MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
1) What is the primary purpose of the statement of financial position?
A) To measure the profit of a business up to
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MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
1) What is the primary purpose of the statement of financial position?
A) To measure the profit of a business up to a particular point in time.
B) To report assets at their current market value at a particular point in time.
C) To report the financial position of the reporting entity at a particular point in time.
D) To report the difference between cash inflows and cash outflows for the period.
Answer: C
2) On January 1, 20X1, two individuals invested $150,000 each to form Hornbeck Corporation.
Hornbeck had total revenues of $15,000 during 20X1 and $40,000 during 20X2. Total expenses for
the same periods were $8,000 and $22,000, respectively. Cash dividends paid out to shareholders
totaled $6,000 in 20X1 and $12,000 in 20X2. What was the ending balance in Hornbeck's retained
earnings account at the end of 20X1 and 20X2?
A) $1,000 and $6,000 respectively. B) $7,000 and $19,000 respectively.
C) $1,000 and $7,000, respectively. D) $301,000 and $306,000 respectively.
Answer: C
3) The BAT Corporation had revenues of $110,000, expenses of $85,000, and an income tax rate of 20
percent in 20X2. What would profit after taxes be?
A) $25,000. B) $15,000. C) $5,000. D) $20,000.
Answer: D
4) Brown Corporation reported the following amounts at the end of the first year of operations,
December 31, 20X1: Share capital $20,000; Sales revenue $95,000; Total assets $85,000, No
dividends, and Total liabilities $35,000. What would shareholders' equity and total expenses be?
A) Shareholders' equity, $80,000 and expenses $40,000.
B) Shareholders' equity, $80,000 and expenses $85,000.
C) Shareholders' equity, $50,000 and expenses $65,000.
D) Shareholders' equity, $60,000 and expenses $75,000.
Answer: C
5) Which of the following would not be considered an internal user of accounting data?
A) A creditor of a company. B) The controller of a company.
C) A salesperson of a company. D) The president of a company.
Answer: A
6) If total liabilities increased by $25,000 and shareholders' equity increased by $5,000 during a period,
then total assets must change by what amount and direction during that same period?
A) $20,000 decrease. B) $25,000 increase.
C) $30,000 increase. D) $20,000 increase.
Answer: C
7) Which of the following activities involves raising the necessary funds to support the business?
A) Operating. B) Marketing. C) Financing. D) Investing.
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