[Test bank for financial accounting for managers 1st edition by wayne thomas and david spiceland and mark nelson

[Test bank for financial accounting for managers 1st edition by wayne thomas and david spiceland and mark nelson FULL TEST BANK FOR Financial Accounting for Managers 1st Edition By Wayne Thomas and David Spiceland and Mark Nelson Answers are at the end of each chapter Chapter 1 Version 1 Student name:_ TRUE/FALSE - Write 'T' if the statement is true and 'F' if the statement is false. 1) Accounting is a system of maintaining records of a company's operations and communicating that information to decision makers. ⊚ true ⊚ false 2) Accounting information is used by investors to decide whether to invest in a company's stock. ⊚ true ⊚ false 3) Accounting information is used by creditors to decide whether to invest in a company's stock. ⊚ true ⊚ false 4) 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. ⊚ true ⊚ false 5) Financing activities include transactions the company has with investors and creditors. ⊚ true ⊚ false 6) Investing activities include transactions involving the purchase and sale of resources that are expected to benefit the company for several years. ⊚ true ⊚ false 7) Operating activities include transactions that relate to the primary operations of the company, such as providing products and services to customers and the associated costs. ⊚ true ⊚ false 8) A corporation is an entity that is legally separate from its owners. ⊚ true ⊚ false 9) Cash, inventory for sale to customers, supplies, and buildings are examples of liabilities. ⊚ true ⊚ false 10) Amounts owed to suppliers, employees, the government in the form of taxes, and utility companies are examples of liabilities. ⊚ true ⊚ false 11) If total assets of a company equal $12,000 and total stockholders' equity equals $4,000, then total liabilities equal $8,000. ⊚ true ⊚ false 12) If total liabilities of a company equal $16,000 and total stockholders' equity equals $9,000, then total assets equal $7,000. ⊚ true ⊚ false 13) The accounting equation shows that a company's total resources equal creditors' and owners' claims to those resources. ⊚ true ⊚ false 14) The costs related to rent, utilities, and salaries in the current reporting period are examples of liabilities. ⊚ true ⊚ false 15) The difference between revenues and expenses is referred to as net income or net loss. ⊚ true ⊚ false 16) If a company reports revenues of $17,000 and expenses of $12,000, then net income equals $5,000. ⊚ true ⊚ false 17) Expenses include a company’s costs of providing products and services to customers, as well as cash payments to its stockholders. ⊚ true ⊚ false 18) Dividends represent a return of the company's profits to its owners, the stockholders. ⊚ true ⊚ false 19) One of the differences between a partnership and a corporation is that owners of a partnership have limited liability. ⊚ true ⊚ false 20) Limited liability means the stockholders are not held personally responsible for the financial obligations of the corporation. ⊚ true ⊚ false 21) A company's total resources include assets and stockholders' equity. ⊚ true ⊚ false 22) Double taxation refers to a corporation's income being taxed twice—first when the company pays corporate income taxes on income it earns, and then again when stockholders pay personal income taxes when the company distributes that income as dividends to them. ⊚ true ⊚ false 23) Financial statements are periodic reports published by the company for the purpose of providing information to managers. ⊚ true ⊚ false 24) The balance sheet is a financial statement that reports the company's revenues and expenses over an interval of time. ⊚ true ⊚ false 25) The statement of stockholders' equity is a financial statement that summarizes the changes in stockholders' equity over an interval of time. ⊚ true ⊚ false 26) Stockholders' equity arises from two primary sources–common stock and revenue. ⊚ true ⊚ false 27) Common stock represents an external source of stockholders' equity, whereas retained earnings represents an internal source. ⊚ true ⊚ false 28) Retained earnings represent all net income minus all dividends over the life of the company. ⊚ true ⊚ false 29) Dividends are considered an expense in running the business and reported on the income statement. ⊚ true ⊚ false 30) All cash transactions reported on the statement of cash flows are classified as (1) operating activities, (2) investing activities, or (3) financing activities. ⊚ true ⊚ false 31) Investing cash flows generally include cash receipts and cash payments for transactions involving revenue and expense activities during the period. ⊚ true ⊚ false 32) Operating cash flows generally include cash transactions for the purchase and sale of resources that are expected to benefit the company for more than one year. ⊚ true ⊚ false 33) Financing activities provide information to investors and creditors about the mix of external financing of the company. ⊚ true ⊚ false 34) Any transaction that affects the income statement ultimately affects the balance sheet through the balance of retained earnings. ⊚ true ⊚ false 35) The statement of comprehensive income is a financial statement that summarizes the changes in equity that arise from nonowner sources. ⊚ true ⊚ false 36) Financial accounting has an impact on everyday business decisions as well as wide- ranging economic consequences. ⊚ true ⊚ false 37) Investors and creditors rely heavily on financial accounting information in making investment and lending decisions. ⊚ true ⊚ false 38) In general, if a company's net income is increasing, so will its stock price. ⊚ true ⊚ false 39) The rules of financial accounting are called Generally Accepted Accounting Principles (GAAP). ⊚ true ⊚ false 40) Financial accounting and reporting standards in the United States are established primarily by the Financial Accounting Standards Board (FASB). ⊚ true ⊚ false 41) The 1933 Securities Act and the 1934 Securities Exchange Act were designed to restore investor confidence in financial accounting following the stock market crash in 1929. ⊚ true ⊚ false 42) The 1934 Securities Exchange Act gives the Securities and Exchange Commission (SEC) the power to require companies that publicly trade their stock to prepare periodic financial statements for distribution to investors and creditors. ⊚ true ⊚ false 43) The role of independent auditors is to help ensure that management has in fact appropriately applied Generally Accepted Accounting Principles (GAAP) in preparing the company's financial statements. ⊚ true ⊚ false 44) Auditors are trained individuals hired by a company as an independent party to express a professional opinion of the fairness of that company's financial statements. ⊚ true ⊚ false 45) The primary objective of financial accounting is to provide useful information to managers in making decisions. ⊚ true ⊚ false 46) All companies are required to provide a summary of significant accounting policies in the disclosure notes to the annual report. ⊚ true ⊚ false 47) The compensation of top executives is disclosed in the proxy statement. ⊚ true ⊚ false 48) Public companies are required to file quarterly financial statements on Form 10-Q. ⊚ true ⊚ false 49) Quarterly financial statements filed with the SEC are not audited. ⊚ true ⊚ false 50) Certain major events – such as mergers, acquisitions, and restatements – are to be reported on a more timely basis to the SEC using a current report. ⊚ true ⊚ false 51) 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. ⊚ true ⊚ false