

Bonds Payable

On a classified balance sheet, companies usually list current assets

In the order in which they are expected to be converted into cash.

For 2019, Whispering Winds Corp. reported net income of $43,900, had average share outstanding of 15,500, paid preferred dividends of $10,400 and common dividends were of $5,200. What was 2019 earnings per share?

2.16

Which of the following statements is true?

By comparing earnings per share of a single corporation over time, a stockholder can evaluate the corporation’s relative earnings performance.

The information needed to determine if companies can pay their current obligations is the

Relationship between current assets and current liabilities.

Free cash flow represents

- Cash provided by operations less adjustments for capital expenditures and dividends.
- a measurement of a company’s cash generating ability.
- a measure of solvency.

The agency of the United States Government that oversees the U.S. financial markets is the

Security Exchange Commission

The two fundamental qualities of useful information are

relevance and faithful representation

What is the primary criterion by which accounting information can be judged?

Usefulness for decision making

The convention of consistency refers to consistent use of accounting principles

From period to period

Most companies that follow IFRS present balance sheet (statement of financial position) information in this order

noncurrent assets; current assets; equity; noncurrent liabilities; current liabilities

If expenses are paid in cash, then

assets will decrease and stockholders’ equity will decrease.

Comstock Company provided consulting services and billed the client $2,500. As a result of this event

Both assets and stockholders’ equity increased by $2,500

If an asset account such as cash is increased by $5,000, which one of the following financial events must also occur to keep the accounting equation in balance?

- Another asset, such as Accounts Receivable, must decrease by $5,000
- A liability, such as Accounts Payable, must increase by $5,000

- Stockholders’ equity, such as Common Stock, must increase by $5,00

Purchasing supplies on account involves

An increase in assets and an increase to liabilities

Transactions in a journal are initially recorded in

chronological order

Which of the following journal entries is recorded correctly and in the basic format?

Salaries and Wages Expense 550
Advertising Expense 950
Cash 1,500

The purpose of the ledger is to

keep in one place all information about changes in specific account balances

Management could determine the amounts due from customers by examining which ledger account?

Accounts Receivable

The principal purpose of posting is to

Accumulate the effects of journalized transactions in the individual accounts

A trial balance is a listing of

general ledger accounts and balances