79 Free Test Bank for Financial Accounting 8th Edition by Libby

Explore 79 Free Test Bank for Financial Accounting 8th Edition by Libby Multiple Choice Questions to see that financial accounting is an interesting field of study which is essential for your business career in the future. Here are free questions with full answers to easily master your financial accounting textbook.

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Which of the following items is reported as an expense on the income statement?

•  A. Dividends declared.
•  B. Cost of goods sold.
•  C. Dividends paid.
•  D. Accounts payable.

Which of the following describes the amount of insurance expense reported on the income statement?

•  A. The amount of cash paid for insurance in the current period.
•  B. The amount of cash paid for insurance in the current period less any unpaid insurance at the end of the period.
•  C. The amount of insurance used up (incurred) in the current period to help generate revenue.
•  D. The amount of cash paid for insurance that is reported within the statement of cash flows.

Which of the following accounts would not be reported on the balance sheet?

•  A. Retained earnings.
•  B. Inventory.
•  C. Accounts payable.
•  D. Dividends.

Which of the following equations is the balance sheet equation?

•  A. Assets + Liabilities = Stockholders' Equity.
•  B. Assets + Stockholder's Equity = Liabilities.
•  C. Assets = Liabilities + Stockholders' Equity.
•  D. Assets = Liabilities + Common Stock.

Which of the following accounts is not a liability on the balance sheet?

•  A. Retained earnings.
•  B. Notes payable.
•  C. Accounts payable.
•  D. Interest payable.

Which of the following has primary responsibility to develop Generally Accepted Accounting Principles?

•  A. Financial Accounting Standards Board.
•  B. Company Executives.
•  C. Securities & Exchange Commission.
•  D. Public Company Accounting Oversight Board.

On January 1, 2014, Miller Corporation had retained earnings of$8,000,000. During 2014, Miller reported net income of $1,500,000, declared dividends of $500,000, and issued common stock for $1,000,000. What were Miller's retained earnings on December 31, 2014?

•  A. $7,000,000.
•  B. $9,500,000.
•  C. $9,000,000.
•  D. $7,500,000.

Atlantic Corporation reported the following amounts at the end of the first year of operations: common stock $200,000; sales revenue $800,000; total assets $600,000; dividends declared $40,000; and total liabilities $320,000. What are Atlantics' retained earnings at the end of the year and what amount of expenses were incurred during the year?

•  A. Retained earnings are $80,000 and expenses incurred totaled $680,000.
•  B. Retained earnings are $80,000 and expenses incurred totaled $720,000.
•  C. Retained earnings are $280,000 and expenses incurred totaled $480,000.
•  D. Retained earnings are $280,000 and expenses incurred totaled $520,000.

Which of the following is the amount of revenue reported on the income statement of a retail company?

•  A. The cash collected from customers during the current period.
•  B. Both cash and credit sales for the period.
•  C. Cash sales for the period and collections from customers.
•  D. Cash sales and stockholders' investments.

Lena Company has provided the following data (ignore income taxes): 2014 revenues were $99,000; 2014 expenses were $47,800; Dividends declared and paid during 2014 totaled $9,500; Total assets at December 31, 2014 were $177,000; Total liabilities at December 31, 2014 were $89,000; Common stock at December 31, 2014 was $28,000. Which of the following is not correct?

•  A. 2014 net income was $51,200.
•  B. Total stockholders' equity at December 31, 2014 was $88,000.
•  C. Total liabilities and stockholders' equity at December 31, 2014was $177,000.
•  D. Retained earnings on December 31, 2014 were $41,700.

When would a company report a net loss on the income statement?

•  A. When revenues are less than the sum of expenses plus dividends during an accounting period.
•  B. If assets decreased during an accounting period.
•  C. If liabilities increased during an accounting period.
•  D. When expenses exceeded revenues for an accounting period.

Which of the following are the components of stockholders' equity on the balance sheet?

Which of the following best describes assets?

•  A. They are equal to liabilities minus stockholders' equity.
•  B. They are considered to be the economic resources of the business.
•  C. They are all reported on the balance sheet at their current market value.
•  D. They equal financing provided by creditors.

What are the categories of cash flows that appear on a statement of cash flows?

•  A. Cash flows from investing, financing, and service activities.
•  B. Cash flows from operating, production, and internal activities.
•  C. Cash flows from financing, production, and growth activities.
•  D. Cash flows from operating, investing, and financing activities.

Which of the following would most likely increase retained earnings?

•  A. An increase in expenses.
•  B. An increase in revenues.
•  C. Declaring a cash dividend.
•  D. Issuing additional common stock.

Which of the following best describes the balance sheet?

•  A. It includes a listing of assets at their market values.
•  B. It includes a listing of assets, liabilities, and stockholders' equity at their market values.
•  C. It provides information pertaining to a company's assets and the claims against sources of financing for those assets.
•  D. It provides information pertaining to a company's liabilities for a period of time.

How are creditor and investor claims reported on a balance sheet?

•  A. The claims of creditors are liabilities and those of investors are assets.
•  B. The claims of both creditors and investors are liabilities, butonly the claims of investors are considered to be long-term.
•  C. The claims of creditors are reported as liabilities while the claims of investors are recorded as stockholders' equity.
•  D. The claims of creditors and investors are considered to be essentially equivalent.

Which financial statement would you use to determine a company's earnings performance during an accounting period?

•  A. Balance sheet.
•  B. Statement of stockholders' equity.
•  C. Income statement.
•  D. Statement of cash flows.

During 2014, Canton Company's assets increased $95,500 and the liabilities decreased $17,300. Canton Company's stockholders' equity at December 31, 2014 was $211,500. What amount was stockholders' equity at January 1, 2014?

•  A. $98,700.
•  B. $324,300.
•  C. $133,300.
•  D. $289,700.

Which of the following statements describes the balance sheet?

Which of the following best describes liabilities and stockholders' equity?

•  A. They are the sources of financing an entity's assets.
•  B. They are the economic resources used by a business entity.
•  C. They are reported on the income statement.
•  D. They both increase when assets increase.

Which financial statement would you utilize to determine whether a company will be able to pay liabilities which are due in 30 days?

•  A. Income statement.
•  B. Balance sheet.
•  C. Statement of stockholders' equity.
•  D. Statement of cash flows.

Which of the following correctly describes the various financial statements?

•  A. An income statement covers a period of time.
•  B. The cash flow statement is a financial statement at a specific point in time.
•  C. The balance sheet is a financial statement that covers a period of time.
•  D. The statement of stockholders' equity is a financial statement at a specific point in time.

During the fiscal year ended 2014, a company had revenues of $400,000, cost of goods sold of $280,000, and an income tax rate of 30 percent on income beforeincome taxes. What was the company's 2014 net income?

•  A. $120,000.
•  B. $36,000.
•  C. $84,000.
•  D. $400,000.

What financial statement would you look at to determine the dividends declared by a business?

•  A. Income statement.
•  B. Statement of stockholders' equity.
•  C. Statement of cash flows.
•  D. Balance sheet.

Which of the following statements is correct?

•  A. Assets on the balance sheet include retained earnings.
•  B. Retained earnings includes common stock.
•  C. The balance sheet equation states that assets equal liabilities.
•  D. A corporation's net income does not necessarily equal its net cash flow from operations.

Which of the following would immediately cause a change in a corporation's retained earnings?

•  A. Net income or net loss and declaration of dividends.
•  B. Declaration of dividends and issuance of common stock to new stockholders.
•  C. Net income and issuance of stock to new stockholders.
•  D. Declaration of dividends and purchase of new machinery.

A company's retained earnings increased $375,000 last year and its assets increased $973,000. The company declared a $79,000 cash dividend during the year. What was last year's net income?

•  A. $296,000.
•  B. $375,000.
•  C. $454,000.
•  D. $519,000.

Madrid Company has provided the following data (ignore income taxes): 2014 revenues were $77,500; 2014 net income was $33,900; Dividends declared and paid during 2014 totaled $5,700; Total assets at December 31, 2014 were $217,000; Total stockholders' equity at December 31, 2014 was $123,000; Retained earnings at December 31, 2014 were $83,000. Which of the following is correct?

•  A. 2014 expenses were $37,900.
•  B. Total liabilities at December 31, 2014 were $11,000.
•  C. Retained earnings increased $28,200 during 2014.
•  D. Common stock at December 31, 2014 was $206,000.

Which of the following equations best describes the income statement?

•  A. Assets - Liabilities = Stockholders' Equity.
•  B. Net income = Revenues + Expenses.
•  C. Net income = Revenues - Expenses.
•  D. Retained earnings = Net Income + Dividends.

Which of the following would not be found on the statement of cash flows?

•  A. Cost flow from manufacturing activities.
•  B. Cash flow from operating activities.
•  C. Cash flow from investing activities.
•  D. Cash flow from financing activities.

Madrid Company has provided the following data (ignore income taxes): 2014 revenues were $77,500; 2014 net income was $33,900; Dividends declared and paid during 2014 totaled $5,700; Total assets at December 31, 2014 were $217,000; Total stockholders' equity at December 31, 2014 was $123,000; Retained earnings at December 31, 2014 were $83,000. Which of the following is not correct?

•  A. 2014 expenses were $43,600.
•  B. Total liabilities at December 31, 2014 were $94,000.
•  C. Retained earnings increased $33,900 during 2014.
•  D. Common stock at December 31, 2014 was $40,000.

Within which of the following would you find the inventory method(s) being used by a business entity?

•  A. Balance sheet.
•  B. Income statement.
•  C. Notes to the financial statements.
•  D. Headings of the financial statements.

Which of the following accounts would be reported as assets on the balance sheet?

•  A. Cash, accounts payable, and notes payable.
•  B. Cash, retained earnings, and accounts receivable.
•  C. Cash, accounts receivable, and inventories.
•  D. Inventories, property and equipment, and common stock.

At the beginning of 2014, a corporation had assets of $270,000 and liabilities of $160,000. During 2014, assets increased $25,000 and liabilities increased $5,000. What was stockholders' equity on December 31, 2014?

•  A. $140,000.
•  B. $130,000.
•  C. $190,000.
•  D. $80,000.