55.
An external transaction is an exchange within an entity that may or may not affect the
accounting equation.
56.
From an accounting perspective, an event is a happening that affects the accounting
equation, but cannot be measured.
57.
Stockholders’ equity is increased when cash is received from customers in payment of
previously recorded accounts receivable.
58.
A stockholder’s investment in a business normally creates an asset (cash), a liability (note
payable), and stockholders’ equity (investment).
59.
Return on assets is often stated in ratio form as the amount of average total assets
divided by income.
60.
Return on assets is also known as return on investment.
61.
Return on assets is useful to decision makers for evaluating management, analyzing and
forecasting profits, and in planning activities.
62.
Arrow’s net income of $117 million and average assets of $1,400 million results in a return
on assets of 8.36%.
63.
Return on assets reflects a company’s ability to generate profit through productive use of
its assets.
64.
Risk is the uncertainty about the return we will earn.
65.
Generally the lower the risk, the higher the return that can be expected.
66.
U.S. Government Treasury bonds provide low return and low risk to investors.
67.
The four basic financial statements include the balance sheet, income statement,
statement of retained earnings, and statement of cash flows.
68.
An income statement reports on investing and financing activities.
69.
A balance sheet covers activities over a period of time such as a month or year.
70.
The income statement describes revenues earned and expenses incurred over a specified
period of time due to earnings activities.
71.
The statement of cash flows shows the net effect of revenues and expenses for a
reporting period.
72.
The income statement shows the financial position of a business on a specific date.
73.
The first section of the income statement reports cash flows from operating activities.
74.
The balance sheet is based on the accounting equation.
75.
Investing activities involve the buying and selling of assets such as land and equipment
76.
Operating activities include long-term borrowing and repaying cash from lenders, and cash
investments or dividends to stockholders.
77.
The purchase of supplies appears on the statement of cash flows as an investing activity
because it involves the purchase of assets.
78.
The income statement reports on operating activities at a point in time.
79.
The statement of cash flows identifies cash flows separated into operating, investing, and
financing activities over a period of time.
80.
Ending retained earnings on the statement of retained earnings is calculated by adding
stockholder investments and net losses and subtracting net income and dividends.
81.
Accounting is an information and measurement system that does all of the following
except
:
82.
Technology:
83.
The primary objective of financial accounting is to:
84.
The area of accounting aimed at serving the decision making needs of internal users is:
1-33
85.
External users of accounting information include all of the following
except
:
86.
All of the following regarding a Certified Public Accountant are true
except
:
87.
Ethical behavior requires that:
88.
The conceptual framework that the Financial Accounting Standards Board (FASB) and the
International Accounting Standards Board (IASB) are attempting to converge and enhance
includes the following broad areas to guide standard setting
except
:
89.
All of the following are true regarding ethics
except
:
90.
The accounting concept that requires financial statement information to be supported by
independent, unbiased evidence is:
91.
A corporation is:
92.
The independent group that issues standards that identify preferred accounting practices
and is attempting to harmonize the accounting practices globally is the:
93.
The private-sector group that currently has the authority to establish generally accepted
accounting principles in the United States is the:
94.
The accounting concept that requires every business to be accounted for separately from
other business entities, including its owner or owners is known as the:
95.
The rule that requires financial statements to reflect the assumption that the business will
continue operating instead of being closed or sold, unless evidence shows that it will not
continue, is the:
96.
If a company is considering the purchase of a parcel of land that was originally acquired by
the seller for $85,000, is offered for sale at $150,000, is assessed for tax purposes at
$95,000, is recognized by the purchaser as easily being worth $140,000, and is purchased
for $137,000, the land should be recorded in the purchaser’s books at:
97.
To include the personal assets and transactions of a business’s stockholders in the
records and reports of the business would be in conflict with the:
98.
The accounting principle that requires accounting information to be based on actual cost
and requires assets and services to be recorded initially at the cash or cash-equivalent
amount given in exchange, is the: