Understanding Financial Accounting 3rd Canadian Edition by Christopher D. Burnley test bank

d) the sale of shares at cost.
 
Answer: a
 
Bloomcode: Comprehension
Difficulty: Medium
Learning Objective: Explain the three categories of business activities and identify examples of transactions related to each category.
CPA: Financial Reporting
AACSB: Analytic
 
 
63. Which of the following statements best describes financial accounting?
a) an information system in which the underlying transactions of an organization are captured, analyzed, and reported
b) the reports that management prepares for the owners of the company summarizing how the company performed during the period
c) an information system in which all transactions with the company are accurately reported
d) the reports that management prepares for use in making decisions related to the financing, investing, and operating activities of a company
 
Answer: a
 
Bloomcode: Knowledge
Difficulty: Easy
Learning Objective: Identify and explain the content and reporting objectives of the four basic financial statements and the notes to the financial statements.
CPA: Financial Reporting
AACSB: Analytic
 
 
64. Where would the information about company operations be found?
a) on the Statement of Income
b) on the Statement of Financial Position
c) in the notes of the financial statements
d) in the statement of management responsibility
 
Answer: a
 
Bloomcode: Knowledge
Difficulty: Easy
Learning Objective: Identify and explain the content and reporting objectives of the four basic financial statements and the notes to the financial statements.
CPA: Financial Reporting
AACSB: Analytic
 
 
65. Muller Ltd. earned gross revenues of $2,500,000 and had net income of $480,000 in the current year. During the year, the company had 200,000 common shares outstanding and its average shareholders’ equity was $1,000,000. Muller’s basic earnings per share for the year is
a) $2.50.
b) $2.40.
c) $12.50.
d) $0.48.
 
Answer: b
 
Bloomcode: Application
Difficulty: Medium
Learning Objective: Identify and explain the content and reporting objectives of the four basic financial statements and the notes to the financial statements.
CPA: Financial Reporting
AACSB: Analytic
 
 
66. All of the following can be found on the Statement of Income EXCEPT for
a) interest expense.
b) depreciation expense.
c) prepaid rent expense.
d) other income.
 
Answer: c
 
Bloomcode: Knowledge
Difficulty: Hard
Learning Objective: Identify and explain the content and reporting objectives of the four basic financial statements and the notes to the financial statements.
CPA: Financial Reporting
AACSB: Analytic
 
 
67. Which of the financial statements provides information about the company’s financial position?
a) Statement of Income
b) Statement of Financial Position
c) Statement of Cash Flows
d) Statement of Changes in Equity
 
Answer: b
 
Bloomcode: Knowledge
Difficulty: Easy
Learning Objective: Identify and explain the content and reporting objectives of the four basic financial statements and the notes to the financial statements.
CPA: Financial Reporting
AACSB: Analytic
 
 
68. Which of the following is the proper order to list current assets on the Statement of Financial Position?
a) Cash, Short-Term Investments, Inventory, Prepaid Expenses
b) Cash, Short-Term Investments, Prepaid Expenses, Accounts Receivable
c) Cash, Inventory, Accounts Receivable, Short-Term Investments
d) Cash, Accounts Receivable, Short-Term Investments, Inventory
 
Answer: a
 
Bloomcode: Comprehension
Difficulty: Hard
Learning Objective: Identify and explain the content and reporting objectives of the four basic financial statements and the notes to the financial statements.
CPA: Financial Reporting
AACSB: Analytic
 
 
69. Which of the following is the basic accounting equation?
a) Assets = liabilities – shareholders' equity
b) Assets = liabilities × shareholders' equity
c) Assets = liabilities ÷ shareholders' equity
d) Assets = liabilities + shareholders' equity
 
Answer: d
 
Bloomcode: Knowledge
Difficulty: Easy
Learning Objective: Identify and explain the content and reporting objectives of the four basic financial statements and the notes to the financial statements.
CPA: Financial Reporting
AACSB: Analytic
 
 
70. Which of the following are the two components of Shareholders’ equity?