The IIT Madras BS Financial Forensics (Financial Forensics) Quiz 1 paper sat on 26 Oct 2025, in the September 2025 term: 25 questions for 25 marks in 120 minutes. Every question is below with its answer. Take it as a timed mock test to be marked, or read it through first.
The Slugger and K Corporation produces custom-made dog toys. During the current fiscal year, Slugger and K had revenues of $460,000 and cost of goods sold of $310,000. The company pays 36 percent in taxes. What was Slugger and K’s net income in the current fiscal year?
$460,000
$150,000
$96,000
$354,000
Correct answer
$96,000
Beacon, Incorporated reported the following amounts at the end of the first year of operations:
| Common stock | $ 316,000 |
|---|---|
| Sales revenue | $ 1,264,000 |
| Total assets | $ 948,000 |
| Dividends declared | $ 68,000 |
| Total liabilities | $ 330,000 |
What are the retained earnings of Beacon at the end of the year, and what amount of expenses were incurred during the year?
Retained earnings are $302,000 and expenses incurred totaled $894,000.
Retained earnings are $302,000 and expenses incurred totaled $962,000.
Retained earnings are $618,000 and expenses incurred totaled $646,000
Retained earnings are $618,000 and expenses incurred totaled $934,000.
Correct answer
Retained earnings are $302,000 and expenses incurred totaled $894,000.
Which of the following best describes the balance sheet?
It includes the amount of revenues minus expenses for the period.
It includes three primary categories of cash flows.
It provides information pertaining to a company's economic resources and the sources of financing for those resources.
It provides information pertaining to a company's liabilities for a period of time.
Correct answer
It provides information pertaining to a company's economic resources and the sources of financing for those resources.
Which of the following would not be found on the statement of cash flows?
Cost flow from manufacturing activities.
Cash flow from operating activities.
Cash flow from investing activities.
Cash flow from financing activities.
Correct answer
Cost flow from manufacturing activities.
Duck Corporation's retained earnings increased $41,200 during the current year. What was Duck's current year net income or loss given that Duck declared $51,200 of dividends during this year?
Net income was $10,000.
Net income was $92,400.
Net loss was $92,400.
Net loss was $10,000.
Correct answer
Net income was $92,400.
Which of the following equations best describes the income statement?
Assets − Liabilities = Stockholders' Equity
Net income = Revenues + Expenses
Net income = Revenues − Expenses
Retained earnings = Net Income + Dividends
Correct answer
Net income = Revenues − Expenses
Kelly Tiles Incorporated has provided the following data for its 2024 operations (ignore income taxes):
2024 revenues were $149,000.
2024 expenses were $72,700.
Dividends declared and paid during 2024 totaled $14,500.
Total assets at December 31, 2024 were $305,000.
Total liabilities at December 31, 2024 were $150,000.
Common stock at December 31, 2024 was $35,000.
Which of the following is correct?
2024 net income was $61,800.
Total stockholders' equity at December 31, 2024 was $318,000.
Retained earnings at December 31, 2024 were $120,000.
Retained earnings at December 31, 2024 were $61,800.
Correct answer
Retained earnings at December 31, 2024 were $120,000.
Total assets are $37,500, total liabilities are $20,000 and common stock is $10,000; therefore, retained earnings are $7,500.
True
False
Correct answer
True
For the current year, net income of Carol Company is $20,000 and dividends declared are $6,000; therefore, retained earnings have increased $26,000 during the year.
True
False
Correct answer
False
The amount of cash paid by a business for dividends would be reported as an operating activity cash flow on the statement of cash flows.
True
False
Correct answer
False
When would a company report a net loss on the income statement?
When revenues are less than the sum of expenses plus dividends during an accounting period.
If assets decreased during an accounting period.
If liabilities increased during an accounting period.
When expenses exceeded revenues for an accounting period.
Correct answer
When expenses exceeded revenues for an accounting period.
Which of the following would immediately cause a change in a corporation's retained earnings?
Net income or net loss and declaration of dividends.
Declaration of dividends and issuance of common stock to new stockholders.
Net income and issuance of stock to new stockholders.
Declaration of dividends and purchase of new machinery.
Correct answer
Net income or net loss and declaration of dividends.
Which of the following would most likely increase retained earnings?
An increase in expenses.
An increase in revenues.
Declaring a cash dividend.
Issuing additional common stock.
Correct answer
An increase in revenues.
Which of the following transactions increases both cash and net income?
Cash receipts from a bank loan.
Cash receipts from sale of common stock.
Cash receipts from customers for services provided.
Cash payments for cost of goods sold.
Correct answer
Cash receipts from customers for services provided.
A calendar year reporting company preparing its annual financial statements should use the phrase "At December 31, 2024" in the heading of which financial statement(s)?
On all of the required financial statements.
On the income statement only.
On the income statement and balance sheet, but not the statement of cash flows.
On the balance sheet only.
Correct answer
On the balance sheet only.
Which of the following properly describes the impact on the financial statements when a company borrows $20,000 from a local bank?
Net income increases $20,000.
Assets decrease $20,000.
Stockholders' equity increases $20,000.
Liabilities increase $20,000.
Correct answer
Liabilities increase $20,000.
Which of the following statements is correct regarding activities and how they impact financial statements?
The payment of a cash dividend reduces net income.
Cash received from issuing common stock to stockholders is reported as a financing activity cash flow within the statement of cash flows.
Providing services to a customer on account does not impact net income.
The purchase of manufacturing equipment is reported within the statement of cash flows as a financing activity.
Correct answer
Cash received from issuing common stock to stockholders is reported as a financing activity cash flow within the statement of cash flows.
Husky Company has provided the following information for its most recent year of operation: Cash collected from customers totaled $91,100.
Cash borrowed from banks totaled $35,300.
Cash paid to employees for salaries totaled $33,900.
Cash received from selling Husky common stock to stockholders totaled $59,000.
Cash payments to banks for repayment of money borrowed totaled $9,300.
Cash paid to suppliers totaled $14,300.
Land costing $37,000 was sold for $37,000 cash.
Cash paid for dividends to stockholders totaled $5,100.
How much was Husky's cash flow from operating activities?
$47,500
$42,900
$35,900
$31,700
Correct answer
$42,900
Which of the following statements regarding income is correct?
Revenues are reported on the income statement regardless of whether the customer has paid for the goods or services.
Expenses are reported on the income statement during the period they are paid for.
Net income includes a deduction for dividend payments made to stockholders.
Net income normally equals the net cash generated by operations.
Correct answer
Revenues are reported on the income statement regardless of whether the customer has paid for the goods or services.
Which of the following transactions affects both the income statement and the statement of cash flows?
Selling stock in exchange for cash.
Declaring and paying a cash dividend.
Selling a product to a customer which creates an account receivable.
Paying employee salaries as they are earned.
Correct answer
Paying employee salaries as they are earned.
During the current year, Rock Company's cash balance increased from $79,000 to $91,300. Rock's net cash flow from operating activities was $37,300 and its net cash flow from financing activities was $11,100. How much was Rock's net cash flow from investing activities?
A net cash flow of $42,900.
A net cash flow of ($36,100).
A net cash flow of $60,700.
A net cash flow of ($60,700).
Correct answer
A net cash flow of ($36,100).
Answer the given subquestions based on the information below:
Fulton Company was established at the beginning of 2024 when several investors paid a total of $200,000 to purchase Fulton common stock. No additional investments in common stock were made during the year. By December 31, 2024, Fulton had cash on hand of $45,000, office equipment of $40,000, inventory of $156,000, and accounts payable of $10,000. Sales for the year were $812,000. Of this amount, customers still owed $20,000. Fulton declared and paid dividends of $25,000 to its stockholders during 2024.
What is the Asset of the company as 31^(st), December 2024 (in $)?
Correct answer: 261000
Answer the given subquestions based on the information below:
Fulton Company was established at the beginning of 2024 when several investors paid a total of $200,000 to purchase Fulton common stock. No additional investments in common stock were made during the year. By December 31, 2024, Fulton had cash on hand of $45,000, office equipment of $40,000, inventory of $156,000, and accounts payable of $10,000. Sales for the year were $812,000. Of this amount, customers still owed $20,000. Fulton declared and paid dividends of $25,000 to its stockholders during 2024.
What is the Liability of the company as 31^(st), December 2024 (in $)?
Correct answer: 10000
Answer the given subquestions based on the information below:
Fulton Company was established at the beginning of 2024 when several investors paid a total of $200,000 to purchase Fulton common stock. No additional investments in common stock were made during the year. By December 31, 2024, Fulton had cash on hand of $45,000, office equipment of $40,000, inventory of $156,000, and accounts payable of $10,000. Sales for the year were $812,000. Of this amount, customers still owed $20,000. Fulton declared and paid dividends of $25,000 to its stockholders during 2024.
What is the Retained earnings of the company as 31^(st), December 2024 (in $)?
Correct answer: 51000
Answer the given subquestions based on the information below:
Fulton Company was established at the beginning of 2024 when several investors paid a total of $200,000 to purchase Fulton common stock. No additional investments in common stock were made during the year. By December 31, 2024, Fulton had cash on hand of $45,000, office equipment of $40,000, inventory of $156,000, and accounts payable of $10,000. Sales for the year were $812,000. Of this amount, customers still owed $20,000. Fulton declared and paid dividends of $25,000 to its stockholders during 2024.
Net income of the company for the given duration is ____. (in $)
Correct answer: 76000
