FinancialAccounting,7eHarrison/HorngrenTestItemFileChapter1:TheFinancialStatements1.1-1 Bookkeepingisatypeofaccountingusedprimarilybyproprietorships.Answer:False LO:1-1 Diff:2 EOC:QC11.1-2 Thethreeformsofbusinessorganizationsareproprietorships,partnerships,andfor-profitorganizations.Answer:False LO:1-1 Diff:1 EOC:E1-131.1-3 Toconvinceaninvestortoinvestmoneyinaparticularcompany,relevantandreliableaccounting informationisrequired.Answer:True LO:1-1 Diff:1 EOC:E1-141.1-4 LimitedLiabilityCompanies(LLCs)havemembersinsteadofstockholders.Answer:True LO:1-1 Diff:1 EOC:E1-131.1-5 Allbusinessownersarepersonallyliableforthedebtsoftheirbusinesses.Answer:False LO:1-1 Diff:1 EOC:E1-131.1-6 Aproprietorshipisadistinctandseparateentityfromtheproprietor,frombothanaccountingandalegal viewpoint.Answer:False LO:1-1 Diff:2 EOC:E1-131.1-7 Thetwotypesofaccountingare:A. profitandnonprofit.B. financialandmanagerial.C. internalandexternal.D. bookkeepinganddecision-oriented.Answer:B LO:1-1 Diff:2 EOC:E1-13

1.1-8 Accordingtotheauthor,potentialinvestorsneedinformationthatis:A. relevantandreliable.B. fairandfuture-oriented.C. accurateandtruthful.D. auditedandcomplete.Answer:A LO:1-1 Diff:2 EOC:E1-141.1-9 Whoultimatelycontrolsacorporation?A. BoardofDirectorsB. TheChiefExecutiveOfficer(CEO)C. ThestockholdersD. ThePresidentAnswer:C LO:1-1 Diff:2 EOC:E1-131.1-10 Financialstatementsare:A. standarddocumentsissuedbyoutsideconsultantswhoarehiredtoanalyzekeyoperationsofthebusinessinfinancialterms.B. standarddocumentsthattellushowwellabusinessisperformingandwhereitstandsinfinancialterms.C. reportscreatedbymanagementthatstatesitisresponsiblefortheactsofthecorporation.D. reportsissuedbyoutsideconsultantswhoarehiredtoanalyzekeyoperationsofthebusiness.Answer:B LO:1-1 Diff:1 EOC:E1-261.1-11 Forwhichformofbusinessownershiparetheownersofabusinesslegallydistinctfromthebusiness?A. CorporationB. PartnershipC. ProprietorshipD. AlloftheaboveAnswer:A LO:1-1 Diff:1 EOC:E1-13

1.1-12 AllofthefollowingareformsofbusinessorganizationsEXCEPT:A. proprietorship.B. limitedpartnership.C. limitedproprietorship.D. limitedliabilitycompany.Answer:C LO:1-1 Diff:1 EOC:E1-131.1-13 ThelargestorganizationofprofessionalaccountantsintheUnitedStatesisthe:A. FinancialAccountingStandardsBoard.B. SecuritiesandExchangeCommission.C. AmericanInstituteofCertifiedPublicAccountants.D. AuditingStandardsBoard.Answer:C LO:1-1 Diff:2 EOC:P1-53B1.2-1 Generallyacceptedaccountingprinciples,orGAAP,aretherulesandproceduresestablishedbythe FinancialAccountingStandardsBoard,ortheFASB.Answer:True LO:1-2 Diff:1 EOC:QC1Theentityconceptisthemostbasicaccountingconcept.Answer:True LO:1-2 Diff:1 EOC:S1-3ThestablemonetaryunitconceptmeansthatthetypeofcurrencyusedforthefinancialstatementsisNOTexpectedtochange.Answer:False LO:1-2 Diff:2 EOC:E1-14Sincecostisareliablemeasuretouseinfinancialaccounting,theobjectivityprinciplestatesthatassetsandservicesshouldberecordedattheiractualcost.Answer:False LO:1-2 Diff:2 EOC:E1-14

1.2-5 TheFinancialAccountingStandardsBoardisresponsibleforestablishing:A.thecodeofprofessionalconductforaccountants.B.theSecuritiesandExchangeCommission.C.generallyacceptedaccountingprinciples.D.theAmericanInstituteofCertifiedPublicAccountants.Answer:C LO:1-2 Diff:2 EOC:QC11.2-6 TheacronymGAAPstandsfor:A.generallyacceptableauthorizedpronouncements.B.governmentauthorizedaccountantprinciples.C.generallyacceptedaccountingprinciples.D.governmentauditedaccountingpronouncements.Answer:C LO:1-2 Diff:2 EOC:E1-271.2-7 AllofthefollowingarecharacteristicsofusefulaccountinginformationEXCEPT:A. informative.B. relevant.C. consistent.D. reliable.Answer:A LO:1-2 Diff:2 EOC:E1-141.2-8 Theobjectivityprincipleofaccounting:A. holdsthattheentitywillremaininoperationfortheforeseeablefuture. B. enablesaccountantstoignoretheeffectofinflationintheaccountingrecords.C.maintainsthateachorganizationorsectionofanorganizationstandsapartfromotherorganizationsandindividuals.D.ensuresthataccountingrecordsandstatementsarebasedonthemostreliabledataavailable.Answer:D LO:1-2 Diff:2 EOC:E1-14

1.2-9 Thestable-monetary-unitconceptofaccounting:A. ensuresthataccountingrecordsandstatementsarebasedonthemostreliabledataavailable. B. holdsthattheentitywillremaininoperationfortheforeseeablefuture.maintainsthateachorganizationorsectionofanorganizationstandsapartfromotherorganizationsandindividuals.enablesaccountantstoignoretheeffectofinflationintheaccountingrecords.Answer:D LO:1-2 Diff:2 EOC:E1-141.2-10 Thegoing-concernconceptofaccounting:A. enablesaccountantstoignoretheeffectofinflationintheaccountingrecords. B. holdsthattheentitywillremaininoperationfortheforeseeablefuture.maintainsthateachorganizationorsectionofanorganizationstandsapartfromotherorganizationsandindividuals.ensuresthataccountingrecordsandstatementsarebasedonthemostreliabledataavailable.Answer:B LO:1-2 Diff:2 EOC:P1-43A1.2-11 Theprinciplewhichstatesthatassetsacquiredbythebusinessshouldberecordedattheiractualpriceis the:A. costprinciple.B. objectivityprinciple.C. reliabilityprinciple.D. stabledollarprinciple.Answer:A LO:1-2 Diff:1 EOC:Q1-301.2-12 Thereliabilityprincipleisalsocalledthe:A. relevanceconcept. B. truthfulnessconcept.C.objectivityprinciple.D.fullandfairprinciple.Answer:C LO:1-2 Diff:2 EOC:E1-14

1.2-13 WhichofthefollowingstatementsisFALSE?A. Reliabledatamaybesupportedbyobjectiveevidence.B. Theinformedopinionofownersisanimportantsourceofobjectiveevidence. C. Anindependentappraisal,conductedbyalicensedprofessional,isusuallyconsideredreliable.D. Reliabledataareverifiable.Answer:B LO:1-2 Diff:2 EOC:E1-141.2-14 Therelevantmeasureofthevalueoftheassetsofacompanythatisgoingoutofbusinessisthe:A. bookvalue.B. currentmarketvalue. C. historicalcost.D. recordedvalue.Answer:B LO:1-2 Diff:2 EOC:P1-43A1.2-15 TheCEOofabusinessownsaresidenceinFlagstaff.ThecompanytheCEOworksforownsaresidence inChandlerusedforstrategicplanningmeetingsbyitsexecutives.Whichofthesepropertiesis consideredanasset(s)ofthebusiness?A. TheFlagstaffresidenceonlyB. TheChandlerresidenceonlyC. BoththeFlagstaffandChandlerresidencesD. NeithertheFlagstaffnorChandlerresidencesAnswer:B LO:1-2 Diff:2 EOC:S1-31.2-16 AnOklahomaCitybusinesspaid$15,000cashforequipmentusedinthebusiness.Atthetimeof purchase,theequipmenthadalistpriceof$20,000.Whenthebalancesheetwasprepared,thevalueof theequipmentlaterroseto$22,000.Whatistherelevantmeasureofthevalueoftheequipment? A. Historicalcost,$15,000 B. Fairmarketcost,$20,000C. Currentmarketcost,$22,000D. $15,000onthedayofpurchase,$22,000onbalancesheetdateAnswer:A LO:1-2 Diff:2 EOC:Q1-301.3-1 TheaccountingequationexpressestheideathatResources-Insiderclaims=Outsiderclaims.Answer:True LO:1-3 Diff:3 EOC:S1-51.3-2 Theaccountingequationmustalwaysbeinbalance.Answer:True LO:1-3 Diff:1 EOC:S1-11.3-3 Liabilitiesaredividedinto"outsiderclaims"and"insiderclaims."Answer:False LO:1-3 Diff:2 EOC:S1-51.3-4 "Netassets",asstockholders’equityisoftenreferredto,representstheresidualamountofbusinessassets whichcanbeclaimedbytheowners.Answer:True LO:1-3 Diff:2 EOC:QC121.3-5 Commonstockandretainedearningsarethemaincomponentsofpaid-incapital.Answer:False LO:1-3 Diff:2 EOC:S1-101.3-6 Retainedearningsdonotrepresentcashthatisavailabletoacompanyforfutureoperationsand expansion.Answer:True LO:1-3 Diff:3 EOC:E1-271.3-7 Netincomeappearsonboththeincomestatementandthestatementofretainedearnings.Answer:True LO:1-3 Diff:2 EOC:Q1-391.3-8 Thestatementofcashflowsisorganizedintermsoftheorganization’soperating,investing,andfinancing activities.Answer:True LO:1-3 Diff:2 EOC:E1-251.3-9 Expensesareincreasesinretainedearningsthatresultfromoperations.Answer:False LO:1-3 Diff:2 EOC:S1-71.3-10 DividendpaymentsareNOTclassifiedasexpenses.Answer:True LO:1-3 Diff:2 EOC:S1-91.3-11 Thecalculationofendingretainedearningsconsiderscurrentnetincomeornetlossanddividends.Answer:True LO:1-3 Diff:2 EOC:S1-9

1.3-12 Theowners’equityofproprietorshipsandpartnershipsisthesame.Answer:False LO:1-3 Diff:2 EOC:S1-91.3-13 Theaccountingequationcanbestatedas:A. Assets+Stockholders’Equity=LiabilitiesB. Assets-Liabilities=Stockholders’EquityC. Assets=Liabilities-Stockholders’EquityD. Assets-Stockholders’Equity+Liabilities=ZeroAnswer:B LO:1-3 Diff:1 EOC:QC31.3-14 Whichofthefollowingbestdescribesaliability?Liabilitiesare:A. aformofpaid-incapital.B. futureeconomicbenefitstowhichacompanyisentitled.C. payablesofthecorporation.D. economicobligationstoownerstobepaidatsomefuturedatebythecorporation.Answer:C LO:1-3 Diff:1 EOC:S1-51.3-15 Theowners’interestintheassetsofacorporationisknownas:A. commonstock.B. stockholders’equity.C. long-termassets. D. operatingexpenses.Answer:B LO:1-3 Diff:2 EOC:S1-51.3-16 Claimsheldbythestockholdersofacorporationarealsoknownas:A. retainedearnings.B. paid-incapital.C. paid-incapitalplusretainedearnings.D. netincome.Answer:C LO:1-3 Diff:3 EOC:S1-5

1.3-17 Payablesareclassifiedas: A. increasesinearnings. B. decreasesinearnings. C. liabilities.D. assets.Answer:C LO:1-3 Diff:1 EOC:S1-61.3-18 Receivablesareclassifiedas: A. increasesinearnings. B. decreasesinearnings. C. liabilities.D. assets.Answer:D LO:1-3 Diff:1 EOC:S1-61.3-19 Thesumof"outsiderclaims"plus"insiderclaims"equals:A. netincome.B. totalliabilities. C. totalassets.D. totalstockholders’equity. Answer:C LO:1-3 Diff:3 EOC:S1-51.3-20 Revenuesare:A. decreasesinassetsresultingfromdeliveringgoodsorservicestocustomers. B. increasesinliabilitiesresultingfromdeliveringgoodsorservicestocustomers.C. increasesinretainedearningsresultingfromdeliveringgoodsorservicestocustomers. D. decreasesinretainedearningsresultingfromdeliveringgoodsorservicestocustomers.Answer:C LO:1-3 Diff:2 EOC:S1-4

1.3-21 Howdorevenuesforaperiodrelatetothebeginningandendingbalancesinretainedearnings?A. Revenueswillincreasethebeginningbalanceofretainedearningsfortheperiod.B. Revenueswillincreasetheendingbalanceofretainedearningsfortheperiod.C. Revenueslessexpenseswilleitherincreaseordecreasethebeginningbalanceofretainedearningsfortheperiod.D. Noneoftheseanswersarecorrect.Answer:C LO:1-3 Diff:2 EOC:S1-91.3-22 Expensesare:A. increasesinliabilitiesresultingfrompurchasingassets. B. increasesinassetsresultingfromoperations.C. increasesinretainedearningsresultingfromoperations. D. decreasesinretainedearningsresultingfromoperations.Answer:D LO:1-3 Diff:2 EOC:S1-41.3-23 Dividends:A. areexpenses.B. alwaysaffectnetincome.C. aredistributionstostockholdersofassets(usuallycash)generatedbynetincome. D. aredistributionstostockholdersofassets(usuallycash)generatedbyafavorablebalanceinretainedearnings.Answer:C LO:1-3 Diff:2 EOC:E1-161.3-24 Acorporation’spaid-incapitalconsistsofA. revenuesandexpenses.B. assetsandliabilities.C. commonstock.D. netincome.Answer:C LO:1-3 Diff:2 EOC:S1-10

1.3-25 Netincomeiscomputedas:A. revenues–expenses–dividends.B. revenues+expenses.C. revenues–expenses.D. revenues–expenses+dividends. Answer:C LO:1-3 Diff:2 EOC:QC81.3-26 WhichofthefollowingmustbeaddedtobeginningRetainedEarningstocomputeendingRetained Earnings?A. Netincome B. ExpensesC. DividendsD. Alloftheseanswersarecorrect.Answer:A LO:1-3 Diff:2 EOC:P1-44A1.3-27 Attheendofthecurrentaccountingperiod,accountbalanceswereasfollows:Cash,$180,000;Accounts Receivable,$75,000;CommonStock,$20,000;RetainedEarnings,$65,000.Liabilitiesfortheperiod were:A. $70,000.B. $170,000.C. $190,000.D. $210,000.Answer:B LO:1-3 Diff:2 EOC:S1-1

1.3-28 OnJanuary1,2023,totalassetsforLiftoffTechnologieswere$125,000;onDecember31,2023,total assetswere$145,000.OnJanuary1,2023,totalliabilitieswere$110,000;onDecember31,2023,total liabilitieswere$115,000.WhatistheamountofthechangeandthedirectionofthechangeinLiftoff Technologies'stockholders’equityfor2023?A. Decreaseof$15,000B. Increaseof$15,000C. Increaseof$30,000D. Decreaseof$30,000Answer:B LO:1-3 Diff:2 EOC:QC121.3-29 Revenueswere$170,000,expenseswere$90,000,andcashdividendswere$30,000.Whatwasthenet incomeandthechangeinretainedearningsfortheperiod? A.Netincomewas$50,000;changeinretainedearningswas$50,000 B.Netincomewas$80,000;changeinretainedearningswas$50,000 C.Netincomewas$80,000;changeinretainedearningswas$80,000 D.Netincomewas$250,000;changeinretainedearningswas$250,000Answer:B LO:1-3 Diff:2 EOC:E1-231.3-30 Atthebeginningoftheperiod,assetswere$490,000andstockholders’equitywas$240,000.Duringthe year,assetsincreasedby$60,000,liabilitiesincreasedby$40,000,andstockholders’equityincreasedby $20,000.Beginningliabilitiesmusthavebeen:A. $230,000.B. $250,000.C. $280,000.D. $300,000.Answer:B LO:1-3 Diff:3 EOC:S1-1

1.3-31 Ifassetsincrease$210,000duringagivenperiodandliabilitiesincrease$65,000duringthesameperiod, stockholders’equitymust:A. increase$145,000.B. decrease$275,000.C. decrease$145,000.D. increase$275,000.Answer:A LO:1-3 Diff:3 EOC:P1-44A1.3-32 Ifliabilitiesincrease$120,000duringagivenperiodandstockholders’equitydecreases$25,000during thesameperiod,assetsmust:A.increase$95,000. B. decrease$95,000.C. decrease$145,000.D. increase$145,000. Answer:A LO:1-3 Diff:3 EOC:P1-44A1.3-33 Stockholders’equityforCommerce-GACorporationon01/01/2023and12/31/2023were$60,000and $75,000,respectively.Assetson01/01/2023and12/31/2023were$115,000and$105,000,respectively. Liabilitieson01/01/2023were$55,000.Whatistheamountofliabilitieson12/31/2023?A. $40,000B. $15,000C. $30,000D. Theamountisindeterminablefromthegiveninformation.Answer:C LO:1-3 Diff:3 EOC:S1-11.4-1 Ramos,Inc.hasmonthlyrevenuesof$30,000andmonthlyexpensesof$18,000,andthecompanypaid $4,000individends;thereforenetincomeforthemonthis$8,000.Answer:False LO:1-4 Diff:2 EOC:S1-81.4-2 AbleCo.has$500,000inassetsand$400,000inliabilities;thereforetheequityis$900,000.Answer:False LO:1-4 Diff:1 EOC:S1-1

1.4-3 YummyInc.hasbeginningretainedearningsof$10,000,netincomeof$50,000,anddividendspaidof $5,000;thereforetheendingretainedEarningsis$65,000.Answer:False LO:1-4 Diff:2 EOC:S1-81.4-4 Dividendsappearonthe: A. statementofretainedearnings. B. boththestatementofretainedearningsandtheincomestatement. C. incomestatement.D. balancesheet.Answer:A LO:1-4 Diff:2 EOC:S1-121.4-5 Assetsappearonthe: A. balancesheet.B. incomestatement.C. statementofretainedearnings.D. bothbalancesheetandthestatementofretainedearnings.Answer:A LO:1-4 Diff:1 EOC:S1-121.4-6 Commonstockappearsonthe:A. balancesheet.B. incomestatement.C. statementofcashflowsandthestatementofretainedearnings.D. Noneoftheabovearecorrect.Answer:A LO:1-4 Diff:1 EOC:S1-121.4-7 Acompany’sgrossprofitfortheperiodisreportedonthe:A.balancesheet.incomestatement.C. statementofcashflows.D. statementofretainedearnings.Answer:B LO:1-4 Diff:1 EOC:S1-81.4-8 Gainsandlossesappearonwhichofthefinancialstatementslistedbelow?A.BalancesheetIncomestatementC. StatementofcashflowsD. Statementofretainedearnings Answer:B LO:1-4 Diff:1 EOC:S1-81.4-9 TheendingbalanceinRetainedEarningsappearsonthe:A. balancesheetonly.B. balancesheetandstatementofretainedearnings.C. statementofretainedearningsonly.D. incomestatementandstatementofcashflows.Answer:B LO:1-4 Diff:2 EOC:P1-49A1.4-10 Cashdividends:A. decreaserevenueontheincomestatement.B. decreaseretainedearningsonthestatementofretainedearnings.C. increaseexpensesontheincomestatement.D. decreaseoperatingactivitiesonthestatementofcashflows.Answer:B LO:1-4 Diff:2 EOC:S1-91.4-11 Whichofthefollowingfinancialstatementsshowsthenetincreaseordecreaseincashduringtheperiod?A. BalancesheetonlyB. StatementofoperationsC. StatementofretainedearningsandbalancesheetD. StatementofcashflowsAnswer:D LO:1-4 Diff:1 EOC:S1-12

1.4-12 Aninvestorwishingtoassessacompany’sfinancialpositionattheendoftheperiodwouldprobably examinethe:A. statementofcashflowsandtheincomestatement.B. incomestatementonly.C. balancesheet.D. statementofretainedearnings.Answer:C LO:1-4 Diff:2 EOC:E1-261.4-13 Apotentialinvestorinterestedinevaluatingacompany’sfinancialperformanceforthecurrentperiod wouldprobablyexaminewhichofthefollowingfinancialstatements?A. BalancesheetonlyB. IncomestatementonlyC. StatementofcashflowsandincomestatementD. StatementofretainedearningsandbalancesheetAnswer:B LO:1-4 Diff:2 EOC:E1-261.4-14 Whichstatement(s)summarizestherevenuesandexpensesofanentity?A. BalancesheetonlyB. StatementofcashflowsandincomestatementC. StatementofretainedearningsandstatementofoperationsD. StatementofoperationsonlyAnswer:D LO:1-4 Diff:2 EOC:S1-81.4-15 Whichfinancialstatementprovidesa"snapshotphoto"ofonemomentintime?A. BalancesheetonlyB. IncomestatementonlyC. StatementofretainedearningsandincomestatementD. StatementofcashflowsonlyAnswer:A LO:1-4 Diff:2 EOC:E1-26

1.4-16 Theincomestatement: A. isnotdated. B. maycoveraperiodoftimeoronlyonedayintime,likeasnapshotphotograph. C. coversadefinedperiodoftime.D. reportstheresultsofoperationssincetheinceptionofthebusiness. Answer:C LO:1-4 Diff:2 EOC:QC51.4-17 Theincomestatementpresentsasummaryofthe: A. cashinflowsandoutflowsofanentity. B.assetsandliabilitiesofanentity.C. revenuesandexpensesofanentityforaspecifictimeperiod.D. changesthatoccurredinthestockholders’equityofanentity.Answer:C LO:1-4 Diff:1 EOC:E1-191.4-18 Operatingexpensesappearontheincomestatement: A.directlyafterrevenue.B. directlyaftergrossprofit.C. directlyaftercostofgoodssold. D. Operatingexpensesdonotappearontheincomestatement.Answer:B LO:1-4 Diff:2 EOC:S1-71.4-19 Costofgoodssoldappearsonthe: A.statementofretainedearningsasanadditiontobeginningretainedearnings. B. incomestatementasadeductionfromsales. C.balancesheetasadeductionfromsales.D. incomestatementasadeductionfromgrossprofit.Answer:B LO:1-4 Diff:2 EOC:P1-49A

1.4-20 Aretailstoresellst-shirtsfor$85andpurchasesthemfor$60.Thestore’scostofgoodssoldwouldbe:A. $25.B. $85.C. $60.D. Noneoftheseanswersarecorrect.Answer:C LO:1-4 Diff:1 EOC:P1-49A1.4-21 Netincomeis: A.addedtoassetsonthebalancesheet. B. deductedfrombeginningretainedearningsontheretainedearningsstatement.C. addedtobeginningretainedearningsontheretainedearningsstatement. D. deductedfromendingretainedearningsontheretainedearningsstatement.Answer:C LO:1-4 Diff:2 EOC:S1-91.4-22 Anetlossoccurswhen: A.notenoughcashexists. B.totalrevenuesexceedtotalexpenses. C.totalexpensesexceedtotalrevenues. D. totalrevenuesanddividendsexceedtotalexpenses.Answer:C LO:1-4 Diff:2 EOC:P1-49A1.4-23 Thebalancesheetisalsoknownasthe: A.statementofprofitandloss. B. operatingstatement.C. assetsstatement.D. statementoffinancialposition. Answer:D LO:1-4 Diff:2 EOC:S1-10

1.4-24 Thebalancesheetreportsinformationabout: A.revenues,expenses,andequity.B. liabilities,equity,andexpenses.C. assets,revenues,andliabilities.D. assets,liabilities,andequity.Answer:D LO:1-4 Diff:1 EOC:S1-101.4-25 Assetsaregenerallyclassifiedas: A.producingassetsandconsumableassets.B. currentassetsandproducingassets.C. currentassetsandlong-termassets.D. long-termassetsandconsumableassets.Answer:C LO:1-4 Diff:1 EOC:E1-201.4-26 Currentassetsareassetsexpectedtobeconvertedtocash,sold,orconsumed: A.withinthenext12monthsorwithinthebusiness’snormaloperatingcycleiflongerthanayear.B. withinthenext12monthsorwithinthebusiness’snormaloperatingcycleiflessthanayear. C. withinthenext6months.D. withinthenext24months.Answer:A LO:1-4 Diff:2 EOC:E1-191.4-27 Notesreceivableduein60dayswouldbeclassifiedasa: A.currentliabilityonthebalancesheet. B.currentassetonthebalancesheet.C. long-termassetonthebalancesheet.D. long-termliabilityonthebalancesheet.Answer:B LO:1-4 Diff:1 EOC:E1-19

1.4-28 Equipmentwouldappearonthe: A.balancesheetwiththelong-termassets.B. incomestatementwiththerevenues.C. incomestatementwiththeoperatingexpenses.D. balancesheetwiththecurrentassets. Answer:A LO:1-4 Diff:1 EOC:E1-201.4-29 Depreciationisnormallyassociatedwithwhichassetonthebalancesheet? A.Inventory B.AccountsreceivableC. Land D. EquipmentAnswer:D LO:1-4 Diff:2 EOC:P1-55B1.4-30 Accountsreceivablewouldappearonthe: A.balancesheetwiththecurrentliabilities. B.balancesheetwiththecurrentassets.C. incomestatementwiththerevenues.D. retainedearningsstatementwiththenetincome. Answer:B LO:1-4 Diff:1 EOC:E1-201.4-31 Notespayable(duein60days)wouldappearasa: A.currentliabilityonthebalancesheet. B.currentassetonthebalancesheet.C. long-termassetonthebalancesheet. D. long-termliabilityonthebalancesheet.Answer:A LO:1-4 Diff:1 EOC:P1-56B

1.4-32 Incometaxesowedtothefederalgovernmentwouldbeclassifiedasa(n): A.expenseontheincomestatement. B. financingactivityonthestatementofcashflows.C. currentassetonthebalancesheet.D. currentliabilityonthebalancesheet.Answer:D LO:1-4 Diff:2 EOC:P1-56B1.4-33 Inrelationtothecashflowstatement,purchasesandsalesoflong-termassetsareexamplesof:A. investingactivities.B. accrualactivities.C. financingactivities.D. operatingactivities.Answer:A LO:1-4 Diff:2 EOC:S1-111.4-34 Stockholders’equitydecreasesasaresultof:A. ownerinvestments.B. anetlossduringtheperiod.C. anetincomeduringtheperiod.D. BothAandCarecorrect.Answer:B LO:1-4 Diff:2 EOC:QC71.4-35 Whentreasurystockispurchasedbyacompany,thistransaction:A. increasestheamountofowners’equity.B. decreasestheamountofowners’equity.C. decreasestheamountoftotalliabilities.D. increasestheamountoftotalliabilities.Answer:B LO:1-4 Diff:3 EOC:P1-49A

1.4-36 Thestatementofcashflowsisdividedintowhichthreecategories? A.Operating,investing,andfinancingactivities B. Planning,executing,andevaluatingactivities C. Increasing,decreasing,andnon-cashactivitiesD. Developing,producing,andmarketingactivitiesAnswer:A LO:1-4 Diff:1 EOC:P1-49A1.4-37 Whatistheproperorderforthecategoriesofthestatementofcashflows?A. Financingactivities,investingactivities,andoperatingactivitiesB. Operatingactivities,investingactivities,andfinancingactivitiesC. Operatingactivities,financingactivities,andinvestingactivitiesD. Investingactivities,financingactivities,andoperatingactivitiesAnswer:B LO:1-4 Diff:2 EOC:P1-49A1.4-38 Wherewouldcashreceivedfromthesaleofstockappearonthestatementofcashflows?A. IntheoperatingactivitysectionB. Inthenon-cashfinancingactivitysectionC. IntheinvestingactivitysectionD. InthefinancingactivitysectionAnswer:D LO:1-4 Diff:2 EOC:E1-231.4-39 Howwouldtherepaymentofalong-termnotepayablebeclassifiedinthestatementofcashflows?A. AsaninvestingactivityB. AsafinancingactivityC. AsanoperatingactivityD. AsacurrentassetonthebalancesheetAnswer:B LO:1-4 Diff:3 EOC:P1-49A

1.4-40 Howwouldtheissuanceofstockforcashbeclassifiedonthestatementcashflows?A. AsaninvestingactivityB. AsafinancingactivityC. AsanoperatingactivityD. AsacurrentassetonthebalancesheetAnswer:B LO:1-4 Diff:3 EOC:P1-48A1.4-41 Howwouldcashcollectedfromcustomersappearonthestatementofcashflows?A. AsanoperatingactivityB. AsafinancingactivityC. AsaninvestingactivityD. UndertheindirectmethodAnswer:A LO:1-4 Diff:2 EOC:P1-48A1.4-42 Wherewouldthepaymentofsalariesappearonthestatementofcashflows?A. WiththeoperatingactivitiesB. WiththecurrentliabilitiesC. Notonstatementofcashflows,butonthestatementofearningswiththerevenuesD. Notonstatementofcashflows,butonthestatementofoperationsaspartofcostofgoodssoldAnswer:A LO:1-4 Diff:3 EOC:E1-191.5-1 Thestatementofcashflowsreportsonwhereassetscamefromandhowtheseassetswereused.Answer:False LO:1-5 Diff:2 EOC:S1-111.5-2 Thestatementofcashflowscontainsthree“parts”—operatingactivities,investingactivities,andstock activities.Answer:False LO:1-5 Diff:2 EOC:S1-111.5-3 Inaccounting,theword"net"means“somethingtakenout”.Answer:True LO:1-5 Diff:2 EOC:S1-71.5-4 Theowners’equityofapartnershipincludesbothpartnerequityandpartnerearnings.Answer:True LO:1-5 Diff:3 EOC:E1-151.5-5 Abalancesheetreportsthecompany’sfinancialpositionataspecificpointintime.Answer:True LO:1-5 Diff:2 EOC:S1-101.5-6 Theincomestatementispreparedtodetermine: A.thechangeinca