114) DW has an ending Retained Earnings balance of $51,100. If during the year DW paid
dividends of $4,300 and had net income of $22,500, then what was the beginning Retained
Earnings balance?
A) $24,300.
B) $32,900.
C) $300.
D) $69,300.
115) The ending Retained Earnings balance of Boomer Inc. decreased by $1.0 million from the
beginning of the year. The company declared a dividend of $5.4 million during the year. What
was the net income for the year?
A) $7.5 million.
B) $6.4 million.
C) $4.4 million.
D) $1.0 million.
116) Given the information below about Thomas Corporation, what was the amount of dividends
the company paid in the current period?
Beginning retained earnings
$
54,000
Ending retained earnings
$
110,000
Decrease in cash
$
10,000
Net income
$
84,000
Change in stockholders’ equity
$
15,000
A) $13,000.
B) $110,000.
C) $28,000.
D) $18,000.
117) For the past five years, Mookie Consulting Services reported the following annual net
income and dividend amounts:
Year
Net Income
Dividends
1
$
22,000
$
2,000
2
17,000
2,000
3
9,000
1,000
4
14,000
3,000
5
25,000
4,000
If Mookie had Retained Earnings of $88,000 at the end of year 5, what was the company’s
Retained Earnings at the beginning of Year 1?
A) $13,000.
B) $25,000.
C) $7,000.
D) $1,000.
118) Nina Corp. had the following net income (loss) for the first three years of operations,
respectively: $7,100, ($1,600), and $3,600. If the Retained Earnings balance at the end of year
three is $1,100, what was the total amount of dividends paid over these three years?
A) $500.
B) $0.
C) $9,100.
D) $8,000.
119) Aikman Company paid dividends of $2,410, $0, $1,570 and $1,060 over the first four years
of the company’s existence, respectively. If Retained Earnings has an ending balance of $9,700 at
the end of year four, what was the average annual amount of net income (loss) over the first four
years for Aikman?
A) $3,685.
B) $14,740.
C) $840.
D) $1,260.
120) On January 1, Gucci Brothers Inc. started the year with a $492,000 balance in Retained
Earnings and a $605,000 balance in Common Stock. During the year, the company reported net
income of $92,000, paid a dividend of $15,200, and issued more common stock for $27,500.
What is total stockholders’ equity at the end of the year?
A) $1,231,700.
B) $1,097,000.
C) $1,201,300.
D) $1,588,300.
121) The financial statement that represents the accounting equation is the:
A) Income statement.
B) Statement of cash flows.
C) Balance sheet.
D) Statement of stockholders’ equity.
122) The equation best describing the balance sheet is:
A) Assets = Liabilities + Stockholders’ Equity.
B) Revenues − Expenses = Net Income.
C) Ending Retained Earnings + Dividends = Net Income.
D) Revenues + Expenses = Net Income.
123) The financial statement that represents activity over the entire life of the company is the:
A) Income statement.
B) Balance sheet.
C) Statement of financial accounting.
D) Statement of cash flows.
124) Liabilities are shown in which of the following statements?
A) Income statement.
B) Statement of cash flows.
C) Balance sheet.
D) Statement of stockholders’ equity.
125) Consider the following account balances of the Shattuck Law Firm at the end of the year:
Accounts Payable
$
4,400
Salaries Expense
12,800
Cash
1,700
Common Stock
2,400
Service Revenue
8,300
Supplies
4,300
Retained Earnings
1,100
Utilities Expense
5,000
How many of these accounts would appear in Shattuck’s year-end balance sheet?
A) Five.
B) Four.
C) Three.
D) Two.
126) The two categories of stockholders’ equity usually found in the balance sheet of a
corporation are:
A) Common stock and liabilities.
B) Assets and liabilities.
C) Common stock and retained earnings.
D) Revenues and expenses.
127) Which of the following is not a balance sheet item?
A) Assets.
B) Retained Earnings.
C) Expenses.
D) Liabilities.
128) Which of the following is a balance sheet item?
A) Net Income.
B) Dividends.
C) Utilities Expense.
D) Cash.
129) Which of the following statements is NOT correct about the financial statements?
A) An income statement reports revenues, expenses, and net income information.
B) The statement of stockholders’ equity presents common stock, dividends, and retained
earnings information.
C) A balance sheet reports assets, liabilities, revenues, and expenses.
D) The statement of cash flows shows cash inflows and outflows from operating, financing, and
investing activities.
130) The balance sheet depicts which of the following equations?
A) Net income = revenue − expenses.
B) Ending retained earnings = beginning retained earnings + net income − dividends.
C) Assets = liabilities + stockholders’ equity.
D) Net cash flows = total cash inflows − total cash outflows.
131) Which of the following financial statements reports a company’s retained earnings?
A) Income statement.
B) Balance sheet.
C) Statement of cash flows.
D) All of the other answers are statements that report retained earnings.
132) Which of the following is not a balance sheet item?
A) Assets.
B) Common stock.
C) Retained earnings.
D) Revenues.
133) Which of the following is not a major section in the statement of cash flows?
A) Cash flows from operating activities.
B) Cash flows from customers.
C) Cash flows from financing activities.
D) Cash flows from investing activities.
134) Cash paid for which of the following activities would affect the amount reported for
operating cash flows in the statement of cash flows?
A) Issuing common stock.
B) Paying dividends.
C) Paying electricity bill for the month.
D) Borrowing cash from a bank to acquire a building.
135) How many of the following transactions would affect operating cash flows reported in the
statement of cash flows (all transaction involve cash)?
Repay $40,000 borrowed from the bank.
Pay $11,000 in salaries to employees.
Receive $25,000 from customers for services provided.
Pay $750 for advertising.
Purchase equipment for $15,000.
Receive $25,000 from the sale of land.
A) One.
B) Two.
C) Three.
D) Four.
136) Investing cash flows in the statement of cash flows would include which of the following?
A) Paying salaries for the month.
B) Purchase of land.
C) Paying dividends to stockholders.
D) Selling goods or services to customers.
137) FlintCo purchases additional office equipment to better serves its customers. This cash
purchase is reported in the statement of cash flows as what type of activity?
A) Company activity.
B) Investing activity.
C) Financing activity.
D) Operating activity.
138) Financing cash flows in the statement of cash flows would include which of the following?
A) Paying salaries for the month.
B) Purchase of land.
C) Paying dividends to stockholders.
D) Selling goods or services to customers.
139) Cash received from bank borrowing would be reported in the statement of cash flows as
what type of activity?
A) Investing.
B) Organizing.
C) Operating.
D) Financing.
140) If total change in cash = $44,000, net operating cash flows = $22,000, and net investing
cash flows = ($13,000); then net financing cash flows =
A) $15,000.
B) $35,000.
C) $25,000.
D) $45,000.
141) The financial statement(s) that record activity over an interval of time include the:
A) Income statement.
B) Balance sheet.
C) Balance sheet and income statement.
D) Income statement and statement of cash flows.
142) Which of the following is the correct order for preparing the financial statements listed?
A) Balance sheet, statement of stockholders’ equity, and income statement.
B) Balance sheet, income statement, and statement of stockholders’ equity.
C) Statement of stockholders’ equity, income statement, and balance sheet.
D) Income statement, statement of stockholders’ equity, and balance sheet.
143) In what order are the following financial statements prepared: (1) balance sheet, (2) income
statement, and (3) statement of stockholders’ equity?
A) 1, 2, 3.
B) 3, 2, 1.
C) 1, 3, 2.
D) 2, 3, 1.
144) Which financial statement is typically prepared first?
A) Balance sheet.
B) Income statement.
C) Statement of stockholders’ equity.
D) Statement of cash flows.
145) Which of the following best represents value created for stockholders during the current
period?
A) Retained earnings.
B) Total assets.
C) Net income.
D) Stockholders’ equity.
146) While many financial accounting numbers have an impact on stock prices, which of the
following has the single greatest impact, on average?
A) Total dividends.
B) Total assets.
C) Total revenues.
D) Net income.
147) Which financial accounting number impacts stock prices more than any other single piece
of information?
A) Retained earnings.
B) Net income.
C) Common stock.
D) Total assets.
148) Which financial statement best reveals to investors and creditors information about a
company’s debt?
A) Income statement.
B) Balance sheet.
C) Statement of cash flows.
D) Statement of stockholders’ equity.
149) GAAP is an abbreviation for:
A) Generally authorized accounting procedures.
B) Generally applied accounting procedures.
C) Generally accepted auditing practices.
D) Generally accepted accounting principles.
150) Generally Accepted Accounting Principles (GAAP) are best defined as:
A) Standards for presenting financial accounting information.
B) Government-mandated rules that companies must follow.
C) Rules that best estimate profitability for a company.
D) The group of individuals that create and enforce all accounting rules.
151) The body of rules and procedures that guide the measurement and communication of
financial accounting information in the United States is known as:
A) Standards of Professional Compliance (SPC).
B) Generally Accepted Accounting Principles (GAAP).
C) Generally Accepted Auditing Standards (GAAS).
D) Rules of Financial Reporting (RFR).
152) The independent, private-sector group that is primarily responsible for setting financial
reporting standards in the United States is the:
A) FASB.
B) IASB.
C) SEC.
D) IRS.
153) Financial accounting and reporting standards in the United States are established primarily
by the:
A) Securities and Exchange Commission.
B) Financial Accounting Standards Board.
C) International Accounting Standards Board.
D) U.S. Congress.
154) The private sector organization that is currently responsible for setting accounting standards
in the United States is the:
A) Financial Accounting Standards Board.
B) Accounting Principles Board.
C) Securities and Exchange Commission.
D) American Institute of Certified Public Accountants.
155) The legal authority to set accounting standards lies with the:
A) Financial Accounting Standards Board.
B) Accounting Principles Board.
C) Securities and Exchange Commission.
D) American Institute of Certified Public Accountants.
156) The International Accounting Standards Board:
A) Is governed by the U.S. Securities and Exchange Commission.
B) Can overrule the FASB when their policies disagree.
C) Promotes the use of high-quality, understandable global accounting standards.
D) Is the primary standard-setting body in the United States.
157) Financial accounting objectives do not include providing information:
A) Useful to investors and creditors in making decisions.
B) To determine market values, assess profit potential, and evaluate management.
C) Helpful to investors in predicting cash flows.
D) That tells about a company’s economic resources and claims to those resources.
158) Which statement below best describes the objectives of financial accounting?
A) Provide information that helps predict cash flows.
B) Provide information about the economic resources, claims to resources and changes in
resources and claims.
C) Provide information that is useful in making decisions.
D) All of the other answers are objectives of financial accounting.
159) Of the following, the most important objective for financial accounting is to provide
information useful for:
A) Predicting cash flows.
B) Determining taxable income.
C) Providing accountability.
D) Increasing future profits.
160) Independent auditors express an opinion on the:
A) Extent to which financial statements are in compliance with GAAP.
B) Accuracy of the amount of income taxes a company owes to the government.
C) Quality of the company’s products.
D) Well-being and fair treatment of a company’s workforce.
161) To ensure that management has in fact appropriately applied GAAP, the SEC requires
independent outside verification of the financial statements of public traded companies by an:
A) Advisor.
B) Attorney.
C) Auditor.
D) Analyst.