Questions:
1. Investing activities:
A) involve day to day events like selling goods and services, which occur when running a business.
B) involve the buying or selling of land, buildings, equipment, and other longer-term investments.
C) only involve financial exchanges.
D) all of the above.
2. Which of the following would represent an operating activity?
A) Purchasing equipment with money borrowed from creditors.
B) An investment of financial capital by the owners.
C) Buying the company's office supplies.
D) Repaying a loan the company had taken out.
3. The three main types of business activities measured by financial statements are:
A) selling goods, selling services, and obtaining financing.
B) operating activities, investing activities, and financing activities.
C) hiring, producing, and advertising.
D) generating revenues, paying expenses, and incurring dividends.
4. Financing that individuals or institutions have provided to a company is
A) always classified as liabilities.
B) classified as liabilities when provided by creditors and stockholders' equity when provided by owners.
C) always classified as equity.
D) classified as stockholders' equity when provided by creditors and liabilities when provided by owners.
5. The Don't Bite Me pest control company has 10,000 gallons of insecticide supplies on hand that cost $300,000; a bill from the vendor for $100,000 of these supplies has not yet been paid. The company expects to earn $800,000 for its services when it uses the insecticide supplies. The company would report:
A) $300,000 in assets under supplies and no accounts payable.
B) $200,000 in assets under supplies and no accounts payable.
C) $300,000 in assets under supplies and $100,000 in liabilities under accounts payable.
D) $800,000 in assets under supplies and $100,000 in liabilities under accounts payable.
6. The Publish or Perish printing company paid a dividend to stockholders. This will be reported on the:
A) audit report.
B) income statement.
C) balance sheet.
D) statement of retained earnings.
7. Which of the following would affect stockholders' equity?
A) A company borrows $100 million and buys $100 million in equipment.
B) A company pays $100 million to stockholders as a dividend.
C) A company sells $100 million in assets for $100 million cash.
D) A company receives payment for $100 million in accounts receivable.
8. At the end of last year, the company's assets totaled $860,000 and its liabilities totaled $740,000. During the current year, the company's total assets increased by $58,000 and its total liabilities increased by $24,000. At the end of the current year,
A) stockholders' equity was $154,000.
B) stockholders' equity was $120,000.
C) stockholders' equity was $34,000.
D) stockholders' equity was $178,000.
9. A company's balance sheet contained the following information:
Contributed Capital $12,000 Total Assets $176,000
Accounts Payable $64,000 Retained Earnings $28,000
Assuming Notes Payable is the only other item on the balance sheet:
A) Notes Payable must equal $200,000.
B) Notes Payable must equal $8,000.
C) Notes Payable must equal $72,000.
D) Notes Payable must equal $344,000.
10. Which of the following would not affect a company's net income?
A) A change in the company's income taxes.
B) Changing the selling price of a company's product.
C) Paying a dividend to stockholders.
D) Advertising a new product.
11. Which of the following is not an example of a liability?
A) Interest receivable.
B) Wages payable.
C) Unearned revenues.
D) Bonds payable.
12. Which of the following is not an example of an asset?
A) Notes receivable.
B) Supplies.
C) Prepaid expenses.
D) Unearned revenues.
13. In 1999, the Denim Company bought land that cost $15,000. In 2005, a similar piece of land was bought for $28,000 and the company's existing land was estimated to be worth $18,000. On the balance sheet at the end of 2005, the land that was purchased in 1999 would be reported at:
A) $15,000.
B) $28,000.
C) $18,000.
D) the average of the three prices.
14. Your company pays back $2 million on a loan it had received earlier from a bank.
A) Assets are unchanged, liabilities and stockholders' equity both increased by $2 million.
B) Assets decrease by $2 million, liabilities decrease by $2 million, stockholders' equity is unchanged.
C) Assets are unchanged, liabilities increase by $2 million, contributed capital decreases by $2 million.
D) Assets decrease by $2 million, liabilities are unchanged, contributed capital decreases by $2 million.
15. A company receives $100,000 cash from investors in exchange for new common stock. Several weeks later, the company buys a $250,000 machine using all of the cash from the stock issue and signing a promissory note for the remainder. The accounts involved in these two transactions are:
A) Long-term Investments; Cash; Equipment; and Accounts Payable.
B) Stockholders' Equity; Cash; Long-term Investments; and Notes Payable.
C) Contributed Capital; Cash; Equipment; and Notes Payable.
D) Retained Earnings; Equipment; and Notes Payable.