Individual Quiz:
Chapter 1
Supplemental Instruction
Iowa State University / Leader: / Ammee
Course: / Acct 284
Instructor: / Whittle
Date:

True-False Questions. If false underline what makes it false

  1. ____ Dividends are expenses and they generate a companies’ earnings
  1. ____The balance of each account is reported only once on either the balance sheet, income statement, or statement of retained earnings.
  1. ____The separate entity assumption states that the financial reports of a business are assumed to include the results of only that business’s activities.
  1. ____Businesses that provide good or services to customers collect cash in payment at the time the goods or services are provided.
  1. ____Generally Accepted Accounting Principles are published by the Securities and Exchange Commission.
  1. ____Retained earnings represents the owners have a claim on amounts they contributed to the business by purchasing the company’s stock.

Multiple Choice Questions

  1. ____Which of the following statements regarding the use of financial accounting reports or financial statements by external users is not correct?
  2. Various local, state, and federal governments pay taxes based on information set forth in financial accounting reports.
  3. Banks use financial statements to evaluate the risk that they will not be repaid the money they’ve loaned to a company.
  4. Certain customers use financial statements to judge the company’s ability to provide future service on its products and honor warranties.
  5. Both existing and future stockholders rely on financial statements to evaluate whether the company is financially secure and likely to be a profitable investment.
  6. ____Which of the following statements regarding stockholders’ equity is not correct?
  7. The owners have a claim on amounts they contributed to the business by purchasing the company’s stock.
  8. Stockholders’ claims equal the company’s liabilities plus its assets.
  9. The owners have a claim on amounts that company has earned through profitable business operations
  10. The goal of most businesses is to generate profits because this increase stockholders’ equity, which allows owners to get more money back from the company that they put in (a return on their investment).
  11. ____Which of the following statements regarding the income statement is not correct?
  12. When listing the accounts on the income statement, revenues are on top, usually with the largest, most relevant revenue listed first.
  13. The income statement is usually the first financial statement that is prepared
  14. The equation for the income statement is Revenues + Expenses = Net Income
  15. It is quite common for a business to provided goods and services in one month and collects the cash in a later month.
  16. ____Which of the following does not describe a frequency with which financial statements are normally prepared?
  17. Monthly
  18. Quarterly
  19. Annually
  20. All of these are valid periods
  21. ____Which of the following statements reports financial information at a specific point in time?
  22. Income Statement
  23. Balance Sheet
  24. Statement of retained earnings
  25. Statement of cash flows
  26. ____Which of the following statements regarding the relevance of financial information is not correct?
  27. Investors look for a delayed return on their contributions to a company through dividends
  28. Creditors are interested in whether the company is generating enough cash to make payments on its loan
  29. Investors are looking for a long-term return by selling stock at a price highs than what was paid by the investor
  30. Creditors are interested in whether the company has enough assets to cover its liabilities
  1. ____Which of the following statements regarding the usefulness of financial information is not correct?
  2. Information is relevant if it makes a difference in decision.
  3. For financial information to be judged useful, it must have two characteristics: relevance and faithful representation.
  4. The usefulness of financial information is enhanced with it is (i) comparable (to prior periods and other companies), (ii) unverifiable, (iii) timely, and (iv) understandable.
  5. Information is relevant if it is a faithful representation if it fully depicts the economic substance of business activities.
  6. ____So that they can report whether, beyond reasonable doubt, the financial statements represent what they claim to represent and whether they comply with GAAP, auditors must follow rules approved by the various bodies including the:
  7. Public Company Accounting Oversight Board (PCAOB).
  8. Government Accounting Office (GAO).
  9. Securities and Exchange Commission (SEC).
  10. Chief Executive Officer (CEO).
  11. ____ In response to recent cases involving fraud and the misrepresentation of financial results of some companies, which of the following was created by the U.S. Congress?
  12. SEC
  13. SOX
  14. GAAP
  15. AICPA
  16. ____Which of the following statements regarding stockholders; equity is correct?
  17. Notes payable are amounts owed to investors.
  18. Borrowers to sign a legal document called a note, which describes details about the company’s promise to repay the bank.
  19. Notes payable are classified as part of stockholders’ equity on the balance sheet.
  20. A note payable is the amount the company is expected to owe supplier goods and services purchased on account.