Introduction to Financial Statements


PART ONE: TRUE OR FALSE
  • Question 1. Proprietorships and partnerships are taxable entities.
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  • Question 2. Internal users of accounting information include a company's shareholders.
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  • Question 3. Interest expense would be classified under operating activities.
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  • Question 4. The notes to the financial statements are not required.
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  • Question 5. The cost principle requires that assets be reported on the balance sheet at their current cost.
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    PART TWO: MULTIPLE CHOICE


  • Question 6. Easy transfer of ownership is a characteristic of which form of business organization?
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  • Question 7. In which forms of business organization are the owners personally liable for all the debts of the business?
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  • Question 8. Internal users want answers to all of the following questions except:
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  • Question 9. Which of the following is not an external user of accounting data?
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  • Question 10. Paying interest expense and receiving interest revenue are examples of:
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  • Question 11. The payment of dividends is an example of a(n):
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  • Question 12. Cost of goods sold would be classified as what type account?
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  • Question 13. Which of the following would not appear on the statement of earnings?
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  • Question 14. Which of the following would not appear on the statement of Retained Earnings?
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  • Question 15. The financial statements are usually prepared in which of the following sequences?
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    Use the following information for questions 16 and 17:
    Saira's Maid Service began the year with total assets of $120,000 and shareholders' equity of $40,000. During the year, the company earned $90,000 in net income and paid $20,000 in dividends. Total assets at the end of the year were $215,000.
  • Question 16. Shareholders' equity at the end of the year was:
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  • Question 17. Total liabilities at the end of the year were:
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  • Question 18. When the auditor is satisfied that the financial statements are presented in accordance with generally accepted accounting principles, then a(n)
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  • Question 19. Which of the accounting assumptions requires that only those things that can be expressed in terms of dollars be included in the accounting records?
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  • Question 20. Which accounting principle prevents companies from reporting their assets at their current market value?
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