Test Bank for Corporate Financial Accounting, 17th Edition by Carl Warren.pdf

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m m m m m m m m m




Chapter 02 Basic Financial Statements
m m m m




1) Themsalemof madditionalmsharesmof mcapitalmstockmwillmcausemretained mearningsmtomincrease.
A) True
B) False

2) A mbusinessmentitymismregarded masmseparatemfrommthempersonalmactivitiesmof mitsmownersmwhethermit mismams
olemproprietorship,mampartnership,mormamcorporation.
A) True
B) False

3) Assetsmneed mnot malwaysmhavemphysicalmcharacteristicsmasmdombuildings,mmachinery,morminventory.
A) True
B) False

4) Themgoingmconcernmprinciplemassumesmthat mthembusinessmwillm continuemindefinitely.
A) True
B) False

5) Notesmpayablemand maccountsmpayablembothmrequiremamcompanymtompaymanmamount mowed mbymamcertainmd
ate.mNotesmpayablemgenerallymhaveminterest,mwhilemaccountsmpayablemgenerallymdomnot.
A) True
B) False

6) Anymbusinessmevent mthat mmight maffect mthemfuturemprofitabilitymof mambusinessmshould mbemreported minmitsmbala
ncemsheet.
A) True
B) False

7) Thempracticemof mshowingmassetsmonmthembalancemsheet mat mtheirmcost,mrathermthanmat mtheirmcurrent mmarket mva
luemismexplained,minmpart,mbymthemfact mthat mcost mismsupported mbymobjectivemevidencemthat mcanmbemverified mbymi
ndependent mexperts.
A) True
B) False

8) Liabilitiesmaremusuallymlisted minmordermof mmagnitude,mfrommsmallest mdollarmamount mtomlargest mdollarmamount.
A) True
B) False

9) Thementitymprinciplemstatesmthat mthemaffairsmof mthemownersmaremnot mpart mof mthemfinancialmoperationsm
of mambusinessmentitymand mshould mbemseparated.
A) True
B) False

10) Themaccountingmequationmmaymbemstated masm"assetsmminusmliabilities mequals mowners'mequity."
A) True
B) False

11) Totalmassetsmplusmtotalmliabilitiesmmust mequalmtotalmowners'mequity.
A) True

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B) False

12) Amtransactionmthat mcausesmanmincreaseminmanmasset mmaymalsomcausemamdecreaseminmanothermasset,manm incre
aseminmamliability,mormanmincreasemin mowners'mequity.
A) True
B) False

13) Themcollectionmof manmaccount mreceivablemwillmcausemtotalmassetsmtomdecrease.
A) True
B) False

14) Thempayment mof mamliabilitymcausesmanmincreaseminmowners'mequity.
A) True
B) False

15) Whenmambusinessmborrowsmmoneymfrommambank,mthemimmediatemeffect mismanmincreaseminmtotalmassetsman
d mamdecreaseminmliabilitiesmormowners'mequity.
A) True
B) False

16) Thempurchasemof manmasset,msuchmasmofficemequipment,mformcashmwillmcausemowners'mequitymtomdecrease.
A) True
B) False

17) Totalmassetsmmust malwaysmequalmtotalmliabilitiesmplus mtotalmowners'mequity.
A) True
B) False

18) If mamcompanympurchasesmequipment mwithmcash,mitsmtotalmassetsmwillmincrease.
A) True
B) False

19) If mamcompanympurchasesmequipment mbymissuingmamnotempayable,mitsmtotalmassetsmwillmnot mchange.
A) True
B) False

20) Thembalancemsheet mshowsmassets,mliabilities,mand mequity,masmanmextensionmof mthemaccountingmequation.
A) True
B) False

21) Amnet mprofit mresultsmfrommhavingmmoremrevenuesmthanmliabilities.
A) True
B) False

22) Amstatement mof mcashmflowsmreportsmrevenuemand mexpensemactivitiesmformamspecificmtimemperiod msuchmasm
onemmonthmormonemyear.
A) True
B) False

23) It mismnot munusualmformanmentitymtomreport mamsignificant mincreaseminmcashmfrommoperatingmactivities,mb
ut mamdecreaseminmthemtotalmamount mof mcash.

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A) True
B) False

24) Themstatement mof mcashmflowsmprovidesmamlinkmbetweenmtwombalancemsheetsmbymshowingmhowmnet mincomem
(ormloss)mhasmchanged mowners'mequitymfrommonembalancemsheet mdatemtomthemnext.
A) True
B) False

25) Articulationmbetweenmthemfinancialmstatementsmmeansmthat mtheymrelatemcloselymtomeachmothermonmthembasis
mof mthemsamemunderlyingmtransactionminformation.

A) True
B) False

26) Limited mliabilitymmeansmthat mownersmof mambusinessmaremonlymliablemformthemdebtsmof mthembusinessmupmto
mthemamountsmtheymcanmafford.

A) True
B) False

27) Inmambusinessmorganized masmamcorporation,mit mismnot mnecessarymtomlist mthemequitymof meachmstockholdermonm
thembalancemsheet.
A) True
B) False

28) Themownermof mamsolemproprietorshipmismpersonallym liablemformthemdebtsmof mthembusiness,mwhereasm
themstockholdersmof mamcorporationmaremnot mpersonallymliablemformthemdebtsmof mthembusiness.
A) True
B) False

29) Window mdressingmoccursmwhenmmanagement mattemptsmtommakemamcompanymlookmfinanciallymstrongermth
anmit mactuallymis.
A) True
B) False

30) Decisionmmakersmoutsidemthemorganizationmbasemtheirmcredit mdecisionsmonmweekly,mormevenmdaily,mfinanc
ialmstatements.
A) True
B) False

31) Themmajormoutgrowthmfrommbusinessmfailuresmand mallegationsmof mfraudulent mfinancialmreportingmduringmt
hem1990smwasmthempassagemof mthemSecuritiesmand mExchangemAct.
A) True
B) False

32) Whichmof mthemfollowingmismthemprimarymobjectivemof manmincomemstatement?
A) Providingmmanagersmwithmdetailed minformationmabout mwheremthementerprisemstandsmat mamspecificmdate.
B) Providingmusersmoutsidemthembusinessmorganizationmwithminformationmabout mthemcompany'smoperatingmresu
ltsmformamperiod mof mtime.
C) ReportingmtomthemInternalmRevenuemServicemthemcompany'smtaxablemincome.
D) Indicatingmtominvestorsminmamparticularmcompanymthemcurrent mmarket mvaluesmof mtheirminvestments.

33) Whichmof mthemfollowingmdescribesmthempropermformmof mambalancemsheet?

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