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Exam 1: The Financial Statements

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Question 21

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All business owners are personally liable for the debts of their businesses.

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Question 22

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When analyzing a company's income statement, a fact to remember is that:

A) cost of sales is another term for gross profit.
B) cost of goods sold is the major expense of merchandising entities.
C) companies are not allowed to offset items such as interest income and interest expense against each other.
D) net sales is equal to sales revenue less cost of goods sold.

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Question 23

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Which of the following is a correct statement about long-term assets?

A company sells travel mugs online for $9. They purchase the mugs for $3 and charge the customers $1 for shipping and handling. Cost of goods sold per mug is:

The portion of net income that the company has kept over a period of years is called:

On the statement of retained earnings:

Liabilities are divided into two categories:

The acronym GAAP stands for:

Exhibit 1.5.1 The following financial statements are to be used to answer the following questions: -Refer to Exhibit 1.5-1. What are the total current assets as of December 31, 2011?

A company whose net income from operations is consistently increasing is regarded as a healthy, high-quality company.

Retained earnings appears on which of the following financial statements?

ABC Company had the following transactions during the year: A) ABC Company delayed issuing its financial statements because the accountant was on vacation. B) ABC Company determined that land that they purchased several years ago for $100,000 had a current fair market value of $140,000. To make the financial statements look better, they increased the carrying value of the land to $140,000. C) The president of ABC Company borrowed $30,000 from the bank to remodel his yacht. ABC put the loan on their books. D) ABC Company was involved in an very complex accounting transaction that they did not want the bank to know about. They decided to make the description of the transaction extremely complex so that no one would realize what the transaction was about. E) ABC believes that the purchasing price of the dollar has changed significantly over the last several years and therefore adjusted the financial statements to reflect current year price levels. F) ABC recently purchased a building that was listed by the realtor for a price of $275,000. ABC paid $250,000 for the building and recorded it on their books for $250,000. G) ABC Company is in excellent financial health and has no plans to go out of business. However, management decided that they did not need to depreciate the cost of their assets to business operations over the assets' economic lives.

A partnership is formed under state law.

When total expenses exceed total revenues, the result is:

Under current accounting rules, the carrying value of a building can be increased to its fair value.

The accounting equation must always be in balance.

Regarding dividends:

Harvest Company had the following activity during the year: At the beginning of the year, the balance in Retained Earnings was $51,000. In addition, Harvest Company had assets at the end of the year of $205,000, and Common Stock of $85,000. REQUIRED: 1. Compute the amount of the net income or loss for the year. 2. Compute the ending retained earnings balance. 3. Compute the amount of the liabilities at the end of the year.

An entity's equity consists of two accounts, Amy Jones, Capital, and Mindy Lenz, Capital. This indicates the entity is a:

Equipment would appear on the: