Financing Questions

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True / False Questions

1. Accounting is a system that collects and processes financial information about an organization and reports that information to decision makers.
TRUE

AACSB Tag: Communications
Difficulty: Easy
L.O.: 1

2. Assets on the balance sheet are recorded at market value or replacement cost.
FALSE

AACSB Tag: Reflective Thinking
Difficulty: Easy
L.O.: 1

3. In accounting and reporting for a business entity, the accounting and reporting for the business must be kept separate from other economic affairs of its owners.
TRUE

AACSB Tag: Reflective Thinking
Difficulty: Easy
L.O.: 1

4. The accounting period in which service revenue is recognized (i.e., revenue for
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The primary purpose of the balance sheet is to
A. measure the net income of a business up to a particular point in time.
B. report the difference between cash inflows and cash outflows for the period.
C. report the financial position of the reporting entity at a particular point in time.
D. report the current value of the business.

AACSB Tag: Reflective Thinking
Difficulty: Easy
L.O.: 1

22. The Beta Corporation had 2009 revenues of $200,000, expenses of $140,000, and an income tax rate of 30 percent. Net income after taxes would be
A. $60,000.
B. $18,000.
C. $42,000.
D. $48,000.

AACSB Tag: Analytic
Difficulty: Hard
L.O.: 1

23. Atlantic Corporation reported the following amounts at the end of the first year of operations: contributed capital $100,000; sales revenue $400,000; total assets $300,000; $20,000 dividends; and total liabilities $160,000. Retained earnings and total expenses would be
A. retained earnings $40,000 and expenses $340,000.
B. retained earnings $60,000 and expenses $320,000.
C. retained earnings $140,000 and expenses $240,000.
D. retained earnings $160,000 and expenses $220,000.

AACSB Tag: Analytic
Difficulty: Hard
L.O.: 1

24. The financial statement that reports the financial position of a business is the
A. income statement.
B. balance sheet.
C. statement of cash flows.
D. footnotes to the financial statements.

AACSB Tag: Reflective Thinking
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