1. The officer of a corporation responsible for the firm's published financial statements would be most concerned about pronouncements of the:
A. FASB.
B. AICPA.
C. GASB.
D. SEC.
E. IRS.
2. Which of the following is not a characteristic or limitation of the kind of information that financial reporting by business enterprises can provide?
A. The information results in approximate, rather than exact, measures.
B. The information largely reflects the financial effects of transactions that have already happened.
C. The information is provided and used at a cost.
D. All of the above are characteristics or limitations of the kind of information that financial reporting by business enterprises can provide.
3. The ethical concept of independence means that an accountant employed:
A. By a corporation cannot prepare financial statements for use by the company's bank.
B. By one company cannot work part-time for another company.
C. By an auditing firm cannot own any stock in the company being audited.
D. By one company cannot accept a job with another company in the same industry.
4. The objectives of financial reporting for non-business enterprises:
A. Are exactly the same as those for business enterprises.
B. Focus on providing information for resource providers, rather than investors.
C. Have more of an internal utilization rather than external reporting focus.
D. Do not give consideration to the cost of providing information.
5. The ethical concept of integrity means that an individual must:
A. Sign a pledge to abide by all laws and regulations.
B. Report to a supervisor any violation of the code of conduct of her company that is observed.
C. Read, understand, and agree to follow all provisions of her employer's code of conduct.
D. Attempt to be honest and forthright in dealings and communications with others.
6. Which of the following is an objective of financial reporting by business enterprises?
A. Financial reporting should provide assurance that all liabilities of business enterprises will be paid.
B. Financial reporting should show the timing and amount of future cash dividends to potential investors.
C. The primary focus of financial reporting is information about the assets of the entity.
D. Financial reporting should provide information about the economic resources of an enterprise, the claims to those resources, and changes in those resources and claims to them.
7. Which of the following is true about the IASB?
A. Created to promote world acceptance and observation of accounting and financial reports.
B. The IASB is a private body and the pronouncements cannot be enforced.
C. Both A and B are correct.
D. None of the above is correct.
8. The provisions of the Sarbanes-Oxley Act of 2002 had the following components:
A. Enforce auditing.
B. Attestation.
C. Quality control.
D. None of the above are provisions.
E. A, B and C are correct.
9. Expenses are:
A. cash disbursements.
B. decreases in net assets from uninsured accidents.
C. decreases in net assets from dividends to stockholders.
D. decreases in net assets resulting from usual operating activities.
10. The purpose of the income statement is to show the:
A. change in the fair market value of the assets from the prior income statement.
B. market value per share of stock at the date of the statement.
C. revenues collected during the period covered by the statement.
D. net income or net loss for the period covered by the statement.
11. The Statement of Changes in Owners' Equity shows:
A. the change in cash during a year.
B. revenues, expenses, and liabilities for the period.
C. net income and dividends for the period.
D. paid-in capital and long-term debt at the end of the period.
12. Paid-in Capital represents:
A. Earnings retained for use in the business.
B. The amount invested in the entity by the owners.
C. Market value of the entity's common stock.
D. Net assets of the entity at the date of the statement.
13. Retained Earnings represents:
A. the amount invested in the entity by the owners.
B. cash that is available for dividends.
C. cumulative net income that has not been distributed to owners as dividends.
D. par value of common stock outstanding.
14. Additional paid-in-capital represents:
A. The difference between the total amounts invested by the owners and the par or stated value of the stock.
B. Distributions of earnings that have been made to the owners.
C. Distributions of earnings that have not been made to the owners.
D. The summation of the total amount invested by the owners and the par or stated value of the stock.
15. The Statement of Cash Flows:
A. Shows how cash changed during the period.
B. Is an optional financial statement.
C. Shows the change in the market value of the entity's common stock during the period.
D. Shows the dividends that will be paid in the future.
16. On January 31, an entity's balance sheet showed total assets of $750 and liabilities of $250. Owners' equity at January 31 was:
A. $500
B. $1,000
C. $750
D. $250
17. On January 31, an entity's balance sheet showed net assets of $1,025 and liabilities of $225. Owners' equity on January 31 was:
A. $800
B. $1,025
C. $1,250
D. $225
18. At the end of the year, retained earnings totaled $1,700. During the year, net income was $250, and dividends of $120 were declared and paid. Retained earnings at the beginning of the year totaled:
A. $2,070
B. $1,330
C. $1,230
D. $1,570
At the beginning of the fiscal year, the balance sheet showed assets of $1,364 and owners' equity of $836. During the year, assets increased $74 and liabilities decreased $38.
19. Owners' equity at the end of the year totaled:
A. $836
B. $872
C. $948
D. $1,438
20. Liabilities at the end of the year totaled:
A. $490
B. $528
C. $836
D. $910
At the beginning of the year, paid-in capital was $82 and retained earnings was $47. During the year, the owners invested $24 and dividends of $6 were declared and paid. Retained earnings at the end of the year were $52.
21. Total owners' equity at the end of the year was:
A. $82
B. $94
C. $106
D. $158
22. A firm's net income for the year was $200,000. Average assets totaled $1.5 million, and average liabilities totaled $0.3 million. Return on equity was:
A. 13.3%
B. 16.7%
C. 10%
D. 20%
23. Which of the following is not usually considered a measure of an entity's liquidity?
A. Current ratio.
B. Acid-test ratio.
C. Cash ratio.
D. Working capital.
24. A current ratio of 6 is usually an indication that the firm:
A. Has a low degree of liquidity.
B. Has a reasonable degree of liquidity.
C. Has not made the most productive use of its assets.
D. Has made the most productive use of its assets.
25. For a firm that presently has a current ratio of 2.0, the effect on this ratio of paying a current liability is:
A. Raises the current ratio.
B. Lowers the current ratio.
C. Doesn't affect the current ratio.
D. Depends on the amount paid.
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