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The main goal of an accounting system is to:


A) capture information about a business so that it can be reported to decision makers.
B) earn a profit for the company's stockholders.
C) prove that assets equal liabilities plus stockholders' equity.
D) provide initial financing for a new start-up.

E) All of the above
F) None of the above

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Use the following Year 3 data to prepare the annual income statement for Kvass,Inc. Use the following Year 3 data to prepare the annual income statement for Kvass,Inc.

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Which of the following statements about financial statement information is correct?


A) If a company has total revenues of $80,000, total expenses of $50,000 and dividends of $10,000, they will have net income of $20,000.
B) A company with total stockholders' equity of $45,000 and total assets of $75,000 must have total liabilities of $120,000.
C) A company with liabilities of $80,000 and stockholders' equity of $50,000 will have Assets of $30,000.
D) A company with total stockholders' equity of $120,000 and common stock of $75,000 must have total retained earnings of $45,000.

E) B) and C)
F) A) and D)

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Which of the following statements about the use of financial statements is not correct?


A) When choosing between a company that pays steady dividends and one that retains its earnings to support future growth, investors will always choose the company that pays steady dividends.
B) Companies can develop reputations for honest financial reporting even when conveying bad news.
C) Trends in a company's net income from year to year can provide clues about its future earnings, which can help investors to decide whether to buy stock in the company.
D) Information in the notes to the financial statements can influence a user's interpretation of balance sheet and income statement information.

E) B) and C)
F) B) and D)

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Net income appears on which of the following financial statements?


A) Balance sheet and income statement
B) Balance sheet and statement of retained earnings
C) Balance sheet and statement of cash flows
D) Income statement and statement of retained earnings

E) B) and D)
F) None of the above

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Stockholders are creditors of a corporation.

A) True
B) False

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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

E) A) and D)
F) C) and D)

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What do independent auditors provide for companies who hire them?


A) Assurance that this year's financial statements are perfect
B) A guarantee that next year's operations will be profitable
C) Assurance that the financial statements follow Generally Accepted Accounting Principles
D) Assurance that the company's stock is a good investment

E) A) and D)
F) B) and C)

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Use the following information to answer questions 130 - 132: A company's financial records at the end of the year including the following amounts: Use the following information to answer questions 130 - 132: A company's financial records at the end of the year including the following amounts: -Use the information above to answer the following question.What is the amount of total assets to be reported on the balance sheet at the end of the year? A) $112,000. B) $102,000. C) $119,000. D) $155,000. -Use the information above to answer the following question.What is the amount of total assets to be reported on the balance sheet at the end of the year?


A) $112,000.
B) $102,000.
C) $119,000.
D) $155,000.

E) All of the above
F) A) and B)

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To determine whether generally accepted accounting principles (GAAP) were followed in the preparation of financial statements,an examination of:


A) tax documents would be performed by the IRS.
B) the company's accounting records would be performed by the SEC.
C) the financial statements and related documents would be performed by an independent auditor.
D) the financial statements and related documents would be performed by the FASB.

E) A) and D)
F) A) and C)

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Relevance is an objective of external financial reporting that means:


A) the financial reports of a business are assumed to include the results of only that business's activities.
B) financial information can be compared across businesses because similar accounting methods have been applied.
C) the financial information possesses a feature that allows it to influence a decision.
D) the financial information depicts the economic substance of business activities.

E) A) and B)
F) A) and C)

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-Use the information above to answer the following question.What amount is represented by letter J in the statement of cash flows? A) ($42,000) B) $42,000 C) ($22,000) D) $22,000 -Use the information above to answer the following question.What amount is represented by letter J in the statement of cash flows?


A) ($42,000)
B) $42,000
C) ($22,000)
D) $22,000

E) B) and D)
F) A) and C)

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The WC Company borrowed $26,500 from a bank during the year.This borrowing would be reported on the statement of cash flows as a(n) :


A) investing activity is the amount of ($26,500) .
B) financing activity in the amount of ($26,500) .
C) investing activity is the amount of $26,500.
D) financing investing activity is the amount of $26,500.

E) B) and C)
F) A) and D)

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Expenses are reported on the:


A) income statement in the time period in which they are paid.
B) income statement in the time period in which they are incurred.
C) balance sheet in the time period in which they are paid.
D) balance sheet in the time period in which they are incurred.

E) B) and C)
F) A) and B)

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Which of the following would not be reported as a liability on the balance sheet?


A) Accounts Payable
B) Common Stock
C) Notes Payable
D) Salaries and Wages Payable

E) C) and D)
F) A) and B)

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A company started the year with the following: Assets $100,000; Liabilities $30,000; Common Stock $60,000; Retained Earnings $10,000.During the year, the company earned revenue of $5,000, all of which was received in cash, and incurred expenses of $3,000, all of which were unpaid as of the end of the year.In addition, the company paid dividends of $1,000 to owners.Assume no other activities occurred during the year. -Use the information above to answer the following question.The amount of retained earnings at the end of the year is


A) $15,000.
B) $11,000.
C) $12,000.
D) $1,000.

E) None of the above
F) All of the above

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An economic resource that is owned by a company and will provide future benefits is referred to as:


A) revenue.
B) an asset.
C) retained earnings.
D) net income.

E) None of the above
F) A) and B)

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Profit is equal to:


A) revenues minus expenses.
B) assets minus liabilities.
C) the amount of cash that a company has.
D) the amount of cash that owners have contributed to the business.

E) All of the above
F) A) and C)

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Which of the following requires that its members adhere to a Code of Professional Conduct?


A) SEC
B) FASB
C) PCAOB
D) AICPA

E) B) and C)
F) A) and B)

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A company began the year with assets of $100,000,liabilities of $20,000,and stockholders' equity of $80,000.During the year assets increased $55,000 and stockholders' equity increased $20,000.What was the change in liabilities for the year?


A) Increase of $75,000
B) Increase of $35,000
C) Decrease of $75,000
D) Decrease of $35,000

E) A) and D)
F) All of the above

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