, FinancialnAccountingn5ce
Chaptern1n–
nThenFinancialnStatements
Chaptern1n ThenFinancialnStatements
1.1 Explainnwhynaccountingnisnthenlanguagenofnbusiness
1) Whichnofnthenfollowingnpersonsnorngroupsnhaventhenultimatencontrolnofnancorporation?
A) thenchiefnexecutivenofficer
B) thenboardnofndirectors
C) thenauditncommittee
D) thenshareholder
snAnswer:nD
Diff:n2n Type:nMCnL.
O.:n L.O.n1-1
2) Financialnstatementsnare:
A) reportsnissuednbynoutsidenconsultantsnwhonarenhiredntonanalyzenkeynoperationsnofnthenbusiness
B) reportsncreatednbynmanagementnthatnstatesnitnisnresponsiblenfornthenactsnofnthencorporation
C) standardndocumentsnthatntellnusnhownwellnanbusinessnisnperformingnandnwherenitnstandsninnfinanci
alnterms
D) standardndocumentsnissuednbynoutsidenconsultantsnwhonarenhiredntonanalyzenkeynoperationsnofnth
enbusinessninnfinancialnterms
Answer:n C
Diff:n1n Type:nMCnL.
O.:n L.O.n1-1
3) Thenaccountingnequationncannbenstatednas:
A) Assetsn +nLiabilitiesn=nShareholders'n equity
B) Assetsn=n Liabilitiesn +nShareholders'n equity
C) Assetsn=nLiabilitiesn-nShareholders'nequity
D) Assetsn +nShareholders'n equityn =n Liabilitie
snAnswer:n B
Diff:n1n Type:nMCnL.
O.:n L.O.n1-1
4) Thenowners'ninterestninnthenassetsnofnancorporationnisnknownnas:
A) assets
B) shareholders'nequity
C) expenses
D) revenues
nAnswer:n B
Diff:n1n Type:nMCnL.
O.:n L.O.n1-1
©n2015nPearsonnCanadanIn 1-1
c.
, FinancialnAccountingn5ce
Chaptern1n–
nThenFinancialnStatements
5) OnnJanuaryn1,n2014,ntotalnassetsnfornLiftoffnTechnologiesnweren$125,000;nonnDecembern31,n2014,ntot
alnassetsnweren$145,000.nOnnJanuaryn1,n2014,ntotalnliabilitiesnweren$110,000;nonnDecembern31,n2014,ntot
alnliabilitiesnweren$115,000.nWhatnarenthenamountnofnthenchangenandnthendirectionnofnthenchangeninnLi
ftoffnTechnologiesnshareholders'nequitynforn2014?
A) decreasenofn$15,000
B) increasenofn$15,000
C) increasenofn$30,000
D) decreasenofn$30,00
0nAnswer:nB
Diff:n2n Type:nMCnL.
O.:n L.O.n1-1
6) Claimsnheldnbynthenshareholdersn(owners)nofnancorporationnarenreferredntonas:
A) retainednearnings
B) sharencapital
C) sharencapitalnminusnretainednearnings
D) sharencapitalnplusnretainednearning
snAnswer:nD
Diff:n3n Type:nMCnL.
O.:n L.O.n1-1
7) Payablesnarenclassifiednas:
A) increasesninnearnings
B) assets
C) decreasesninnearnings
D) liabilitiesn
Answer:n D
Diff:n1n Type:nMCnL.
O.:n L.O.n1-1
8) Receivablesnarenclassifiednas:
A) increasesninnearnings
B) assets
C) decreasesninnearnings
D) liabilitiesn
Answer:n B
Diff:n1n Type:nMCnL.
O.:n L.O.n1-1
9) Revenuesnare:
A) increasesninnliabilitiesnresultingnfromndeliveringngoodsnornservicesntoncustomers
B) increasesninnretainednearningsnresultingnfromndeliveringngoodsnornservicesntoncustomers
C) decreasesninnassetsnresultingnfromndeliveringngoodsnornservicesntoncustomers
D) decreasesninnretainednearningsnresultingnfromndeliveringngoodsnornservicesntoncustomer
snAnswer:nB
Diff:n2n Type:nMCnL.
O.:n L.O.n1-1
©n2015nPearsonnCanadanIn 1-2
c.
, FinancialnAccountingn5ce
Chaptern1n–
nThenFinancialnStatements
10) Ifnassetsnincreasen$120,000nduringnangivennperiodnandnliabilitiesndecreasen$25,000nduringnthensam
enperiod,nshareholders'nequitynmust:
A) increasen$95,000
B) decreasen$145,000
C) decreasen$95,000
D) increasen$145,00
0nAnswer:nD
Diff:n3n Type:nMCnL.
O.:n L.O.n1-1
11) Ifnliabilitiesnincreasen$120,000nduringnangivennperiodnandnshareholders'nequityndecreasesn$25,000ndurin
gnthensamenperiod,nassetsnmust:
A) decreasen$145,000
B) increasen$145,000
C) increasen$95,000
D) decreasen$95,000
nAnswer:nC
Diff:n3n Type:nMCnL.
O.:n L.O.n1-1
12) Expensesnare:
A) increasesninnassetsnresultingnfromnoperations
B) increasesninnretainednearningsnresultingnfromnoperations
C) increasesninnliabilitiesnresultingnfromnpurchasingnassets
D) decreasesninnretainednearningsnresultingnfromnoperation
snAnswer:nD
Diff:n2n Type:nMCnL.
O.:n L.O.n1-1
13) Howndonrevenuesnfornanperiodnrelatentonthenbeginningnandnendingnbalancesninnretainednearnings?
A) Revenuesnwillnincreasenthenbeginningnbalancenofnretainednearningsnfornthenperiod.
B) Revenuesnwillndecreasenthenbeginningnbalancenofnretainednearningsnfornthenperiod.
C) Revenuesnlessnexpensesnwillneithernincreasenorndecreasenthenbeginningnbalancenofnretainednearningsnf
ornthenperiod.
D) Revenuesnlessnexpensesnwillneithernincreasenorndecreasenthenendingnbalancenofnretainednearningsnfornth
enperiod.
Answer:n D
Diff:n2n Type:nMCnL.
O.:n L.O.n1-1
14) Whichnofnthenfollowingnbestndescribesnanliability?
A) Liabilitiesnarenanformnofnsharencapital.
B) Liabilitiesnarenfutureneconomicnbenefitsntonwhichnancompanynisnentitled.
C) Liabilitiesnarenaccountsnreceivablenofnthencompany.
D) Liabilitiesnareneconomicnobligationsntoncreditorsntonbenpaidnatnsomenfuturendatenbynthencompan
y.nAnswer:nD
Diff:n1n Type:nMCnL.
O.:n L.O.n1-1
15) Shareholders'nequitynfornRaisinnCorporationnonnJanuaryn1,n2014nandnDecembern31,n2014nweren$60,000n
andn$75,000,nrespectively.nAssetsnonnJanuaryn1,n2014nandnDecembern31,n2014nweren$115,000nandn$105,000,
nrespectively.nLiabilitiesnonnJanuaryn1,n2014nweren$55,000.nWhatnisnthenamountnofnliabilitiesnonnDecembern
31,n2014?
A)n$40,000
©n2015nPearsonnCanadanIn 1-3
c.
Chaptern1n–
nThenFinancialnStatements
Chaptern1n ThenFinancialnStatements
1.1 Explainnwhynaccountingnisnthenlanguagenofnbusiness
1) Whichnofnthenfollowingnpersonsnorngroupsnhaventhenultimatencontrolnofnancorporation?
A) thenchiefnexecutivenofficer
B) thenboardnofndirectors
C) thenauditncommittee
D) thenshareholder
snAnswer:nD
Diff:n2n Type:nMCnL.
O.:n L.O.n1-1
2) Financialnstatementsnare:
A) reportsnissuednbynoutsidenconsultantsnwhonarenhiredntonanalyzenkeynoperationsnofnthenbusiness
B) reportsncreatednbynmanagementnthatnstatesnitnisnresponsiblenfornthenactsnofnthencorporation
C) standardndocumentsnthatntellnusnhownwellnanbusinessnisnperformingnandnwherenitnstandsninnfinanci
alnterms
D) standardndocumentsnissuednbynoutsidenconsultantsnwhonarenhiredntonanalyzenkeynoperationsnofnth
enbusinessninnfinancialnterms
Answer:n C
Diff:n1n Type:nMCnL.
O.:n L.O.n1-1
3) Thenaccountingnequationncannbenstatednas:
A) Assetsn +nLiabilitiesn=nShareholders'n equity
B) Assetsn=n Liabilitiesn +nShareholders'n equity
C) Assetsn=nLiabilitiesn-nShareholders'nequity
D) Assetsn +nShareholders'n equityn =n Liabilitie
snAnswer:n B
Diff:n1n Type:nMCnL.
O.:n L.O.n1-1
4) Thenowners'ninterestninnthenassetsnofnancorporationnisnknownnas:
A) assets
B) shareholders'nequity
C) expenses
D) revenues
nAnswer:n B
Diff:n1n Type:nMCnL.
O.:n L.O.n1-1
©n2015nPearsonnCanadanIn 1-1
c.
, FinancialnAccountingn5ce
Chaptern1n–
nThenFinancialnStatements
5) OnnJanuaryn1,n2014,ntotalnassetsnfornLiftoffnTechnologiesnweren$125,000;nonnDecembern31,n2014,ntot
alnassetsnweren$145,000.nOnnJanuaryn1,n2014,ntotalnliabilitiesnweren$110,000;nonnDecembern31,n2014,ntot
alnliabilitiesnweren$115,000.nWhatnarenthenamountnofnthenchangenandnthendirectionnofnthenchangeninnLi
ftoffnTechnologiesnshareholders'nequitynforn2014?
A) decreasenofn$15,000
B) increasenofn$15,000
C) increasenofn$30,000
D) decreasenofn$30,00
0nAnswer:nB
Diff:n2n Type:nMCnL.
O.:n L.O.n1-1
6) Claimsnheldnbynthenshareholdersn(owners)nofnancorporationnarenreferredntonas:
A) retainednearnings
B) sharencapital
C) sharencapitalnminusnretainednearnings
D) sharencapitalnplusnretainednearning
snAnswer:nD
Diff:n3n Type:nMCnL.
O.:n L.O.n1-1
7) Payablesnarenclassifiednas:
A) increasesninnearnings
B) assets
C) decreasesninnearnings
D) liabilitiesn
Answer:n D
Diff:n1n Type:nMCnL.
O.:n L.O.n1-1
8) Receivablesnarenclassifiednas:
A) increasesninnearnings
B) assets
C) decreasesninnearnings
D) liabilitiesn
Answer:n B
Diff:n1n Type:nMCnL.
O.:n L.O.n1-1
9) Revenuesnare:
A) increasesninnliabilitiesnresultingnfromndeliveringngoodsnornservicesntoncustomers
B) increasesninnretainednearningsnresultingnfromndeliveringngoodsnornservicesntoncustomers
C) decreasesninnassetsnresultingnfromndeliveringngoodsnornservicesntoncustomers
D) decreasesninnretainednearningsnresultingnfromndeliveringngoodsnornservicesntoncustomer
snAnswer:nB
Diff:n2n Type:nMCnL.
O.:n L.O.n1-1
©n2015nPearsonnCanadanIn 1-2
c.
, FinancialnAccountingn5ce
Chaptern1n–
nThenFinancialnStatements
10) Ifnassetsnincreasen$120,000nduringnangivennperiodnandnliabilitiesndecreasen$25,000nduringnthensam
enperiod,nshareholders'nequitynmust:
A) increasen$95,000
B) decreasen$145,000
C) decreasen$95,000
D) increasen$145,00
0nAnswer:nD
Diff:n3n Type:nMCnL.
O.:n L.O.n1-1
11) Ifnliabilitiesnincreasen$120,000nduringnangivennperiodnandnshareholders'nequityndecreasesn$25,000ndurin
gnthensamenperiod,nassetsnmust:
A) decreasen$145,000
B) increasen$145,000
C) increasen$95,000
D) decreasen$95,000
nAnswer:nC
Diff:n3n Type:nMCnL.
O.:n L.O.n1-1
12) Expensesnare:
A) increasesninnassetsnresultingnfromnoperations
B) increasesninnretainednearningsnresultingnfromnoperations
C) increasesninnliabilitiesnresultingnfromnpurchasingnassets
D) decreasesninnretainednearningsnresultingnfromnoperation
snAnswer:nD
Diff:n2n Type:nMCnL.
O.:n L.O.n1-1
13) Howndonrevenuesnfornanperiodnrelatentonthenbeginningnandnendingnbalancesninnretainednearnings?
A) Revenuesnwillnincreasenthenbeginningnbalancenofnretainednearningsnfornthenperiod.
B) Revenuesnwillndecreasenthenbeginningnbalancenofnretainednearningsnfornthenperiod.
C) Revenuesnlessnexpensesnwillneithernincreasenorndecreasenthenbeginningnbalancenofnretainednearningsnf
ornthenperiod.
D) Revenuesnlessnexpensesnwillneithernincreasenorndecreasenthenendingnbalancenofnretainednearningsnfornth
enperiod.
Answer:n D
Diff:n2n Type:nMCnL.
O.:n L.O.n1-1
14) Whichnofnthenfollowingnbestndescribesnanliability?
A) Liabilitiesnarenanformnofnsharencapital.
B) Liabilitiesnarenfutureneconomicnbenefitsntonwhichnancompanynisnentitled.
C) Liabilitiesnarenaccountsnreceivablenofnthencompany.
D) Liabilitiesnareneconomicnobligationsntoncreditorsntonbenpaidnatnsomenfuturendatenbynthencompan
y.nAnswer:nD
Diff:n1n Type:nMCnL.
O.:n L.O.n1-1
15) Shareholders'nequitynfornRaisinnCorporationnonnJanuaryn1,n2014nandnDecembern31,n2014nweren$60,000n
andn$75,000,nrespectively.nAssetsnonnJanuaryn1,n2014nandnDecembern31,n2014nweren$115,000nandn$105,000,
nrespectively.nLiabilitiesnonnJanuaryn1,n2014nweren$55,000.nWhatnisnthenamountnofnliabilitiesnonnDecembern
31,n2014?
A)n$40,000
©n2015nPearsonnCanadanIn 1-3
c.
