Chapter 2—Financial Statements: An Overview Key
1. The financial statement that reports resources owned, the obligations to transfer resources to other
organizations, and the claims by the entity’s owners is known as the
2. Another name for the balance sheet is the
3. Which of the following types of accounts are NOT found on the balance sheet?
4. Economic resources that are owned or controlled by an enterprise are called
5. Which of the following is generally considered to be an asset?
6. Which of the following accounts is NOT an asset account?
7. Which of the following generally is NOT considered to be a liability?
8. An enterprise’s obligations to pay cash or other economic resources to others are called
9. Which of the following is generally considered to be a liability?
10. Which of the following types of accounts show how resources came into a firm?
11. A business owned by one person is called a
12. A business owned by two or more individuals or entities is called a(n)
13. Owners of a corporation are referred to as
14. Distributions by a corporation to its stockholders are called
15. Which of the following usually is NOT considered to be an owners’ equity account?
16. The total amount invested to acquire an ownership interest in a corporation is called
17. Net assets are equal to
18. Which of the following decreases owners’ equity?
19. The basic accounting equation is
20. Which of the following is the reason that the accounting equation is true by definition?
21. The idea that an increase or decrease on one side of the accounting equation must be offset exactly by an
increase or decrease on the other side of the accounting equation is called
22. A transaction that causes an increase in an asset may also cause
23. If a corporation has total assets of $350,000, total liabilities of $150,000, and retained earnings of $100,000,
what is the amount of capital stock?
24. Exhibit 2-1
The following data were taken from the records of Moss Corporation for the year ending December 31, 2012:
01/01/12
12/31/12
Assets
$11,250
?
Liabilities
8,580
$10,365
Owners’ equity
?
6,465
Refer to Exhibit 2-1. Given the above information, owners’ equity on January 1, 2012 was
25. Exhibit 2-1
The following data were taken from the records of Moss Corporation for the year ending December 31, 2012:
01/01/12
12/31/12
Assets
$11,250
?
Liabilities
8,580
$10,365
Owners’ equity
?
6,465
Refer to Exhibit 2-1. Given the above information, assets on December 31, 2012, were
26. Current assets usually are listed on a balance sheet in
27. Which of the following would be classified as a current asset?
28. Which of the following would be classified as a long-term asset?
29. Companies prepare classified and comparative financial statements because
30. Which of the following is true of the balance sheet?
31. Which of the following financial statements provides a picture of the enterprise at a particular point in
time?
32. Which of the following accounts is considered to be the most liquid?
33. Which of the following distinguishes between current and long-term assets?
34. Which of the following would be considered a long-term liability?
35. Which of the following includes a company’s financial position for both the current year and the preceding
year?
36. What is the primary limitation of the balance sheet?
37. Which of these is an economic asset that is NOT found on the balance sheet?
38. The price that would be paid today for an asset is the
39. Expense and revenue accounts appear on the
40. Another name for the income statement is
41. Which of the following would be included on an income statement?
42. The financial statement that presents a summary of the revenues and expenses of a business for a specific
period of time, such as a month or a year, is called a(n)
43. Resource increases from the sale of goods or services are called
44. Revenues cause
45. Costs that are incurred during the normal operations of a business to generate revenues are called
46. Expenses generally cause
47. Which of the following is an overall measure of the performance of a business entity’s activities?
48. Which of the following is a revenue generating activity?
49. The difference between sales and cost of goods sold is called
50. Earnings per share is equal to
51. Which of the following is the correct way to date an income statement?
52. Which of the following is an example of a nonoperating expense?
53. If a company sells its equipment for more than it is valued on the balance sheet, the difference is called a(n)
54. If a company has $528,000 of sales revenue, pays $26,400 in dividends, and has net income of $158,400,
how much were the expenses for the year?
55. During the year, Rigby Corporation earned revenues of $114,000 and incurred $98,000 for various
operating expenses. There are 1,280 shares of stock outstanding. Earnings per share is
56. The following information was taken from the records of Merle Corporation for the period ending
December 31, 2012:
Advertising expense
$1,200
Equipment
800
Accounts receivable
1,500
Notes payable
6,000
Retained earnings
8,420
Utilities expense
1,385
Revenues
4,620
Dividends
975
Interest receivable
125
Rent expense
655
Assuming that 3,450 shares of stock are outstanding, earnings per share is approximately
57. Eddy Corporation reported the following data for the period: Earnings per share, $3.00; Retained Earnings,
$27,000; Revenues, $75,000; Capital Stock, $15,000; Expenses, $64,500. With this information, determine how
many shares of stock are outstanding.
58. Exhibit 2-2
The following information was taken from the records of Tellers Corporation for the month ended December
31, 2012:
Advertising expense
$20,625
Income tax expense
13,095
Accounts payable
13,450
Dividends paid
14,125
Retained earnings (12/1/12)
57,860
Consulting fees revenue
93,550
Rent expense
11,728
Supplies expense
16,917
Refer to Exhibit 2-2. Given the above information, net income is
59. Exhibit 2-2
The following information was taken from the records of Tellers Corporation for the month ended December
31, 2012:
Advertising expense
$20,625
Income tax expense
13,095
Accounts payable
13,450
Dividends paid
14,125
Retained earnings (12/1/12)
57,860
Consulting fees revenue
93,550
Rent expense
11,728
Supplies expense
16,917
Refer to Exhibit 2-2. If Tellers has 2,100 shares of stock outstanding, earnings per share is approximately
60. The following information was taken from the records of McDyce Corporation for the year ended December
31, 2013:
Dividends paid
$ 12,800
Service revenue
90,500
Accounts payable
139,750
Capital stock
378,750
Total expenses
67,000
Retained earnings (1/1/13)
43,400
The net income at December 31, 2013 was
61. The beginning balance of retained earnings will be greater than the ending balance if
62. Which of the following is NOT included in the statement of retained earnings?
63. Retained earnings are
64. During the year, Roger Company earned revenues of $114,000, incurred $98,000 for various operating
expenses, and distributed $5,600 in dividends. If retained earnings for the previous year was $34,600, what is
retained earnings for the current year?
65. The following information was taken from the records of McDyce Corporation for the year ended December
31, 2013:
Dividends paid
$ 6,400
Service revenue
45,250
Accounts payable
69,875
Capital stock
189,375
Total expenses
33,500
Retained earnings (1/1/13)
21,700
The retained earnings balance at December 31, 2013 was
66. The following information was taken from the records of Tellers Corporation for the year ended December
31, 2013:
Advertising expense
$20,625
Income tax expense
13,095
Accounts payable
13,450
Dividends paid
14,125
Retained earnings (12/31/13)
57,860
Consulting fees revenue
93,550
Rent expense
11,728
Supplies expense
16,917
Given the above information, retained earnings on December 31, 2012 was
67. Rolf Corporation reported the following data for the period end: Earnings per share, $6.00; Retained
Earnings, $54,000; Revenues, $150,000; Capital Stock, $30,000; Expenses, $129,000; Dividends, $24,000.
With this information, determine retained earnings for the prior period.
68. The following information was taken from the records of Hart Corporation for the month ended December
31, 2013:
Advertising expense
$20,625
Income tax expense
13,095
Accounts payable
13,450
Dividends paid
14,125
Retained earnings (12/1/13)
57,860
Consulting fees revenue
97,875
Rent expense
11,728
Supplies expense
16,917
Given the above information, retained earnings as of December 31, 2013 is
69. On April 1, Bonita Corporation’s retained earnings account had a balance of $785,000. During April, Bonita
had revenues of $135,000 and expenses of $93,000. On April 30, retained earnings had a balance of $811,500.
What amount of dividends were paid during April?
70. A major source of cash from operating activities is
71. Which of the following is a primary use of cash?
72. Which of the following financial statements shows an entity’s cash receipts and payments?
73. Which of the following classifications does NOT appear on the Statement of Cash Flows?
74. Which of the following classifications refers to those activities associated with buying and selling long-term
assets?
75. Which of the following classifications refers to those activities whereby cash is obtained or repaid to owners
and creditors?
76. Which of the following classifications refers to those activities that are part of the day-to-day business of a
company?