Reference no: EM132595291

There is only one correct answer to each question. Please write the correct answer in the parentheses provided next to the question.

Question 1. Who are the major information users of financial statements of a company?

a. managers of the company

b. government agencies who collect income taxes from the company

c. labor union of the company

d. stockholders and creditors of the company

Question 2. Accounting valuation represents: ( )

a. the act of recording an item in the accounting records

b. the act of assigning an item a monetary value

c. the act of providing information about the organization and the construction of its accounting reports

d. all of the above

Question 3. Disclosure represents: ( )

a. the act of recording an item in the accounting records

b. the act of assigning an item a monetary value

c. the act of providing information about the organization and the construction of its accounting reports

d. all of the above

Question 4. Assume that a firm has total liabilities of $90,000 and total stockholders' equity of $90,000.

What must be the total assets? ( )

a. $140,000

b. $100,000

c. $180,000

d. $0

Question 5. Which of the following step in the accounting cycle need to be taken after you have recorded the effects of transactions in the journal? ( )

a. making a trial balance

b. posting to the accounts in the ledger

c. making journal entries

d. making a balance sheet

Question 6. Suppose that a firm's cash flow statement indicates a net change in cash of $400,000 during a given period. Assuming the following information,

Net cash flow from financing activity: $100,000

Net cash flow from operations: $600,000

What must have been the net cash flow from investing activity? ( )

a. ($300,000)

b. $1,100,000

c. $300,000

d. $200,000

Question 7. Which of the following statements regarding dividends is true? ( )

a. Corporations have a legal obligation to pay dividends.

b. Corporations must record the total future stream of dividends as a liability.

c. Dividends become an obligation only when directors vote to pay a dividend.

d. Dividends are an asset.

Question 8. Smithers Corporation has a debt-to-equity ratio of 0.75. This means that: ( )

a. an investment in Smithers carries very low risk

b. Smithers has relied primarily on stockholders for financing

c. for every dollar of financing provided by owners, an additional 75 cents is supplied by creditors

d. Smithers is unable to pay its bills as they come due

Question 9. On January 2, 20x1, Erin Co.'s stockholders contributed $20,000 cash, $18,000 of which was immediately used to purchase land. No other transactions have occurred since then. The managers are considering selling the land. If Erin were to sell its land on December 31, 20x1, it would receive $25,000. The amount that should be reported for land on the December 31, 20x1 balance sheet is: ( )

a. $18,000

b. $20,000

c. $25,000

d. $0 since the company is considering selling the land

Question 10. EK Co. is a clothing store. In December, 20x1, EK sold $20,000 of gift certificates for cash to holiday shoppers. As of January 31, 20x2, the end of its fiscal year, $15,000 of the gift certificates had been redeemed by customers. The remaining $5,000 is still outstanding. In EK's balance sheet dated January 31, 20x2, the $5,000 of gift certificates outstanding should be treated as: ( )

a. inventories

b. accounts payable

c. unearned revenues

d. prepaid expenses