1. The primary purpose of the balance sheet is to show

a. results of operations for a company for a period of time.

b. results of operations for a company at a point in time.

c. financial position for a company at a point in time.

d. financial position for a company for a period of time.
 
 

2. The primary purpose of the income statement is to show

a. results of operations for a company for a period of time.

b. results of operations for a company at a point in time.

c. financial position for a company at a point in time.

d. financial position for a company for a period of time.
 
 

3. All of the financial statements of a company are related to each other. In describing this relationship, one would say that the financial statements

a. resonate with each other.

b. articulate with each other.

c. are consolidated.

d. are coordinated.
 
 

4. The three financial statements listed below relate to each other. Because the financial statements tie together they must be prepared in a logical order, which is

a. balance sheet, income statement, and statement of retained earnings.

b. income statement, balance sheet, and statement of retained earnings.

c. statement of retained earnings, balance sheet, and income statement.

d. income statement, statement of retained earnings, and balance sheet.
 
 

5. The amount of retained earnings as shown in the balance sheet represents

a. owner’s contributed capital plus net income less losses and owner’s withdrawals since inception of the business.

b. net income less losses since inception of the business.

c. net income less losses and owner’s withdrawals since inception of the business.

d. net income only since inception of the business.
 
 

6. In which of the following financial statements will you see the net income of a company shown?

a. income statement, statement of retained earnings, and balance sheet.

b. income statement, statement of cash flows—indirect method, and statement of retained earnings.

c. income statement, statement of cash flows—direct method, and balance sheet.

d. income statement, and both the direct and indirect methods of the statement of cash flows.
 
 

7. The following selected information was taken from the financial statements of a company at the end of the first month of operations:

Based on the information above, the life of the insurance policy must be

a. one year.

b. two years.

c. one month.

d. four years.
 
 

8. The following selected information was taken from the financial statements of a retail department store:

Based on the information above, the original total cost of the computer to the company must have been

a. $6,000.

b. $5,000.

c. $18,000.

d. $11,000.
 
 

9. The following selected information was taken from the financial statements of a retail department store.

Based on the information above, the balance in accounts receivable in the ending balance sheet should be

a. $500.

b. $1,000.

c. $1,500.

d. $2,500.
 
 

10. The following selected information was taken from the financial statements of a bank for a recent month

Based on the information above, the wages payable account in the ending balance sheet versus the beginning balance sheet should have

a. increased $500.

b. increased $12,000.

c. decreased $500.

d. decreased $12,000.
 
 

11. The following selected data was taken from the balance sheet of a company:

Based on the above information, total long-term liabilities must be

a. $18,000.

b. $38,000.

c. $50,000.

d. $62,000.
 
 

12. If a company has $5,000 net income it means that the

a. company is solvent.

b. cash account balance increased during the year.

c. revenues earned were greater than the expenses incurred during the year.

d. the company will report a positive cash flow from operations in the statement of cash flows.