41. The balance sheet is based on the accounting equation.
42. Investing activities involve the buying and selling of assets such as land and equipment that are held for long-term use in the business.
43. Operating activities include long-term borrowing and repaying cash from lenders and cash investments by owners or dividends to the owner.
44. The purchase of supplies must appear on the statement of cash flows as an investing activity because it involves the purchase of assets.
45. The statement of cash flows reports on cash flows separated into operating, investing, and financing activities over a period of time.
46. FastForward paid $6,000 in dividends. This amount should be included as an expense on the income statement.
Multiple Choice Questions
47. Which of the following is the primary purpose of accounting?
A. To establish a business.
B. To identify, record, and communicate business transactions.
C. To earn a large profit.
D. To reduce taxes owed for the business.
E. To establish credit for a company.
48. Technological advancement
A. Has replaced accounting.
B. Has not changed the work that accountants do.
C. Has freed accounting professionals to concentrate more on the analysis and interpretation of information.
D. In accounting has replaced the need for decision makers.
E. In accounting is only available to large corporations.
49. Identifying business activities requires selecting transactions and events relevant to an organization. Which of the following events would be recorded in the accounting records of Acme Car Wash?
A. Acme washes 500 cars.
B. J.B. Smith, a customer, buys lunch at the restaurant next door to Acme while waiting for her car to be washed.
C. Clean Company, a supplier, sells 50 pounds of soap to ABC Company.
D. Sudsey Company, a supplier, goes out of business.
E. Acme hires Andrea as a receptionist.
50. Internal users of accounting information include:
A. Shareholders
B. Customers
C. Creditors
D. Government regulators
E. Production managers