multiple choice questions 154 a set of financial statements a is intended to assist 4298329
Multiple Choice Questions
154. A set of financial statements:
A. Is intended to assist users in evaluating the financial position, profitability, and future prospects of an entity.
B. Is intended to assist the IRS in determining the amount of income taxes owed by a business organization.
C. Includes notes disclosing information necessary for the proper interpretation of the statements.
D. Is intended to assist investors and creditors in making decisions involving the allocation of economic resources.
155. Which of the following statements is not consistent with generally accepted accounting principles relating to asset valuation?
A. Many assets are originally recorded in accounting records at their cost to the business entity.
B. Subtracting total liabilities from total assets indicates what the owner's equity in the business is worth under current market conditions.
C. Accountants assume that assets such as office supplies, land, and buildings will be used in business operations, rather than being sold at current market prices.
D. Accountants prefer to base the valuation of assets upon objective, verifiable evidence rather than upon appraisals or personal opinion.
156. Water world Boat Shop purchased a truck for $12,000, making a down payment of $5,000 cash, and signing a $7,000 note payable due in 60 days. As a result of this transaction:
A. Total assets increased by $12,000.
B. Total liabilities increased by $7,000.
C. From the viewpoint of a short-term creditor, this transaction makes the business more solvent.
D. This transaction had no immediate effect upon the owner's equity in the business.
157. A transaction caused a $15,000 decrease in both total assets and total liabilities. This transaction could have been:
A. Purchase of a delivery truck for $15,000 cash.
B. An asset with a cost of $15,000 was destroyed by fire.
C. Repayment of a $15,000 bank loan.
D. Collection of a $15,000 account receivable.
158. Which of the following is (are) correct about a company's balance sheet?
A. It displays sources and uses of cash for the period.
B. It is an expansion of the basic accounting equation: Assets = Liabilities + Owners' Equity.
C. It is sometimes referred to as a statement of financial position.
D. It is unnecessary if both an income statement and statement of cash flows are available.
159. Which of the following would you expect to find in a correctly-prepared income statement?
A. Cash balance at the end of the period.
B. Revenues earned during the period.
C. Contributions by the owner during the period.
D. Expenses incurred during the period to earn revenues.
160. What information would you find in a statement of cash flows that you would not be able to get from the other two primary financial statements?
A. Cash provided by or used in financing activities.
B. Cash balance at the end of the period.
C. Total liabilities due to creditors at the end of the period.
D. Net income.
161. Which of the following statements relating to the role of professional judgment in the financial reporting process are valid?
A. Different accountants may evaluate similar situations differently.
B. The determination of which items should be disclosed in notes to financial statements requires professional judgment.
C. Once a complete list of generally accepted accounting principles is prepared, judgment need no longer enter into the financial reporting process.
D. The possibility always exists that professional judgment later may prove to have been incorrect.