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Exam 1: A Framework for Financial Accounting

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Question 31

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How does the value of an audit affect financial statements?

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Outside auditors add credibility to fina...

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Question 32

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In what order are the following financial statements prepared: (1) balance sheet, (2) income statement,and (3) statement of stockholders' equity?

A) 1,2,3.
B) 3,2,1.
C) 1,3,2.
D) 2,3,1.

E) A) and D)
F) A) and B)

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Question 33

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The role of auditors is to help ensure that management has in fact appropriately applied Generally Accepted Accounting Principles (GAAP)in preparing the company's financial statements.

The Financial Accounting Standards Board's conceptual framework does not prescribe Generally Accepted Accounting Principles.It provides an underlying foundation for the development of accounting standards and interpretation of accounting information.

Any transaction that affects the income statement ultimately affects the balance sheet through the balance of retained earnings.

Match each qualitative characteristic with its definition.

Transactions of a company that include the purchase and sale of long-term productive assets are referred to as:

Double taxation refers to a corporation's income being taxed twice-first when the company earns it and pays corporate income taxes on it,and then again when stockholders pay personal income taxes on any amounts the firm distributes to them as dividends.

Aikman Company has paid dividends of $2,410,$0,$1,570 and $1,060 over the first four years of the company's existence.If Retained Earnings after year four has an ending balance of $9,700,what is the average annual amount of net income (loss) over the past four years for Aikman?

Financial statements are periodic reports published by the company for the purpose of providing information to managers.

Financial accounting does not deal with which of the following?

If total liabilities of a company equal $16,000 and total stockholders' equity equals $9,000,then total assets equal $7,000.

The primary objective of financial reporting is to provide useful information to managers in making decisions.

Which of the following items would not appear in an income statement?

At the end of the current period,Maltese,Inc.reports the following amounts: Assets = $50,000;Liabilities = $28,000;Dividends = $4,000;Revenues = $22,000;Expenses = $16,000.Calculate net income and stockholders' equity at the end of the period.

Which of the following accounts appears in the statement of stockholders' equity?

The difference between revenues and expenses is referred to as net income or net loss.

The primary functions of financial accounting are to measure business activities of a company and to communicate those measurements to internal parties for decision-making purposes.

Which accounting number has the single greatest impact on stock prices?

Today,financial accounting and reporting standards in the United States are established primarily by the Financial Accounting Standards Board (FASB).