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Financial accounting

Financial positions

Multiple choice questions

1) Which of the following statements about stockholders' equity is false?

• A) Stockholders' equity is the shareholders' residual interest in the company resulting from the difference in assets and liabilities.
• B) Stockholders' equity accounts are increased with credits.
• C) Stockholders' equity results only from contributions of the owners.
• D) The purchase of land for cash has no effect on stockholders' equity.

2) Assets, liabilities, and stockholders' equity are all found within which of the following financial statements?

• A) Balance sheet.
• B) Income statement.
• C) The investing activities section of the Statement of Cash Flows.
• D) Statement of stockholders' equity.

3) Which of the following statements is incorrect concerning balance sheets prepared under IFRS and GAAP?

• A) The same elements are used in preparing balance sheets under both GAAP and IFRS.
• B) Under IFRS stockholders' equity is listed before liabilities, while under GAAP liabilities are listed before stockholders' equity.
• C) Under GAAP assets are usually listed in increasing order of liquidity, while under IFRS assets are usually listed in decreasing order of liquidity.
• D) Under GAAP current items are presented first, while under IFRS noncurrent items are presented first.

4) In what order would the following assets be listed on a balance sheet?

• A) Cash, Short-term Investments, Accounts Receivable, Inventory.
• B) Cash, Intangible Assets, Accounts Receivable, Property and Equipment.
• C) Cash, Accounts Receivable, Property and Equipment, Inventory.
• D) Cash, Inventory, Intangible Assets, Accounts Receivable.

5) Where would changes in stockholders' equity resulting from financing provided by operations be reported?

• A) Within a long-term asset account.
• B) Within the additional paid-in capital account.
• C) Within a liability account.
• D) Within the retained earnings account.

6) Which of the following events will cause retained earnings to increase?

• A) Dividends declared by the Board of Directors.
• B) Net income reported for the period.
• C) Net loss reported for the period.
• D) Issuance of stock in exchange for cash.

7) Which of the following correctly describes retained earnings?

• A) It is the cumulative earnings of a company.
• B) It represents the investments by stockholders in a company.
• C) It equals total assets minus total liabilities.
• D) It is the cumulative earnings of a company less dividends declared.

8) Which of the following describes the primary objective of financial accounting?

• A) To provide useful financial information only to stockholders.
• B) To provide information about a bu...