82. A firm has $260,000 in assets and $158,000 in stockholders’ equity. It owes $55,000 from a long-term loan, and this
is its only long–term liability. This firm has in total current liabilities.
a. $55,000
b. $103,000
c. $47,000
d. $102,000
e. $213,000
83. Rick and Joe get together and start a mortgage brokerage business. They each contribute $25,000 of capital to the
business. After the first year of operation, the total owners’ equity is listed as $60,000. Most likely, the additional
$10,000 of owners’ equity is
a. common stock.
b. long–term liabilities.
c. current liabilities.
d. retained earnings.
e. a bank loan.
84. Winshare Art Company has issued only common stock. Currently it has 10,000 shares outstanding. The value of the
stock is shown as $20 per share. In addition, $100,000 of Winshare‘s earnings have been reinvested in the business
since it was founded. What is Winshare’s total owners’ equity?
a. $300,000
b. $200,000
c. $100,000
d. $2,000,000
e. $100,020
85. All American National Company earned $240,000 last year. The board of directors decided to pay out one-half of
the firm‘s earnings to the stockholders. Before the board’s decision, the firm’s retained earnings were $740,000.
Which of the following statements is true?
a. Each shareholder will receive more than he or she received last year.
b. The firm‘s retained earnings are too high.
c. The value of the firm’s retained earnings is now $860,000.
d. The value of the firm’s retained earnings is now $620,000.
e. The firm should be more profitable.
86. As the accountant for Ideal Manufacturing Company, you determine the following totals in your balance sheet: total
assets–$124,000; current liabilities–$41,000; long-term liabilities–$13,000. What is the total owners’ equity for this
company?
a. $178,000
b. $165,000
c. $137,000
d. $70,000
e. $0
87. A(n) is a summary of a firm’s revenues and expenses during a specified accounting period, such as a year.
a. income statement
b. balance sheet
c. capital statement
d. statement of financial position
e. statement of owners’ equity
88. The earnings statement is another term for the
a. balance sheet.
b. income statement.
c. statement of financial position.
d. owners’ equity statement.
e. capital statement.
89. When Betty Tran prepared a personal income statement, the remainder or residual value is called
a. net asset total.
b. total assets.
c. total revenues.
d. retained earnings.
e. cash surplus.
90. All of the following are sections of the income statement for a business except
a. cost of goods sold.
b. liabilities.
c. revenues.
d. operating expenses.
e. net income or loss.
91. Revenues − cost of goods sold − expenses = net income characterizes which financial statement?
a. Balance sheet
b. Statement of retained earnings
c. Statement of cash flows
d. Statement of financial position
e. Income statement
92. Marilyn provides piano lessons to students in her home four days a week. The money she earns from providing
these services would be called on an income statement.
a. expenses
b. cash
c. revenues
d. retained earnings
e. equity
93. Merchandise that has been sold and is returned to the firm by the customer is called
a. a sales discount.
b. an expense.
c. a sales allowance.
d. cost of goods sold.
e. a sales return.
94. A reduction in price that is offered to customers who accept slightly damaged or soiled merchandise is referred to
as
a. a sales discount.
b. cost of goods sold.
c. a sales allowance.
d. an operating expense.
e. a sales return.
95. The Dress Barn offered its customers a reduction in price on some clothing items that were slightly faded from
being in the window at the front of the store. This reduction is called a
a. cost of goods sold.
b. sales allowance.
c. sales return.
d. sales discount.
e. sales bargain.
96. A price reduction to customers who pay their bills promptly is called
a. a sales allowance.
b. cost of goods sold.
c. an operating expense.
d. a sales discount.
e. a sales return.
97. Energizer offers its customers a reduction in price if they pay for their shipments of batteries within ten days of
receiving them. This is a(n)
a. sales allowance.
b. trade discount.
c. sales return.
d. sales discount.
e. inventory reduction.
98. Walmart takes its net sales and subtracts the cost of goods sold during the previous period. The result is Walmart’s
a. gross sales.
b. net income.
c. gross profit.
d. net margin.
e. net purchases.
99. Beginning inventory plus net purchases minus ending inventory equals
a. cost of goods sold.
b. gross profit on sales.
c. total revenue.
d. the balance of merchandise inventory.
e. net income before sales.
100. Lutex Corporation began its accounting period with a merchandise inventory (beginning inventory) that cost
$10,000. During the period, it purchased for resale merchandise with a retail value of $100,000. With purchase
discounts, it paid only $80,000 for this merchandise. Thus, during this period, Lutex had
sale.
a. $180,000
b. $70,000
c. $80,000
d. $90,000
e. $190,000
in goods available for
101. During the year Comer, Inc., had $200,000 in goods available for sale. At the end of the accounting period it had an
ending inventory of $40,000. This reveals that it had sold all but worth of the available goods.
a. $200,000
b. $160,000
c. $40,000
d. $20,000
e. $10,000
102. During the year Comer, Inc., had $200,000 in goods available for sale. At the end of the accounting period it had an
ending inventory of $40,000. The cost of goods sold by Comer was therefore
a. $200,000.
b. $160,000.
c. $40,000.
d. $20,000.
e. $10,000.
103. Ruin Company‘s net sales for the period were $175,000. Its cost of goods sold was $85,000. What is this firm’s
gross profit on sales?
a. $175,000
b. $135,000
c. $125,000
d. $100,000
e. $90,000
104. KYZ Radio pays salaries, rent, insurance, and utilities each month. These are all
a. current assets.
b. operating expenses.
c. cost of merchandise sold.
d. fixed liabilities.
e. None of these answers is correct.
105. Each month, Bath & Body Works pays employees wages, telephone bills, and salaries to accountants. These are all
considered
a. cost of goods sold.
b. gross profit.
c. sales allowances.
d. operating expenses.
e. current assets.
106. Selling expenses are considered to be a type of
a. current liability.
b. general expense.
c. prepaid expense.
d. operating expense.
e. fixed liability.
107. APSCO Lighting, Inc., had a gross profit of $234,000 for the last twelve-month period. Operating expenses were
$185,000. What was APSCO’s net income before taxes?
a. $490,000
b. $234,000
c. $185,000
d. $49,000
e. $41,000
108. For the previous year, Sambino‘s Italian Restaurant had a total of $320,000 in expenses and $295,000 in revenues.
Sambino’s
a. had a net income of $325,000 for the year.
b. had a net loss of $25,000 for the year.
c. lost $25,000 in revenues.
d. acquired an additional $295,000 in assets.
e. increased its stockholders’ equity by $25,000.
109. Wallace Plumbing Company had income from operations of $110,000. It paid federal income taxes of $26,000.
What was the firm’s net income after taxes?
a. $144,000
b. $98,000
c. $84,000
d. $22,000
e. $12,000
110. Schluster Hardware, Inc., had a gross profit of $380,000, operating expenses of $210,000, and income taxes of
$48,000. What is Schluster’s net income after taxes?
a. $122,000
b. $80,000
c. $208,000
d. $170,000
e. $332,000
111. The financial statement that provides information about a firm’s operating, investing, and financing activities during
an accounting period is the
a. balance sheet.
b. income statement.
c. cash flows statement.
d. retained earnings statement.
e. financial analysis statement.
112. The statement of cash flows for a business offers information on all of the following except
a. available cash to pay a company’s bills.
b. expenses during a particular accounting period.
c. available cash to pay dividends to stockholders.
d. decisions about the evaluation of a company’s future investments.
e. a company’s financing needs.
113. Which of the following best describes the organization of a statement of cash flows?
a. Assets = liabilities + stockholders‘ equity
b. Revenues − expenses = net income
c. Operating, investing, and financing cash flows
d. Cash in, cash out
e. Payments − receipts = cash
114. What are the three activities according to which a statement of cash flows is organized?
a. Operating, selling, and investing
b. Financing, buying, selling
c. Investing, financing, and expensing
d. Processing, operating, receiving
e. Operating, investing, financing
115. Which section of the statement of cash flows would show Wendy’s payments for food ingredients and wages paid
to employees?
a. Cash flows from operating activities
b. Cash flows from financing activities
c. Business cash flows
d. Non-business-related cash flows
e. Cash flows from investing activities
116. The cash that Coca-Cola receives from providing customers with Coke and other soft drinks and juices would
appear in the section of the statement of cash flows.
a. financing
b. business
c. receiving
d. operating
e. investing
117. General Motors decides to close one of its manufacturing plants in the Midwest. GM sells the facility to a new
foreign automobile manufacturer. The money GM receives from this sale would belong in the
statement of cash flows.
a. operating
b. investing
c. business
d. selling
e. financing
section of the
118. Since business has been rapidly expanding, A Shot of Sugar Bakery decides to purchase a second industrial oven.
The cash paid for this oven would be listed in the section of the statement of cash flows.
a. operating
b. purchasing
c. investing
d. financing
e. business
119. Intel decides to issue new stock in order to build a new facility and expand its operations. The receipt of cash from
this stock issue would appear in the section of the statement of cash flows.
a. operating
b. business
c. equity
d. investing
e. financing
120. The cash at the end of the year reported on the statement of cash flows is the same as the
a. cash amount reported on the firm’s balance sheet.
b. cash amount reported on the firm’s income statement.
c. net income reported on the firm’s income statement.
d. owners’ equity amount reported on the firm’s balance sheet.
e. total amount of assets reported on the firm’s balance sheet.
121. Which of the following statements is false?
a. It is possible to compare one firm’s accounting data with another firm’s accounting data as long as both firms
used generally accepted accounting procedures.
b. Many managers compare the financial results from one accounting period with the results from previous
accounting periods.
c. Most corporations include in their annual reports comparisons of important elements of their financial
statements for recent years.
d. The format and information contained in one firm’s financial statements are most likely to differ drastically
from the format and information contained in another firm‘s financial statements.
e. Many firms compare their financial results with industry averages.