Midterm quiz 1) The cash flow statement is divided into three categories relating to cash flows from operating, investing, and: A) management planning activities B) financing activities C) strategic positioning activities D) marketing activities 2) To determine a company’s gross margin for the period, an investor would look on the: A) balance sheet B) cash flow statement C) income statement D) statement of retained earnings 3) Which financial statement is based on the accounting equation? A) statement of retained earnings B) income statement C) cash flow statement D) balance sheet 4) The main source of cash for a business normally arises from: A) current assets B) operating activities C) financing activities D) investing activities 5) Gains and losses appear on which of the financial statements listed below? A) the balance sheet B) the income statement C) the retained earnings statement D) the cash flow statement 6) The date of the income statement: A) covers one day in time B) covers a period of time, usually for an accounting period C) is not dated D) may cover a period of time or only one day in time, like a snapshot photograph 7) Equipment would appear on the: A) income statement with the revenues B) balance sheet with the non-current assets C) balance sheet with the current assets D) income statement with the operating expenses 8) Depreciation is normally associated with which asset on the balance sheet? A) land B) accounts receivable C) inventory D) equipment 9) An owner investment of a building, valued at $100,000 with an $80,000 outstanding mortgage, transferring this asset into the business would: A) increase assets by $20,000 B) increase assets by $80,000 C) increase shareholders' equity by $20,000 D) increase shareholders' equity by $100,000 10) Performing services on account would: A) increase assets and liabilities B) increase assets and decrease shareholders' equity C) increase revenue and decrease shareholders' equity D) increase net income and shareholders' equity 11) The collection of cash from a customer on account would: A) increase net income and shareholders' equity B) increase assets and decrease liabilities C) increase assets and increase net income D) have no effect on net income or shareholders' equity 12) Dividends paid to the shareholders when declared will: A) increase assets and decrease liabilities B) decrease assets and increase liabilities C) have no effect on shareholders' equity D) decrease assets and decrease shareholders' equity 13) What type of account is Prepaid Rent? A) a liability B) an expense C) shareholders; equity D) an asset