financial statement analysis

The assumption that enables us to prepare periodic statements between the time that a business
commences operations and the time it goes out of business is

Time period

The business being separate and distinct from the owners is an integral part of the:

business entity assumption

The accounting principle that assumes that inflation will not take place or will be immaterial is

monetary unit

The assumption that deals with when to recognize the costs that are associated with the revenue that is being recognized is

matching

The most significant current source of generally accepted accounting principles is the:

financial accounting standards board

The following data relate to Swift Company for the year ended December 31, 2012. Swift Company
uses the accrual basis.
Sales on credit $250,000
Cost of inventory sold on credit 170,000
Collections from customers 220,000
Purchase of inventory on credit 150,000
Payment for purchases 140,000
Selling expenses (accrual basis) 40,000
Payment for selling expenses 45,000
Which of the following amounts represents income for Swift Company for the year ended December
31, 2012

40000

The following data relate to Gorr Company for the year ended December 31, 2012. Gorr Company
uses the accrual basis.
Sales for cash $200,000
Sales for credit 220,000
Cost of inventory sold 180,000
Collections from customers 300,000
Purchases of inventory on credit 190,000
Payment for purchases 180,000
Selling expenses (accrual basis) 50,000
Payment for selling expenses 60,000
Which of the following represents income for Gorr Company for the year ended December 31, 2010?

190000

Many of our present financial statement figures would be misleading if it were not for the going
concern assumption

True

An entity usually cannot reasonably account for the profits related to inventory until that inventory is
sold in the normal course of business

True

At the time of originally recording a transaction, historical cost also represents the fair market value

True

Accountants normally recognize revenue when cash is received.

False

Using the business entity assumption, the financial statements are prepared separate and distinct from the owners of the entity

True

The accrual basis of accounting recognizes revenue when realized (realization concept) and expenses when incurred (matching concept)

True

The cash basis recognizes revenue when cash is received and expenses when cash is paid

True

The accountant records only the events that affect the financial position of the entity and that can be
reasonably determined in monetary terms

True

Private companies are required to report under Sarbanes-Oxley

False

Who is responsible for the preparation and integrity of financial statements?

Management

Which of the following is not a type of audit opinion?

Clean opinion

If liabilities total $70,000 and stockholders' equity totals $50,000, then total assets must be:

120000

Tiffin Company had retained earnings of $50,000 at the end of last year. For the current year, income was $20,000 and dividends $15,000. What is the balance in retained earnings at the end of the current year

55000

Financial statements of legally separate entities may be issued to show financial position, income, and cash flow as they would appear if the companies were a single entity

True

The responsibility for the preparation and integrity of financial statements rests with management

True

The assets for the balance sheet must equal the liabilities and stockholders' equity

True

The retained earnings account is the link between the balance sheet and the statement of cash flows

False

A corporation is considered to be a legal entity separate and distinct from the stockholders

True

The principal financial statements of a corporation are the balance sheet, income statement, and
statement of cash flows

True

A balance sheet shows the financial condition of an accounting entity for a particular period of time.

False

The income statement is a summary of revenues and expenses and gains and losses, ending with net income, for a particular period of time.

True

The statement of retained earnings reconciles the beginning retained earnings balance to the retained earnings balance at the end of the current period.

True

The statement of cash flows consists of two sections: cash flows from operating activities and cash
flows from financing activities

False

The point of cash receipt for revenue and cash disbursement for expenses is important under the
accrual basis when determining income.

False