Ferg Acctg Bellringer 11 Financial

Where would an investor find information about the total revenue and expenses of a company.

• The income statement

• The statement of change in equity

• The cash flow statement

• The balance sheet

The net income is derived from which pieces of information?

• Revenue and expense

• Taxable income and liabilities

• Liabilities and equity

• Long term and short term debt

From a balance sheet, the assets less the owner's equity will equal which of the following?

• Liabilities

• Revenue

• Accounting ratios

• Long term debt

If a sister sold a house to her brother, this would be suspicious to an investor because of which of the following reasons?

• It is not an arm's length transaction

• It is seldom a good idea to do business with family

• There would be a cloud on the title

• It would be coming from the same pool of money

Your plumbing company fixed the shower for Jane Smith. You have invoiced Jane for $1,000 but she has not paid yet. Using the accrual method of accounting, how much should you show as income?

• $1,000

• $500

• $0

• One-twelfth of $1,000

Which method of accounting is preferred under GAAP?

• Accrual

• Whichever the IRS uses

• Cash

• Income

An auditor makes a note that there is a patent lawsuit. After the audit is complete, the company losses the lawsuit. If the auditor noted this as a recognized event, what would need to be done?

• The financial statements would need to be changed to reflect the lawsuit

• The note would need to be removed

• No changes would need to be made

• A new letter from the auditor would need to be added

Which of the following would be a cash outflow operating activity for a small healthcare manufacturer?

• Cost of the raw materials

• An accounting of bad debt

• Paying the staff

• Revenue from a new order

How is a cash flow statement different from an income statement?

• A cash flow statement shows actual cash received and expended. Income statements show all revenue and expense.

• Cash flow also compares the assets to the equity

• Income statement shows cash received and expensed. Cash flow statements show all revenue and expense.

• Both are the same.

A balance sheet compares liabilities and equity to which of the following?

• Assets

• Revenue

• Salaries

• Debt