Equity In A Business F4 Quiz

25 Questions | By Amphib2007 | Last updated: Mar 20, 2022 | Total Attempts: 266

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1.

Instead of issuing a statement of stockholders’ equity, a corporation that does not have any changes in contributed capital and that has not issued any common or preferred stock may want to prepare a:
- A.
  
  Statement of retained earnings
- B.
  
  Statement of cash flows
- C.
  
  Combined income statement and balance sheet
- D.
  
  None of these answers is correct
2.

What is the impact of net income on the owners’ equity in a business?
- A.
  
  Net income increases owners’ equity.
- B.
  
  The answer depends on whether the business is a proprietorship or a partnership.
- C.
  
  Net income does not directly affect owners’ equity, since it is an income statement amount.
- D.
  
  Net income decreases owners’ equity.
3.

In what order should financial statements be prepared?
- A.
  
  Statement of owners’ equity, balance sheet, income statement
- B.
  
  Balance sheet, statement of owners’ equity, income statement
- C.
  
  Balance sheet, income statement, statement of owners’ equity
- D.
  
  Income statement, statement of owners’ equity, balance sheet
4.

Gross margin represents:
- A.
  
  The amount the products cost the company
- B.
  
  How much more a company received from the sale of its products than what the products cost the company
- C.
  
  The amount available from sales to cover all other expenses the company incurs
- D.
  
  Answers b and c are both correct.
5.

Expenses take various forms as shown on the income statement. The cost of the products that merchandisers and manufacturers sell make up an expense called:
- A.
  
  Cost of goods sold
- B.
  
  Cost of products sold
- C.
  
  Cost of sales
- D.
  
  All of these answers are correct
6.

The income that is produced by the major business activity of the company is shown on the income statement as:
- A.
  
  Net income
- B.
  
  Operating income
- C.
  
  Gross income
- D.
  
  Net profit
7.

What information will a multiple-step income statement show that a single-step will omit?
- A.
  
  Total expenses and operating income
- B.
  
  Gross profit and net income
- C.
  
  Gross margin and operating income
- D.
  
  Gross margin and net loss
8.

Gross profit can be calculated as:
- A.
  
  Sales - cost of goods sold
- B.
  
  Sales + cost of goods sold
- C.
  
  Sales - total expenses
- D.
  
  Sales + operating income
9.

The advantage for users of a multiple-step income statement over the single-step is that it clearly shows:
- A.
  
  Total expenses
- B.
  
  Gross profits
- C.
  
  Net loss
- D.
  
  Total revenues
10.

The excess of the rewards over the sacrifices for a given time period is the monetary reward of doing business, which is also known as:
- A.
  
  Net earnings
- B.
  
  Net profit
- C.
  
  Earnings
- D.
  
  All of these answers are correct.
11.

Which ratio uses net income as its denominator?
- A.
  
  Earnings per share
- B.
  
  Rate of return on assets ratio
- C.
  
  Dividend payout ratio
- D.
  
  Net profit margin ratio
12.

The statement of cash flows provides a wealth of important information. Activities related to the items found on the income statement may appear in which section of the statement of cash flows?
- A.
  
  Financing activities
- B.
  
  Operating activities
- C.
  
  Investing activities
- D.
  
  Earnings activities
13.

On the income statement, when the cost of goods sold is subtracted from sales, the result is:
- A.
  
  Net loss
- B.
  
  Gross margin
- C.
  
  Net income
- D.
  
  Operating income
14.

When preparing financial statements, accountants prepare which statement first?
- A.
  
  Balance sheet
- B.
  
  Statement of owners’ equity
- C.
  
  Statement of cash flows
- D.
  
  Income statement
15.

It is generally better to see cash outflow than inflow from which business activity?
- A.
  
  Operating activities
- B.
  
  Investing activities
- C.
  
  Financing activities
- D.
  
  Investing and/or financing activities
16.

The link between the income statement and the balance sheet is called:
- A.
  
  Dividends
- B.
  
  Revenue
- C.
  
  Expenses
- D.
  
  Articulation
17.

A dividend is actually paid on the date of:
- A.
  
  Record
- B.
  
  Declaration
- C.
  
  Liability
- D.
  
  Payment
18.

The basic formula used by a company to compute its income tax is:
- A.
  
  Sales x tax rate
- B.
  
  Total assets x tax rate
- C.
  
  Taxable income x tax rate
- D.
  
  Cost of goods sold x tax rate
19.

The ending capital balance found in a statement of owners’ equity is also found on:
- A.
  
  The statement of cash flows
- B.
  
  The income statement
- C.
  
  The balance sheet
- D.
  
  The ending capital balance is not found on any other financial statement.
20.

The relationship among the accounting elements found on the income statement can be represented by the following equation:
- A.
  
  Revenues – expenses = net loss
- B.
  
  Revenues – expenses = net income
- C.
  
  Answers a and b are both correct
- D.
  
  Assets – liabilities = net income
21.

The statement that provides a “bridge” between the information the income statement provides and the information the balance sheet provides is the:
- A.
  
  Statement of financial position
- B.
  
  Statement of owners’ equity
- C.
  
  Statement of cash flows
- D.
  
  None of these answers is correct
22.

The financial statement that would provide the best information on a firm's past performance is the:
- A.
  
  None of these answers is correct
- B.
  
  Income statement
- C.
  
  Balance sheet
- D.
  
  Owners' equity statement
23.

The equation used in the statement of owners’ equity starts with beginning owners’ equity, then:
- A.
  
  Adjust for changes in stock ownership and any net income or loss
- B.
  
  Add contributions by owners, plus net income or minus net loss, and minus distributions to owners
- C.
  
  Add contributions by owners and subtract distributions to owners
- D.
  
  Add any net income or subtract any net loss for the income statement period
24.

The shareholder who will receive the dividend is the one who holds one or more shares of stock on the:
- A.
  
  Declaration date
- B.
  
  Record date
- C.
  
  Distribution date
- D.
  
  Payment date
25.

The following information is available for a company: Net sales, $750,950; Cost of goods sold, $330,418; total expenses, $214,775; average total assets for the year, $459,785. What is the company’s rate of return on assets ratio (round your answer to two decimal places)?
- A.
  
  45%
- B.
  
  27%
- C.
  
  56%
- D.
  
  The ratio cannot be computed from the information given.