Question 1

The primary responsibility for the content of the financial statements lies with the external auditor.

Accepted Answer

False

Question 2

The balance sheet includes assets,liabilities and stockholders' equity as of a point in time.

Accepted Answer

True

Question 3

The amount of cash paid by a business for dividends would be reported on the statement of cash flows as an operating activity.

Accepted Answer

False

Question 4

In the United States,the Securities and Exchange Commission (SEC)is considering the adoption of International Financial Reporting Standards (IFRS).

Accepted Answer

The answer of In the United States,the Securities and Exchange...

Question 5

The statement of retained earnings explains the change in the retained earnings balance caused by stockholder investments and dividend declarations.

Accepted Answer

The answer of The statement of retained earnings explains the...

Question 6

Assets are initially recorded on the balance sheet at the total cost paid to acquire the asset.

Accepted Answer

The answer of Assets are initially recorded on the balance...

Question 7

One of the advantages of a corporation when compared to a partnership is the limited liability of the owners.

Accepted Answer

The answer of One of the advantages of a corporation...

Question 8

Total assets are $37,500,total liabilities are $20,000 and contributed capital is $10,000; therefore,retained earnings are $7,500.

Accepted Answer

The answer of Total assets are $37,500,total liabilities are $20,000...

Question 9

The auditor can be held liable for malpractice in situations where the investors suffered losses while relying on the financial statements.

Accepted Answer

The answer of The auditor can be held liable for...

Question 10

Stockholders' equity on the balance sheet consists of contributed capital and retained earnings.

Accepted Answer

The answer of Stockholders' equity on the balance sheet consists...

Question 11

The financial statement that shows an entity's economic resources and claims against those resources is the balance sheet.

Accepted Answer

The answer of The financial statement that shows an entity's...

Question 12

Business managers utilize managerial accounting reports to plan and manage the daily operations.

Accepted Answer

The answer of Business managers utilize managerial accounting reports to...

Question 13

The accounting equation states that Assets = Liabilities + Stockholders' Equity.

Accepted Answer

The answer of The accounting equation states that Assets =...

Question 14

A decision maker who wants to understand a company's financial statements must carefully read the notes to the financial statements because the notes provide useful supplemental information.

Accepted Answer

The answer of A decision maker who wants to understand...

Question 15

The Financial Accounting Standards Board (FASB)has been given the authority by the Securities and Exchange Commission (SEC)to develop generally accepted accounting principles.

Accepted Answer

The answer of The Financial Accounting Standards Board (FASB)has been...

Question 16

The income statement is a measure of an entity's economic performance for a period of time.

Accepted Answer

The answer of The income statement is a measure of...

Question 17

An audit examines the financial statements provided by management to ensure that they represent what they claim and to make sure that they are in compliance with Generally Accepted Accounting Principles.

Accepted Answer

The answer of An audit examines the financial statements provided...

Question 18

Revenue is recognized within the income statement during the period in which cash is collected.

Accepted Answer

The answer of Revenue is recognized within the income statement...

Question 19

A business entity's accounting system creates financial accounting reports which are provided to external decision makers.

Accepted Answer

The answer of A business entity's accounting system creates financial...

Question 20

A company's retained earnings balance increased $50,000 last year; therefore,net income last year must have been $50,000.

Accepted Answer

The answer of A company's retained earnings balance increased $50,000...

Quiz 1: Financial Statements and Business Decisions