An advantage of a classified balance sheet is that it is easy to see:

A) If the company is likely to be profitable in future periods.

B) If the company is profitable in the current period.

C) If current assets are large enough to pay current liabilities.

D) If dividends have been paid to stockholders.

Answer: C

A current liability is defined as:

A) An amount borrowed less than one year ago.

B) An amount due to an employee.

C) An amount due within one year.

D) A small amount due.

Answer: C

Patents, copyrights, franchises, and trademarks are examples of:

A) Current assets.

B) Investments.

C) Intangible assets.

D) Property, plant, and equipment.

Answer: C

How many of the items listed above are generally long-term assets?Land Accounts Receivable Notes Payable

Consider the following items:

Land

Accounts Receivable

Notes Payable (due in three years)

Accounts Payable

Retained Earnings

Prepaid Rent

Deferred Revenue

Buildings

Notes Payable (due in six months)

Equipment

How many of the items listed above are generally long-term assets?

A) Two.

B) Three.

C) Four.

D) Five.

Answer: B

Resources owned by the company that will provide a benefit for more than one year are called:

A) Current assets.

B) Current liabilities.

C) Long-term assets.

D) Revenues.

Answer: C

Long-term productive assets used in the normal course of business are typically classified as:

A) Current assets.

B) Investments.

C) Intangible assets.

D) Property, plant, and equipment.

Answer: D

The following financial information is from Shovels Construction Company: Accounts Payable $ 15,000 Buildings 80,000

The following financial information is from Shovels Construction Company:

Accounts Payable $ 15,000

Buildings 80,000

Cash 10,500

Accounts Receivable 9,500

Sales Tax Payable 4,500

Retained Earnings 47,500

Supplies 40,000

Notes Payable (due in 18 months) 35,000

Interest Payable 3,000

Common Stock 35,000

What is the amount of current assets, assuming the accounts above reflect normal activity?

A) $20,000.

B) $60,000.

C) $140,000.

D) $175,000.

Answer: B

With respect to current assets, liquidity refers to:

A) How quickly the asset can be converted to cash.

B) The magnitude of the asset's account balance.

C) Whether cash was paid for the asset at the time of acquisition.

D) The accuracy of the balance being reported.

Answer: A

Current assets include:

A) Assets that must be paid for within 12 months.

B) Assets that will be used up or converted to cash within 12 months.

C) Assets that will be used for many years.

D) Any assets that were purchased for cash.

Answer: B

In the statement of stockholders' equity, the balance of Retained Earnings increased by $32,000. The company declared a dividend of $10,000 during the year. What was the net income for the year?

A) $10,000.

B) $32,000.

C) $42,000.

D) $22,000.

Answer: C

A classified balance sheet ________.

A) Shows only current assets and current liabilities

B) Shows changes in assets, liabilities, revenues and expenses

C) Contains confidential information

D) Shows subtotals for current assets and current liabilities

Answer: D

Which financial statement provides information for a point in time only?

A) Statement of cash flows.

B) Income statement.

C) Statement of stockholders' equity.

D) Balance sheet.

Answer: D

In the statement of stockholders' equity, Retained Earnings had a beginning balance of $60,000. During the period, the company reports a net loss of $10,000 and net cash outflows of $15,000. The ending balance in the Retained Earnings account is:

A) $60,000.

B) $35,000.

C) $50,000.

D) $45,000.

Answer: C

In the statement of stockholders' equity, Retained Earnings had a beginning balance of $25,000. During the period, the company reports a net income of $10,000 and a dividend of $4,000. The ending balance in the Retained Earnings account is:

A) $10,000.

B) $35,000.

C) $39,000.

D) $31,000.

Answer: D

The statement of stockholders' equity includes:

A) Net income from the income statement.

B) The amount of stock issued in the current period.

C) Dividends declared to stockholders in the current period.

D) All of the other answers are correct.

Answer: D

If a company records cash received for services to be provided in the future with a debit to Cash and a credit to Service Revenue, how will this error affect net income for the current period?

A) Net income will be too low.

B) Net income will be correct.

C) Net income will be too high.

D) Not possible to determine.

Answer: C

If a company incorrectly records a payment as an expense instead of an asset, how will this error affect net income in the current period?

A) Net income will be too low.

B) Net income will be correct.

C) Net income will be too high.

D) Not possible to determine.

Answer: A

The statement of stockholders' equity includes which of the following for the period?

A) Details of a company's profitability that represents stockholders' claims.

B) Changes in stockholders' equity accounts.

C) Inflows and outflows of cash that benefit stockholders.

D) Current assets available to pay current liabilities to reduce risk to stockholders.

Answer: B

The following table contains financial information for Trumpeter Inc. before closing entries: Cash $ 12,000

The following table contains financial information for Trumpeter Inc. before closing entries:

Cash $ 12,000

Supplies 4,500

Prepaid Rent 2,000

Salaries Expense 4,500

Equipment 65,000

Service Revenue 30,000

Miscellaneous Expense 20,000

Dividends 3,000

Accounts Payable 5,000

Common Stock 68,000

Retained Earnings 8,000

What is Trumpeter's net income?

A) $3,500.

B) $2,500.

C) $5,000.

D) $5,500.

Answer: D

Which of the following best describes the information reported in the income statement?

A) The portion of profits paid in cash to stockholders.

B) The current resources available to pay current obligations.

C) The amount recognized from providing goods and services to customers compared to the cost of doing so.

D) The extent to which cash inflows exceed cash outflows.

Answer: C

Which of the following is true about an income statement?

A) It reports activity for a period of time.

B) It does not include dividends paid.

C) It reports revenues and expenses.

D) All of the other answers are true.

Answer: D