64) Which of the following is an operating activity?
A) Issuing common stock.
B) Paying dividends.
C) Borrowing cash from a bank to acquire a building.
D) Paying electricity bills for the month.
65) How many of the following transactions are operating activities?
Borrow $50,000 from the bank.
Purchase $12,000 in supplies.
Provide services to customers for $27,000.
Pay the utility bill of $750.
Purchase a delivery truck for $12,000.
Receive $25,000 from issuing common stock.
A) One.
B) Two.
C) Three.
D) Four.
66) Transactions related to the primary business activities of the company, such as selling goods
and services to customers, are referred to as:
A) Investing activities.
B) Operating activities.
C) Management activities.
D) Financing activities.
67) Stimpleton Company engages in the following cash payments:
Purchase equipment
$
2,000
Pay rent
500
Repay loan to the bank
5,000
Pay workers’ salaries
1,000
What is the total amount of cash paid for operating activities?
A) $6,000.
B) $2,000.
C) $7,000.
D) $1,500.
68) Accountants are responsible for measuring various operating, investing and financing
activities. Which of the following correctly matches the activity with its type?
A) Investing – paying utilities for the month.
B) Investing – purchasing land.
C) Operating – paying dividends to stockholders.
D) Financing – selling equipment for cash.
69) Transactions of a company that include the purchase and sale of long-term assets are referred
to as:
A) Investing activities.
B) Financing activities.
C) Expenditure activities.
D) Operating activities.
70) McGill purchases additional office equipment to better serve its customers. This purchase is
classified as what type of activity?
A) Company activity.
B) Financing activity.
C) Investing activity.
D) Operating activity.
71) Transactions of a company involving external sources of funding are referred to as:
A) Investing activities.
B) Financing activities.
C) External activities.
D) Operating activities.
72) Financing activities include:
A) Primary operations such as selling goods to customers.
B) Transactions with company employees.
C) Transactions involving external sources of funding.
D) The purchase and sale of long-term assets.
73) Financing activities include:
A) The purchase of a building.
B) Issuing common stock to stockholders.
C) Transactions with company employees.
D) Selling goods or services to customers.
74) The accounting equation is defined as:
A) Assets = Liabilities + Stockholders’ Equity.
B) Assets = Liabilities − Stockholders’ Equity.
C) Net Income = Revenues − Expenses.
D) Liabilities + Revenues = Assets.
75) Which statement below best describes the accounting equation?
A) The change in retained earnings equals net income less dividends.
B) Equality of revenue and expense transactions over time.
C) Resources of the company equal creditors’ and owners’ claims to those resources.
D) Financing activities equal investing and operating activities.
76) If a company has stockholders’ equity of $60,000 at the end of the year, which of the
following statements must be true?
A) The company’s assets exceed liabilities by $60,000.
B) The company has issued $60,000 of common stock.
C) Net income for the year equals $60,000.
D) Total revenues during the year equal $60,000.
77) Emmitt had the following final balances after the first year of operations: assets, $55,000;
stockholders’ equity, $25,000; dividends, $3,000; and net income, $10,000. What is the amount
of Emmitt’s liabilities?
A) $55,000.
B) $30,000.
C) $13,000.
D) $7,000.
78) An alternative form of the accounting equation is:
A) Net Income = Revenues − Expenses.
B) Stockholders’ Equity = Assets + Liabilities.
C) Assets = Liabilities − Stockholders’ Equity.
D) Assets − Liabilities = Stockholders’ Equity.
79) The accounts that represent the resources of the company are called:
A) Liabilities.
B) Revenues.
C) Expenses.
D) Assets.
80) The assets of a company represent:
A) Amounts owed to creditors.
B) Sales of goods or services to customers.
C) Resources that will be used to benefit the company.
D) Investments by stockholders.
81) Which of the following accounts represents a resource of the company?
A) Common stock.
B) Service revenue.
C) Supplies.
D) Salaries expense.
82) Which of the following does not represent an asset of a company?
A) Supplies held by the company.
B) Amounts owed to suppliers.
C) Equipment owned and used for operations.
D) Land owned by the company.
83) Creditors’ claims to a corporation’s resources are referred to as:
A) Dividends.
B) Assets.
C) Liabilities.
D) Stockholders’ equity.
84) Liabilities are best defined as:
A) Amounts the company expects to collect in the future from customers.
B) Debts or obligations the company owes resulting from past transactions.
C) The amounts that owners have invested in the business.
D) Payments to stockholders.
85) Amounts owed to suppliers for supplies purchased on account are defined as a(n):
A) Revenue.
B) Asset.
C) Liability.
D) Expense.
86) Which of the following does not represent a liability of a company?
A) Salaries owed to employees.
B) Taxes owed to the government.
C) Amounts owed to suppliers.
D) All of the other answers are liabilities.
87) The accounts that represent resources owed to creditors are called:
A) Assets.
B) Liabilities.
C) Dividends.
D) Stockholders’ equity.
88) Liabilities can be best described as:
A) The amount of expenses over the past year.
B) The amount expected to be distributed to stockholders.
C) The amount owed to creditors.
D) The amount of services provided to customers during the year.
89) The stockholders’ interest in a corporation is called:
A) Dividends.
B) Assets.
C) Liabilities.
D) Stockholders’ equity.
90) Stockholders’ claims to the company’s resources are referred to as:
A) Stockholders’ equity.
B) Revenues.
C) Assets.
D) Liabilities.
91) Using the information below from the accounting records of Thomas Corporation,
stockholders’ claims to the company’s resources amount to:
Assets
$
1,200,000
Liabilities
$
800,000
Net income
$
100,000
Retained earnings
$
250,000
A) $1,200,000.
B) $800,000.
C) $250,000.
D) $400,000.
92) Which of the following best describes revenue?
A) Resources of a company.
B) Sales of goods and services to a customer.
C) Cash received from a customer.
D) Dividends paid to stockholders.
93) The costs of providing goods and services to customers are referred to as:
A) Assets.
B) Expenses.
C) Liabilities.
D) Revenues.
94) The costs associated with producing revenues are referred to as:
A) Dividends.
B) Assets.
C) Liabilities.
D) Expenses.
95) Net income can best be described as:
A) Net cash received by a company during the year.
B) Revenues minus expenses.
C) The amount of profits retained in a company for the year.
D) Resources of a company.
96) Use the following appropriate amounts to calculate net income: Revenues, $12,000;
Liabilities, $5,000; Expenses, $4,000; Assets, $19,000; Dividends, $4,000.
A) $6,000.
B) $8,000.
C) $4,000.
D) $14,000.
97) The account type that represents payments to stockholders is called:
A) Liabilities.
B) Assets.
C) Stockholders’ equity.
D) Dividends.
98) Dividends represent:
A) Resources of the company.
B) Cash payments to stockholders.
C) Amounts owed to creditors.
D) Expenses of operating the company.
99) The equation best describing the income statement is:
A) Revenues − Expenses = Net Income.
B) Assets = Revenues − Expenses.
C) Assets = Liabilities + Stockholders’ Equity.
D) Revenues + Expenses = Net Income.
100) Expenses are shown in which of the following statements?
A) Income statement.
B) Statement of cash flows.
C) Balance sheet.
D) Statement of stockholders’ equity.
101) Which of the following items would not appear in an income statement?
A) Salaries expense.
B) Advertising expense.
C) Service revenue.
D) Cash.
102) Which of the following items would not appear in an income statement?
A) Delivery Expense.
B) Accounts Payable.
C) Service Revenue.
D) Utilities Expense.
103) 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 income statement?
A) Five.
B) Four.
C) Three.
D) Two.
104) Given the information below, calculate net income in the current period.
Accounts Receivable
$
14,700
Rent Expense
7,500
Insurance Expense
2,100
Common Stock
24,000
Service Revenue
28,300
Supplies
4,300
Equipment
21,600
Income Tax Expense
4,200
A) $27,300.
B) $29,200.
C) $14,500.
D) $10,200.
105) A company had the following amounts at the end of the year:
Cash
$
11,200
Supplies Expense
1,500
Dividends
2,600
Service Revenue
23,500
Prepaid Rent
4,300
Salaries Expense
8,200
Accounts Payable
12,700
Land
36,900
What amount would the company report for net income?
A) $11,200.
B) $6,900.
C) $13,800.
D) $42,300.
106) Net income (loss) appears in which two financial statements?
A) Balance sheet and income statement.
B) Income statement and statement of stockholders’ equity.
C) Statement of stockholders’ equity and balance sheet.
D) Net income appears in only one financial statement.
107) Which of the following items is reported in the statement of stockholders’ equity?
A) Total assets.
B) Total expenses.
C) Net income.
D) Operating cash flows.
108) Which of the following accounts appears in the statement of stockholders’ equity?
A) Accounts Payable.
B) Accounts Receivable.
C) Common Stock.
D) Supplies.
109) Which of the following accounts appears in the statement of stockholders’ equity?
A) Supplies.
B) Cash.
C) Salaries Payable.
D) Retained Earnings.
110) Which one of the following statements regarding financial reports is correct?
A) The balance sheet classifies all assets according to operating, investing, and financing
activities.
B) The income statement is used to show that a company’s resources equal claims to those
resources.
C) The statement of stockholders’ equity updates the balances of common stock and retained
earnings for related transactions during the year.
D) The statement of cash flows shows cash inflows and outflows from operating activities only.
111) Which of the following best explains the meaning of total stockholders’ equity?
A) The difference between total revenues and total expenses, less dividends for the year.
B) The amount of common stock less dividends over the life of the company.
C) All revenues, expenses, and dividends over the life of the company.
D) The amount of capital invested by stockholders plus profits retained over the life of the
company.
112) Which of the following statements regarding financial reports is not correct?
A) A balance sheet contains assets, liabilities, and stockholders’ equity information.
B) An income statement shows revenues and expenses.
C) A statement of stockholders’ equity reports revenues, net income, and dividends information.
D) A statement of cash flows shows cash inflows and outflows from operating, investing, and
financing activities.
113) Retained earnings at the end of the year is calculated using:
A) Beginning retained earnings, net income, and dividends.
B) Common stock and dividends.
C) Stockholders’ equity, net income, and dividends.
D) Net income and dividends.