Wiley Plus Ch 1-3 ACCT Flashcards

Questions and Answers

Indicate in which financial statement each item would appear:

Service Revenue = Income Statement Equipment = Balance Sheet Advertising Expense = Income Statement Accounts Receivable = Balance Sheet Common Stock = Balance Sheet Interest Payable = Balance Sheet

What is the basic accounting equation?

assets = liabilities + stockholders' equity

Which one of the following are liabilities? Choose all that apply.

Salaries and Wages Payable (correct)

Equipment

Accounts Receivable

Service Revenue

Supplies

Rent Expense

Cash

Dividends

Accounts Payable (correct)

Indicate in which part of the statement of cash flows each item would appear:

Cash received from customers Signup and view all the answers

In each case, identify whether the item would appear on the balance sheet or income statement.

Inventory Signup and view all the answers

Identify which statement you would examine to find each item:

Total debts outstanding at the end of the period Signup and view all the answers

Which statement about users of accounting information is incorrect?

Regulatory authorities are considered internal users. Signup and view all the answers

Resources owned by a business are referred to as:

Assets Signup and view all the answers

Paying interest expense and receiving interest revenue are examples of:

Operating Activities Signup and view all the answers

The payment of dividends is an example of a(n):

Financing Activity Signup and view all the answers

Which of the following is not one of the three primary business activities?

Advertising Signup and view all the answers

Which of the following is an example of a financing activity?

Issuing shares of common stock Signup and view all the answers

What kind of classification is cost of goods sold?

Expense Signup and view all the answers

Which of the following would not appear on the income statement?

Dividends Paid Signup and view all the answers

Which of the following would not appear on the retained earnings statement?

Service Revenue Signup and view all the answers

What is Harold's net income? Given: Accounts Receivable $5,000, Sales Revenue $75,000, Cash $15,000, Salaries and Wages Expense $20,000, Rent Expense $10,000.

$45,000 Signup and view all the answers

In which of the following sequences are the financial statements usually prepared?

Income Statement, Retained Earnings Statement, Balance Sheet, and Statement of Cash Flows. Signup and view all the answers

Which statement presents information as of a specific point in time?

Balance Sheet Signup and view all the answers

Which financial statement reports assets, liabilities, and stockholders' equity?

Balance Sheet Signup and view all the answers

The ending retained earnings balance appears on:

Both the Retained Earnings Statement and the Balance Sheet. Signup and view all the answers

How much are total liabilities at the end of the year? Given: Saira's Maid Service began with total assets of $120,000, stockholders' equity of $40,000, earned $90,000 in net income, paid $20,000 in dividends, and had total assets of $215,000.

$105,000 Signup and view all the answers

The balance sheet:

Reports the assets, liabilities, and stockholders' equity at a specific date. Signup and view all the answers

Stockholders' equity represents:

Claims of owners. Signup and view all the answers

The most common description of IFRS as contrasted to GAAP is that:

GAAP is rules based and IFRS is principles based. Signup and view all the answers

Indicate in which part of the statement of cash flows each item would appear:

Cash paid to suppliers. Signup and view all the answers

The full disclosure principle dictates that:

Financial statements should disclose all events and circumstances that would matter to users of financial statements. Signup and view all the answers

If a company has excessive debt compared to its future earning prospects:

It is likely to be in financial distress. Signup and view all the answers

A company has total assets of $650 million and $375 million in equity. Liabilities represent:

A smaller proportion of assets compared to equity. Signup and view all the answers

In a classified balance sheet, how are assets usually classified?

Current assets; long-term investments; property, plant, and equipment; and intangible assets Signup and view all the answers

In what order are current assets listed?

By Liquidity Signup and view all the answers

The correct order of presentation in a classified balance sheet for the following current assets is:

Cash, Accounts Receivable, Inventories, Prepaid Insurance. Signup and view all the answers

A company purchased a tract of land on which it expects to build a production plant in approximately five years. During the five years before construction, the land will be idle. In what classification should the land be reported?

A Long-term Investment Signup and view all the answers

Which of the following is not classified as a current asset?

Patents Signup and view all the answers

Which of the following is considered property, plant, and equipment on a classified balance sheet?

Land Signup and view all the answers

Current liabilities are $10,000, long-term liabilities are $20,000, common stock is $50,000, and retained earnings totals $70,000. How much is total stockholders' equity?

$120,000 Signup and view all the answers

Which one of the following is not an alternate means of expressing a ratio?

Dollar Amount Signup and view all the answers

Earnings per share is computed by dividing net income:

Less Preferred Stock Dividends by the Average Common Shares Outstanding. Signup and view all the answers

Which is an indicator of profitability?

Earnings per Share Signup and view all the answers

For 2017, Stoneland Corporation reported net income of $24,000; net sales of $400,000; and average shares outstanding of 6,000. There were no preferred stock dividends. How much was the 2017 earnings per share?

$4.00 Signup and view all the answers

Net income is $200,000, preferred dividends are $20,000, and average common shares outstanding are 50,000. How much is earnings per share?

Signup and view all the answers

Study Notes

Financial Statements

Financial Statements Types:
- Income Statement shows revenue and expenses.
- Balance Sheet displays assets, liabilities, and stockholders' equity.
- Statement of Cash Flows tracks cash inflows and outflows from operating, investing, and financing activities.

Key Financial Item Classifications

Service revenue and advertising expense are reported on the income statement.
Equipment, accounts receivable, common stock, and interest payable are included in the balance sheet.

Basic Accounting Principles

Basic Accounting Equation: Assets = Liabilities + Stockholders' Equity.
Resources owned by a business are termed assets.

Liabilities Identification

Accounts payable and salaries and wages payable are classified as liabilities.
Cash, dividends, accounts receivable, supplies, and equipment are not liabilities.

Cash Flow Activities

Operating Activities: Cash received from customers, cash paid to suppliers.
Financing Activities: Cash paid to stockholders (dividends), cash received from issuing new stock.
Investing Activities: Cash paid for purchasing new office buildings.

Retained Earnings and Income Statement

Retained Earnings Statement: Reflects dividends, beginning retained earnings, and net income.
Income Statement: Prepares for revenues, expenses, and net income.

Financial Ratios & Indicators

Earnings Per Share (EPS): Calculated by dividing net income less preferred dividends by the average common shares outstanding.
Profitability indicator: Earnings per share is a key measure of a company's profitability.

Understanding Financial Health

Excessive debt compared to future earnings can lead to financial distress.
Stockholders' equity represents the claims of owners against the assets of a company.

Financial Statement Preparation Order

Financial statements are typically prepared in the following order: Income statement, retained earnings statement, balance sheet, statement of cash flows.

Asset Classification in Balance Sheets

In classified balance sheets, assets are categorized into current assets (e.g., cash, accounts receivable) and long-term investments.
Current assets are listed by liquidity, from most liquid to least liquid.

Current vs. Long-term Liabilities

Current liabilities are obligations due within one year, while long-term liabilities extend beyond that.
Total liabilities at year-end are calculated by assessing total assets minus stockholders' equity.

International Financial Reporting Standards (IFRS)

IFRS is described as principles-based, in contrast to GAAP, which is more rules-based.

Important Calculations

To find net income: Sales Revenue - Expenses.
The ending retained earnings balance appears on both the retained earnings statement and the balance sheet.

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Test your knowledge of financial statements and the basic accounting equation with these flashcards covering Wiley Plus chapters 1 to 3. Perfect for accounting students looking to reinforce their understanding of key concepts. Get ready to match items to their respective financial statements and answer foundational accounting questions.

Wiley Plus Ch 1-3 ACCT Flashcards

Questions and Answers

Indicate in which financial statement each item would appear:

What is the basic accounting equation?

Which one of the following are liabilities? Choose all that apply.

Indicate in which part of the statement of cash flows each item would appear:

In each case, identify whether the item would appear on the balance sheet or income statement.

Identify which statement you would examine to find each item:

Which statement about users of accounting information is incorrect?

Resources owned by a business are referred to as:

Paying interest expense and receiving interest revenue are examples of:

The payment of dividends is an example of a(n):

Which of the following is not one of the three primary business activities?

Which of the following is an example of a financing activity?

What kind of classification is cost of goods sold?

Which of the following would not appear on the income statement?

Which of the following would not appear on the retained earnings statement?

What is Harold's net income? Given: Accounts Receivable $5,000, Sales Revenue $75,000, Cash $15,000, Salaries and Wages Expense $20,000, Rent Expense $10,000.

In which of the following sequences are the financial statements usually prepared?

Which statement presents information as of a specific point in time?

Which financial statement reports assets, liabilities, and stockholders' equity?

The ending retained earnings balance appears on:

How much are total liabilities at the end of the year? Given: Saira's Maid Service began with total assets of $120,000, stockholders' equity of $40,000, earned $90,000 in net income, paid $20,000 in dividends, and had total assets of $215,000.

The balance sheet:

Stockholders' equity represents:

The most common description of IFRS as contrasted to GAAP is that:

Indicate in which part of the statement of cash flows each item would appear:

The full disclosure principle dictates that:

If a company has excessive debt compared to its future earning prospects:

A company has total assets of $650 million and $375 million in equity. Liabilities represent:

In a classified balance sheet, how are assets usually classified?

In what order are current assets listed?

The correct order of presentation in a classified balance sheet for the following current assets is:

A company purchased a tract of land on which it expects to build a production plant in approximately five years. During the five years before construction, the land will be idle. In what classification should the land be reported?

Which of the following is not classified as a current asset?

Which of the following is considered property, plant, and equipment on a classified balance sheet?

Current liabilities are $10,000, long-term liabilities are $20,000, common stock is $50,000, and retained earnings totals $70,000. How much is total stockholders' equity?

Which one of the following is not an alternate means of expressing a ratio?

Earnings per share is computed by dividing net income:

Which is an indicator of profitability?

For 2017, Stoneland Corporation reported net income of $24,000; net sales of $400,000; and average shares outstanding of 6,000. There were no preferred stock dividends. How much was the 2017 earnings per share?

Net income is $200,000, preferred dividends are $20,000, and average common shares outstanding are 50,000. How much is earnings per share?

Study Notes

Financial Statements

Key Financial Item Classifications

Basic Accounting Principles

Liabilities Identification

Cash Flow Activities

Retained Earnings and Income Statement

Financial Ratios & Indicators

Understanding Financial Health

Financial Statement Preparation Order

Asset Classification in Balance Sheets

Current vs. Long-term Liabilities

International Financial Reporting Standards (IFRS)

Important Calculations

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