Multiple Choice Questions
1. Which financial statement reports assets, liabilities, and equity?
a. Statement of cash flows
b. Balance sheet
c. Income statement
d. Statement of retained earnings
2. Retained earnings is defined as:
a. the difference between assets and liabilities.
b. equity generated from profitable operations and retained in the business.
c. a decrease in assets resulting from selling a good or providing a service.
d. equity resulting from contributions from owners.
3. As of December 31, Lurie Company has assets of $18,400 and equity of $6,500. What are the liabilities for Lurie Company as of December 31?
a. $24,900
b. $11,900
c. $14,200
d. $8,600
4. Maker's Company had the following account totals: cash $25,000; inventory $15,000; accounts payable $15,000; retained earnings $25,000; equipment $80,000; investments $10,000; and other assets $40,000. What is Maker's total assets?
a. $170,000
b. $190,000
c. $85,000
d. $210,000
5. The statement of retained earnings links which two financial statements?
a. The income statement and the balance sheet
b. The balance sheet and the statement of cash flows
c. The income statement and the statement of cash flows
d. The statement of retained earnings does not link any statements
6. A company begins a period with a $5,000 retained earnings balance. The company generates $12,000 of revenues and $10,000 of expenses during the period and pays $1,000 of dividends. What is the retained earnings balance at the end of the period?
a. $7,000
b. $5,000
c. $6,000
d. $1,000
7. Which of the following is not one of the sections on the statement of cash flows?
a. Investing activities
b. Financing activities
c. Operating activities
d. Income activities
8. Which of the following is not a qualitative characteristic of accounting?
a. Understandability
b. Relevance
c. Pertinence
d. Consistency