C. an increase in contributed capital.

B. financial reporting.

C. financial statement analysis.

2. A company ’ s current financial position would best be evaluated using the

A. balance sheet.

B. income statement.

C. cash flow statement.

3. A company ’ s profitability for a period would best be evaluated using the

A. balance sheet.

B. income statement.

C. cash flow statement.

4. Accounting methods, estimates, and assumptions used in preparing fi nancial statements

are found

A. in footnotes.

B. in the auditor’s report.

C. in the proxy statement.

5. Information about management and director compensation would best be found

A. in footnotes.

B. in the auditor’s report.

C. in the proxy statement.

6. Information about material events and uncertainties would best be found in

A. footnotes.

B. the proxy statement.

C. management’ s discussion and analysis.

7. What type of audit opinion is preferred when analyzing financial statements?

A. Qualified.

B. Adverse.

C. Unqualified.

8. Ratios are an input into which step in the financial analysis framework?

A. Process data.

B. Collect input data.

C. Analyze/interpret the processed data.

Chapter 2

1. Which of the following items would most likely be classifi ed as an operating activity?

A. Issuance of debt

B. Acquisition of a competitor

C. Sale of automobiles by an automobile dealer

2. Which of the following items would most likely be classifi ed as a fi nancing activity?

A. Issuance of debt

B. Payment of income taxes

C. Investments in the stock of a supplier

3. Which of the following elements represents an economic resource?

A. Asset

B. Liability

C. Owners ’ equity

4. Which of the following elements represents a residual claim?

A. Asset

B. Liability

C. Owners ’ equity

5. An analyst has projected that a company will have assets of € 2,000 at year - end and liabilities

of € 1,200. The analyst ’ s projection of total owners ’ equity should be closest to

A. € 800.

B. € 2,000.

C. € 3,200.

6. An analyst has collected the following information regarding a company in advance of

its year - end earnings announcement (in millions):

Estimated net income $200

Beginning retained earnings $1,400

Estimated distributions to owners $100

The analyst ’ s estimate of ending retained earnings (in millions) should be closest to

A. $1,300.

B. $1,500.

C. $1,700.

7. An analyst has compiled the following information regarding Rubsam, Inc.

Liabilities at year - end € 1,000

Contributed capital at year - end € 500

Beginning retained earnings € 600

Revenue during the year € 5,000

Expenses during the year € 4,300

There have been no distributions to owners. The analyst ’ s most likely estimate of total

assets at year - end should be closest to

A. € 2,100.

B. € 2,300.

C. € 2,800.

8. A group of individuals formed a new company with an investment of $500,000. The

most likely effect of this transaction on the company ’ s accounting equation at the time

of the formation is an increase in cash and

A. an increase in revenue.

B. an increase in liabilities.

C. an increase in contributed capital.

9. HVG, LLC paid $12,000 of cash to a real estate company upon signing a lease on 31

December 2005. The payment represents a $4,000 security deposit and $4,000 of rent

for each of January 2006 and February 2006. Assuming that the correct accounting is

to refl ect both January and February rent as prepaid, the most likely effect on HVG ’ s

accounting equation in December 2005 is

Date: 2016-03-03; view: 1955