Which of the following statements is true regarding the statement of cash flows?

Multiple select question.

Depreciation expense is added back to net income in the operating activities section.

Cash received from the sale of buildings or equipment is an investing activity, and the activity is a source
of cash.

Payment of cash dividends on common stock is an operating activity, and the activity is a use of cash.

Cash received from the sale of long-term debt is a financing activity, and the activity is a source of cash.

The increase in accounts payable for the year is a source of cash and is shown as an operating activity.

and is shown as an operating activity.

Which of the following are reported in the statement of changes in

stockholders' equity?
Multiple select question.

Cash flows from operations for the year

Year-end balance of retained earnings.

Net income for the year

Total assets at the end of the year

Dividends for the year

Common stock issued during the year

Total stockholders' equity at the end of the year.

Total revenues for the year

Financial statements that show a column for the current year and the prior year are known
comparative
as financial statements.

Which of the following concepts/principles relate to the entire model?

Multiple select question.

Accounting equation

Objectivity

Unit of measurement

Accounting entity

Full disclosure

Going concern

In the horizontal model representation of the financial statements,

______.

the statement of cash flows is the key financial statement illustrated in the
model

the balance sheet and income statement columns are completely

independent of each other

A = L + SE - R - E

the arrow pointing from net income to stockholders' equity indicates that net
income affects retained earnings

Stockholders' equity is:

increased by net income for the year

increased by dividends paid during the year

increased by bonds issued during the year

decreased by additional investments made by stockholders during the year

Accounting entity refers to the entity for which the financial statements are being prepared.

Which of the following statements are true regarding the statement

of cash flows?

If a current liability account increases for the year, this will show up
as a source of cash in the operating activities section.

The decrease in accounts payable for the year is a source of cash and is
shown as an operating activity.

The net increase in cash for the year is equal to the sum of the net
cash provided or used by operating, investing, and financing
activities.

Payment of cash dividends on common stock is a financing activity,

and the activity is a use of cash.

If a current asset account increases for the year, this will show up as a
source of cash in the operating activities section.
The two main components reported on the statement of changes in
stockholders' equity are:

common stock and retained earnings

paid-in capital and net income

paid-in capital and retained earnings

common stock and net income

When a subsidiary is not wholly owned, the other stockholders of the

subsidiary are referred to as minority stockholders, and their ownership
rights are referred to as the noncontrolling interest.

The four concepts/principles that relate to the financial statements

are:

consistency, full disclosure, materiality, and conservatism

consistency, full disclosure, matching, and accrual

materiality, full disclosure, objectivity, and going concern

materiality, conservatism, matching, and going concern

In the horizontal model representation of the financial statements, the
arrow going from net income to stockholders' equity means that net
income affects the retained earnings account within stockholders' equity.

Which concept/principle supports the fact that assets such as land,

buildings, and equipment are not reported at their fair values?

Conservatism

Consistency

Full disclosure

Cost principle

The concept that refers to the presumption that the entity will
continue to operate in the future is known as the:

consistency concept

materiality concept

accounting period concept

going concern concept

The period of time selected for reporting financial statements is known

as the accounting period.

Which of the following statements is true regarding the statement

of cash flows?

Cash received from the sale of long-term debt is a financing activity,

and the activity is a source of cash.

Cash received from the sale of buildings or equipment is an

investing activity, and the activity is a source of cash.
The increase in accounts payable for the year is a source of cash
and is shown as an operating activity.

Payment of cash dividends on common stock is an operating activity, and the

activity is a use of cash.

Depreciation expense is added back to net income in the operating

activities section.
For a parent–subsidiary relationship to exist,

the parent must have several subsidiaries who themselves can be parents of
other subsidiaries

the parent must own 100 percent of the stock of another corporation

the parent must normally own more than 50 percent of the stock of
another corporation

the parent must normally own at least 75 percent of the stock of another
corporation

Which of the following concepts/principles relate to bookkeeping

procedures and the accounting process?

Accrual

Materiality

Revenue recognition

Accounting entity

Matching

Full disclosure

Accounting period

The conservatism principle in accounting relates to making judgments and

estimates that result in lower profits and asset valuation estimates rather
than higher profits and asset valuation estimates.

In the United States, the dollar is the unit of measurement for all transactions.

Revenue is recognized at the time of sale, which is when:

the cash payment from the buyer to seller is made

a discount is provided for prompt payment

title passes to the buyer or when the services are performed

the cash payment from the seller to buyer is made

The value of a management team or of the morale of the workforce is not
included as a balance sheet asset because it cannot be objectively
measured.

True

False
Most assets are reported on the balance sheet based on their:

cost or market value whichever is lower

current market (fair) value

replacement cost

original (historical) cost

When a parent–subsidiary relationship exists, the financial

statements issued by the parent company also reflect the results of
the subsidiary company or companies and are referred to as
consolidated financial statements.

Which of the following are limitations of financial statements?

The use of estimates in the accounting process

The fact that assets must be equal to liabilities plus stockholders' equity

The use of the cost principle

The fact that financial statements are not adjusted for the impact of
inflation

The fact that financial statements do not reflect opportunity costs

The use of the matching concept and accrual accounting to measure income

Materiality means that absolute exactness is not necessary in the amounts

shown in the financial statements.

Which of the following items are normally included as key

components of a corporation's annual report?

The net present value of expected future cash flows of the reporting firm's
next major capital investment project

Highlights for the year, including net revenues, diluted earnings per
share, and return of stockholders' equity

The reporting firm's financial statements for the year

Management's discussion and analysis of the financial statements

Legal counsel's assessment of the likelihood that the reporting firm may face
future patent infringement lawsuits

Which concept/principle suggests that a given transaction should be

recorded in the same way in all situations?

Objectivity

Accrual

Matching

Full disclosure

True or false: Financial statements report qualitative economic

variables.
False

Most assets are not recorded at their current market values because of
the limitations imposed by the cost principle.

Estimates are frequently made in accounting for each of the

following items, except:

pension expense
depreciation of buildings and equipment

cash receipts from customers

warranty costs

Which of the following items are normally included as key

components of a corporation's annual report?

The reporting firm's operating budget for the next fiscal year

The notes to the financial statements

A five-year (or longer) summary of key financial data

The report of the external auditor's examination of the financial

statements

A corporate structure chart showing line and staff reporting responsibilities of

all key personnel employed by the reporting firm

Which of the following are limitations of financial statements?

The fact that assets must be equal to liabilities plus stockholders' equity

The use of the cost principle

The fact that financial statements are not adjusted for the impact of
inflation

The use of the matching concept and accrual accounting to measure income

The use of estimates in the accounting process

The fact that financial statements do not reflect opportunity costs