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Principles of Accounting Volume 1: Financial Accounting

Mitchell Franklin, Patty Graybeal, Dixon Cooper

Chapter 2

Introduction to Financial Statements - all with Video Answers

Educators

Section 1

Describe the Income Statement, Statement of Owner’s Equity, Balance Sheet, and Statement of Cash Flows, and How They Interrelate

06:18

Problem 1

Which of these statements is not one of the financial statements?
A. income statement
B. balance sheet
C. statement of cash flows
D. statement of owner investments

Puneet Prajapati
Puneet Prajapati
Numerade Educator
06:30

Problem 2

Stakeholders are less likely to include which of the following groups?
A. owners
B. employees
C. community leaders
D. competitors

Puneet Prajapati
Puneet Prajapati
Numerade Educator
05:52

Problem 3

Identify the correct components of the income statement.
A. revenues, losses, expenses, and gains
B. assets, liabilities, and owner’s equity
C. revenues, expenses, investments by owners, distributions to owners
D. assets, liabilities, and dividends

Puneet Prajapati
Puneet Prajapati
Numerade Educator
05:16

Problem 4

The balance sheet lists which of the following?
A. assets, liabilities, and owners’ equity
B. revenues, expenses, gains, and losses
C. assets, liabilities, and investments by owners
D. revenues, expenses, gains, and distributions to owners

Puneet Prajapati
Puneet Prajapati
Numerade Educator
05:14

Problem 5

Assume a company has a $350 credit (not cash) sale. How would the transaction appear if the
business uses accrual accounting?
A. $350 would show up on the balance sheet as a sale.
B. $350 would show up on the income statement as a sale.
C. $350 would show up on the statement of cash flows as a cash outflow.
D. The transaction would not be reported because the cash was not exchanged.

Puneet Prajapati
Puneet Prajapati
Numerade Educator
03:41

Problem 6

Which of the following statements is true?
A. Tangible assets lack physical substance.
B. Tangible assets will be consumed in a year or less.
C. Tangible assets have physical substance.
D. Tangible assets will be consumed in over a year

Puneet Prajapati
Puneet Prajapati
Numerade Educator
07:06

Problem 7

Owners have no personal liability under which legal business structure?
A. a corporation
B. a partnership
C. a sole proprietorship
D. There is liability in every legal business structure.

Puneet Prajapati
Puneet Prajapati
Numerade Educator
06:00

Problem 8

The accounting equation is expressed as ________.
A. Assets + Liabilities = Owner’s Equity
B. Assets – Noncurrent Assets = Liabilities
C. Assets = Liabilities + Investments by Owners
D. Assets = Liabilities + Owner’s Equity

Puneet Prajapati
Puneet Prajapati
Numerade Educator
07:15

Problem 9

Which of the following decreases owner’s equity?
A. investments by owners
B. losses
C. gains
D. short-term loans

Puneet Prajapati
Puneet Prajapati
Numerade Educator
06:49

Problem 10

Exchanges of assets for assets have what effect on equity?
A. increase equity
B. may have no impact on equity
C. decrease equity
D. There is no relationship between assets and equity.

Puneet Prajapati
Puneet Prajapati
Numerade Educator
06:52

Problem 11

All of the following increase owner’s equity except for which one?
A. gains
B. investments by owners
C. revenues
D. acquisitions of assets by incurring liabilities

Puneet Prajapati
Puneet Prajapati
Numerade Educator
04:47

Problem 12

Which of the following is not an element of the financial statements?
A. future potential sales price of inventory
B. assets
C. liabilities
D. equity

Puneet Prajapati
Puneet Prajapati
Numerade Educator
03:05

Problem 13

Which of the following is the correct order of preparing the financial statements?
A. income statement, statement of cash flows, balance sheet, statement of owner’s equity
B. income statement, statement of owner’s equity, balance sheet, statement of cash flows
C. income statement, balance sheet, statement of owner’s equity, statement of cash flows
D. income statement, balance sheet, statement of cash flows, statement of owner’s equity

Puneet Prajapati
Puneet Prajapati
Numerade Educator
03:03

Problem 14

The three heading lines of financial statements typically include which of the following?
A. company, statement title, time period of report
B. company headquarters, statement title, name of preparer
C. statement title, time period of report, name of preparer
D. name of auditor, statement title, fiscal year end

Puneet Prajapati
Puneet Prajapati
Numerade Educator
01:15

Problem 15

Which financial statement shows the financial performance of the company on a cash basis?
A. balance sheet
B. statement of owner’s equity
C. statement of cash flows
D. income statement

Narayan Hari
Narayan Hari
Numerade Educator
View

Problem 16

Which financial statement shows the financial position of the company?
A. balance sheet
B. statement of owner’s equity
C. statement of cash flows
D. income statement

Susan Hallstrom
Susan Hallstrom
Numerade Educator
01:21

Problem 17

Working capital is an indication of the firm’s ________.
A. asset utilization
B. amount of noncurrent liabilities
C. liquidity
D. amount of noncurrent assets

Hubert Agamasu
Hubert Agamasu
Numerade Educator