Question 1

Which of the following best describes the primary purpose of the income statement?

Accepted Answer

To report the revenues, expenses, and net income or net loss for a period

Question 2

A company has beginning retained earnings of $$10,000, net income of 5$$,000, and dividends of $$2,000 for the year. What is the ending retained earnings? Use the formula $$	ext{Ending Retained Earnings} = 	ext{Beginning Retained Earnings} + 	ext{Net Income} - 	ext{Dividends}$.

Accepted Answer

$$13,000$$

Question 3

Which of the following is NOT a characteristic of a corporation?

Accepted Answer

Shareholders are personally liable for business debts

Question 4

Which financial statement would you consult to determine how much cash a company generated from its operating activities during the year?

Accepted Answer

Statement of Cash Flows

Question 5

According to the historical-cost assumption, how are assets recorded on the balance sheet?

Accepted Answer

At their purchase price

Question 6

Which of the following is a current asset?

Accepted Answer

Inventory

Question 7

A company reports total assets of $$120,000 and total liabilities of 80$$,000. What is the amount of owners’ equity? Use the formula $$	ext{Assets} = 	ext{Liabilities} + 	ext{Owners' Equity}.$$

Accepted Answer

$$40,000$$

Question 8

Which accounting assumption states that a business is a separate economic unit from its owners?

Accepted Answer

Separate-entity assumption

Question 9

Which of the following is a responsibility of company management in financial reporting?

Accepted Answer

Preparing the financial statements

Question 10

Which of the following is a key difference between financial accounting and management accounting?

Accepted Answer

Management accounting includes budgets, forecasts, and projections

Question 11

If a company has net income of $$8,000, dividends of 3$$,000, and beginning retained earnings of $$12,000, what is the ending retained earnings? Use $$	ext{Ending Retained Earnings} = 	ext{Beginning Retained Earnings} + 	ext{Net Income} - 	ext{Dividends}$.

Accepted Answer

$$17,000$$

Question 12

Which of the following activities is classified as an investing activity on the statement of cash flows?

Accepted Answer

Purchasing equipment

Question 13

Which principle requires that the value of the currency used in accounting remains stable over time?

Accepted Answer

Stable-monetary-unit assumption

Question 14

Which of the following is NOT a user of accounting information?

Accepted Answer

Auditors

Question 15

A company issues common shares for $50,000 cash. Which section of the statement of cash flows will this transaction appear in?

Accepted Answer

Financing activities

Question 16

Which of the following is a risk associated with improper use of technology in accounting?

Accepted Answer

Incorrect data input

Question 17

Which of the following is an example of a non-current liability?

Accepted Answer

Bonds payable

Question 18

Which ethical question is most closely related to the principle of treating others as you would like to be treated?

Accepted Answer

Which options result in treating others as I would like to be treated?

Question 19

Which set of accounting standards is used by publicly accountable enterprises in Canada?

Accepted Answer

International Financial Reporting Standards (IFRS)

Question 20

A company has total assets of $$200,000, total liabilities of 120$$,000, and common shares of $$50,000. What is the amount of retained earnings? Use $$	ext{Assets} = 	ext{Liabilities} + 	ext{Common Shares} + 	ext{Retained Earnings}$.

Accepted Answer

$$30,000$$

Chapter 1: The Financial Statements – Foundations of Financial Accounting

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