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Exam 1: Accounting and the Financial Statements

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Question 91

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Income from operations includes interest revenue and interest expense because these items are considered to be operating in nature.

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Question 92

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You are a potential creditor and are concerned that a particular company you are ready to give a loan to might have too much debt.Which financial statement would provide you information needed in order to evaluate your concern?

A) Balance Sheet
B) Income Statement
C) Statement of Retained Earnings
D) Statement of Public Accounting

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Question 93

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The income statement summarizes the assets,liabilities and stockholders' equity for a period of time.

Beaver Tree Service $\begin{array}{ll} \text { Beginning Retained Earnings } &\$ 550,000 \\ \text { Ending Retained Earnings } &700,000 \\ \text { Dividends Paid } &100,000 \\ \text { Revenue } &525,000\end{array}$ -Refer to Beaver Tree Service.The company's expenses are:

Bass Tours The following balances were taken from the company's records: - Refer to Bass Tours.If the average current ratio for similar companies is 2.0 to 1,what does this tell you about this company's liquidity?

Which one of the following items is least likely to be found in a corporate annual report?

On a multiple-step income statement,operating income results from subtracting total operating expenses from which of the following amounts?

Potential stockholders and lenders are interested in a company's financial statements.Several financial statement items appear below.Answer the questions that follow. $\begin{array}{lll}\text { Accounts receivable } & \text { Accounts payable } & \text { Advertising expense } \\\text { Cash } & \text { Depreciation expense } & \text { Income taxes } \\\text { Common stock } & \text { Land held for future expansion } & \text { Dividends } \\\text { Retained earmings } & \text { Loss on the sale of equipment } & \text { Servicereveme } \\\text { Office supplies } & \text { Patent amortization expense } & \text { Sales } \\\text { Uneamed revemue } & \text { Utilities expense } &\end{array}$ A)List the two items from above in which stockholders would be most interested. Explain why the two you sele cted are important to stockholders. B)In which one item would lenders be most interested? Explain why thisitem is important.

The company's annual report is contained within the company's 10-K filing with the Securities Exchange Commission.

An independent auditor's (CPA's)report is a guarantee that the financial statements are free from fraud or material error.

Bellweather Times The company reports the following balances: -Refer to Bellweather Times.By what amount will net income on a single-step income statement differ from net income on a multiple-step income statement if the company prepares both formats?

The ability of a company to pay its debt as it comes due relates to ____________________.

Baloon-E-Tunes $\begin{array}{l}\begin{array}{ll}\text { Retained Earnings } & \$ 370,000 \\\text { Accumulated Depreciation } & 130,000 \\\text { Income Taxes Payable } & 240,000 \\\text { Plant } & 480,000 \\\text { Cash } & 110,000 \\\text { Accounts Receivable } & 350,000 \\\text { Common Stock } & 600,000\end{array}\begin{array}{ll}\text { Notes Payable (due in } 6 \text { years) } & \$ 120,000 \\\text { Salaries Payable } & 10,000 \\\text { Supplies } & 20,000 \\\text { AccountsPayable } & 360,000 \\\text { Inventory } & 330,000 \\\text { Land } & 500,000 \\\text { Prepaid Insurance } & 40,000\end{array}\end{array}$ -Refer to Baloon-E-Tunes.Calculate the current ratio at December 31,2013.What does this ratio tell you about the "composition" of the current assets?

Dividend payments appear on the Statement of Retained Earnings.

Which one of the following items is reported as a current stockholders' equity on a classified balance sheet?

On January 1,2012,a company reported assets of $1,000,000 and liabilities of $600,000.During 2012,assets decreased by $100,000 and Stockholders' Equity decreased $200,000.What is the amount of liabilities at December 31,2012?

Which of the following would not be considered to be an intangible asset?

Which one of the following is not a major category for long-term assets?

Barrett Oil Company reported the following balances as of December 31,2013: - What is the company's current ratio?

Both net income and dividends can be found on this financial statement: ____________________.