Question 1

Which of the following characteristics correctly describes balance sheets prepared in accordance with generally accepted accounting principles?

There's a tendency to be conservative in the reporting of gains.

Managerial judgment does not play a role in the determination of the numbers reported on the balance sheet.

All assets on the balance sheet are stated at their current values.

All

Question 2

4pts

Which of the following characteristics correctly describes income statements prepared in accordance with generally accepted accounting principles?

When the market value of an asset, such as land or inventory, goes up, income is recognized.

Every firm has the choice of using either the cash basis or the accrual basis of accounting to recognize revenues and expenses.

Transactiuons must be allocated to a specific time period.

None

Question 3

4pts

Under the accrual basis of accounting,

expenses are recognized when creditors lend money to the firm.

expenses incurred in the process of generating revenues are recognized at the same time as the revenues are recognized.

revenues are recognized when shareholders contribute cash to the firm.

All

Question 4

4pts

The accrual basis of accounting is superior to cash basis accounting because

revenues should not be recognized until cash is collected

expenses are matched in time with the revenues to which they are associated, resulting in a more informative income statement.

a firm needs to be able to generate positive net cash flows in order to survive.

All

Question 5

4pts

If a firm enters into a transaction that involves an asset being credited for $100 and a liability being debited for $100, by how much does its net assets change? (no dollar sign)

Question 6

4pts

Occasionally the defense for an accounting error is that it was not material. Which of the following errors would be considered material?

All of these errors.

An error that had an effect on reported net income.

An error that affected earnings per share.

An error that affected the liquidity ratio.

Question 7

4pts

Which of the following events results in the recognition of expenses by a firm?

The firm purchases some inventory that it will later sell to customers.

The firm prepays 12 months' rent on office space.

The firm sells inventory to customers.

All

Question 8

4pts

Which of the following is not an asset?

Income taxes that the firm owes, but has not yet paid.

Equipment that has been purchased and paid for.

Inventory that has been purchased but not yet paid for.

All

Question 9

4pts

Which of the following is not a liability?

Payments due on land purchased.

Payments due on wages earned but not yet paid for.

Retained earnings.

All.

Question 10

4pts

Which of the following characterizes the relation between the balance sheet and the income statement?

Expenses cause shareholders' equity to go down.

Revenues cause shareholders' equity to go up.

Revenues minus expenses equals the amount that retained earnings increases as a result of the firm's operations.

All

Question 11

4pts

Which of the following correctly characterizes assets listed on the balance sheet?

Nonmonetary assets are never reported on the balance sheet at a value above their acquisition cost.

Monetary assets are generally measured on the balance sheet at their current cash value.

Monetary assets that will not be collected in cash for at least one year from the balance sheet date are reported at their present value.

All

Question 12

4pts

Which of the following is a correct descriptionof liabilities that are recognized on the balance sheet?

They represent amounts contributed by the firm's shareholders.

They arise when goods or services have been received, but not yet paid for.

They are valued at the amount due, regardless of when the liability will be paid.

None

Question 13

4pts

If a firm's revenues are equal to $50,000 and its net income is equal to $5,000, its expenses must equal

$5,000.00

$45,000.00

$50,000.00

It depends on whether the revenues were all collected in cash during the year.

Question 14

4pts

A statement of cash flows is useful because

a firm's net income over a given period of time need not equal its cash flow over that time.

a firm can only survive if it generates sufficient cash flows.

it's important to know how much of the firm's cash is coming from operating activities, investing activities, and financing activities.

All of these.

Question 15

4pts

Which of the following cash flows is considered a cash flow from investing activities?

Payment for the purchase of office supplies.

Receipt of cash from a bank loan.

Payment to purchase land for future use.

All