Multiple-Choice Questions

1. Which of the following is not a statement you would expect to find in a corporate annual report?

a. Statement of financial position

b. Statement of earnings

c. Statement of stockholders' equity

d. Statement of accounts receivable

2. The following information was reported on the income statement of Wagon Wheel Company.

Sales revenues .................$450,000

Cost of goods sold ................. 200,000

Selling, general, and administrative expenses ..... 150,000

Interest expense ................ 30,000

Wagon Wheel's gross profit and operating income would be

             Gross profit              Operating income

a.           $300,000 .............................. $70,000

b.           $250,000 ..............................$70,000

c.            $250,000 ...........................$100,000

d.           $100,000 ...............................$70,000

3. Which of the following is a false statement regarding the statement of stockholders' equity?

a. It lists changes in contributed capital and retained earnings for a fiscal period.

b. It contains information about net income and dividends for a fiscal period.

c. It reports the net change in stockholders' equity for a fiscal period.

d. It reports increases or decreases in stocks and bonds for a fiscal period.

4. The following assets appear on the balance sheet for Astroid Company:

Accounts receivable .......$ 50,000

Accumulated depreciation ..... 160,000

Cash ............ 20,000

Intangible assets ......... 60,000

Inventory .......... 100,000

Plant assets .......... 400,000

The amount of current assets reported by Astroid is

a. $170,000.

b. $150,000.

c. $230,000.

d. $470,000.

5. A balance sheet that provides information for more than one fiscal period is:

a. A classified balance sheet.

b. A comparative balance sheet.

c. A consolidated balance sheet.

d. A combined balance sheet.

6. Working capital is the amount of

a. Cash and cash equivalents available to a company at the end of a fiscal period.

b. Long-term investments available at the end of a fiscal period less long-term debt at the end of the period.

c. Current assets available at the end of a fiscal period less current liabilities at the end of the period.

d. Total assets available at the end of a period that can be converted to cash.

7. Orange Bowl Company reported plant assets for the latest fiscal year of $5 million, net of accumulated depreciation. From this information, which of the following is an accurate statement about the company?

a. The book value of the company's plant assets at the end of the fiscal year was $5 million.

b. The company would have to pay $5 million to replace its assets if they were replaced at the end of the fiscal year.

c. The amount the company would receive if it sold its plant assets at the end of the fiscal year would be $5 million.

d. The amount the company paid for the plant assets it controlled at the end of the fiscal year was $5 million.

8. A consolidated financial statement is one in which

a. More than one year's financial data is included.

b. The personal financial activities of the owner are combined with those of the company.

c. The income statement and the balance sheet are combined into a single statement.

d. The financial information of multiple corporations is reported as if they were a single firm.

9. Which of the following is false?

a. Financial statement information is not always presented in a timely manner.

b. The purpose of a balance sheet is to report the market value of assets and liabilities.

c. Certain types of resources and costs are not reported in financial statements.

d. Many of the numbers reported in financial statements result from estimates and allocations.

10. Where on an income statement would you expect to find administrative salaries expense?

a. Just after cost of goods sold

b. Grouped with other operating expenses

c. As part of cost of goods sold

d. Following income taxes